Danielle DiMartino Booth, The Daily Feather, Quill Intelligence, STATE PENSIONS TO UNCLE SAM.sm

State Pensions to Uncle Sam: “Gone to Texas” and Other Tall Tales

Why go to the devil or the dogs when you can instead go to Texas? That was the thinking throughout much of the 1800s by many Americans, including one bear-hunting, story-telling Tennessean, Col. David Crockett. What prompted Col Crockett’s trek where he would soon meet Gen. Santa Anna and his fate at the Alamo? One might say that he was most displeased by his failed Congressional re-election campaign. Just days before the Battle of the Alamo and his untimely death, Crockett was asked to speak before a group of Texian colonists in Nacogdoches, Texas. Anticipating inquiries as to what brought him to the country, Crockett replied that he’d have been happy enough to maintain his Congressional post if re-elected: “I would serve them faithfully as I had done; but, if not, they might all go to h—, and I would go to Texas. I was beaten, gentlemen, and here I am.”

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

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FIXING WHAT IS NOT BROKEN, Danielle DiMartino Booth, Quill Intelligence, Monetary Policy, Finance,

Fixing it When it’s Not Broken

 Fixing it When it’s Not Broken

Unconventional Monetary PolicyDistorts the Principles of Finance 

 

 “A Diamond is _______.”

“Snap! Crackle! ___!”

“Just Do __.”

“Finger Lickin’ ____.”

Some accidents are preordained. In the prim and proper 1950s, ladies wore snow white gloves in public and gentlemen tipped their fedoras in acknowledgement of the era’s contained composure. Hence one disgruntled housewife’s horror in seeing Dave Harman (daughter Wendy) licking his fingers in broad daylight, for all the world to see, on live TV, no less! Harman had merely been along for the ride. He’d toted a box of Kentucky Fried Chicken to a local Phoenix TV station and having only come to observe, was chomping away in the background, albeit in full view of the camera, as his franchise manager Ken Harbough spun out the restaurant’s advertising. As for Harbough’s spontaneous reply to the scandalized woman on the other end of the phone he described as, “mad as the devil”? “Well, it’s finger lickin’ good!” An advertising legend was born, poor etiquette and all.

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America.
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DiMartino Booth, Bloomberg Opinion, Corporate bonds are a potential bomb ready to explode. Photograph: Three Lions/Hulton Archive

The Corporate Bond Market Is Getting Junkier

Few investors realize the ticking time bombs populating what they believe are the safest parts of their portfolios.

VIPs

  • Corporate bonds rated BBB now total $2.56 trillion, having surpassed in size the sum of higher-rated debentures, which total $2.55 trillion.
  • And then there’s the massive market for leveraged loans, where covenants protecting investors have all but disappeared.
  • In 2000, BBB bonds were a mere third of the market, net leverage was 1.7 times. By the end of last year, the ratio had ballooned to 2.9 times.
  • So why not treat the BBB portion of the bond market for what it is: a high-risk slice of the corporate debt pie.
  • Add the BBB market to what are already designated high-yield bonds and leveraged loans and you arrive at $5 trillion, twice the size of what investors should realistically classify as money-good investment-grade debt.
  • Ask yourself this question: How many small investors perceive the corporate debt market as two parts high-risk and one part low-risk? The reality is precious few retail investors conceive of the ticking time bombs populating what they believe to be the safest slice of their portfolio pie.

 

Much has been made of the degradation of the $7.5 trillion U.S. corporate debt market. High yield offers too little, well, yield. And “high grade” now requires air quotes to account for the growing dominance of bonds rated BBB, which is the lowest rung on the investment-grade ladder before dropping into “junk” status. And then there’s the massive market for leveraged loans, where covenants protecting investors have all but disappeared.

How does that break down? Corporate bonds rated BBB now total $2.56 trillion, having surpassed in size the sum of higher-rated debentures, which total $2.55 trillion, according to Morgan Stanley. Put another way, BBB bonds outstanding exceed by 50 percent the size of the entire investment grade market at the peak of the last credit boom, in 2007.

But aren’t they still investment grade? At little to no risk of default? In 2000, when BBB bonds were a mere third of the market, net leverage (total debt minus cash and short term investments divided by earnings before interest, taxes, depreciation and amortization) was 1.7 times. By the end of last year, the ratio had ballooned to 2.9 times.

The True $2.5 Trillion Investment Grade Bond Market
Dwarfed by $5 Trillion in High Risk Debt

7.3.18-bonds-bloomberg

 

Given the marked deterioration in fundamentals, bond powerhouse Pacific Investment Management Co. worries that “This suggests a greater tolerance from the credit rating agencies for higher leverage, which in turn warrants extra caution when investing in lower-rated IG names, especially in sectors where earnings are more closely tied to the business cycle.”

In the event this warning rings a bell, be heartened that your memory is still largely intact. Investors blindly following credit rating firms’ designations on subprime mortgages despite a clear degradation in the due diligence upon which the ratings were assigned ended up regretting such faith when the financial crisis hit.

So why not treat the BBB portion of the bond market for what it is: a high-risk slice of the corporate debt pie. Keeping count of “fallen angels,” or those investment-grade bonds that are downgraded into junk territory, will become a spectator sport.

With that as a backdrop, add to the BBB market what are already designated high-yield bonds and leveraged loans and you arrive at $5 trillion, twice the size of what investors should realistically classify as money-good investment-grade debt. The leveraged loan market is generally where companies whose credit is so weak they can’t access the high-yield bond market go to attain financing. It just exceeded the high-yield bond market in size, growing to $1.22 trillion compared with high-yield’s $1.21 trillion, according to Fitch Ratings.

Query institutional investors and they will answer that they’re increasingly guarded in their approach to the market. The investment community’s suspicions are amply reflected in the awful performance put in by the investment-grade market this year, with the Bloomberg Barclays U.S. Corporate Bond Index dropping 2.80 percent through Friday. Among 19 major parts of the global bond market tracked by the Bloomberg Barclays indexes, only dollar-denominated emerging-market debt has done worse.

The extra yield investors demand to own investment-grade corporate bonds instead of U.S. Treasuries is equally indicative of investor skepticism. At about 1.25 percentage points, the spread has expanded from an average of 0.85 percentage point in February to the widest since 2016.

But ask yourself this question: How many small investors perceive the corporate debt market as two parts high-risk and one part low-risk? According to State Street Advisors, despite the underperformance of investment-grade funds, June saw continued inflows of $2.8 billion into the space while high-yield sustained outflows of $2 billion. Through the first six months of this year, investment-grade inflows totaled $5.6 billion while high-yield funds bled $5.9 billion.

The reality is precious few retail investors conceive of the ticking time bombs populating what they believe to be the safest slice of their portfolio pie.

 


Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC.

Visit QuillIntelligence.com to find out more.

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For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

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Quill Intelligence, Danielle DiMartino Booth, Economy, Central Banks, Federal Reserve

Tales of Bonds & Bondage

Tales of Bonds & Bondage — Central Banks Put Markets in a Vise

Crocodile Shears elicit anything but crocodile tears. And the Rack extracts as almost no other device. But it’s the Head Vise that tops the list of the most brutal torture techniques of all time. Introduced during the Spanish Inquisition (when else?), vises of all stripes employed compression to extrapolate the desired intelligence. Hands, feet and especially knee caps could be twisted, contorted and irreparably damaged. You might have lived to tell, but you couldn’t write about it and the scribe would have to come to you. The head though, when targeted, produced the most pitiless and violent of outcomes.

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America.
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The State of Jobless Claims in America: One Nation, Most Divisible

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VIPs

  • Jobless claims are a rare breeds of economic indicator – high frequency and hard data.
  • Broad brush strokes can get you into trouble when examining 50 states, our nation’s capital, Puerto Rico and the Virgin Islands. No two states’ labor markets are created alike.
  • Indiana the most exposed to an industrial slowdown with 28.6% of its economy driven by manufacturing is a desert-island indicator in and of itself.
  • The Institute for Supply Management New Orders is flashing the same heat that’s swept the nation so far this summer, but past ISM heatwaves that were equally protracted culminated with jobless claims in high-manufacturing states hitting record lows.
  • Daimler the German bellwether claims that Chinese customers will buy fewer SUVs following tariffs slapped on US auto imports…from Alabama.
  • Is there a trade to put in place? Always. Short the autos and go long jobless claims.

Jobless claims a rare breed of economic indicator — high frequency and hard data. It may sound like so much noise each Thursday morning, but the signal should never be dismissed. Credit gurus, equity strategists and economists concur. If you prefer mixed metaphors to commit claims’ importance to memory, consider them a desert island, crossover artist. Claims have the capacity to preview where the business cycle is headed, forecast payroll employment, wage inflation, corporate balance sheet health and give us direction of credit spreads and equity prices.

Call it great depth and unmatched breadth. Of course, broad brush strokes can get you into trouble when examining 50 states, our nation’s capital, Puerto Rico and the Virgin Islands. No two states’ labor markets are created alike. Some are known hubs. New York dominates finance. Michigan churns out autos. Nevada caters to gamblers while West Virginia mines coal. You get the point.

There’s always divergence. Take Connecticut’s insured unemployment rate of 1.9%, the third highest in the nation after Alaska and New Jersey, and almost twice the nationwide record-low rate of 1.2%. Including D.C. as a “state,” the insured rate distribution has a “fat” right tail – they deviate greatly from the center of that bell curve you grew to hate in college. Some 36 states’ rates fall below the national average; 15 states are above it. That’s good breadth redefined.

We can even judge the top tail risk – a full-blown trade war – by delving into the state of states’ initial jobless claims. Trade and manufacturing being synonymous, let’s narrow the universe down to a Letterman Top 10 List of states whose economies are driven by manufacturing to the greatest extent:

Betcha didn’t know The Middle’s economy is more than one-quarter factories? That makes Indiana the most exposed to an industrial slowdown and a desert-island indicator in and of itself. You might want to consider a temporary subscription to the Indianapolis Star for the next 12 months. Just sayin’.

Backing out to the nation, the Institute for Supply ManagementNew Orders is flashing the same heat that’s swept the nation so far this summer. The sub-index has been above 60 (50 is dividing line between expansion and contraction) for 13 months straight and 16 of the last 17 months. There’s strength in numbers, so staying with the top 10, past ISM heatwaves that were equally protracted culminated with jobless claims in high-manufacturing states hitting the freezer, as in hitting record lows.

As white hot as things are now, the risk of a “downside” surprise is at its apex with all 10 states posting year-over-year declines in jobless claims. If the breadth-alizer’s reading falls below five states, the status quo gets shaken and stirred. This moment will unsettle markets more than in prior cycles given claims’ volatility in the Top 10 has been unusually stable in the current cycle.

A ‘normal’ environment entails ISM New Orders running hot and cold. The near-comatose run may have something to do with this cycle’s backdrop of slower growth and lower productivity. Need it be said: Enter the trade war.

Did someone mention that one-in-eight jobs in manufacturing behemoth Germany are tied to the auto industry? It’s too convenient that Daimler cut its profit outlook on the back of escalating US/China trade tensions. The German bellwether claims that Chinese customers will buy fewer SUVs following the tariffs slapped on US auto imports…from Alabama. (That’s state #9 if you’re keeping score.)

What state is next up in the crosshairs? How about BMW which exports vehicles to China from its South Carolina (#10) plant.

Worried speculation will bleed into the remainder of the top 10: #8 Wisconsin, #7 Kentucky, #5 Michigan and #1 Indiana fill out the auto industry’s traditional Midwest footprint.

Is there a trade to put in place? Always. Short the autos and go long jobless claims. The auto sector is at huge risk from this escalated point on. The squeeze will be brutal. Higher tariffs on export sales will squeeze the top line while spiking steel and aluminum prices smoke bottom lines. What choice will automakers have but to go on the defensive and protect their balance sheets? How is this best accomplished? By cutting the biggest cost, of course. If you’ll allow a fill in the blank on your behalf: Labor costs are on the factory line.

Wishing you well,

Danielle & The Quill Team / quillintelligence.com

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Leveraged Lyrics Fall on Deaf Ears, Danielle DiMartino Booth, Quill Intelligence, Money Strong, Jay Powell

Leveraged Lyrics Fall on Deaf Ears — Are U.S. Corporations as Strong as Jay Powell Contends?

“The Sounds of Silence” was Simon & Garfunkel’s break through hit, a soulful ballad that introduced the idea of white space to song. Years later, Depeche Mode invited us Gen X-ers to “Enjoy the Silence.” We did. And more recently Justin Timberlake’s smash hit “Say Something” taught us that, “the greatest way to say something is to say nothing at all.” Now there’s a deep thought. Less is more, especially when it comes to what can’t be said. But is silence golden?

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America.
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The Mystery of John Williams at the New York Fed

Please enjoy this complementary piece, run earlier this week, on the changing of the guard at the second-most influential Fed.

“It was Monday’s Daily Feather that caused buzz and comment around Wall Street.”
— Art Cashin in Cashin’s Comments


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Danielle DiMartino Booth 6.18.18-price-cost-profitVIPs

  • John Williams is now the second-most powerful leader inside the world’s most powerful central bank. If Jay Powell gets hit with the flu in a few months, it is Williams who directs interest rate policy.
  • Williams has advocated for raising the inflation target off the 2% level they’ve failed to attain forever as it’s an ill-designed metric not meant to rise.
  • Williams also advocated for further bond-buying (a.k.a. Quantitative Easing) and in the event all else fails, forward guidance.
  • Williams’ SF Fed has extensively researched raising the inflation target to coerce a steepening in the yield curve. But is that even do-able?
  • That also builds in higher inflation expectations across the term structure of interest rates, so long-end yields would rise. Raising the inflation target means the Fed doesn’t just tolerate higher prices, it tolerates higher costs and profits.
  • But it falls flat in practice. If firms can’t raise prices, then either costs are cut, profits are squeezed, or companies’ balance sheets weaken due to the reduced cash or added leverage that stems from the higher-cost environment. The issue then becomes a credit problem.

La plus ca change does not apply to the New York Federal Reserve’s John Williams. If you’re in the City, drop him a line. Today is his first day on the job since resigning his post as the President of the San Francisco Fed, where he’d been since 2002. New York can be a harsh place, so I’m sure he’d appreciate the warm welcome.

In the event you’re not a Fed watcher, John Williams is now the second-most powerful leader inside the world’s most powerful central bank.Along with a new vista on the Hudson or East Rivers, Williams’ new gig also crowns him Vice Chair of the Federal Open Market Committee. If Jay Powell gets hit with the flu in a few months, it is Williams who directs interest rate policy.

But wait! There’s more. As head honcho at the NY Fed, Williams is also in command of the open market operations of the FOMC, acting as the agent of the U.S. Treasury, and handling banking and clearing services to foreign central banks, governments and international agencies. Not finished yet! Williams also shoulders the responsibility of regulating the country’s biggest banks and safeguarding the financial stability of the financial markets. All of this for a man who, by his admission, was not inclined to have a Bloomberg terminal on his desk.

You may recall that one Jerome Powell was greeted on his first day in office with a quadruple-digit slide in stocks. Williams has it a wee bit better. He’s toting his metal pail to the office today with a 35 basis-point differential between the yields on the 2-year and 10-year Treasuries.A Swedish pancake being run over by a steamroller yield curve unquestionably bests a flash crash, right?

Aside from that, the new job is nothing new.

Surely this 24-year veteran of the Federal Reserve System, who has been inside the organization since the day he earned his PhD in economics from Stanford University, will uphold his duties? He’s never worked anywhere else and is a nice enough inside guy. What more could we ask for?

If you managed to read through that last bit, you’ve sailed past the point. In just the past year, Williams has advocated for raising the inflation target off the 2% level they’ve failed to attain for like ever as it’s an ill-designed metric not meant to rise. He has advised the world – not just the United States – that global central banks should prepare to implement negative interest rates to combat the next downturn.

In a speech at the SF Fed last fall, Williams said that, “We will all be better able to contain the next economic recession if we develop approaches that succeed even when many countries are simultaneously constrained by the lower bound.”

In the interest of deploying other failed measures, Williams also advocated  for further bond-buying (a.k.a. Quantitative Easing) and in the event all else fails, forward guidance.

You may have noticed Jay Powell dispensed with forward guidance just last week at the June FOMC meeting? Why, the adult in room reasoned, make unquantifiable promises the Fed may or may not be able to keep?

Moreover, Powell doesn’t seem like the kind of a guy who’d ever let negative interest be mentioned on his watch, much less imposed.That makes it more difficult to explain why the new Fed chair gave Williams his blessing prior to be appointed (he had to have; we’re talking about his second-in-command).

Perhaps it comes down to “persistency,” Powell’s favorite term, and the testy task of eventually defining it when the time comes. Powell’s advocating for Williams may come down to getting buy-in from the traditional economics community. Just how far above the 2% target the Fed can dare venture? For how long?

Williams’ SF Fed has extensively researched raising the inflation target to coerce a steepening in the yield curve. But is that even do-able?

In theory, a higher inflation target means policymakers resist tightening and short-end yields don’t rise as much as when the inflation target was lower. It also builds in higher inflation expectations across the term structure of interest rates, so long-end yields would rise.

Because of the great identity of all corporate balance sheets – price = cost + profit – raising the inflation target also means the Fed doesn’t just tolerate higher prices, it tolerates higher costs and higher profits.Put another way, the Fed tolerates higher price inflation (like CPI, PCE), higher wage inflation (like average hourly earnings, ECI) and higher profits inflation (equity prices).

The problem with this is simple. It falls flat in practice. If firms can’t raise prices, then either costs are cut, profits are squeezed, or companies’ balance sheets weaken due to the reduced cash or added leverage that stems from the higher-cost environment. The issue then becomes a credit problem.Powell, with his real-world experience, understands this risk all too well. Williams, not so much. And that means it is Powell who is making the real gamble. Mystery solved.

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McMansion Multiple Listings Multiply

Will Demographics & the Tax-Law Change Topple High-End Residential Real Estate?

Fibonacci was a ‘hare’ off base. When it comes to hyper-productive procreation, bees best rabbits by a helluva hive. That’s not to say the legendary mathematician doesn’t deserve credit where it’s due. It’s no stretch to say the numeric system we take for granted would not exist if not for his ground-breaking work. As for his name, that’s another story. Fibonacci was born in Pisa as Leonardo Pisano, hence his first given name. But he was also son of Guglielmo Bonaccio, which he hand-wrote into his mathematics masterpiece Liber Abaci as “fillius Bonacci,” or son of Bonaccio, and was in turn misinterpreted to become his second name, (fi)bonacci. The error would hold given the year he perished – 1250 – two centuries before the printing press graced the masses.

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Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America. Amazon.com | Barnes & Noble.com | Indie Bound.com  |  Books•A•Million

Strong Labor Market? Dig a Bit Deeper

Hiring intentions this year are off by almost half compared with 2017.

For the first time in four years, the U.S. Commerce Department may be on the verge of reporting a gross domestic product number that tops 4 percent. The Federal Reserve Bank of Atlanta’s widely followed GDPNow index, which aims to track growth in real time, indicates that the economy is likely expanding at a 4.49 percent annualized rate this quarter.

If that number ends up being in the ballpark, the implications would be profound. First, the odds would rise that the most optimistic growth forecasts for this year would be realized and the current economic expansion will likely extend to June 2019 to become the longest in U.S. history. Also, the midterm elections would probably not be the slam dunk for Democrats that political strategists currently envision. A strong economy could be a sufficient swing factor that prevents Democrats from winning back power in Congress.

On the surface, a break from the recent pattern where strong growth in one quarter is followed by subpar results the next seems wholly achievable, especially with the unemployment rate having plummeted to such lows that commentators find themselves drawing parallels to the Kennedy administration. And yet, as difficult as it is see, the issue is one of a backdrop that is too good to be prolonged. It is true that in certain industries employers cannot source the workers they need to satisfy customers’ demand. It is also true that when they do get their hands on the requisite warm body, it is costlier than it’s been in years.

Wage inflation is alive and well in certain industries, and therein lies a challenge for managers to overcome. Some of the best insights into the overwhelming demand for workers can be gleaned from the less-followed but rich data published monthly by Challenger, Gray & Christmas. The firm is best known for its data on layoffs, but its monthly hiring announcements provide great information on the bottlenecks in the labor force.

The big picture is stark. Hiring intentions this year are off by almost half compared with 2017, driven by a collapse in the demand for workers in Information Technology, Entertainment & Leisure, Telecommunications and Retail. What little demand there is can be seen in some of the industries that have the smallest pools of available workers such as Construction, Energy and Electronics.

Passing along increased labor costs that come from filling open positions to customers is the preferred path for employers, but that has been easier said than done. So, those costs must be mitigated. Non-labor costs can be cut, but that avenue has been pursued to its extremes. Another option entails boosting leverage to carry the increased labor expense, but if the added debt to cover incremental costs hits its natural limit, companies make their way to the final source of margin relief: mergers.

Some $1.27 trillion of mergers and acquisitions have been announced in the first five months of the year as companies seek synergies, a record for that period, according to data compiled by Bloomberg. Companies are clearly in damage-control mode as it pertains to protecting their margins, even if it means sacrificing corporate cultures via a forced marriage.

Although there is a natural order to cost containment efforts, life doesn’t always conform to a chronological script. Oftentimes, solutions are pursued in haphazard fashion as managers scramble to react to a margin squeeze. This inherent tension is reflected in Conference Board data on job postings, which have been on a steady decline since peaking in November 2015. As difficult as it is to imagine, big parts of the underlying economy have been slowing even as the industrial sector gets juiced by a weaker dollar, the worst year on record for natural disasters in 2017 and fears of a trade war erupting.

The same cannot be said of job re-postings, which are open positions that are re-posted if they’re not filled. Those postings have jumped , reflecting the surge in demand for skilled workers.

One thing is certain: the gap between the new job postings and re-postings will be resolved as companies take steps to contain their labor costs. A miracle manifestation of skilled workers to fill the open positions would validate economists’ rosiest forecasts. But miracles are rare. The likelier outcome entails the disruption of the illusion floating markets today.

Danielle DiMartino Booth is CEO and Director of Intelligence at Quill Intelligence LLC.

Visit QuillIntelligence.com to find out more.

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America. Amazon.com | Barnes & Noble.com | Indie Bound.com  |  Books•A•Million

 

Fees High, Foes Dumb — Has Amazon Become Too Big to Slight?

Greetings from parking lot traffic in Manhattan on what is finally a warm, sunny day that has strangely enough brought out more drivers. Walk already and take in some Vitamin D. You look like you need it!

Today is, of course, that other Fed day, the day the Minutes are released three weeks to the minute after the FOMC statement is released. This is also the second ‘clean’ set of Minutes we will see of the Jay Powell era. No longer are the Minutes manipulated as Yellen advocated, a tradition to which we can all agree to say, “Good riddance!”

Unvarnished Minutes also mean we will not see any mention of risky assets’ recent recovery, not even a nod to the easing of trade tensions and subsequent ratcheting back up of the rhetoric, nor a recognition that the yield on the benchmark 10-year Treasury has pierced through the 3% ceiling and retreated anew. Nope – we should not see evidence of any events that have taken place since Federal Reserve policymakers met earlier this month. And we’ll be more honest for it.

That is not to say there is no reason to parse the Minutes. They will reveal the impetus behind the Fed’s adding the word “symmetric” to its approach to inflation. Why the abandoning of the hard 2% target after Ben Bernanke fought so hard to set it in place? (Another “Good riddance!” to that, at least in my book.)

While many see “symmetric” as flexibility-additive, my chastened former central banker fear is that it means just that come the next downturn, as in too flexible in a dovish way. If the Fed targets a range of say 1.5-2.5%, it means that they can let inflation run hot and cold. They can keep tightening even if inflation rises above 2% but they can also keep policy loose for longer yet come the next easing cycle.

If there’s one thing that should give you pause, it’s the idea that at some point in the future, the Fed could keep interest rates too low for even longer than anything we’ve got on record. But I’m getting ahead of myself, I hope.

For the moment, the investing world is fixated on the holidays, which will bring with them the final FOMC meeting of the year. In the event you’ve muted the FedSpeak for your sanity’s sake, it’s beginning to look a lot like we will not get a Christmas rate hike marking the first December in three years we go without.

Call it the flat-yield-curve, rising-mortgage-rate and recession-threat must-have 2018 stocking stuffer – the absence of a December rate hike.

What you can expect for the holidays is more of us will be capitalizing on our new and improved (for Jeff Bezos) Amazon Prime membership. Make that $20 price increase count! But stop and ask yourself if this is a good thing. Do we really want to become more beholden to this company?

For more on the Amazonification of a nation, please enjoy this week’s latest installment, Fees High, Foes Dumb: Has Amazon Become Too Big to Slight?

Hoping you’re not manipulating a single Minute of your day and as always, wishing you well,

Danielle

 

For a full archive of my writing, please visit my website Money Strong LLC at www.DiMartinoBooth.com

Click Here to buy Fed Up:  An Insider’s Take on Why the Federal Reserve is Bad for America. Amazon.com | Barnes & Noble.com | Indie Bound.com  |  Books•A•Million