Posts belonging to Category FED



Stocks: Do lower interest rates justify higher valuations?

Warren Buffett says stock valuations make sense with interest rates where they are

Billionaire Warren Buffett told CNBC on Tuesday stock market valuations make sense with interest rates where they are. Rates have been a “powerful factor” in equities values, he said. The chairman and CEO of Berkshire Hathaway, who appeared on CNBC’s “Squawk Box,” said stocks are going to outperform bonds.

“I can’t remember any decision we ever made based on the Fed,” Buffett said, stressing he buys shares of companies he likes rather than playing the overall market.

But Buffett said Berkshire is holding off selling investments until he sees how the GOP tax reform efforts play out in Washington.

http://www.cnbc.com…  Mon.,  16  October 2017

Asia stocks reach 10-year peak

Federal Reserve showed a more guarded view towards inflation

Asian stocks reached a 10-year high on Thursday, riding the bull run in global equity markets, while the dollar sagged after the Federal Reserve showed a more guarded view towards inflation. Spreadbetters expected a mixed start for European stocks, forecasting Britain’s FTSE to open down 0.05 percent, Germany’s DAX to start 0.03 percent higher France’s CAC to open flat. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.55 percent and at its highest since December 2007.

Japan’s Nikkei was up 0.4 percent after brushing 20,994.40, its highest since November 1996. South Korea’s KOSPI added 0.55 percent to mark a fresh record peak and Hong Kong’s Hang Seng scaled a decade-high. Asia took cues from Wall Street, where major indexes rose to yet another set of record closing highs overnight following a report that a market-friendly candidate was being pushed as successor to Janet Yellen at the helm of the Fed.

http://www.reuters.com…  Thu.,  12  October 2017

Bridgewater founder is not a believer in cryptocurrencies

Ray Dalio, founder of the world’s largest hedge fund, says ‘bitcoin is a bubble’

Bridgewater Associates founder Ray Dalio said Tuesday he is not a believer in cryptocurrencies. “Bitcoin today you can’t make much transactions in it. You can’t spend it very easily,” Dalio said on CNBC’s “Squawk Box.” “It’s not an effective storehold of wealth because it has volatility to it, unlike gold,” the hedge fund founder added. “Bitcoin is a highly speculative market. Bitcoin is a bubble.”

The investor said there are two important facets to being considered a valid currency: ease of transactions as a medium of exchange and being a “storehold of wealth.” “It’s a shame, it could be a currency. It could work conceptually, but the amount of speculation that is going on and the lack of transactions [hurts it],” he said.

http://www.cnbc.com…  Mon.,  09  October 2017

Next Financial Crisis

Where Deutsche Bank thinks the next financial crises could happen

Central banks unwinding quantitative easing, potential crises in China and Italy, elevated global trade imbalances and a backdrop of populism: Just some of the potential sources of the next financial crisis, according to the latest research from Deutsche Bank. In a report looking for the potential source of the next financial shock, Deutsche Bank strategists Jim Reid, Nick Burns, Sukanto Chanda and Craig Nicol warned that there are “a number of areas of the global financial system that look at extreme levels.”

“This includes valuations in many asset classes, the incredibly unique size of central bank balance sheets, debt levels, multi-century all-time lows in interest rates and even the level of potentially game changing populist political support around the globe. If there is a crisis relatively soon (within the next 2-3 years), it would be hard to look at these variables and say that there was no way of spotting them.” Although the strategists note that their list of potential sources for the next financial shock is “far from a prediction that they will occur,” their list is designed to show where some of the stresses are in the financial system and ones that could create global financial and economic problems.

http://www.cnbc.comThu.,  28  September 2017

Will Trump reappoint Yellen?

Central Bank’s massive bond-buying program worries Republicans

From her early days as Federal Reserve chair, Janet Yellen has been the target of criticism from Republicans worried that the central bank’s massive bond-buying programs and near-zero interest rates engineered by her predecessor would be the ruin of the country. With little more than four months left in her term and questions swirling over whether the White House will ask her to stay on for another four years, Yellen has turned that story around.

The Fed has raised rates faster than markets had thought possible this year and, on Wednesday, it announced its $4.5 trillion bond portfolio would begin to shrink in October. All the while, unemployment has plunged to boomtime levels and inflation has remained well in check. Now Yellen’s stock appears to be rising, both among her critics and on a real-money exchange where traders can place bets on who they think will be the next Fed chair.

http://www.reuters.comFri.,  22  September 2017

JP Morgan attacks Bitcoin

JP Morgan: bitcoin ‘is a fraud’

Bitcoin “is a fraud” and will blow up, Jamie Dimon, chief executive of JPMorgan Chase & Co (JPM.N), said on Tuesday. Speaking at a bank investor conference in New York, Dimon said, “The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart.” Dimon said that if any JPMorgan traders were trading the crypto-currency, “I would fire them in a second, for two reasons: It is against our rules and they are stupid, and both are dangerous.”

Dimon’s comments come as the bitcoin, a virtual currency not backed by any government, has more than quadrupled in value since December to more than $4,100. Bitcoin is a digital currency that enables individuals to transfer value to each other and pay for goods and services bypassing banks and the mainstream financial system.

http://www.reuters.com…  Wed.,  13  September 2017

US debt is still climbing

The US government just passed $20 trillion in debt for the first time ever

For the first time in its history, the US federal government has more than $20 trillion in outstanding debt.

The milestone was technically hit Friday, with the Treasury Department settling its accounts at the end of the day with $20,162,176,797,904 of debt outstanding. Of that debt, the Treasury said $14,622,661,213,046 is held by the public, while $5,539,515,584,857 is held by various parts of the government, also known as Intragovernmental Holdings.

http://www.businessinsider.com…  Tue.,  12  September 2017

There is no full employment in the US economy

Weak wage growth suggests the economy is not at full employment

TODAY’S labour market report showed that the American economy created 156,000 net new jobs in August. That was a bit less than expected, but payrolls are still growing comfortably faster than the working-age population.
Despite having created over 2m jobs in the last year, pushing unemployment below 4.5% for the last five months, wage growth remains muted, at around 2.5%, compared to more like 3.5% the last time unemployment was comparably low. Potential explanation for weak wage growth: retirements of high-earnings baby-boomers.

http://www.economist.com…  Mon.,  04  September 2017

Jackson Hole meeting in focus

Speeches by Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi on Friday will be scrutinized

U.S. stocks dipped on Thursday as political uncertainty in Washington kept investors cautious ahead of comments on monetary policy from central bankers gathered for their annual meeting in Jackson Hole, Wyoming. Speeches by Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi on Friday will be scrutinized for hints on the path of monetary policy, but neither of them is expected to give fresh guidance.

The focus on central bankers’ views will be a departure from the past two weeks, when the stock market was roiled by concerns over geopolitics, mayhem in Washington, and President Donald Trump’s controversial comments. President Donald Trump picked a new fight with fellow Republicans whose support he needs to advance his policy agenda, saying congressional leaders could have avoided a “mess” over raising the U.S. debt ceiling if they had heeded his advice.

http://www.reuters.com…  Fri.,  25  August 2017

US Debt

Americans’ debt level notches a new record high

Americans’ debt level notched another record high in the second quarter, after having earlier in the year surpassed its pre-crisis peak, on the back of modest rises in mortgage, auto and credit card debt, where delinquencies jumped. Total U.S. household debt was $12.84 trillion in the three months to June, up $552 billion from a year ago, according to a Federal Reserve Bank of New York report published on Tuesday.

The proportion of overall debt that was delinquent, at 4.8 percent, was on par with the previous quarter. However a red flag was raised over the transitions of credit card balances into delinquency, which the New York Fed said “ticked up notably.” Loosening lending standards have allowed borrowers with lower credit scores to access credit cards, Andrew Haughwout, an in-house economist, said in the report.

http://www.reuters.com…   Wed.,  16  August 2017