Tag Archives: The Fed Minutes

“Markets Can Remain Irrational Longer Than You Can Remain Solvent”

The Economy: The numbers were again mixed and eclipsed this week by politics. Housing starts and building permits were down. Jobless claims up, Industrial Production down. Fed minutes were, as usual, a sleeper … watching Yellen kick the can down the road is tedious at best. The excitement was reserved for the NOKO Doughboy, who blinked; for the rewriting of U.S. history that occurred in North Carolina and for the continuing Circus on the Potomac. With the exit of Steve Bannon from the White House, Chief of Staff John Kelly appears to have consolidated his control. If true, we may begin to see a unified message from the Trump Administration. Even if that message is via tweet, it may be an improvement over the noise that has become a distraction. With the uncertainty of the past few weeks, stocks have weakened while bonds have been in a holding pattern.

Food for Thought: Stocks are making some investors nervous. After relentlessly moving up this year, markets have stalled. Is it because August is usually a weak month, or is something else at play? U.S. markets have failed to hold their highs and the FANGs are down about 10%. Bulls see Dow 30,000 around the corner. Bears are salivating for a 20% correction. Central Banks continue to pump trillions into the global economy. As long as Fed Policy is “Free Money Forever” there will be an upward bias to stocks. Yet warnings abound. Fiscal policy along with Trump Initiatives are DOA. Political gridlock under Obama was astonishing; under The Donald it is simply unbelievable. Clearly stocks can’t go up forever. This begs the question for investors who are on the sidelines or short, “Do you want to be right or do you want to make money?” Which of course leads to the caveat, “Markets can remain irrational longer than you can remain solvent.”

Music of the Week: Shakira’s “Can’t Remember to Forget You”

 

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”