Rearview or Windshield? On the Fed & Shareholder Letters

The Federal Reserve meeting minutes that came out yesterday were no surprise.  Well, except for one thing:  If size matters, the Fed meetings are getting to be a very BIG deal.  I might be off on my count, but it looks like 75-people attended the meeting.

Other than the usual FedSpeak like…

“Many participants judged that the inflation data received over the intermeeting period had been about in line with their expectations that inflation would move temporarily further below the Committee’s goal, largely reflecting declines in energy prices and lower prices of non-oil imports. They continued to expect that inflation would move up toward the Committee’s 2 percent objective over the medium term as the effects of these transitory factors waned and conditions in the labor market improved further.”

But this gets us focused on this morning’s first neuron collisions:  Which way are rates going to go – and what will it mean?  We assume that rates going up in the medium term means five-years or so, although definitions matter hugely.

I’ve always believe short-term was as long as a person could hold their breath.  Long-term (and this is according to OECD data) marriages typically last 8-years in the USA anymore.  So I guess four-years would be medium term; halfway between breathing and divorcing.

Here’s the problem with the Fed’s happy-speak:  The Swiss have just started to sell 10-year bonds at a negative interest rate.  That’s right – you have to pay the Swiss to take your money and hold it for 10-years

Part of the reason for the Swiss skating on the interest problem is the CHF is one of the few currencies out there that was (by law) 40% backed by gold until 2000.  Ah, you’re thinking, those clever Helvetics!  They seem to be adhering to the belief that a currency that holds something (other than ink, like the US currency) is a good idea.

Not so in America, which has more or less completely given up on “solid money” because it’s much more expedient to follow the dual mandate (full employment, stable prices) than actually have money of reliable value.

It’s for this reason that you may look forward to tomorrow’s report because we will be looking at the next Fed H.6 money stock report because it has been showing increases of M1 in the 15%+ range while M2 is going up at around 8.9% (basis: 3-months annualized).

That’s why Ures truly will be sitting on the edge of the recliner by late afternoon about 4:30 PM Eastern when the next confessional is expected.

Near as I can figure it, the disparity between the Swiss honest deflation scenario and the 75-fedsters thinking inflation will be along, is because the fedsters will be printing money in nearly Weimar-like wheelbarrow loads to put a thumb on the scales.

JP Morgan’s Jamie Diamond offers a grim assessment – forecasting a major increase in volatility of markets when the next panic comes along.

Even if you are managing 38-cents of personal savings, it’s worth reading Dimon’s annual report starting on page 30 where he takes up with…

“In the rest of this section, we will look at how
the table is set – what is going on that is the
same or different than in the past. Later in
this section, we will speculate on what might
happen differently if we enter a new crisis.”

And that’s where he gets into it.  I won’t spoil the fun.

The market is still in ho-hum mode.  We know that the Fed is printing hard enough (here, have some free money) to keep the appearance of normalcy intact.  But we’re also mindful of the cost – the continued hollowing out of core value of America’s money.

Not that markets care much:  The futures were about flat when I looked, but like Dimon commends in his shareholder letter:  Think strategy in the long term but manage like an operator.

Whether you think Dimon’s writing is as polished as the annual gems issued by Warren Buffett (they’re so good that Berkshire has a whole archive of them over here) is a matter of taste.

And since I don’t have any (taste), I read ‘em both.

Market futures are about flat, Bitcoins are down to 242, Baltic Dry Index still dying at 580, and retail sales came in this morning OK, but people aren’t going wild with spending…

Iran Whining

If you look closely, you’ll see diplomacy crashing on the rocks as Iran is now saying no nuclear deal unless sanctions are lifted.

Of course, the whole point of negotiations and sanctions is to force a good faith agreement and I’ve made clear what my expectations are.  All in favor of giving peace a chance, but there’s hope through June 30…

Ending sanctions without an iron-clad agreement would be about the stupidest thing imaginable, so we can look forward to announcement of it shortly, deal or not.

Candidate-Bashing on the Left

Not to put too much of a point on it, but did you catch the very strong anti-Paul tone to the Washington Post’s coverage of Rand Paul’s first day in?

Or, how about the New Republic piece on Carly Fiorina where she’s labeled Palin 2.0?

To be sure, both have clay feet, but can someone explain to me why Fiorina (who actually landed a real CEO job at HP) and gets bounced on scandalous leaks is getting such a different ride in print that Hillary the Server Wiper?

The evidence (and this is only data, mind you) suggests an agenda…but only to those with an open mind who don’t care for either party…and that happens to include me…seem to be able to see it.

Red Dragon Rising, IV

In case you slept through the contrail/missile firing off Los Angeles a few years back, NORTHCOM is now publicly saying that indeed, China’s three nuclear missile packing submarines are a concern.

Oh wait!  That was just a contrail, right?

Science or…???

Robert Kennedy, Jr. likens vaccine use to a modern holocaust.

But this makes my Christmas gift for Kennedy much simpler.  Just one book ought to do it: The Demon-Haunted World: Science as a Candle in the Dark.

Where We’re Going

Oh, yeah – let’s see how national healthcare government style is working out in Kneeler Land, shall we?  Prescriptions for toothpaste and sun cremes, is it?

Just think where we can go with corporations controlling government instead of the other way around.

Readers Wishes

…may be granted after all.  Word that a terminally ill man is about to get a head transplant means there is hope Ures truly can be turned around at some point.

I’ve long suspected this kind of surgery existed – and is widely practiced in Washington – where they seem to be installing empties.

Land of Stupid Consumers

You know Society is in trouble when ComputerWorld runs an article like “Which smartwatch sucks the LEAST: Apple Watch, Android Wear, Pebble, or Samsung Gear?

One of the joys of being a reprobate is seeing through the smoke:  Watches are to tell you what time it is.  I can find that on my phone, in the lower right corner on any of the 8 computer screens in my office, the 4 screens in the house (2 laptops, media server, music studio).

And if that doesn’t work, the clock on the kitchen stove works, as does the one of the dash of the car, the one in the truck.

If all else fails, the clocks on the kitchen stove and microwave work, along with the spawn of Satan on the bed stand that aggravates me on a daily basis.

Look: A $500 watch simply tells me that a person is either mentally impaired or has more money than sense, or both.

But since everything is a business model…

    

Comments

Rearview or Windshield? On the Fed & Shareholder Letters — 6 Comments

  1. “Money of reliable value” is sort of an oxymoron. Fiat paper is a medium of exchange, not a store of value. Folks tend to confuse the two, at their financial peril.

    Stores of value are very hard to find (but currency should not be). Is gold reliable as a store of value? Its price peaked in 1980, then fell 90% or so, adjusted for inflation, over the next 20 years. Its absolute value peaked at the end of the Civil War; then it traded for about 165 greenbacks to the ounce, this at a time when an acre of good farmland went for a couple of bucks.

    We seem to keep forgetting & then rediscovering old truths; in pre-Revolutionary days, Ben Franklin and other observers noted that the colonies with fiat money were prosperous and vibrant, those without were psychologically and economically depressed. In part, the Revolution was a reaction to the Crown’s desire to ban colonial currencies. At the end of the 19th century, it was Progressives — representing farmers, the middle class and small businessmen — who fought the “cross of gold”; they wanted more money in circulation, in other words, more currency. The creation of the Fed resulted from a deal between Progressives and Wall Street.

    And who better to manage the money supply than bankers? Absent a political directive to act otherwise (i.e., the German Central Bank in the early ’20s), bankers follow their fiduciary interest, which is relatively “reliable” money (since it comprises their “inventory”) and economic stability (so their loans get repaid).

    There aren’t any pat answers or robotic alternatives to human judgment: Even Milton Freedman eventually gave up on the idea of putting the money supply on autopilot.

  2. So you’re skeptical about climate change but not some of the vaccines? Okaay

  3. There have been many smart watches available in Asia for at least the last 5 years.

  4. Gen X and Y seem to get along without watches, but I ALWAYS wear mine, unless I’m in the shower or sleeping with a girl. That includes jackhammering and other construction. It has a large face that can tell me the time without being obvious about it, and it’s very accurate and reasonably good looking.

    I bought this watch eight years ago and it’s still ticking on its original battery. It’s a genuine Timex and cost me $30.00 from Walmart. Prior to that, I had the exact same model that lasted easily 10 years. If/when this one fails, I might upgrade to an altimeter version, providing I don’t lose the large face and easy reading.

    It’s beyond me why anyone would want to fish in their pocket to find a phone just to see what time it is, and beyond that, why anyone would pay more than two figures for the time!

  5. I’ve been using the (old) 5th generation ipod nano as a watch, using an aftermarket wrist band available through Apple. It has clock faces, FM radio, and stores all my tunes. Great for entertainment while waiting in lines. It seems this new Apple watch requires an iphone, so I dont know what Apple was thinking- with this, AND ruining the nano by making it too huge to be worn as a watch. Makes me wonder if they saw how many watchbands they were selling and wanted in on the action.

    • What Apple is thinking is that they understand the future, creating products that people don’t even know they need until they see them. iPod, smartphone, iPad, MacBook Air, etc. All you dinosaur Luddites talking about telling time are not apple’s market. Their market is people who have never worn a watch in their life. To them the word “watch” has a completely different definition than something that tells time. So if you think the word watch has anything to do with time these days, just realize that you are no more relevant to the world than those folks who remained on dialup after high speed internet came out. They simply did not count for anything, and literally nobody cared if they could view their web pages or not. Neither do you in Apple’s world, and it’s a really really big world.

      The same principle applies to people who say perpetual motion when someone talks about over unity energy devices. Their internal noise level is so high and so programmed that they simply cannot see what they are looking at. They are all certain perpetual motion is impossible. Same goes for folks obsessed with a “watch” telling time.

      An apple product is like a BMW. You can say it’s not my kind of car, or it’s too expensive and I can’t afford it, but nobody says this car is crap. And BTW, apple is indifferent to their watch. They only spent $38 million promoting it worldwide. It’s the press and everybody else making a big deal about it. Apple cares nothing about stock price or market share. It’s about quality products that people want. They are not for the people bragging about finding the cheapest way to tell time or tsk tsking about the cost of quality, something most Americans cannot afford these days, and certainly cannot produce.