The Fed’s aggressive and creative policy response to the financial crisis is one of the most controversial and widely misunderstood financial topics in the modern era. The impact of the Fed’s actions on the real economy is debatable, but few would argue it has had significant influence on the psychology of financial market participants. https://www.seasoninvestments.com/insights/the-virtuous-circle/
Our last several posts have covered the history of banking in the United States, starting around the time of the Revolutionary War and leading up to the modern era of central banking. We shift gears this week to an examination of how the US Federal Reserved is structured and the roles of its various branches. https://www.seasoninvestments.com/insights/a-three-legged-stool/
Last week we reviewed some of the historical context of the US banking system leading up to the creation of the Federal Reserve. In this week’s post we will continue our walk through history by taking a close look at the time directly before and after the Federal Reserve was created in 1913 https://www.seasoninvestments.com/insights/shaping-the-course-of-history/
Super accommodative monetary policy has been necessary to spur economic recovery and ensure markets don’t fall into a deflationary spiral. But these same policies which have kept interest rates at record lows for so long are creating vulnerabilities in the economy as debt levels continue to rise. https://www.seasoninvestments.com/insights/the-perils-of-low-volatility/
Last Friday we caught a glimpse of the extent to which financial markets are still addicted to monetary stimulus when stocks, bonds and commodities all tumbled in response to comments made by Fed officials. When everything is grinding upward, moving All Together Now is not a problem, but that sentiment changes quickly when asset classes begin to nosedive in tandem. https://www.seasoninvestments.com/insights/all-together-now/
As any casual NBA fan already knows, Kevin Durant was in the news last week with his decision to leave the OKC Thunder for this year's NBA Finals runner-up Golden State Warriors. His decision to abandon his team in order to join a rival was seen as a betrayal to say the least. Why is this move becoming more common place in the NBA? https://www.seasoninvestments.com/insights/plight-of-an-nba-superstar/
Back in 2007 Warren Buffett issued a public challenge that the S&P 500 would outperform any basket of hedge funds. Hedge fund manager Ted Seides with Protege Partners took Buffett up on his challenge and "the Bet" was born. Now eight years into the bet, who is winning and what can we learn from it? https://www.seasoninvestments.com/insights/buffetts-bet/
The market’s reaction to the strong jobs’ report on Friday was not pretty. About the only investment that was green on the day was the US dollar. The problem the Fed now faces is whether or not to raise rates under the deflationary pressure of a strong currency and lackluster growth in other developed countries. https://www.seasoninvestments.com/insights/fasten-your-seatbelts/
Now that the Fed’s third, and supposedly final, round of QE is concluded, the next step is to begin reversing its zero interest rate policy by making short-term interest rate hikes. Predicting when the first rate hike will take place, despite being a near impossible task as we will show, has been the source of endless discussion in the financial media in recent months. https://www.seasoninvestments.com/insights/not-here-yet/
You lend the government money for ten years, and in return they’ll offer you a yield just barely high enough to cover expected inflation over that time period. Sure, you might not gain any real ground, but at least you won’t be losing purchasing power. How does that sound? Are you ready to buy a lost decade? https://www.seasoninvestments.com/insights/lost-decade-for-sale/
Last Thursday the Swiss National Bank (SNB) surprised the market by announcing that it would no longer peg the value of the Swiss Franc to the Euro. The news sent the Franc soaring against the Euro while the Swiss stock market cratered. This week we look at the reasons for the peg, why it may have ended so abruptly, and what it all means for our US-based clients. https://www.seasoninvestments.com/insights/swiss-surprise/
There are myriad reasons for the recent strength in our currency, but one of the simplest explanations is that despite its problems the US Dollar is still the “cleanest dirty shirt in the closet”. The fact of the matter is that the headwinds of over-indebtedness, soft labor trends and anemic private sector growth are not at all unique to the United States. https://www.seasoninvestments.com/insights/the-cleanest-dirty-shirt/
With quantitative easing on its way out, the next important step from US policy makers will be to signal to the markets that they are ready to begin raising interest rates. Across the pond in Europe the situation is quite different, and monetary policy appears poised to move in the opposite direction as the US. https://www.seasoninvestments.com/insights/opposite-directions/
