Fed History Suggests Rate Cut Coming
Q1 hedge fund letters, conference, scoops etc
Panic has driven the 3mo/10yr Treasury spread to -0.18% (negative 18bps). The talk is about the Fed cutting rates, when and how much. Despite this becoming the dominant topic history indicates that the Fed follows 3mo Treasury rates(T-Bill rates) by lagging shifts in FFunds rates up to 30dys vs 3mo Treasury market rates.
Current market psychology has 3mo rates at 2.14% v FFunds at 2.4%. Based on recent Fed actions, we could see the Fed adjust FFunds lower by 0.25% shortly.
While a host of positive economic activity indicate continued expansion, i.e. no global slowdown as repeated daily in the media, the Fed, following its historical pattern, is likely to cut.
Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis.
His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.