As many folks know I am less than thrilled each time Federal Reserve officials yak–and that goes doubly when the Chair speaks as he will today and tomorrow. In this case the whole thing is a ‘dog and pony show’—not really of much use as congressional people either praise the chair or beat him up. If these folks were so bright we wouldn’t have such a government fiscal mess. While these speakers irritate me, maybe my irritation should be with investors who act like a bunch of nervous Nellie’s every time these knuckleheads talk instead of acting rationally. Oh well–just deal with it.
For my part I have been super busy with my ‘real work’ so yesterday I was out of the office most of the day so did nothing investment wise–which would have probably been the case even if I would have been in the office. Collecting dividends and interest certainly is lower stress than trading in and out of various investment options. As I have mentioned before my current allocation of CDs, money markets, short duration high yield term preferreds and baby bonds and a sprinkling of perpetual preferreds has performed extremely well (relatively speaking). I am staying ‘green’, although it is very modestly green–I don’t see this changing for now–until I can get a firm conviction on the direction of interest rates down the road I won’t be buying perpetuals.
The 10 year Treasury is trading at a current yield of 4.53% which is up 5 basis points from the 4.48% close yesterdays while waiting for Jay Powell and then the CPI tomorrow. We have been in a trading range of all of 2025 of 4.4% to 4.8%, but news this week could push it to new lows—or very well may push it higher if CPI/PPI come in just a little hot. Guess we just have to wait and see.
So today I watch–that’s it. I will look for my next possible buy–but no pressure to do anything–boring, but I think it is the best way to preserve capital for now.
End the FED.
Seriously, those who have read, and understand the Federal Reserve beginning, and subsequent “making” policy, and manipulating our money system realize their inherent danger.
I’ve been looking for an excuse to say this. The Fed has a dual mandate. I think the Fed’s prime mandate is the stability of the banking system.
Quote of the day:
“If these folks were so bright we wouldn’t have such a government fiscal mess”
Their job is economic policy they can’t always fix bad political policy or bad banking policy. Sure, they get some blame for their policy errors but not the lions share of our problems.
I take it the original line in the article was about members of Congress, not the Fed’s leaders. Members of Congress take it upon themselves to blame or praise the Fed, but III notes they lack the authority or credibility to do either one since they can’t make or maintain rational decisions.
Do you really believe that, Martin? I think the existence of the Fed IS a big part of our problems. The Fed is a proven failure at trying to manipulate the money supply and steer through every economic problem that pops up. By my count, it’s wrong about 90% of the time. Why wouldn’t we be far better off with no Fed and a formulaic increase in the MS at the long-term real rate of growth of the economy–about 2% per year? No need for any of these phony know-it-alls whatsoever–auto-pilot all the way! Martin, can you think of ANYTHING you could try to predict and be wrong 90% of the time?
From FRED
https://fred.stlouisfed.org/series/M2SL
Tried pasting a snippet of graph but this blog does not apparently allow. Anyhow suffice it to say the M2 money supply jumped starting in 2020. This undoubtedly fueled the jump in inflation. So share much of your sentiment. Seems pretty obvious unless am missing something. Hope link works. (Of course fiscal policy is not under their control).
Covid money printing was a factor. Delayed reaction because the shutdowns slowed the velocity of money. Shutdowns ended and massive overspendimg continued on other things, that’s when Inflation exploded. Check the dates of 7-10% Inflation. Later cut back to normal overspending and Voila! Inflation rate went down but not enough. If they actually balance the budget Fed slows money printing and inflation stops dead in its track but austerity problems might be created. We’re stuck because of previous policy failures.
Tacitus
The notes to the FRED chart say they changed the definition of M2 (‘removing savings deposits (including money market deposit accounts)’) in May, 2020, so there is some amount of distortion to the curve from that change.
I didn’t take the time to go try to figure out what the “unrevised” curve would look like, but it would be different.
How can the money supply be seasonally adjusted? Does it fluctuate like jobs? Is there some sort of flow in and out of the money supply based on the season?
Without trying to calculate anything, wouldn’t it generally flatten the curve some as the money supply would be under counted by not including savings and MM balances, ……by nearly $7 trillion. That’s like 1/3rd of the $21T shown in the chart. So should the M1 be something like $28T?
Or am I completely misreading the data?
Still researching some, but does anyone know the reason for the change? To mask the astronomical rise in M1?