Operating at the Intersection of Technology and the Capital Markets
Tag: Federal Reserve
The Fed will likely hike by 25 BPS today (although we hope for 50 BPS). On the subject of a Fed pivot, market commentators seemingly always neglect to mention the QT component. QT is a more powerful monetary policy tool than is the Fed Funds rate in our view. Banks can't lend a Dollar that … Continue reading A Full Fed Pivot
Crypto currency will become a mainstream accepted form of payment when the Federal Reserve rolls out its central bank digital currency ("CBDC"), or FedCoin. Not before then. The Fed and the SEC would never allow a third-party crypto currency to replace the U.S. Dollar. The only commodity that will ever replace the Dollar (every fiat … Continue reading Here’s When Crypto Currency Will Work
The sooner the Fed gets to where it is going, the sooner it may pause and observe. In addition, Treasury yields remain negative across the yield curve which is not long-term healthy for the economy. The Effective Fed Funds rate range stands at 4.25-4.50%. If the Fed believes that the upper bound should sit at … Continue reading Why The Fed Should Hike By 50 BPS
The Fed's tightening game is more than a one-trick pony. Quantitative Tightening ("QT"), is equally if not more important to monetary policy than the Fed Funds Rate. The Money Supply & QT. The Fed reduces the size of its balance sheet by selling holdings or allowing holdings to mature. Both methods result in money being … Continue reading The Money Supply & QT
The Fed's Treasury position was essentially unchanged for the week-ended January 25th while the Fed's Government agency/Mortgage-backed securities position was $15.2 billion lower over the last week. The housing market remains inflated in our view due the Fed's ZIRP policy in 2020 and 2021. Many suburban housing markets that saw residential properties trade at $200/SQFT … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
The NASDAQ Composite has had a nice little run, up more than 9% year-to-date. However, I would exercise caution ahead of Tech earnings and the Fed's January 31st / February 1st FOMC meeting. We have written on numerous occasions that we expect management teams to take a conservative approach to 2023 Revenue and EPS guidance. … Continue reading Technology Stocks Are Not Yet In The Clear
Treasury Secretary Janet Yellen is campaigning for the U.S. to raise its debt ceiling. This is code for Treasury can't afford to pay down its debt and wants to issue new debt to pay down the old debt. Reducing fiscal spending is the answer, but Washington is used to having its cake and eating it … Continue reading Treasury’s Vicious Debt Cycle
The S&P 500 is approximately at its long-term average P/E multiple of 20x (if one looks back to 1964). However, that multiple could go lower should the Fed hold rates higher for a longer period than what many investors expect. Further, markets tend not to bottom until after the Fed begins to cut rates (we … Continue reading How Low Will Valuations Go?
The Fed significantly trimmed its Treasury holdings during the week-ended January 18th while its Agency security holdings are essentially unchanged over the same period. The Fed has treated the U.S. housing market with kid gloves over the past month, certainly so since January 1st as its Agency security position is only $1.5 billion lower month-to-date. … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
The Fed's balance sheet was essentially unchanged over the week-ended January 11th. Treasuries: The Fed’s Treasury security holdings were $1.2 billion lower over the last week and $58.2 billion lower on a rolling 4-week total basis. Agencies: The Fed’s Government Agency security holdings were unchanged over the last week and $17.2 billion lower on a … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
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