• Tag Archives Federal Reserve
  • Gundlach Warns Flatter Curve Is “A Concern For US Economic Growth”

    Doubleline Capital founder Jeff Gundlach warned that the flattening yield curve could become a concern for US economic growth when two and three-year notes yield about the same, and the price per barrel of WTI crude oil plunges into the $30s, he said during a phone call with a Reuters reporter.
    The last time the spread between two- and three-year yields held below 10 basis points was around the time former Federal Reserve Chairman Ben Bernanke announced the beginning of Operation Twist and then QE3 in late 2012.

    This post was published at Zero Hedge on Jun 21, 2017.


  • Even the Mainstream Sees the Disconnect Between Fed Rhetoric and Actual Data

    The Fed is hawkish about jacking up interest rates, but even the mainstream is catching on to the disconnect between Fed rhetoric and actual data.
    The recent Federal Reserve rate increase and talk of more boosts in the future has sparked a rally for the dollar. This has caused the price of gold to sag. But TJM Institutional Services managing director Jim Iuorio recently said on CNBC’s Futures Now that he’s still bullish on gold because he thinks the Fed’s hawkish tone doesn’t line up with actual economic data.
    I’m a longer-term bull in gold and if you look at the long-term chart the trend is still higher. What the Fed said yesterday is disconcerting to the market, and that’s why the dollar rallied so hard. But as we start to move away from that, we start to see some data that is deteriorating, the dollar should shrink back again and gold should be fine.

    This post was published at Schiffgold on JUNE 21, 2017.


  • Anti-Gold Propaganda Flares Up

    Predictably, after the gold price has been pushed down in the paper market by the western Central Banks – primarily the Federal Reserve – negative propaganda to outright fake news proliferates.
    The latest smear-job comes from London-based Capital Economics by way of Kitco.com. Some ‘analyst’ – Simona Gambarini – with the job title, ‘commodity economist,’ reports that ‘gold’s luck has run out’ with the 25 basis point nudge in rates by the Fed. She further explains that her predicted two more rate hikes will cause even more money to leave the gold market.
    Hmmm…if Ms. Gambarini were a true economist, she would have conducted enough thorough research of interest rates to know that every cycle in which the Fed raises the Funds rate is accompanied by a rise in the price of gold. This is because the market perceives the Fed to be ‘behind the curve’ on rising inflation, something to which several Fed heads have alluded. In fact, the latest Fed rate hike, on balance, has lowered longer term interest rates, as I detailed here: Has The Fed Really Raised Rates?

    This post was published at Investment Research Dynamics on June 21, 2017.


  • 5 Ways Fed Rate Hikes May Squeeze Your Wallet

    The Federal Reserve nudged up interest rates another .25 points last week. Of course, nobody was surprise by the central bank’s move. It was widely expected. Nevertheless, the Fed’s latest policy move has everybody bullish on increasing rates into the future
    Of course, nothing has fundamentally changed. As Paul Singer said earlier this month, the financial system is no more sound than it was in 2008. All of this talk about rate hikes will vanish like a vapor if actual economic data continues to point toward a slowdown.
    But since everybody is talking rate hikes right now, this is probably a good time to consider just how rising interest rates will effect your wallet.
    We tend to think about Federal Reserve policy in macro-economic terms. How will it effect the stock market? What kind of bubbles will it blow up? How will it impact the price of gold? But Fed policy also has a direct effect on the average American. In simplest terms, rising rates mean it will cost you more to pay off credit cards and other loans. That’s not good news for an economy buried in debt.
    Here are five ways rising interest rates can put the squeeze on your pocketbook.

    This post was published at Schiffgold on JUNE 21, 2017.


  • Deloitte Audited the Fed for Eight Straight Years of the Financial Crash

    In 2006 the Federal Reserve’s books were audited by PricewaterhouseCoopers. But beginning in 2007 and for every year thereafter through 2014, the Fed’s books were audited by Deloitte & Touche. That’s a very long eight years that just happen to coincide with the greatest economic upheaval in the U. S. since the Great Depression. (Since 2015, KPMG has issued the annual audited statement of the Fed’s books.)
    We’re not suggesting that Deloitte didn’t do its job properly but we are suggesting that the Fed benefited by not having a bunch of different prying eyes looking at its books during those bizarre years when its assets ballooned from $914.8 billion at the end of 2007 to $4.5 trillion in 2014. In just the single year of 2013 the Fed’s assets jumped by a staggering $1 trillion from $2.9 trillion at the end of 2012 to $4 trillion at the end of 2013, according to Deloitte’s audited financial statement of the Fed’s books.

    This post was published at Wall Street On Parade on June 20, 2017.


  • Amid Dreary Landscape, Event Funds Stage A Comeback

    The US hedge fund industry is in rough shape as the Federal Reserve’s lift-all-boats monetary policy has made it increasingly difficult to beat the market. US hedge funds endured nearly $100 billion in redemptions last year, as only 30% of US equity funds beat their benchmarks. But as confidence in traditional stock pickers dwindles, so-called ‘event-driven’ funds are attracting renewed interest in investors, particularly in Europe, where near-zero rates and relatively attractive valuations are expected to stoke a boom in M&A activity, Bloomberg reports.

    After these funds experienced some high-profile stumbles in recent years – one such fund managed by John Paulson’s Paulson & Co. posted a 49% loss and endured billions of dollars in redemptions – some Europe-based funds are seeing billions in inflows. Kite Lake Capital Management, Everett Capital Advisors and Melqart Asset Management have garnered billions in fresh investor capital over the past two years.
    ‘Kite Lake Capital Management almost doubled client assets this year, while Everett Capital Advisors nearly tripled its funds since launching in January 2016. The money overseen by Melqart Asset Management has grown 12-fold since the firm started less than two years ago. The three event-driven funds have $1.5 billion in combined assets and invest across Europe, where an increasingly buoyant economy and record-low interest rates are boosting dealmaking. Their resurgence is part of a comeback effort by a hedge-fund industry that’s only now starting to recover from a wave of investor redemptions and years of disappointing returns.

    This post was published at Zero Hedge on Jun 20, 2017.


  • El-Erian Warns “The Fed No Longer Has Your Back”

    In hiking rates and, more notably, reaffirming its forward policy guidance and setting out plans for the phased contraction of its balance sheet, the Federal Reserve signalled last week that it has become less data dependent and more emboldened to normalise monetary policy. Yet, judging from asset prices, markets are failing to internalise sufficiently the shift in the policy regime. Should this discrepancy prevail in the months to come, the Fed could well be forced into the type of policy tightening process that could prove quite unpleasant for markets.
    Setting aside multiple signs of an economic soft patch and sluggish inflation, the Federal Reserve did three things on Wednesday that lessen monetary stimulus, only the first of which was widely expected by markets: It raised interest rates by 25 basis points, reiterated its intention to hike four more times between now and the end of next year (including one in the remainder of 2017), and set out a timetable for reducing its $4.5bn balance sheet.
    These three actions confirm an evolution in the Fed’s policy stance away from looking for excuses to maintain a highly accommodative monetary policy – a dovish inclination that dominated for much of the aftermath of the 2008 global financial crisis. Rather, the Fed is now more intent on gradually normalising both its interest rate structure and its balance sheet. As such, it is more willing to ‘look through’ weak growth and inflation data.
    This evolution started to be visible in March when Fed officials worked hard, and successively, to aggressively manage upwards expectations that were placing the probability of an imminent rate hike at less than 30 per cent. With that, the hike that followed was an orderly one.

    This post was published at Zero Hedge on Jun 19, 2017.


  • The Fed’s Policy and Its Balance Sheet

    At its June meeting, the FOMC again raised the target range for the federal funds rate by 25 basis points, to 1 – 1 percent. They did so despite evidence that inflation had moderated and that the second estimate of first quarter GDP growth was clearly subpar at 1.2%. Furthermore, despite the fact that 7 of the 12 Federal Reserve district banks had characterized growth in the 2nd quarter as ‘modest,’ as compared with only 4 banks that described it at ‘moderate’ (the NY bank simply said that growth had flattened), the FOMC in its statement described growth as ‘moderate’ (here one needs to know that in Fed-speak ‘modest’ is less than ‘moderate’). The overall discussion evidenced in the statement and subsequent explanations by Chair Yellen in her post-meeting press conference, together with the fact that the only significant change in June’s Summary of Economic Projections was a slight downward revision in the unemployment rate for 2017, failed to make a convincing argument to this writer that there was a compelling case for a rate move at this time. The principal conclusion we can draw is that the FOMC had already conditioned markets to expect an increase in June and that the FOMC’s main rationale was its desire to create more room for policy stimulus should the economy take a sudden turn to the downside.
    More significant than the rate move, however, was the detail the FOMC provided on its plan to normalize its balance sheet, which elaborated on the preliminary plan it put forward in March. Once the Committee decides to begin that process, it will employ a set of sequentially declining caps, or upper limits, on the amount of maturing assets that will be permitted to run off each month. The cap for Treasury securities will initially be $6 billion per month, and it would be raised in increments of $6 billion every three months until $30 billion is reached. Similarly, the cap for MBS will be $4 billion per month, which would also be raised by that amount every three months until $20 billion is reached. These terminal values would be maintained until the balance sheet size is normalized. Left unsaid was what the size of the normalized balance sheet would be.

    This post was published at FinancialSense on 06/19/2017.


  • NY Fed’s Dudley: ‘Remain Calm!! All Is Well! Flattening Yield Curve Is NOT A Bad Sign For The Economy!!’

    The New York Fed’s President and CEO William (Bill) Dudley just uttered one of the silliest statements of all time at a business forum in Plattsburgh, New York.
    (Bloomberg) – Federal Reserve Bank of New York President William Dudley sounded a positive note on the U. S. economy, saying the central bank wanted to tighten monetary policy ‘very judiciously’ to avoid derailing the expansion that began in mid-2009.

    This post was published at Wall Street Examiner on June 19, 2017.


  • Democracy Is A Front For Central Bank Rule

    Several years ago when the Federal Reserve had its Fed funds rate at zero to 25 basis points (one-quarter of one percent – 0.25%), there was a great deal of talk, somehow presented as urgent, whether the Federal Reserve would raise interest rates.
    RT asked me if the Fed was going to raise interest rates. I answered that the purpose of low interest rates was to restore the solvency of the balance sheets of the ‘banks too big to fail’ by raising debt prices. The lower the interest rate, the higher the prices of debt instruments. The Fed drives bond prices up by purchasing bonds, and the Fed raises interest rates by selling bonds, or by purchasing fewer of them than previously.
    I told RT that a real increase in interest rates would undercut the Fed’s policy of rescuing the balance sheets of the big banks whose balance sheets were loaded up with bad debt that desperately needed a rise in debt prices for the banks to remain solvent.

    This post was published at Paul Craig Roberts on June 19, 2017.


  • Fed Raises Rates – Will Other Central Banks Follow?

    Last week, the Federal Reserve announced an increase in the Federal Funds rate to 1.25 percent. The last time the target rate reached so high was in September of 2008, when the rate was 2.0 percent. In October of that year, the target rate fell to 1.0 percent, and was moved down to 0.25 percent in December. It remained at 0.25 percent for the next 83 months.
    This week’s rate increase was the third increase since December 2016, when the Fed increased the rate from 0.5 percent to 0.75 percent.
    Compared to the last seven years, this policy looks hawkish by comparison. On the other hand, compared to the 1990s – which were at the time seen as an era of low rates – current policy remains remarkably accommodative.

    This post was published at Ludwig von Mises Institute on June 19, 2017.


  • Today the Federal Reserve Is the Bank of the United States, and There Is No President Andrew Jackson

    Today the Federal Reserve Is the Bank of the United States, and There Is No President Andrew Jackson
    ‘Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin!
    You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!’ – Andrew Jackson, shortly before ending the charter of the Second Bank of the United States.
    (From the original minutes of the Philadelphia committee of citizens sent to meet with President Jackson (February 1834), according to Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels)

    This post was published at Paul Craig Roberts on June 18, 2017.


  • NY Fed Nowcast Downgrades Q2 GDP Growth To 1.86%, Bad Housing Start Data Latest Culprit (Slip Slidin’ Away)

    The New York Federal Reserve’s NOWCAST model for GDP growth just downgraded Q2 GDP growth to 1.86%.
    The latest culprit? The rotten housing starts data from this morning.
    And we were so hopeful about 3%+ GDP growth in February. Alas, Congress is not going along with Trump’s economic agenda.

    This post was published at Wall Street Examiner on June 16, 2017.


  • Week in Review: June 17, 2017

    The Federal Reserve this week raised the Federal Funds Rate a quarter point to 1.25 percent, bringing the rate to the highest it’s been in eight years. One might now say monetary policy has progressed from a policy of “ultra low” rates to simply a policy of low rates.
    How this will play out over time continues to depend quite a bit on how much the Fed shrinks its balance sheet and how soon a recession descends on the economy.
    Not surprisingly, then, many continue to discuss the best ways to reform the Federal Reserve. But, there’s definitely a wrong way to do this.

    This post was published at Ludwig von Mises Institute on June 17, 2017.


  • The Eternal Plea for Inflation

    This is a syndicated repost courtesy of The Daily Reckoning. To view original, click here. Reposted with permission.
    We learned in yesterday’s Washington Post that the Federal Reserve ‘needs to learn to love inflation.’
    Economics writer Matt O’Brien argues the Fed’s 2% inflation target is far too modest… that Janet Yellen lacks something in the way of vocational ambition.
    This fellow believes Ms. Yellen should set her cap much higher – 4% inflation:
    The higher inflation is, the higher interest rates have to be to control it – and the more room there is to cut them when the economy gets into trouble. So if a 2% target doesn’t get rates high enough to keep them away from zero, then maybe a 4% one will…

    This post was published at Wall Street Examiner by Brian Maher ‘ June 17, 2017.


  • Haunting Yellen

    I wouldn’t put it in the category of LBJ ‘losing Cronkite’, but it is at least a measure of amplified pressure (or just any pressure). This week has been utterly embarrassing for the Federal Reserve, a central bank that refuses to define clearly what it is attempting to do. It leaves questions even for who used to be highly sympathetic.
    Their aim is simple enough as a matter of pure economics. The economy didn’t recover and is never going to (so long as monetary matters remain truly unexamined). Having resisted this possibility for nearly a decade, officials who have now come around wish to avoid having to admit it. So they let the media define the economy by the unemployment rate which projects an image of conditions that simply don’t exist.
    The New York Times has typically been friendlier to the official stance on these matters. Credentials go a long way there, and who has better pedigree than Federal Reserve policymakers? But even they may have to call foul because it’s not like the unemployment rate just yesterday dropped so low. It’s been flirting with official levels of ‘full employment’ for three years, forcing the FOMC’s suspect models to redefine down their calculated central tendency (the theorized range where low unemployment is believed to spark serious wage acceleration and then consumer price inflation) time and again.
    At 4.3%, the unemployment rate doesn’t any longer leave much room for interpretation. It’s go time, now or never.

    This post was published at Wall Street Examiner on June 16, 2017.


  • Bill Blain: “It’s Tough Being A Central Banker”

    By Bill Blain of Mint Partners
    Blain’s Morning Porridge
    ‘Sometimes I’ve believed as many as six impossible things before breakfast.. ‘ * * *
    It’s tough being a Central Banker. The expectation they are doing the right thing lies heavy upon them. We’d like to believe Central Bankers are omnificent celestial beings (because we like the idea of an ordered universe), but the truth is they are as much hostage to the fickle winds of economic destiny as the rest of us. Just when they are guiding us to believe the economy is about to explode, it contracts. Just as they sort out the banks, the economy then votes for collective economic suicide. Just as they think they’ve licked inflation, commodity prices go chaotic.
    The official line on Wednesday’s Federal Reserve meeting is: more hawkish than expected – 3rd hike in 6 months and talking about they will normalise the balance sheet by rolling off assets and capping reinvestment. They expect unemployment to continue improving and remain robust. They are happy with the outlook for consumption and capex.

    This post was published at Zero Hedge on Jun 16, 2017.


  • Is the Fed Repeating ‘The Mistake of 1937’?

    The esteemed brothers and sisters of the Federal Reserve raised interest rates 0.25% yesterday.
    It was the fourth rate hike since December 2015… and the third in six months.
    Janet Yellen has officially taken to the warpath.
    Phoenix Capital:
    … the Fed is embarked on a serious tightening cycle. One rate hike can be a fluke. Two rate hikes could even be just policy error. But three rate hikes means the Fed is determined.
    But is the Fed repeating ‘the mistake of 1937’?
    Stricken by the Crash of ’29, the American economy was climbing out of its sickbed by 1936.
    Annual GDP growth – real GDP growth – was rising steadily.
    Unemployment was falling, from its 25% high to 14%.
    But by 1936 the Federal Reserve grew anxious, anxious that it was incubating inflation… that its previous loose monetary policy had healed enough.
    It feared any more could start a fever.

    This post was published at Wall Street Examiner on June 15, 2017.


  • Global Markets Down On More Hawkish Fed, Trump Obstruction Investigation

    This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission.
    (Kitco News) – World stock markets were mostly weaker overnight. U. S. stock indexes are pointed toward lower openings when the New York day session begins.
    The news reports late Wednesday that special prosecutor Robert Mueller will investigate U. S. President Donald Trump for obstruction of justice has thrown more uncertainty into the world marketplace.
    Gold prices are solidly lower in pre-U. S.-session trading Thursday. The yellow metal is pressured by the hawkish reading the marketplace gave this week’s FOMC meeting.
    The Federal Reserve on Wednesday afternoon raised U. S. interest rates by 0.25%, as expected by most. The Fed said it will also fairly aggressively reduce its big balance sheet of government securities in the coming months. The FOMC statement also said U. S. inflationary pressures have eased a bit recently. However, Fed Chair Janet Yellen at her press conference sounded a more hawkish tone on inflation. After digesting the FOMC statement and Yellen’s remarks, the marketplace deemed this latest Fed meeting as more hawkish on U. S. monetary policy.

    This post was published at Wall Street Examiner by Jim Wyckoff ‘ June 15, 2017.


  • How to Discover Unknown Market Anomalies

    Seasonax Event Studies As our readers are aware by now, investment and trading decisions can be optimized with the help of statistics. After all, market anomalies that have occurred regularly in the past often tend to occur in the future as well. One of the most interesting and effective opportunities to increase profits while minimizing risks at the same time is offered by the event studies section of the Seasonax app.
    ***
    As a pertinent example for this, the Federal Reserve Bank of New York published a study in 2011 which examined the effect of FOMC meetings on stock prices. The study concluded that these meetings have a substantial impact on stock prices – and contrary to what most investors would tend to expect, mainly before rather than after the announcement of the committee’s monetary policy decision.

    This post was published at Acting-Man on June 15, 2017.