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!
Q1 hedge fund letters, conference, scoops etc, Also read Lear Capital: Financial Products You Should Avoid?
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
