Riding on Air

By | 2018-04-13T07:00:49+00:00 April 13th, 2018|Global Market Update|

Is our economy enjoying economic tailwinds right now? Illustration of the polar jet stream. Public Domain. Source: NASA/Goddard Space Flight Center A few months ago, I flew from LA to Boston and the flight took a lot less time than I anticipated. The reason was the polar jet stream had shifted south, and our ground speed was over 100 miles per hour faster than normal. The jet stream can make your average airliner perform much better than expected. Recently, Fed Chair Jerome Powel, Vice [...]

Jerome Powell: Master of the Universe

By | 2018-03-26T06:50:47+00:00 March 26th, 2018|Global Market Update|

Who is Jay Powell? Public Domain. Source: Federal Reserve Jerome Powell, or “Jay,” is the 16th head of the Federal Reserve, charged with overseeing the nation’s money supply and financial system. Because of the Fed’s economic significance, the Fed Chair has been called the second most powerful person in the nation, with an outsized role regarding monetary policy. While our central bank is a hybrid system, with 12 regional Federal Reserve Bank Presidents, an Open Market Committee, and a powerful career staff, in reality [...]

Fed Obsessions

By | 2018-03-09T07:14:23+00:00 March 9th, 2018|Global Market Update|

What effect does the Fed have? Poster from 1880s. Source: Wikimedia For years we’ve obsessed about the Federal Reserve. Whether we picture the Chair as a heroic figure fighting off the forces of darkness and doom, or see the Fed as the center of a global conspiracy to enact vicious cycles of ruin, or view Fed staff and officers as primarily technocrats overseeing the country’s banking and monetary system, the Fed is at the center of a lot of our thinking. And a lot [...]

A Parliament of Fed Officials

By | 2017-11-29T06:02:57+00:00 November 29th, 2017|Global Market Update|

Who makes up the Fed? Burrowing Owls. Photo: Tania Thompson. Source: Shutterstock For most people, the Federal Reserve is a mysterious place that makes mysterious hooting sounds every few months, and they tell banks where to set interest rates. Academics and politicians rail at the Fed for various reasons, but their debates often sound like medieval scholastics debating how many angels can dance on the head of a pin: irrelevant to our everyday lives. But the Fed is an essential part of our financial [...]

The (In)Effectual Fed?

By | 2017-07-31T07:40:57+00:00 July 31st, 2017|Global Market Update|

What good is the Fed? Federal Open Market Committee. Public Domain. Source: Federal Reserve The conventional wisdom is that the Fed controls the economy in the short run by controlling short-term interest rates. But folks didn’t always think this way. In the ‘60s and ‘70s Keynesian economists thought that interest rates only had a tiny effect on spending, and therefore a minimal impact on the economy. Then came Paul Volker. He made ending inflation the goal of Fed policy, and he did this by [...]

The Dangers of Success

By | 2017-07-17T12:21:33+00:00 December 21st, 2016|Global Market Update|

The Dangers of Success What happened to “The Maestro”? Public Domain. Source: IMF Alan Greenspan chaired the Federal Reserve from 1987 to 2006. He’s a fascinating character: a mostly self-taught economist, a jazz clarinet player, a policy advisor and skilled political operator. He understood how political power ebbs and flows, and used that understanding to direct Fed policy for almost 30 years—an eternity in Washington. His greatest success came when he successfully intuited that productivity was growing much faster in the mid-‘90s than initially [...]

Dissent and Dysfunction?

By | 2017-07-17T12:21:42+00:00 September 22nd, 2016|Global Market Update|

Does the Federal Reserve need to do some team-building? Federal Reserve “Dot Plot.” Source: Federal Reserve As expected, the Fed did not increase their interest rate target. Instead, they decided to wait for further progress in the economy. In her prepared remarks, Janet Yellen emphasized that their decision doesn’t reflect a lack of confidence in the economy. Rather, she noted, the pace of hiring in the labor market seems to have slowed, and inflation is still running below 2%. In their projections for economic [...]

Wagging the Dog

By | 2017-07-17T12:22:08+00:00 February 16th, 2016|Global Market Update|

Wagging the Dog Where does finance fit into the economy? Photo: David Whelan. Source: Morguefile Time was that the real economy was considered the dog and the financial economy the tail. Except for an occasional bubble, the tail didn’t wag the dog. What people ate and how they dressed was critical; how the saved and where they invested wasn’t. Now it’s not so clear. The world produced about $80 trillion in goods and services in 2015. At the same time, public and private markets [...]

Fed To Markets: Never Mind

By | 2017-07-17T12:22:10+00:00 January 29th, 2016|Global Market Update|

Fed To Markets: Never Mind Photo: NBC Television. Source: Wikipedia When I read the latest policy statement coming out of the Fed on Wednesday, I was reminded of how the character Emily Litella from Saturday Night Live would always close our her commentary: “Never mind.” This is a critical time for the Fed. Their very legitimacy has been called into question. So they’ve been trying to guide the markets, to make sure we aren’t blindsided by a sudden action. Some Fed Ph.D. must have [...]

“We Have Liftoff”?

By | 2017-07-17T12:22:19+00:00 December 7th, 2015|Global Market Update|

“We Have Liftoff?” What happens when the Fed starts to raise rates? Photo: Kim Shiflett. Source: NASA Many investors are worried about the value of their bond portfolios. When interest rates rise, bond prices fall. It’s simple mathematics: bonds have a contractual future payment stream, and that payment stream isn’t worth as much when the discount rate rises. With the Fed now poised to raise rates, their portfolios may be at risk. As a result, many investors have shifted to short-term bonds, because short-term [...]