Two Major Questions Facing Mankind!

Where’s Putin? He hasn’t been seen in public for ten days!

and

Will the word “patient” be removed from this week’s Fed policy statement?

My answer to question number one: I don’t know and I don’t care. As to question number two, my answer is a question: why should we care? As there will never be a perfect time to raise rates, which the removal of the word “patient” would indicate might be coming. Let us begin, even though there is a choir out there singing about supposed weakness (which I question) in the U.S. economy and the usual sluggishness in Europe, as reasons to continue to delay the inevitable.

 

For some reason there are those who believe there will be a ‘right time,’ people like Jeffrey Gundlach (the new “bond King”). Gundlach was quoted in Barron’s this weekend, trumpeting that this was NOT that time.

But, given the growing signs of weakness at home and abroad, hiking rates in the near term would make the folks at the Fed a “bunch of blockheads,” contends Jeffrey Gundlach, the head of the DoubleLine Asset Management complex. (If you are a Wall Street Journal subscriber, you may find link to Barron’s article here —“Global Markets vs. Reality: The Great Divide” )

This rhetoric is reminiscent of that which a former “Bond King”, Bill Gross, used to throw at the Fed before his fall from grace at the firm he co-founded, PIMCO. It seems to me an example of the license people who have had great success (ergo, superior knowledge) feel they have to make broad pronouncements. Even though Gundlach is highly knowledgeable, his expression of opinion seemed more out there to grab a headline than provide critical guidance as to when the time would be ideal to raise rates, just a little bit. And, frankly folks, that is all we are talking about … just a smidge.

1937 Redux

In the same article referenced above, it was noted that some believe we could be headed for same fate that the U.S. economy endured when the Fed tightened up in 1937, Great Depression part II. Give me a break! We are talking about a potential fifty or seventy-five basis point rise in short-term rates from near zero, not tightening credit. Remember this was the same type of commentary that was floating around as the Fed was tapering QE; and, also when Quantitative Easing was halted last Fall. Amazing stuff, and Barron’s over the years has been viewed as a credible source on financial matters.

Does this try your patience?

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