The FED..."You're on your own kids" >>>--->
Based on the recent (three week old) information from the FOMC minutes as well as current economic data, it seems that the FED is out of the game till after the November presidential election. Barring another financial crisis or obvious & severe economic downturn, the FED will not act to lower or raise interest rates. The reasoning behind this conclusion is that the FED all but said as much in the FOMC minutes & they are very concerned about inflation. They won’t change rates right before the election as they wouldn’t want to be seen influencing the presidential race, and they have said the markets need time to heal. So, essentially the FED is saying to the financial markets…â€you’re on your own kidsâ€.
That’s a scary thought in an environment of sluggish or uneven economic growth combined with generally obvious inflationary forces, or what I will call, â€slugflationâ€. I like that word better than stagflation, as it crystallizes what that economic enviroment does to businesses & consumers. Slugflation, as the word implies, will slug businesses with higher costs & slower sales, while at the same time it will slug consumers with higher prices & fewer jobs or stagnant incomes.
The prospect of no further FED action, except for the rolling TAFfys, TSLFys, & SLAFfys, is quite a new investment environment for most who have begged for & relied on FED & government interventions to defend their investment ideas & strategies. Allowing the free market to actually operate free from all the artificial supports & government interventions could pose a problem for the majority of investors, mutual fund mngrs, & hedge fund managers, especially with the ongoing belief that the market will be saved if any trouble comes along.
Looking ahead to a relaxing Memorial Day weekend with my family, I can’t help but be concerned about the current economic predicament====$4+ gas, high food costs, an ongoing how-zing collapse, an impaired financial system, a tight lending environment, a hotly divided electorate, & a sluggish economic environment. We have been told there are no silver bullets & that time is the remedy for many of the problems. I guess I can put my hope in the Treasury Secretary’s words “that relative to other developed nations around the world the US economy is fundamentally strong, flexible, & resilientâ€.
Or I could sell in May & go away.
Based on the recent (three week old) information from the FOMC minutes as well as current economic data, it seems that the FED is out of the game till after the November presidential election. Barring another financial crisis or obvious & severe economic downturn, the FED will not act to lower or raise interest rates. The reasoning behind this conclusion is that the FED all but said as much in the FOMC minutes & they are very concerned about inflation. They won’t change rates right before the election as they wouldn’t want to be seen influencing the presidential race, and they have said the markets need time to heal. So, essentially the FED is saying to the financial markets…â€you’re on your own kidsâ€.
That’s a scary thought in an environment of sluggish or uneven economic growth combined with generally obvious inflationary forces, or what I will call, â€slugflationâ€. I like that word better than stagflation, as it crystallizes what that economic enviroment does to businesses & consumers. Slugflation, as the word implies, will slug businesses with higher costs & slower sales, while at the same time it will slug consumers with higher prices & fewer jobs or stagnant incomes.
The prospect of no further FED action, except for the rolling TAFfys, TSLFys, & SLAFfys, is quite a new investment environment for most who have begged for & relied on FED & government interventions to defend their investment ideas & strategies. Allowing the free market to actually operate free from all the artificial supports & government interventions could pose a problem for the majority of investors, mutual fund mngrs, & hedge fund managers, especially with the ongoing belief that the market will be saved if any trouble comes along.
Looking ahead to a relaxing Memorial Day weekend with my family, I can’t help but be concerned about the current economic predicament====$4+ gas, high food costs, an ongoing how-zing collapse, an impaired financial system, a tight lending environment, a hotly divided electorate, & a sluggish economic environment. We have been told there are no silver bullets & that time is the remedy for many of the problems. I guess I can put my hope in the Treasury Secretary’s words “that relative to other developed nations around the world the US economy is fundamentally strong, flexible, & resilientâ€.
Or I could sell in May & go away.
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