Wednesday, August 3, 2016

Fed just took the prospect of near term rate hikes off

You go back and think of all the rate hikes that people thought were going to happen. I knew that the Fed couldn’t raise rates. The fact that they did one trivial quarter point rate hike and then backtracked and took them all off the table proves that I was right.

They said they couldn’t raise interest rates without crushing the markets. They raised interest rates. The markets got crushed. The only reason the markets rallied back was because they stopped raising interest rates, which is exactly what I said.

I still believe, and I said this in December of last year, that the next move by the Fed is going to be a cut in rates.

It’s the opposite of Teddy Roosevelt. He used to say ‘speak softly but carry a big stick,’ but when it comes to rate hikes the Fed has no stick. So, all they can do is speak loudly and hope nobody notices the absence of a stick. They want to keep talking about all the rate hikes and how they’re going to raise interest rates. But the last thing they want to do is actually do that because then the whole economy will implode and then the markets will realize the box that we’re in.

Instead, they keep positioning as if they’re about to raise rates, but then they keep coming up with one excuse after another why they’re not going to do it. Meantime they’ve been making up excuses for so long, the economy has basically relapsed back into recession. We’re either there or we’re on the doorstep of one. 

I think had the Fed already raised interest rates a few years ago, they would be cutting them right now based on how weak the economy is.




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