Tag Archives: Interest Rate Hikes

More of the Same with a Shrinking Balance Sheet

The Economy: Synchronized global growth, central bank easy money and politics as usual remain the norm. China finished up its Party Conference and deified Xi alongside Mao and Deng. The ECB and the Fed met and left their respective rates unchanged. No surprise there, as global growth is still viewed as delicate. So Synchronized but delicate would be a more accurate description of global growth. But the Fed is taking the lead in normalizing monetary policy. In October it did shrink its balance sheet by about $10 billion. They also indicated that another interest rate hike was on tap for December. Thursday, Trump is expected to announce Powell as the new Fed Chair. Powell is seen as dovish and if selected is expected to maintain the lower for longer policies we’ve come to know and love.

Food for Thought: Stocks continue to march higher. A week without new records now feels like a personal insult. The rally may continue through year-end as investors pile into the markets to make up for lost time. Algorithms are appearing daily that show how markets will go up for years to come. Everyone is an aggressive risk-taker when they are making money. But how do you feel about losses? Know your risk profile.

Music of The Week: Tim Bowman’s “Circles”

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Global Economic Improvement, Steep Budget Cuts, and Unfazed Financial Markets

The Economy: Global economies appear to be improving with Germany and France leading the way in Europe. The U.S. continues to present a mixed picture. The Fed released its minutes on Wednesday. They looked through the data to indicate another interest rate increase in June. While some see the Fed as increasingly hawkish, actions speak louder than words and the Fed has been unwilling to inflict the pain that rising rates will bring. With the explosion of information provided by the internet, a solid case can be made for any position that suits your fancy. Believers who warn of bubbles are countered by equally sage adherents on the other side of the argument. While we’re awash in the rhetoric of change, it’s questionable how much will be legislated given all of the animosity. The Trump budget proposes the largest cuts in decades. But like the rest of the agenda it’s so steeped in emotion that its final form is impossible to discern. Add the Special Prosecutor to this witches brew and you can almost hear the wheels of government grinding to a halt.

Food for Thought: Financial markets are unfazed by this circus and continue their 8-year bull run. Interest rates remain at historic lows. Bond yields remain suppressed. Investors are convinced that Central Banks will continue to inflate asset bubbles into the foreseeable future. Terrorism remains a blight; though the vernacular has morphed from calling them Freedom Fighters to calling them Losers. That’s an accurate step in the right direction. Never give in; never give up; never stop dreaming; never stop believing. Enjoy your Memorial Day Holiday!

Music of the Week: Bob Mamet’s “Day Into Night”

An Expanding Economy and The Future of The Health Care Industry

The Economy: Government statistics continue to show an expanding economy with healthy employment and inflation that will support a near certain interest rate hike next week, when the Fed meets. Fake news? Who knows! Who cares? How do things look from your place in the firmament? Economists and analysts are evenly opposed on the question. David Rosenberg, the economist who coined the phrase the “New Normal” is a case in point. Regardless of glowing reports, Rosenberg remains skeptical that the outlook is so rosy. The noise from both sides of this issue is only exceeded by the screams of the Social Justice Warriors and their nemeses, the Deplorable Populists. For all the racket about how bad things are, I see full restaurants, crowded malls, private schools with waiting lists and growing numbers of happy new car owners who’ve forked over 6 or 7 figures for their piece of the American Dream. If this is a bubble, then the lambs are the happiest campers in history.

Food for Thought: I had hip replacement surgery last week. Was walking around the same day. Was back home 24-hours after surgery and back in the office less than 48-hours after surgery. … I only lasted an hour in the office before my body demanded immediate and total bedrest for the next 4-days. Call it a jock’s hope over experience. Nevertheless, the speed of my recovery has amazed me and I’m now up and about on a full schedule. I’ll have the other hip done as soon as I can get it scheduled. The miracles of modern medicine don’t need my riff. What does is the observation that all aspects of Health Care will be a growth industry as far into the future that we can see. The sector has taken a breather while the new administration brings its plans to fruition, but the space is built on boomer demographics.

Music of the Week: Peter White’s “Smile”