To Stimulate or Not to Stimulate?

+ Fed Chair Ben Bernanke reiterated today they will do all that they can and “would provide additional monetary accommodation through unconventional measures if it proves necessary.”

+ A Harvard study looked at 232 occasions over the past 42 years. The study found “strong and widespread evidence of corporate retrenchment in response to government spending shocks”. The average firm cut back on capital investment by 15%.

+ Canadian 30 year bond yields dropped to 3.44% this week, making them lower than the 30 year US Treasury yield of 3.52%. The 2 year yield of 0.52% in the US is still much lower than the 2 year yield in Canada of 1.24%. The flattening of the Canadian yield curve might suggest that the Canadian economy is slowing down.

Liquidity Trap

+ PIMCO’s Mohamed El-Erian is concerned that the US is in a ‘liquidity trap’, and if so monetary policy is no longer effective. A ‘liquidity trap’ is where the government is trying to push people, companies, banks etc to take on more risk but to no avail. Effectively, ‘pushing on a string’.

Potash Corporation of Saskatchewan

+ A Reuters survey indicated Potash shareholders would accept $162 US a share.

+ If BHP raised its offer above $158.50 a share, or $47 billion, UK stock market rules would require the company to get approval from its own shareholders because the purchase would exceed 25% of BHP’s market capitalization.

+ National Bank Financial’s analyst, Hari Sambasivam’s, target is $180.00 US.