Next week the Fed Funds rate is expected to be raised, for the first time in over three years. Pundits love to say the Federal Reserve is “in a corner”, implying a Hobson’s Choice between possible courses of action. This hackneyed term is being deployed again, mischaracterizing their choices. It’s true inflation expectations have edged […]
Last week the US Energy Information Administration (EIA) published their 2022 Annual Energy Outlook. Solar and wind output are expected to grow at 4% pa, reaching 12% of our total energy production by 2050, triple their share today. This is an impressive growth rate, although less than the media coverage of renewables would suggest. It’s […]
Had Jay Powell and the FOMC prudently begun reducing the economy’s degree of monetary support a year ago when the Covid vaccine was already being administered, they’d have more flexibility to manage the economy’s current challenges. From a 2% neutral rate and with the balance sheet shrinking, they’d be able to pivot towards easing or […]
Who can’t be moved by the pictures of women being trained to fire automatic weapons, and crates of Molotov cocktails being prepared in backyards. The Ukrainian people are drawing the world’s admiration and financial markets’ attention. There are numerous possible paths for the war to follow, and each one brings its own set of investment […]
Maslow’s Hierarchy of Needs is a stylized pyramid with food and shelter at the base and self-actualization at the top. Maslow wasn’t around to contemplate where ESG (Environmental, Social and Governance) aspirations sit on his pyramid, but he would likely have placed them near the summit. The people and institutions most sensitive to ESG have […]
Last week JPMorgan forecast that the Fed will raise rates at their next nine meetings, resulting in a 2.25% hike in short term rates by March 2023. They warned that inflation is entering a “feedback loop”, whereby higher wages demanded by workers to compensate for eroding purchasing power feed back into higher prices. Over the […]
The last two years have provided an empirical test of Modern Monetary Theory (MMT), the idea that a government can borrow indefinitely in its own currency with no fear of bankruptcy. Stephanie Kelton is the cheerleader for testing the limits of fiscal prudence – I reviewed her book in late 2020 (see Reviewing The Deficit […]
European policymakers are being forced to reassess energy policy. Premature reliance on intermittent renewables came up short last Fall (see Europe Follows California Into Renewables Oblivion). More recently, the EU’s reliance on Russia for 40% of its natural gas imports is being exposed as especially unwise with Russian troops poised to invade Ukraine. Britain has […]
Friday afternoon’s warning from the White House that a Russian invasion of Ukraine could come at any time did at least distract attention from Thursday’s CPI. Energy stocks rose while the S&P500 fell – a welcome negative correlation. Bonds also recouped their losses from the prior day. Over several decades the bond market’s sensitivity to […]
Mohamed El-Erian maintained his criticism of the Federal Reserve, with an op-ed on Monday morning (see Fed and ECB still behind the inflation curve). It’s remarkable that the ECB’s “hawkish pivot” simply resulted in a fourth quarter tightening no longer being off the table. The Fed meanwhile moves ahead in their predictable fashion even while […]
