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All Eyes on Powell

Well we have the chief Fed yakker testifying today before congress – do we think he is going to say anything new? For all the importance some folks put on this I think that no one darned thing new will be said–I mean really the Fed’s position has been well spelled out and it takes data to get the rate cuts that so many long to see.

There is other economic news today–the ADP employment report is released at 7:15 a.m. (central) and this has become more important as time has passed. The forecast is for 150,000 new jobs. I watch this closely because I am convinced that jobs is a key to future rate cuts. Then at 1 p.m. central we have the ‘beige book’ released and we will see anecdotal evidence from all the regions of the country on the economic conditions Fed folks are seeing.

Well let’s see—bitcoin is up and at $66,000 this morning. I have made no effort to learn the ins and outs of bitcoin or other block chain currency’s. I don’t see any use for bitcoin–for me. It simply is kind of fun to watch and it seems that there is now the critical mass of investors to keep the price high—we’ll see how this plays out.

The 10 year treasury is at 4.15% right now–the drift lower is kind of surprising in particular in light of the U.S. treasury issuing massive debt (now and forever). I think every one of us knows something is going to ‘break’–but what we don’t know is when it will break. One might think it could happen this year-but these things take time to play out–sometimes much longer than one might expect.

Little or nothing for me to do today–actually I might buy a small CD–probably 3 month for 5.3% or so. Today I have a JPMorgan payout on a early redemption of a 5.6% CD, but on Friday I have relatively massive maturities–maybe 15% of portfolio values–no doubt I will ‘roll’ some of this, but also little doubt that I will deploy some into current holdings being mindful that I don’t want to go much above a ‘full’ position.

7 thoughts on “All Eyes on Powell”

  1. When I listen to some of our Reps asking Powell questions I often wonder if they even have a point during their 5 minutes except to possibly get on the news for 15 seconds with a nice sound bite. They either read from a script possibly written for them by an underling or just rattle on bringing up so many points Powell is just sitting there wondering what the real question is if any.

    Powell: “Sorry that is outside my realm”.

    Hopefully this was not too political. No names mentioned except Powell. I just feel bad for the guy in some ways. They simply are bad at asking questions. Way too wordy and drone on if their point was to even ask a real question.

    1. Darkly hilarious really thinking of all these know-nothing Reps drilling down Powell re the monetary side when everyone alive knows the issues are on the fiscal side.

      The most predicted and talked-about financial mess in the history of mankind and it’ll just lay there until it becomes a crisis – at which point it will morph into a finger pointing contest.

      Read recently/of interest: US Debt currently at $34T is now increasing at the rate of $1T every 100 days on average. What could go wrong?

      Also dark: Bodes well for future Treasury holdings.

  2. Personally I don’t want them to cut, but expect that they will.

    I saw an interesting note on Zerohedge a few days ago. One of the Fed officials was floating the idea of a “Reverse Twist”. The idea was that the Fed would sell assets from their large Agency MBS portfolio and use the proceeds to purchase short term notes and bills. This reduces their duration and would (I assume) be done in a way to keep their principal balance the same. The effect would be a bull steepening of the yield curve and driving down 2 year yields.

    If you subscribe to the theory that the Fed simply follows the 2 year (which I do) this policy could given them the cover they are looking for to cut rates in 2024. Also if you subscribe to the theory that the Fed will do literally anyting to drive to the desired election outcome (which I do) then you get a cuts in 2024.

    Assuming they won’t cut in September and November due to election optics, and assuming March is off the table then we could get cuts in Apr/May, June, July and December. At 25 bps per meeting that is still 100 bps in 2024. I’ll stick to that expectation for now and be looking for operation Reverse Twist.

    1. Rates are pretty much normal as far as I am concerned. I suspect some young people think the ZIRP years were normal. not so. Best thing Fed could do is leave rates alone, they will settle where the market says they should be.

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