Fleeing The Fed Ship

George Yacik - INO.com Contributor - Fed & Interest Rates


William Dudley, the president of the Federal Reserve Bank of New York, has become the latest senior Fed official to announce his retirement. He follows Fed Vice Chair Stanley Fischer, who announced his intention to resign in September, and Daniel Tarullo, the central bank's top financial regulator, who announced his resignation back in February.

Of course, the biggest departure at the Fed was one that wasn’t voluntary, namely President Trump decision not to renominate Janet Yellen for another term as Fed chair, ignoring 40 years of precedent to reappoint a sitting Fed chief. Instead, of course, he nominated Fed governor Jerome Powell to replace her when her four-year term ends in February. Still, Yellen is entitled to finish her 14-year term as a member of the Fed’s Board of Governors, which doesn’t expire for another seven years, on January 31, 2024, although her staying on would also be unprecedented.
All told, there are now three open seats on the seven-member Board of Governors, which of course may rise to four if Yellen elects to leave.

It’s pertinent to ask, then: What are all the departures at the Fed, both voluntary and involuntarily, signaling? Is it simply senior officials graciously moving aside to let a new president get a chance to pick his own people? Or is there something more sinister afoot, namely, do they indicate that a big change in the market is about to occur and they want to get out before the chickens come home to roost? Continue reading "Fleeing The Fed Ship"

Will There Be A November Surprise?

George Yacik - INO.com Contributor - Fed & Interest Rates


In its most recent Beige Book, covering late August through early October, released last week, the Federal Reserve noted that although economic “outlooks are positive, contacts in several sectors cite the upcoming presidential election as a source of near-term uncertainty, delaying some business decisions.”

The same could be said for the Fed itself. How much uncertainty has it created and business decisions has it delayed by its endless dawdling and indecisiveness on whether or not to raise interest rates? No matter who wins the vote, the election will end – maybe not on November 8, if it can be shown that someone did, in fact, rig the voting – but eventually, Donald Trump or Hillary Clinton will become president. But we have no such certitude that the Fed won’t continue to tease the markets about when it will start normalizing monetary policy. Continue reading "Will There Be A November Surprise?"

Is Data Dependency Dead At The Fed?

George Yacik - INO.com Contributor - Fed & Interest Rates


While it was certainly gratifying to know that the Federal Reserve may, finally, be ready to raise interest rates and normalize monetary policy before the end of the year, its reason for doing so, elucidated after last week’s FOMC meeting and Janet Yellen’s press conference left me shaking my head. To put it in economic terms, it didn’t make a whole lot of sense, given the Fed’s past behavior.

As we all know by now, the Fed, as widely expected, left interest rates unchanged last week, but hinted strongly for the umpteenth time that it’s almost ready to raise rates, just not right now.

“The committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives,” the post-meeting announcement said.

Yet, at the same time, the Fed lowered its estimate for U.S. economic growth this year to 1.8% from its June forecast of 2.0%, which is also its new long-term view of the economy. That’s certainly justified by the reports we’ve been getting the last several weeks, which show the economy slowing, not gaining strength, in the second half.

So why would the Fed say that the case for raising rates had “strengthened” even as it downgraded its view of the economy and most recent reports back that up? Continue reading "Is Data Dependency Dead At The Fed?"

What Are You Doing To Prepare For 2015?

One of the things I've always done over the years is close out all my accounts just before the middle of December. Looking back on the year, I have to say it's been a good year and I hope 2014 was a good year for you too.

This is perhaps the most dangerous time of the year when the markets are very thin and volatile. They can swing dramatically one way or the other and make very little sense. It's not that way every year, but trading does drop off dramatically and liquidity becomes a problem, even with big stocks.

If you haven't made your money for the year by the middle of December, you're not going to make it in the last two weeks of December. I can practically guarantee that.

So here's what I do, I look forward to enjoying the holidays with my family and I look forward to 2015 and get mentally prepared for the markets. There is absolutely zero doubt in my mind that there will be some huge moves next year. You only need to catch one of these giant moves to make your year. I happen to think that next year will be golden - that is when the new bull market starts in gold (FOREX:XAUUSDO). Now remember, that is what I think, but I'm going to have to have the Trade Triangles back those thoughts with solid technical evidence that gold is going higher. Continue reading "What Are You Doing To Prepare For 2015?"

Economy Post-'Jobs’ Report; Real or Memorex?

Now it gets interesting because early in the bailout process the Fed talked about achieving certain employment milestones before hiking interest rates.  Here we are at the 10th consecutive month with 200,000+ job gains (321,000 in November) and the jobless rate down to 5.8% and still there is a question on when or whether ZIRP will be withdrawn?

Well I am a visual learner so I for one can never get enough pictures to inform my thinking.  Pardon the redundancy in this chart’s frequent appearances in NFTRH

sp500
Source: SlopeCharts

The rectangular red box is zero interest rate policy (ZIRP), which is 6 years old this month.  If we play it straight we would be expected to believe what the mainstream believes, that the “Great Recession” is a thing of the past and that something built of abnormal policy can proceed per normal metrics and assumptions when abnormal policy is removed.  I don’t buy it. Continue reading "Economy Post-'Jobs’ Report; Real or Memorex?"