Tuesday, August 23, 2016

Fed Hint To Markets: Policy Not Working, Raise Rates And Have Even More QE As A Backstop

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Fed Chair Yellen's speech has taken on immense importance.
She may admit defeat thanks to "structural issues."
That would give another reason to get rates back to normal and away from zero.

We've seen several times over the last few weeks the Fed admitting defeat. What's accomplished by sending a message of defeat? It could be another reason to raise rates.
Monetary Policy Not Working
The Federal Reserve said in their minutes,
"The staff's assessment that both monetary and fiscal policy appeared to be better positioned to offset large positive shocks than adverse ones." (PDF Page 8)
Above you see the Fed admitting that their stimulus has not benefited the economy's "adverse" shocks. Monetary policy hasn't worked.
But Low Rates Are A Building Inflation Risk
Allianz SE's Mohamed El-Erian was quoted in Fed Vice-Chair Fischer's speech on Sunday. Mr. El-Erian said the Fischer speech was "excellent."
El-Erian told Bloomberg that Fed Chair Yellen's speech on Friday has the chance to academically speak over the heads of most investors. In coded language she may talk about structural economic issues being the reason rate cuts didn't work.

Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS

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