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  1. Default Sitting Between Investing’s Doom and Gloom

    The Federal Reserve has spoken, and it’s done so today via the Federal Open Market Committee’s (FOMC) decision to leave interest rates unchanged.

    And while any change in the benchmark fed funds rates from the current range of 1% and 1.25% wasn’t expected, what was highly anticipated was language in the FOMC statement signaling how and when Fed Chair Janet Yellen and colleagues plan to unwind the balance sheet.

  2. Default

    On that front, there was a development, as the Fed changed the language in Paragraph 5 of the FOMC statement to clearly signal that balance sheet reduction will begin “relatively soon.”

  3. Default

    What this basically means is that the Fed will begin unwinding its balance sheet (likely very slowly) beginning with the September FOMC meeting. That also means that we most likely will get one more quarter-point rate hike this year, and that may well come at the December FOMC meeting.

  4. Default

    Now, the one potential wildcard in the FOMC statement was the Fed’s outlook on inflation, but that also turned out basically to be as expected. The Fed did acknowledge the recent weakness in inflation, saying inflation measures “have declined and are running below 2%.” Yet importantly, the Fed kept its language that the near-term risks to the economic outlook appear to be “roughly balanced.”

  5. Default

    The bottom line with respect to today’s Fed statement is basically that it was “as expected” by Wall Street. And while we’ve all learned to live with the Fed and to interpret its short-term machinations, the broader issue of massive central bank money printing still is a huge underlying unknown for global financial markets and the global economy.

    Indeed, the issue of the Fed and the potential mess that might be headed down the road was one of the subjects of an investment panel I was on this weekend at the FreedomFest conference in Las Vegas. Here I am, seated between two of the world’s most-famous market Cassandras, Jim Rogers (to your left) and Peter Schiff (to your right).



    While both of these gentlemen have interesting thoughts on the markets, the Fed and the future of the global economy, both are bearish on U.S. equities and on the economy. Also, both warn of a coming debt-fueled collapse somewhere down the road.

 

 

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