Stock picking:
- UBS named UPS the "2022 top stock pick."
Investing: unless the Fed really, really surprises me, I am thrilled with "everything" investing.
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The Fed's Announcement
Disclaimer: done on the fly; not spell-checked; there will be typographical and content errors. Facts and opinions are interspersed; hard to tell the difference.
2:01 announcement: regardless of how the analysts see it and/or how the market reacts today, this was an incredibly dovish announcement. Investing? I'm all in.
2:05:
- Market reaction: none.
- moments later: Dow, which had been down, is now green, and solidly green
- Ten-year treasury: flat, at 1.475%. But CNBC anchor says TYT is surging, from 1.4whatever to 1.475%. But now, TYT is 1.460; now 1.467%.
- "Dots" yet to be posted.
- later: dots suggest -
- two or three rate hikes next year;
- two the following year
- Fed decision: anonymous.
- San (Rick Santelli): sees Jay Powell reacting to a "stagflation" environment.
- San: says the market has it right
- San: has the Fed just right with regard to tapering
- NASDAQ reaction will be the real signal:
- NASDAQ has gone from solidly negative to turning green.
- What am I going to look at? AAPL
- negative at the start of the day, has now turned green;
- negative at the start of the day, now up $2.26
- by the close, profit taking but that initial surge was very, very important to see;
- I just turned on CNBC at the announcement:
- talking heads generally seem a bit flummoxed
- trying to talk down the market, but,
- Melissa suggests we saw the "bottom" in the market this morning, but prior to the announcement
Likely:
- asset rotation, from high-flying meme stocks to solid stocks actually reporting profits
For all the hype: a "nothing burger" -- first glance, yet, but the fact that this is so dovish, and the market responded as such, this was huge.
Biggest problem the Fed has: the middle class can't take much more --
- Covid; high gasoline prices; house prices out of reach; hamburger doubling in price --
- can America's middle class actually handle higher interest rates. Wow. Think about that.
Next big question:
- is Fed only thinking about the dual mandate (inflation. job creation), or
- does the Fed have one eye on the equity market
- I don't think so. I don't think Jay Power is looking at the market when he makes his decision. At the end of the day, Jay Powell has an eye on the American middle class;
Steve Liesman saw the "silver bullet."
- I'm impressed. He got it exactly right. I'll come back to that later. Bullish, bullish, bullish. Irony: Liesman is generally bearish, bearish, bearish.
- The sentence that Liesman caught --
- The Fed will raise rates when the two targets are reached:
- inflation target has been reached, and was reached several months ago; that means the rates need to be increased, but ...
- the second of two mandates, unemployment was not meant. Powell says "we" are not yet at full employment and he won't raise rates until we are at full employment
- Powell did not define "full employment"
- in round numbers, there are about 10 million unfilled jobs in the US. Tell me again we are not at full employment.
- current unemployment rate: 4.2%
Definition of "full employment."
Frederic Mishkin: former Fed governor --
- very critical of the current Fed;
- how he reads the decision today; remains disappointed.
- Says we already are at full employment
- calls this very expansionary (very dovish, in other words)
Tapering:
- The Fed is buying $120 billion in government backed bonds each month — $80 billion in Treasury debt and $40 billion in mortgage-backed securities. -- November 3, 2021.
- The Fed has been dropping that $120 billion "buy" by $15 billion each month.
- Today, the Fed said they will double that taper, to buying $30 billion LESS each month
$120 billion / $30 billion = four months.
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Q&A
Definition of unemployment / full employment / maximum employment: a judgement call. Many factors go into defining maximum employment.
Rates: will not raise rates until tapering has concluded next March. Will not answer question: how long the hiatus between concluding the taper March, 2022) and the first fed rate.
In other words, no rate increase until at least 2Q22. Currently at a "zero-percent rate" it appears, a quarter-percent rise each quarter in CY22.
- 2Q22: 0.25%
- 3Q22: 0.50%
- 4Q22: 0.75%
While Q&A going on, TYT: 1.468%.
Market:
- tech is surging again
- NASDAQ after being down a couple hundred points today is now up 50 points
- PFE: up $2.87
- WTI moving up.
Jay Powell:
- avuncular
- able to speak clearly to the average American
- not speaking from an ivory tower
- reminds me a lot of Louis Rukeyser and his panelists back in the late 1990s and early 2000s
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Melissa: 4:00 P.M.
Wow, Melissa thinks this was a hawkish announcement.
Wow.
Talk about misreading the event.
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