About 19 or 20 years ago I was introduced to the works of Hyman Minsky. A basic tenant of his economic philosophy is stability leads to instability. His work focused on economies that are hooked on debt; excessive borrowings fuels financial instability. Minsky believes that change happens slowly, then suddenly. An analogy used to explain … Read more
Where to now? September is regarded as the worst month of the year for the markets with the climatic event occurring in October. The markets are devoid of liquidity, and direction is primarily determined by momentum and technology-based trading, the direction of which is heavily influenced by five-word headlines. It is widely accepted that the … Read more
Led by the mega techs, equities staged an impressive rally believing the Federal Reserve will be able to engineer a soft landing. Markets declined nominally on Wednesday after the decision was made. Some pundits asked what changed between Wednesday and Thursday? As noted several times, the Atlanta’s Fed GDPNow Index currently suggests third quarter GDP … Read more
The narrative surrounding the near simultaneously explosion of the Hezbollah pagers is rising. How did it occur and what are the ramifications? “Unnamed” senior US officials report “a sophisticated supply chain infiltration occurred;” a comment made when a US official stated that Isreal was behind the pager attack. There were reports yesterday that there are … Read more
Will the markets be disappointed? Bloomberg writes this is the second longest time between a rate hike and rate cut but is the strongest market return between a hike and a cut ever. Is the environment conducive for the proverbial buy on rumor and sell on fact outcome? An argument can be made market volatility … Read more
The most anticipated change ever forecasted for the federal funds rate is at hand. The question is how much? At the close of trading last week, the odds of a 50-bps reduction were zero. Yesterday a Bloomberg headline read Traders See Half Point Rate Cut Likelier Than Quarter Point. Swaps tied to tomorrow’s Fed decision … Read more
How much will the Federal Reserve lower interest rates on Wednesday? This is perhaps the most forecasted reduction in history with the initial cut expected/forecasted over 20 months ago. Friday’s comments suggested that inflation data is no longer significant given the Fed’s statements that it is now all about jobs and last week’s muted reaction … Read more
Little attention was focused upon August’s PPI data which was nominally higher than expected. Since the Fed shifted its three-year focus from inflation to jobs, there is little fanfare around the release of any inflation data. Today import/export price data is released and barring any significant aberration, this data point may also be met with … Read more
Underlying inflation unexpectedly picked up in August. The culprit was higher prices for housing and travel, undercutting the chances of an outsize interest rate cut next week. The core CPI—which excluded food and energy—increased 0.3% from July, the most in four months and 3.2% from a year ago. The three-month annualized rate advanced 2.1%, picking … Read more
The markets have fully discounted a 25-bps reduction in Fed Funds at next week’s FOMC meeting. Based upon the most basic definition is monetary policy is restrictive; inflation around 3% and the overnight rate at 5.25%, thus suggesting 225 bps of easing to have monetary neutrality. The 2-year Treasury has fully discounted such to occur. … Read more
