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Weekend Reading: DNC – Discerning & Notional Conjugations

Written by Lance Roberts | Jul, 28, 2016
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DNC-Weekend Reading

This week, the headlines have been dominated by the Democratic National Convention pushing Janet Yellen’s latest FOMC non-action to “page 6.”

Of course, it was not surprising to hear yesterday Janet Yellen has once again “flip-flopped” on hiking rates. This tweet from HedgEye sums it up nicely.

As I noted a couple of weeks ago:

Come July, Janet Yellen and the FOMC are going to once again ‘punt’ hiking interest rates in favor of waiting for ‘global instability’ due to the ‘Brexit’ to subside. However, as stated this is a mistake for a couple of reasons.

First, with the markets making new all-time highs, there is a ‘price’ cushion available for the markets to absorb a rate hike without breaking important downside support.

Secondly, with Central Banks globally flooding the markets with liquidity, a further ‘shock absorber’ is currently engaged in softening the impact of a rate hike.

Lastly, the economy is likely going to show a bit of ‘strength’ in upcoming reports, with slightly stronger inflationary pressures. This pickup in economic strength will be another inventory restocking cycle following several months of weakness. As has been in the past, it will be transient and that strength will evaporate as quickly as it came.

If I was Janet Yellen, I would hike interest rates by .50 bps immediately in a surprise announcement and use the price and Central Bank liquidity cushions to soften the blow. This would move the Fed towards its goal of reloading its primary policy tool while there is some ability to temporarily control the outcome of the rate hike.

But that is just me. She won’t do it.”

And…she didn’t.

Now the question will be her excuse will be for not hiking rates in September to keep from affecting the outcome of the Presidential election. As my friend Danielle DiMartino-Booth stated in her interview with me:

“Global instability is now the perma-excuse for the Fed.”

The only question will be where that instability pops up next?

Here is what I will be reading this weekend.


Interesting Stuff

 


Markets

 


Always Good To Read

 


“All Sunshine Makes A Desert” – Old Arab Saying

Questions, comments, suggestions – please email me.

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Lance Roberts

Lance Roberts is a Chief Portfolio Strategist/Economist for Clarity Financial. He is also the host of “The Lance Roberts Show” and Chief Editor of the “Real Investment Advice” website and author of “Real Investment Daily” blog and “Real Investment Report”. Follow Lance on Facebook, Twitter, and Linked-In

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