The Economy: The Fed’s latest buzz-word is the “High Pressure Economy.” … as in The Fed is going to run a “High Pressure Economy.” The High Pressure Economy is one in which inflation is allowed to run beyond levels deemed prudent. It’s the latest Fed-Speak for managing a sluggish economy that refuses to respond to 8-years of unbridled stimulus and low interest rates. While the focus is on whether the Fed will raise interest rates in December, attention might be better placed in the future. Another ¼ point hike in rates isn’t going to do much more than blow marginal players out of dubious deals. But keeping interest rates artificially low for several more years will have a significant impact on many aspects of society. Pension plans are especially at risk. Yellen rules until at least 2018 possibly 2022. Bigly. Come the new year, the voting members of the Fed Open Market Committee (FOMC) who are hawks, reach the end of their terms. Coincidently, their replacements are uber-doves who will play into Yellen’s “lower for longer” policy. Inflation is persistently running below target. The U.S. and global economies are showing weak to inconsistent metrics. Why would the Fed feel compelled to raise rates at all?
Food for Thought: Finding safe income in a zero interest rate environment is a desperate challenge for investors in general and retirees in particular. Bank deposits and money markets are losers when you figure in taxes and inflation. The long treasury at 2.49% is a bust as well. Dividend paying stocks are now being touted as the answer. But the dividend can always be cut and the stock can always plunge in value; even when inside an Exchange Traded Fund (ETF) or a mutual fund.
Music of the Week: Halie Loren’s “After Dark”
The Economy: The Song Remains The Same. Global slow growth; China head-in-the-sand; Europe in Brexit Denial; the Russians ignoring sanctions to re-establish their traditional presence in the Middle East. Macro data seems to confirm a global economy that is continuing to slow. What this means at the local level is more difficult to determine. With 60% of the U.S. budget going to entitlements, there is direct taxpayer support for the U.S. economy. As the world’s 6th largest economy, California is awash in money. Yet, in our ongoing, informal poll, people continue to say, “I’m waiting for the other shoe to drop.” If this is optimistic-unease it may explain why most financial markets have gone nowhere for the past 15-months.
Food for Thought: Only 18-days till the Theater of the Absurd closes. One Champion is accused of being a Russian puppet. (Huh?!?) The other Champion is accused of being the darling of a corrupt Justice Department and the FBI. (Please!?!) In a more genteel age, “I am not a crook” and “I did not have sex with that woman” were seen as the epitome of lowbrow. No more. As the greatest economic and military power in history, as the world’s beacon of hope and enlightenment, we have set new benchmarks for gutter crawlers, petty dictators, morons and idiots.
Debate #1: Stupid
Debate #2: Stupider
Debate #3: Stupidest
Father, take this cup from me.
Music of the Week: Halie Loren’s “After Dark”
The Economy: 3rd quarter earnings season began this week but it’s too early to tell whether this will be a good or bad metric. Of more immediate focus were the Fed minutes that were released today. As expected the minutes showed the Fed slowly moving towards an interest rate hike at some point in the future. Hawks have jumped on a December hike. Doves push it out into the indeterminate future. Low interest rates and slow growth have become embedded in the global economy. Something extraordinary will have to happen to change that dynamic. Governments and central banks have proven adept at containing immediate damage and pushing the day of reckoning into the future; if in fact there is one. While the list of the Gloom and Doom Crowd grows longer, they’ve been wrong for so long that their voices have faded to insignificance.
Food for Thought: 4th quarter is here with its annual tax planning and year end strategy sessions. This is a good time to review all aspects of your financial picture. Are you on target? … do you have a target? Has your tolerance for risk changed? Is your financial documentation up to date and in a location that is known to someone other than yourself? Are wills, trusts and health care directives current? Contact us if we can help you.
Music of the Week: Vanessa Williams’ “The Real Thing”
The Economy: Economic news has been positive this week. Of course this doesn’t mean that Janet and the Seven Dwarfs will raise interest rates anytime soon. While the rest of the planet teeters on the verge of another banking crisis, the U.S. has already moved beyond the Wells Fargo Follies and on to other jollies. Wells Fargo finished up revelations of fraudulent accounts with revelations that they illegally repossessed automobiles of servicemen and women; many of whom were serving overseas. The Wells Fargo culture has obviously taken a page from the leadership manual of Schwarzenegger’s Conan the Barbarian who famously said that what is best in life is, “To crush your enemies (customers), to see them driven before you, and to hear the lamentations of their women.” Then there’s the parallel saga of Deutsche Bank with more than $30 TRILLION in derivatives exposure. Huh?!? That’s twelve times the GDP of Germany. Lehman Brothers was leveraged 21:1 when they blew up. According to some wags, Deutsche Bank is leveraged 40:1. Someone’s laughing, Lord, Kumbaya Someone’s crying, Lord, Kumbaya; Someone’s praying, Lord, Kumbaya; Oh Lord, Kumbaya.
Food for Thought: The next episode of Circus Maximus comes to you this Sunday when our American Gladiators again face off in their second “Ruder Than You” slug fest. The hapless moderators have been swept-up in the noxious atmosphere and are now part of the show as they struggle for the perfect amount of uncivilized behavior. As Americans we’re guaranteed that whoever wins this odious election will be able to swagger in to any international confrontation with their bones made.
Music of the week: Ruder Than You’s Album “Philly Stylee”