Tag Archives: federal reserve

Weekly Snapshot

By Alhambra Investment Partners

Top News Headlines

  1. Whipsaw market in full effect. Stocks stage a bounce-back, at least temporarily. The VIX Index is still at 26.
  2. Crude oil up over 10% for the week; biggest weekly gain in 6 years.
  3. Sanders, Trump ride anti-establishment wave.
  4. Fed rate cut to be delayed?
  5. Alaska’s Mount McKinley to be renamed Denali.

Random Thought Of The Week

Is China jumping the gun, giving the US economy a rate hike before the Fed even gets in the game? Even in the face of widespread concern about global growth Treasuries spent most of last week in search of a bid. We know China and the other emerging markets are selling Treasuries to try and defend their currencies. Hell, that was the plan, the entire reason for accumulating all those reserves. I do wonder if anyone thought that plan through. A slowing US economy isn’t going to make emerging markets perform any better.

Chart Of The Week

Continue reading Weekly Snapshot

Even Slower Now

By Alhambra Investment Partners

June was the for-sure liftoff point early in the year. That followed last year’s for-sure exit as March, April at the latest. Now more than a halfway through 2015 September is increasingly in doubt. They have to start somewhere even if they claim a methodical and slow pace to ensure as little disruption (in their twisted view). As I wrote yesterday, “’Intend to move slowly’ gets slower with each ‘dollar’ wave and that is the relevant motion of policy and economy quite against all the continued propaganda.

The first reaction from the Wall Street Journal is telling in that regard:

The Federal Reserve’s next policy meeting is four weeks away and officials show no clear sign of having settled on a decision about whether to raise short-term interest rates at that time.

That cannot be in light of all the certainty with which the recovery was given and not all that long ago. Last year was 5% GDP and full employment while this year stands as the gaining drip of “downside risks.” At the very least, it shows the FOMC knows nothing when it comes to this economy (and any other).

Continue reading Even Slower Now

Gold’s Safe Haven Status is Not in Doubt

By Steve Saville

Gold is very different from all other commodities. This is due to physical characteristics that caused it to be money for thousands of years and led to its aboveground supply becoming orders of magnitude greater than its annual production*. However, despite the huge size of its existing above ground supply relative to the rate at which new supply is created, that is, despite its massive stocks-to-flow ratio, gold is still a commodity and its US$ price is still affected by the overall trend in commodity prices. In particular, a major decline in commodity prices will naturally put downward pressure on the gold price and a major advance in commodity prices will naturally put upward pressure on the gold price. That’s why gold’s performance can be most clearly ‘seen’ by comparing it to the performances of other commodities, with the most appropriate comparison being with ‘non-monetary’ metals**. Such a comparison reveals that gold has performed exactly as a safe haven should have performed given the economic and financial-market backdrops.

Continue reading Gold’s Safe Haven Status is Not in Doubt

Can US Economy Survive More Fed Support?

By Steve Saville

Can the US Economy Survive More of the Fed’s Monetary Support?

This post is a slightly-modified excerpt from a recent TSI commentary.

Everybody knows that the Fed will eventually hike its targeted interest rate. When it comes to rate hikes, the only unknowns involve timing. What hardly anybody knows is that the Fed’s interest-rate suppression has damaged the economy and that the longer it continues, the weaker the economy will get.

Based on the wording of last week’s FOMC statement it is still likely, but far from a certainty, that the first rate hike will happen in September. That is, the timing of the Fed’s first rate hike remains unknown. The bigger unknown, however, is the timing of the Fed’s second rate hike. The reason is that there could be a large gap between the first and second hikes as a jittery Fed takes its time assessing the effects of the first hike. It could also be a case of “one and done”.

Continue reading Can US Economy Survive More Fed Support?

Amazing Inability to See the Fed’s Money Creation

By Steve Saville

The belief that the Fed’s QE (Quantitative Easing) does not directly boost the US money supply remains popular, even though it is obviously wrong. This is remarkable. It’s even more remarkable, however, that this wrongheaded belief is dearly held by some analysts who are generally astute, a fact I was reminded of when reading a recent post by Doug Noland.

The above-linked Noland post contains the following quote from Russell Napier. The quote is extraordinary due to a) the large number of errors that have been crammed into a few lines, b) the supreme confidence with which blatantly-wrong information is stated, and c) the fact that Russell Napier usually comes across as a smart analyst.

Continue reading Amazing Inability to See the Fed’s Money Creation

Is Fed Privately Owned?

By Steve Saville

Is the Fed Privately Owned? Does it Matter?

The answer to the first question is ‘sort of’. The answer to the second question is no. The effects of having an institution with the power to manipulate interest rates and the money supply at whim are equally pernicious whether the institution is privately or publicly owned. However, if you strongly believe that the government can not only be trusted to ‘manage’ money and interest rates but is capable of doing so to the benefit of the economy, then please contact me immediately because I can do you a terrific deal on the purchase of the Eiffel Tower.

Continue reading Is Fed Privately Owned?

…Same Dollar ‘Rampage’

By Alhambra Investment Partners

July Closes With Same ‘Dollar’ Rampage

The “dollar” has ended the month much the way it started. Despite headlines suggesting the dollar is “down” today, it is very much proving to be disruptive across every proxy. Gold was down to $1,080 at the AM fix before rebounding. Commodities were sold broadly, with copper back near $2.359, down almost $0.02 at some parts of the futures curve; oil is down too, with WTI in the front back close to $47.

ABOOK July 2015 Dollar Copper 31st Continue reading …Same Dollar ‘Rampage’

The Fed and Inflation

By Tom McClellan

Debunking the Fed as the Controller of Inflation

Global temperatures and CPI Inflation Rate
July 31, 2015

A commentator on CNBC recently stated that former Fed Chairman Paul Volcker is “revered” in the bond market for having slayed the inflation dragon.  While that version of history is widely believed to be true, and while then-Chairman Volcker did take aggressive action with interest rates, the causal relationship between Fed action and inflation rates has now been debunked by revelations from other data.

Continue reading The Fed and Inflation

The ‘Real’ Reason the Fed Wants to Raise Rates

By Biiwii

In case you thought you were smart enough to know why the Fed wants to do what it supposedly wants to do [1] MarketWatch sets you straight with the real scoop.  We’ll use this as a talking point and see what comes of it…

Here’s the real reason the Fed wants to raise rates

Policy makers want to give themselves some room to maneuver

That is the commonly held belief and who am I to dispute it?  A big part of the problem is and has been their refusal to begin a journey toward normalization 2 years ago, when the economy began to visibly (we noted the seeds of that improvement in January of that year) improve.  They had no confidence and I was left to wonder (aloud here, frequently and I am sure, sometimes obnoxiously) why Grandma [2] (and her 0% savings account payout) had to continue to bear the brunt of this non-action despite a recovering economy.

Continue reading The ‘Real’ Reason the Fed Wants to Raise Rates

Can the Fed Do More?

By Steve Saville

It’s not an overstatement to say that over the 6-year period beginning in September-2008, the US Federal Reserve went berserk with its Quantitative Easing (QE). The following chart shows that the US Monetary Base, an indicator of the net quantity of dollars directly created by the Fed*, had a gentle upward slope until around August of 2008, at which point it took off like a rocket. More specifically, the Monetary Base gained about 30% during the 6-year period leading up to September of 2008 and then quintupled (gained 400%) over the next 6 years. Is it therefore fair to say that the Fed has now ‘shot its load’ and will be unable to do much in reaction to the next financial crisis and/or recession?

monetarybase_070715

Continue reading Can the Fed Do More?

Animal Farm was a Template

By Alhambra Investment Partners

I am more convinced than ever that the FOMC is simply trying to scare a recovery into existence. The June update to the Fed’s models for central economic tendencies were, in a word, atrocious. The economy was marked down in almost every facet, and not by a little. The upper boundary on the central tendency for GDP was dropped by 0.7%, all the way to just 2% from 2.7% at the March update. That means, given the current thinking which somehow includes an economy strong enough to consider ending ZIRP (from an orthodox perspective), this year is going to be worse than last year.

Somehow out of all that word salad statement, we are to assume that the Fed is even more convinced that the economy has only gotten better if only because it got worse?

ABOOK June 2015 FOMC Central Tend 2015ABOOK June 2015 FOMC Central Tend 2014-16 Continue reading Animal Farm was a Template