It is difficult to imagine a scenario in which the U.S. economy does not experience stagflation. Record debt levels, low labor participation, muted long-term Real GDP growth, persistent inflation and the fact that the Federal Reserve is limited in its options to fight inflation leads us to believe that stagflation is imminent. Our premium TEK2day … Continue reading Stagflation Is ImminentPremium
Tag: interest rates
The Federal Reserve has two primary tools that it may use to fight inflation: halting the printing press and raising interest rates. The first option is unlikely given Treasury Chief Yellen and Fed Chief Powell are operating in lock step. The Fed is limited in its use of the second option. If the Fed were … Continue reading The Fed’s Options To Fight Inflation Are Limited
“Given the low level of interest rates, there’s no issue about the United States being able to service its debt at this time or in the foreseeable future,” - Fed Chair Jerome Powell. Maintaining low rates to minimize debt service expense is top of mind with the Fed as we wrote last week and as … Continue reading Powell Just Told Us Why Interest Rates Will Remain Low
Rising yields will slow debt-funded M&A activity. We expect the pace of Technology M&A to slow as companies review M&A pipelines and landscapes, alternative M&A deal structures and alternative capital allocation choices in the face of rising Treasury yields. Technology valuations are near an all-time high. A fresh $1.9 Trillion print could send equity valuations … Continue reading Rising Yields Will Slow M&A Activity
The U.S. Just Passed $1.9 Trillion In Debt-Funded "Relief". Now Is Not The Time For The Fed To Raise Rates. Yield Curve Control Is On The Horizon. Some expect the Federal Reserve to become more hawkish in the near-term. We don't see it. Not with $1.9 Trillion in new Government debt. The Fed will eventually … Continue reading A More Hawkish Fed Is Not In The Cards This Year
We reviewed the 592 page Biden COVID Relief / Stimulus bill which recently became law. Our breakdown includes the nine primary spend categories and related subcategories as presented in the bill. Needless to say this is a massive debt-funded fiscal spending program at a time when Debt to GDP is at a record level. The … Continue reading A Breakdown of Biden’s Debt-Funded COVID Relief Program
The three-headed Hydra of low labor participation, increased debt levels and higher taxes will cripple U.S. long-term Real GDP growth for decades. Labor participation is not going back to December 2019 levels. To believe that scenario is wishful thinking. For starters, 25% of restaurants and bars are permanently closed. Those jobs are not returning. Second, … Continue reading Brace for Anemic Long-Term Real GDP Growth
We have said it on our TEK2day Podcast and in conversations with some of you that the Fed's next move is to accelerate its QE effort to control long bond yields. This may occur as soon as this month. An interest rate hike is not coming this year in our view. There is far too … Continue reading The Fed’s Next Move Is To Ramp QE, Not Raise Rates.
Over the past 11 months and as recently as Tuesday the Federal Reserve has consistently reiterated its mission to get the U.S. Economy back to full employment. We are not there yet. The labor participation rate remains below 2008-2009 financial crisis levels. Let me know your thoughts on the below (particularly if you are on … Continue reading Is The Fed’s View On The Relationship Between Interest Rates and Jobs Wrong?
The Fed would have us believe "There's nothing to see here," (to quote Frank Drebin), as it relates to inflation. Consumer spending funded by government debt is of inferior quality as compared to spending funded by increased production. In January Americans spent their debt-funded government checks that were mailed out at the end of December. … Continue reading Long Rates Continue To Climb As Inflation Persists. Nothing To See Here.