To the Fed I Say, "Not So Fast"

I am no economist, but I say, "Not so fast," on the idea of the Fed lowering interest rates just yet, even if there are some indications of some minor improvements in both the rate of inflation as well as certain jobs data.

Investors appear hopeful we may see the Fed rate lowered.

While we're closer to the desired 2% inflation rate, we're still much higher than that. Beyond that, what we experienced in this particular inflationary period while interest rates were higher was no real slowdown in consumer spending—something that is aimed for when the Fed raises rates. The idea is, of course, to at least stall the economy.

Part of the reason spending really didn't slow down all that much, I think, was due to a couple of factors, and perhaps a third one.

For one thing, while many jobs were impacted by the pandemic shutdowns, many people—in fact, the majority of workers—remained fully employed and earned paychecks. With less places to spend their earnings, people accumulated money that would have otherwise been spent. That money rested on the sidelines until things finally opened back up.

The second thing was that trillions of dollars were forced into the economy through relief checks to people and businesses. On top of that, unemployment benefits were extended for people impacted by Covid. In other words, while the economy itself had a stall during the pandemic, consumers were still largely cash rich. They were either stockpiling money or they were otherwise shored up by the government.

That left a lot of money on the table to be spent eventually and spend it consumers did when doors were once again open.

The third thing, I think, was a bit of what I am calling a "capitulation," of sorts. During that roughly two-year period it was miserable. No two ways about it. If you were spending, it was only on the essentials. With the lockdowns you couldn't really go anywhere. And even when it came to any shopping you could do there were massive supply chain disruptions which meant shelves were virtually left empty on many of the things we needed and wanted to buy.

Then came massive inflation, and I think people simply said, "Screw it." 

People not only wanted to get out when the economy opened back up for business. They needed to. And they were going to spend their money no matter what because they had the money to spend. Thus, through all of this, even while the Fed tried to slow people down, it just wasn't happening, and inflation continued despite the efforts of the Fed.

I do think we are finally seeing at least some indication that higher interest rates are beginning to take effect and help to reverse course. McDonald's and other fast-food chains recently reported a slowdown in sales for the first time in a long time. Consumer spending overall has slowed a bit.

The thing is, why lower rates now when things are just getting started? Let's get much closer to that 2% and then make a decision.

It's sort of the same reasoning that Biden's passage of the American Rescue Plan at a time when things were already opened back up and people began returning to work was simply wrong. It provided for prolonged issues in the supply chain and lead to massive labor shortages, both of which contributed largely to a lot of the inflation we are experiencing now.

It was simply the wrong time to infuse more money into the economy when it really didn't need it.

It's not to say that even if the Fed lowers the rate nominally, say 25 basis points, that consumers will go wild and return to normal spending levels right away. But I think the better idea is to wait until not only we get to the desired 2%, but we stay there for a little while. Then we lower the rates.

Today we will hear comments from New York Fed President John Williams and Richmond Fed President Tom Barkin that should at least provide for a better idea as to what moves the Fed will make in the near term.

I am hoping they indicate that for now we're going to sit tight.

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The Not So State of the Union

Was it the State of the World? The State of Ukraine? Where was America in President Joe Biden's final address to the Union? If you were paying close attention, America wasn't part of it. In fact, it wasn't a State of the Union address at all. It was a campaign speech.

Where was mention of massive fentanyl deaths that are claiming the lives of 100,000 Americans every year? Drug cartels controlling our border states and the border crisis itself and the impact it has had across the nation? The cost of goods and services and eroding personal economies affecting every American household navigating through the pain of inflation? Where was talk about the massive rise in crime and chaos happening across our cities and towns?

Instead, Biden shouted at us in what was nothing less than a dark, pessimistic, and foreboding rant that put politics before American interests, and instead of addressing the core issues that are of concern to every single American.

On the issue of the economy, he tried to prop it up by saying, "Our economy is the envy of the world," even though the average American needs $11,400 more today to maintain the same lifestyle they enjoyed in 2021. Since Biden took office, grocery prices have risen 17%, cash strapping hard working Americans and straddling the poor. Instead of focusing on the core issues causing the inflation, such as the supply chain crisis and the high cost of energy, he railed against "greedy" corporations for price gouging and shrinkflation.

He once again took aim at Republicans for being the cause of trhe border crisis when everyone knows it was his decisions on day one to end Trump's border policies which was followed by a flood of illegal immigrants into our country. He blasted Republicans for not passing a border security bill that would do nothing to actually secure the border.

All in all, Biden simply missed the mark. Sure, he was amped up. He was more voracious than usual. But it was all for show. What was missing from his riled-up speech was substance. It was missing the core issues and what he plans to do about them. What was missing was where we are now, how we got here, and what he will do to fix it. According to Joe Biden, everything is fine in America, and we just can't see it.

He offered no solutions. He passed the buck. He assigned blame. He shrugged off bearng any responsibility for many of the issues we are faced with, and in typical Joe Biden fashion, he entirely dismissed the real State of the Union Americans are actually living in.

He chided and scolded and blasted, fist pounded and yelled. He looked and sounded more like an angry old man hyped up on too much coffee than a president ready and willing to lead all Americans united together into a better and brighter future.

I won't call his speech out as a total disaster. But it wasn't good, and I don't think it wins Biden any points except among his die-hard supporters which, quite frankly, are leaving in droves every single day as his policies and actions separate themselves from the reality we are all dealing with that cannot be escaped from.

What Americans want from our leaders is a sense of urgency that we can see they feel when times are not so good, and for them to accept and acknowledge the reality rather than sell us a bill of goods. We want to be understood and uplifted and have a sense that our leadership will forge better paths ahead for us.

How can we be assured that the challenges we face can be addressed and made into achievements if our leaders don't even convey a sense that the challenges exist?

When President Biden denies the truth and turns a blind eye, it leaves Americans with no hope. No sense of resolution. When his focus is on the safety and protection of other countries and other people while leaving Americans behind, it makes Americans wonder which country it is he is leading?

I would find it hard to believe that any honest, thinking person who watched that speech walked away feeling better about the current state of, or future of America. And that was the job of the State of the Union. It was the job of President Joe Biden.

Like so many other jobs since his administration took control of the White House, he didn't get this job done. Even if his speech really was essentially a campaign speech, you can't win over the American people and earn their vote relying on denial and lies to get it. All the assurances that we are on the right path and have strong future prospects have to be conjoined with the reality Americans actually live.

His State of the Union did not accomplish that.

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Trump Is NOT An Idiot!

IN NO WAY IS MY INTENT TO BE COMBATIVE HERE, FOLKS. But as I troll around the Internet in the usual places like Twitter and Facebook, there is just the annoying assertion by a good number of people, and on both sides of the aisle (with the bulk of it of course pouring in mostly from the left and the lamestream media) that somehow President Donald J. Trump is an idiot.

This, folks, cannot be farther from the truth.

Look, I have said multiple times that I do wish our president would tone down his Twitter antics a bit. But I have also said that the person Donald Trump is today is the same Donald Trump he was before he became President of the United States.

The thing here that needs to be pointed out, that gets sorely missed by many making this assertion, are the multitude of accomplishments this president has achieved and to point out that what he has done in his first year in office is actually rather historical. If you think it's just the economy he has done well with, you're just not paying close enough attention to what's actually happening in our government, and with this current administration.

He's an idiot? He's not a leader? Really? What planet are you living on?

Now, don't get mad at me for being so blunt here. Just read on and hear me out. Because I think it is important for you to be more than aware of why I think that President Trump is not only not an idiot, but is also a strong leader. Because the truth is that there is more than enough that is positive that's happening in the White House, and unless you are tuned into Fox News, you aren't going to hear the half of it.

• Border crossings are down 70% since Donald Trump took office.
  
• MS-13 gangs are under heavy fire from the Justice Department.
• Deportations of illegal aliens is on the rice, and law enforcement officials in ICE and Border Patrol have been strengthened.

Even if we don't have good immigration reform right now, the fact is that more is being done than has been done in many, many years and across many past administrations to simply enforce existing laws on the books. This should make throngs of American citizens, including legal immigrants, very happy. This means less crime, less drugs entering the country, less burden on the American taxpayer for welfare and other benefits some illegals receive, and more jobs available for legal citizens across the country.

• ISIS has been seriously depleted in their numbers.
• Citizens of Iran are making an uprising in their country with the full support of the administration, and sanctions are WORKING.
• North Korea is quieting down at least a LITTLE BIT, and have even reached out to South Korea in a way they have not before. I think Kim Jong Un is getting the message it might be better not to mess with the U.S. Something they would not have considered in the past administration.

The truth is we have actually seen some stability forming in the Middle East. When you reduce the power of ISIS and build coalitions with other Middle Eastern countries like Saudi Arabia, Egypt, Jordan, and Israel, it puts more pressure on the bad actors in that region to reconsider what they are doing, and it also empowers the people to push back harder against bad regimes and terrorist groups who make want only to maintain unrest and make the average citizen's lives miserable.

I am not going to say that North Korea having a small part in the Olympics is any sign that Rocket Man still does not have a strong desire to lob missiles and strut his "might" wherever he can. But it is a start. It is also something I am not certain we would have seen had Hillary Clinton won the election.

Now you might have noticed I have said nothing at all so far about the economy. Why? Because it is the obvious accomplishment—even if even that is seriously under reported by the lamestream media. But clearly you have historic lows in both Hispanic and black unemployment, more and more jobs being created, repatriation of overseas money, bonuses and wage increases, and of course an exploding stock market.

And everything I have mentioned herein is just a small slice of what he's accomplished. The bottom line is that if you think that Trump is an idiot or not a leader, you may want to consider your own intelligence and perhaps schedule a psychiatric exam rather quickly. Your mental health may be in jeopardy.

Wall Street in Flip-Flops...Again

I have written before that I sometimes find the folks on Wall Street to be a comedy of sorts. Today I have this same sentiment based on the news on the Street that today ended a four-day rally because, of all things, the folks on Wall Street were frazzled that just maybe the economy is weaker than they thought.

Just yesterday the DOW rallied triple digits on the news that Larry Summers would not be in contention to be the replacement for current Fed Chairman Ben Bernanke. Instead it looks more likely that Janet Yallen will replace him. If Larry Summers would have been the top successor he would likely have decided to taper the bond buying program currently in place by the Fed. Janet Yallen, however, is more likely to continue it.

To the folks on Wall Street this came as a relief yesterday. Thus the rally.

But, and I have said this before, tapering would in fact be a stronger economic development than not tapering. So what's the surprise on the street that the economy is not as strong as anyone thought?

One word. Duh. That is why quantitative easing is currently the position of the Fed. It is because the belief is by the Fed that the economy needs to be artificially propped up. It needs to be stimulated by low interest rates, and the bond buying program helps to accomplish that.

Perhaps I am missing something, but my take is that tapering should actually have the effect on the markets, that quantitative easing continuing seems to have had originally. The markets, and their underlying businesses would have a much better shot at gains and growth if more Americans are working, more Americans are spending, and when consumer confidence shows signs of improving. All of these things are lacking, thus the Fed continues to see quantitative easing as a means to hold things up in the interim. That is inherently a sign that the economy is weaker.

Still, I don't think today's move really means much. I just felt an urge to state the comedy of it. Yesterday the Street jumped for joy that the economy was crappy enough to warrant continuing easing. Today they sold off because they felt the economy was the obvious same level of crappy enough it was yesterday to hurt their investments.

It just leaves me scratching my head is all.

Cautious Optimism for the US Markets

Today wound up being another fairly good day in the markets, and certainly the markets have been enjoying some fairly nice runups of late. And while there are definitely positive signs that the economy may slowly be in the beginning stages of coming out of the doldrums, I am still fairly cautious about the moves I make in the markets, but also optimistic going forward that certain stocks will see some nice gains.

Part of the activity in the markets was due to the start of a two-day meeting by the Feds which, for all intents and purposes appears that they will not make any immediate changes, which is positive news overall. It willalso be interesting see what the Fed will have to say about some of the predictions they made in March when they last met in which they said they saw GDP growth around 2.6% through 2013, and a nearly 1 point increase in 2014 to 3.2%. In March the Fed also suggested that unemployment numbers would continue to improve, dropping to 7.4% by the end of 2013, and down to 6.9% by 2014. I think that if the Fed reaffirms these figures, or show better numbers for GDP growth projections and unemployment figures, obviously this will cause the markets to continue to rally. If the Fed adjust these numbers to the negative, it may throw a bit of uncertainty in the markets and cause stocks to go lower. My strong suspicion is that the Fed will not adjust their figures, but rather will state that they are on track to meet these projections they made back in March. That is still a positive, to my mind, and I think the markets will react positively to that news.

I also think that, for the time being, the Fed will maintain monthly purchases of $85 billion worth of bonds. They won't start scaling this back, I believe, until some of the projected figures begin to get closer to becoming fact. Bernanke, I think, tends to be a bit cautious about acting too soon. Although a scaling back of these bond purchases would certainly be a strong signal for the economy, and the markets could see gains as a result.

Stocks I like right now are Ford Motor Company (F), Dunkin Brands Group (DNKN), Target (TGT), and Masco Corp. (MAS).

I picked Ford due to what I perceive as better auto sales figures due to improving employment, an uptick in refinancing of mortgages which may open some money up to potential buyers, and aging fleets which will need to be replaced sometime in the near future which Ford could be a beneficiary of. Dunkin Brands Group was picked due to a good earnings cycle, and strong expansion of their business and upgrading of stores. Dunkin is making a strong push for market share, and I think they have a good chance of getting some of it. Target is my choice because consumer confidence is up slightly, and because I think Target is considered by many consumers as an upgrade to other discount players like Dollar Tree and Walmart. If economic conditions improve, and employment situations improve, consumers may well treat themselves to shopping up at Target over the other discounters. Plus, their stores look great. Masco Corp. is a play on the nearly 7% uptick in new housing starts recently reported, and improving home sales overall. When people buy new or existing homes, they tend to want to spruce things up a bit, and Masco Corp. is definitely a company who offers products new homeowners can turn to to help them to do this.

Will Lincoln ever offer a truck again?

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Ford Motor Cpmpany: An American Gem