7/31/24 Federal Reserve Presser

[immamac 42832]

 

Fed leaves benchmark rates between 5.25-5.5% 

Broad set of indicators have returned where they were before the pandemic. Increasing but not overheated. 

[immamac 42832]

Dual mandate of low unemployment and lowering inflation. 

Inflation is trending towards the right direction and they are gaining confidence, if the economy stays strong and unemployment stays low they will leave it alone. If unemployment creeps up or inflation drops to 2% the fed will act accordingly 

[immamac 42832]

Could be September, but no promises they aren't confident enough in the entire body of data. 

Inflation is tame, and heading in the right direction but unemployment is creeping up. 

So we need GDP to stay strong, inflation to stay tame and unemployment to stay flatish for September rate cut. 

[immamac 42832]

2019 is very similar to today's economy. 

Doesn't want to see cooling in the labor market, they are growing in confidence that inflation is on the right path but not sold yet. 

[immamac 42832]

Question related to staying apolitical with a possible rate cut so close to a general presidential election in the country. 

Reiterates that they are not committed to any action in any future meeting. They don't change anything based on the political calendar, they are focused purely on the economy they don't care or don't aim to set policy that benefits anyone but the economy based on data.

They do not take into account the difference between policy from either administration leading up to an election.

There hasn't been a dissenting vote on a rate decision in "quite some time" so how do we know that a rate cut will happen if the data you are comfortable with happens? There is no veto, it's just a question of who votes for and against. 

[immamac 42832]

CBDC (Central Bank Digital Currency) - Powell says they are watching it, they don't have authority to do that and they aren't seeking that. They said they do have interest in the instant payments system as a payer etc.

Really clear guidance that the fed is not looking into, experimenting with or wanting a digital currency managed or issued by the fed. That's pretty big.

[troph 24781]

Thanks for posting this. 

[UTGrad98 2271]

My big question is did the fed wait 1 meeting too long to lower rates. Will be curious to see if they say in hind site, they should have started lowering rates in July vs Sept. More of the economy is starting to show cracks and its looking like investors have overshot the AI craze. Yearly bottoms the past 2 years have been in October. Curious if it will be this year as well.

[immamac 42832]

Just now, UTGrad98 said:

My big question is did the fed wait 1 meeting too long to lower rates. Will be curious to see if they say in hind site, they should have started lowering rates in July vs Sept. More of the economy is starting to show cracks and its looking like investors have overshot the AI craze. Yearly bottoms the past 2 years have been in October. Curious if it will be this year as well.

I think it was interesting because he said the tightening took a long time to feel restrictive. If anything I think they should have raised rates in the first quarter to 5.75 or a tad higher then started cuts starting in Q4 of this year if things stayed steady. 

I think by not doing one more raise they kept some zombie companies alive and they got spooked on the bank run from SVB that almost got out of control. 

[troph 24781]

I’ve lost track of inflation lately - I’ve been distracted but I’ll tell ya I’d much rather be late on a cut than too early. Inflation like we had was almost panic level shit. And we are still feeling it some. We don’t want to FAFO with that. 

Edited August 2 by troph

[UTGrad98 2271]

13 hours ago, troph said:

I’ve lost track of inflation lately - I’ve been distracted but I’ll tell ya I’d much rather be late on a cut than too early. Inflation like we had was almost panic level shit. And we are still feeling it some. We don’t want to FAFO with that. 

I think they are going to be late. Last 2 days have been blood baths with the data that has come in. Sahm rule triggered. Vix north of 20. Talk of a 50 basis point cut in Sept now. I remember an article I read 6 months or so ago which said when the fed starts cutting rates is when you should feel nervous not before. That will be especially true if they feel they are behind and have to cut 50 basis points for their first cut. It will basically be admitting a mistake.

[immamac 42832]

2 minutes ago, UTGrad98 said:

I think they are going to be late. Last 2 days have been blood baths with the data that has come in. Sahm rule triggered. Vix north of 20. Talk of a 50 basis point cut in Sept now. I remember an article I read 6 months or so ago which said when the fed starts cutting rates is when you should feel nervous not before. That will be especially true if they feel they are behind and have to cut 50 basis points for their first cut. It will basically be admitting a mistake.

The jobs report isn't a fucking shocker to the Fed. It's not some top secret thing they can't see early. They have the data and know the data. The market needs a correction. The fed isn't worried about the market as much as they are worried about the economy, inflation and unemployment. Stocks going down don't mean unemployment. Missed earnings and lack of revenue means unemployment. Are they correlated? I mean loosely. WDC lost 2B dollars and their stock went up 95%. 

There's real fear that these GDP numbers are being propped up by a ton of B2B spend that makes no sense and when that bomb goes off it's a dirty bomb. You can't invest collectively 100B dollars in product to produce 20B in revenue. That's what AI is doing. It's a doom loop that could collapse as soon as the circular spend stops. 

I think you are right that somethings gotta give, but I don't think the fed is going to react to the stock market correcting as much as they are to a real slowdown in GDP, which is currently mostly fueled by the irrational American consumer and the circular B2B spend. 

[UTPhil2006 3800]

It’s almost a certainty for a cut in Sept just a matter of 25 or 50

[Trey3216 15343]

21 hours ago, immamac said:

I think it was interesting because he said the tightening took a long time to feel restrictive. If anything I think they should have raised rates in the first quarter to 5.75 or a tad higher then started cuts starting in Q4 of this year if things stayed steady. 

I think by not doing one more raise they kept some zombie companies alive and they got spooked on the bank run from SVB that almost got out of control. 

I think part of the reason the tightening took so long to be restrictive is because there was so much damn $$ supply in the system.  Took a long long while for it to circulate enough times that it finally started to dry up with the rates higher.  

 

I think they should have raised a full point on the first one, and I said it back then.   Citi just put out a note and said they are now thinking the FED cuts 100bps by Nov.  That's like staring down the barrel of .45 and holding up a notebook hoping it will stop the bullet.  

[immamac 42832]

1 minute ago, Trey3216 said:

I think part of the reason the tightening took so long to be restrictive is because there was so much damn $$ supply in the system.  Took a long long while for it to circulate enough times that it finally started to dry up with the rates higher.  

 

I think they should have raised a full point on the first one, and I said it back then.   Citi just put out a note and said they are now thinking the FED cuts 100bps by Nov.  That's like staring down the barrel of .45 and holding up a notebook hoping it will stop the bullet.  

The thing is the zombie companies need to die. The zombie banks also need to fail. It's gonna get ugly fast, I don't know how anyone thought it was going to be possible to engineer a soft landing. 

[Trey3216 15343]

Just now, immamac said:

The thing is the zombie companies need to die. The zombie banks also need to fail. It's gonna get ugly fast, I don't know how anyone thought it was going to be possible to engineer a soft landing. 

Some of us got made fun of mercilessly for a while saying the recession is coming and a bunch of this economy is a sham.  Seriously, go look at the sales lots of every heavy equipment dealer you drive by.  They're practically parking scissor lifts on top of the other scissor lifts to make space.  

[immamac 42832]

Just now, Trey3216 said:

Some of us got made fun of mercilessly for a while saying the recession is coming and a bunch of this economy is a sham.  Seriously, go look at the sales lots of every heavy equipment dealer you drive by.  They're practically parking scissor lifts on top of the other scissor lifts to make space.  

Transportation/shipping is the canary in the coal mine that's been screeching and dead for months. 

[Trey3216 15343]

Just now, immamac said:

Transportation/shipping is the canary in the coal mine that's been screeching and dead for months. 

One of the timeless things I learned in school...always keep an eye on the transports.  Always.  Glad that was my sector in the Portfolio Mgmt class where we actively managed a live 10 figure endowment portfolio.  

[DalTxHornFan 3097]

11 minutes ago, UTPhil2006 said:

It’s almost a certainty for a cut in Sept just a matter of 25 or 50

My bet is 50.

[UTPhil2006 3800]

3 minutes ago, DalTxHornFan said:

My bet is 50.

10 year market is certainly aiming that way 

[troph 24781]

if ever there was a classic example of acting like a pussy it's the stock market. fucking gyrations about the fed, I mean I get it but talk about some pretend alpha male scared nutless nutsacks. fucking Showtime's Billions my ass.

as for being late, they are always late. still a recession with inflation gone is way easier to handle than early 1980s entrenched inflation. fuck that noise, I remember it. my entire view of the world is scarred by that time period as a preteen.

and recessions are necessary and normal. if we don't have one now the next one will be deeper and longer. fuck that noise too. circle of life and all. can't escape it might as well get it over with now.

as for 100 bps cut by year end, bring it. Our household is so rate dependent (half to two-third of our income is real estate related), plus we finished our house and financed a mortgage at the absolute highest worst point in the market. If we get a 1.00% drop in rates, we would throw a helluva GDP increasing party to celebrate.

Edited August 2 by troph

[UTPhil2006 3800]

Well at least you got a refi to bank on soon