Author Archive

To Figure Out What the Fed is Going to Do, Just Ignore the Fed

After almost seven years, the beginning of the end of ultralow rates is here.

What’s that you say? The Fed is going to raise rates?

Remember the so-called taper tantrum in 2013, when some traders dumped Treasuries to express their ire at the Federal Reserve for having the temerity to suggest that rates can’t stay at zero forever? Today it’s hard to imagine anyone left who doesn’t understand a rate increase is coming, most likely sooner (2015) rather than later (2016). Still, there’s a whole generation of traders who have never seen a rate increase, the last of which was a 25 basis-point bump in the fed funds rate way back on June 29, 2006.

Regardless, normalization of interest rates can’t get here soon enough for me, if for no other reason than to end this incessant game of “Will they or won’t they?” Higher borrowing costs are a small price to pay to shut up the ninnies who feel compelled to engage in the semantic game of parsing each and every word of every speech, Q&A session, and most especially the latest Federal Open Market Committeestatement.

Instead of hanging on every Fed utterance, let me suggest you take a different approach. Take one phrase from the Fed as your mantra: data-dependent. The rest of the Kremlinology over the incessant communications from, by or about the Fed should be ignored with prejudice. Instead, step back and take the 30,000-foot view to understand what is happening today, and what is most likely to occur in the future. That does a far better job communicating what is likely to happen than anything Fed Chair Janet Yellen will say in a news conference.

The big picture is simply this: The Fed has a dual mandate to keep inflation under control – check! – and to increase U.S. employment –check! When the Fed says any interest-rate decision is data-dependent, this is it’s talking about. If you want to put some flesh on those bones, let’s consider a few bullet points about the present environment

Continues here: Pay Attention, Ignore the Fed

 

 

Category: Data Analysis, Economy, Federal Reserve

10 Thursday AM Reads

Did Janet Yellen say something new yesterday? I wasn’t paying attention. Oh, and our morning train reads: • The Worst Mutual Fund in the World (Fund Reference) • Advisers’ Stock Recommendations Drag Down Clients’ Portfolios, Study Finds (WSJ) but see How Financial Advisers Can Help Close the Behavior Gap (CFA Institute) • Uber’s Phantom Cabs (Motherboard) • Donald Trump Is The…Read More

Category: Financial Press

Market is Thinning Out

Source: WSJ

Category: Markets, Technology

MiB: Dambisa Moyo on Why China Can’t Afford a Slowdown

This week on our Masters in Business radio podcast, we speak with international economist Dambisa Moyo. Moyo, named by Time magazine as one of the “100 Most Influential People in the World,” says that China’s slowdown creates a challenge for the government: if it wants to double per-capita income over the course of a generation it…Read More

Category: Podcast

China’s Share of Foreign Investment

Click through to see the whole exhibit. Source: NYT

Category: Finance, Politics

10 Wednesday AM Reads

Our midweek explainer on just about everything will make you smarter by the time your morning train commute is over: • 6 Great Investors Explain What Makes Stocks Rise (Barron’s) • Nobody Knows How Much Bonds Cost (BV) • Gold: Is it really likely to hit 5,000 an ounce? (MutualFunds.com) • Are Home Prices Again Breaking Records? Not Really (Real…Read More

Category: Financial Press

China Bailout Charted

Awesome RBS graphic via FT Alphaville:   Source: FT Alphaville:  

Category: Bailouts, Really, really bad calls

The US Averages One Mass Shooting Per Day in 2015

Source: WonkBlog h/t KnowMore

Category: Data Analysis, Digital Media, Legal, Politics

Where the Commodities Meltdown Will Hurt the Most

Source: Bloomberg

Category: Commodities, Digital Media, Economy

Stop Anthropomorphizing Markets !

    Act. v. What a financial market supposedly does. As if it were a living creature with a sense of self and volition . . . Depicting a financial market as an athlete sprinting, leaping or cliff diving makes news coverage more exciting than a droning flux of numbers. The above definition is from “The Devil’s…Read More

Category: Humor, Markets, Really, really bad calls