SOUNDING OFF ON THE FED, YIELDS AND ALL THAT CRAP

For all those that believe Powell needs to cut rates more, while he just cut short term rates by 1/4 point, the real market, the free market of yields have seen them yields go higher. In other words, Powell cut his short term rates but your mortgage rates have gone up. We would love to sit down with the new Trump appointed fed head as he is calling for 2% fed funds. Be careful what you wish for. Long rates are much more important than short rates and while we cannot predict, there is every chance if the fed did lower rates that much, real yields would spike as the bond market would recognize there is no longer any care about stability…just give us more easy money. But easy money has its downside…namely what Powell did a few years back.

There has been no bigger critic than us. We ripped Powell daily on our Fox Business appearances and on our radio show for his crazy printing to $9 trillion and taking rates to 0% and sitting there while inflation was picking up. That inflation was caused by that ridiculous easy money. That easy money caused the housing distortions that are here to this day with his rigged bond market 3% and under mortgages. It was bad enough he caused all the problems but worse is that even with a bazillion analysts, did not see the problems he caused coming. That is when he should have been fired. That is when Yellen should have been fired with him.

But we do not believe Powell has done much wrong in recent months. The many are complaining along with the president that he should have cut rates and cut them aggressively. We respectfully disagree and if you do not believe us, believe the bond market. The bond market has been as stable as stable can be. Stable bond markets are a good thing. It is only when you screw with it do things go awry. How does one screw with it? Go too far up or too far down. The president wants  too far down. The newest fed head wants too far down. The president has actually called for 1%. You want problems? Keep lowering fed funds rates when the market doesnt want them and in real time…let’s repeat, since Powell’s fed rate cut, real yields have headed north.

Of course, that could change. We are in hopes real yields come back down but with deficits now $2 trillion+/year going forward (thank you both parties), one has to wonder. Let us not also forget if the bond market believes that the fed or the administration no longer cares and is not paying attention to stability or inflation, guess what yields might do? If we were running the joint, we would be at most, 1/4 point lower but if real yields start heading north in a meaningful fashion, we would get worried.

So far, yields backing up looks more like an oversold bounce. Let’s hope that is all it is. We’ll stay on it.