E The Ghost Of The Feds Past: Rate Hikes, Rate Cuts, And The Great Collapse

It appears the Ghost of 1936-37 is howling. 

Point 3. "I’d like to underscore that the forecasts of the appropriate path of the federal funds rate, as usual, are conditional on participants’ individual projections of the most likely outcomes for economic growth, employment and inflation, and other factors. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data. Stronger growth or a more rapid increase in inflation than we currently anticipate would suggest that the neutral federal funds rate was rising more quickly than expected, making it appropriate to raise the federal funds rate more quickly as well. Conversely, if the economy were to disappoint, the federal funds rate would likely rise more slowly," Says Yellen. Well, this point is simple - clearly the data is showing that we are will be in a recession. So expect a rate cut at the very least, but this author still believes negative rates are upon us. 

Final Words

To summarize: China is collapsing, Brazil is Crashed, the EU is pumping and to trying replace solvency with liquidity, US stocks are collapsing, markets are becoming iliquid, there are numerous bubbles such as auto debt, college debt, corporate debt that need attention. And the next Bigger Short will be U.S. fracking companies in the junk bond market (although it appears to already be). 

Recalling the introduction of the article, this author will do a follow up piece highlighting the very worst of the oil stocks in the U.S., using an analogy these will be equivalent to the CCC - D rated subprime CDOs in the housing debacle of 07; giving investors short ideas. Digging up companies with no cash, maxed out revolving credit line, disgusting amounts of debt, massive writedowns on previous reserves, and worst of all - unprofitable at oil below $60.

For investors, there is more downside in markets until the fed will inevitable be forced to cut rates, increase QE doses, or even turn rates negative. All roads point to a cheapening of the US dollar, which conversely benefits gold.

Reiterate from a previous article: Long precious metals, short the Central Bankers and Elites. 
Try not to drown out there. 

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This is a column I wrote in my recent newsletter issue.

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Comments

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Joe Economy 4 years ago Member's comment

Even if Yellen did seem too overly optimistic about the state of the economy when she decided to raise interest rates, I still believe that whatever turbulence we are seeing now in the stock markets are not as a result solely of that rate hike. China was and still is extremely volatile, oil continues to spiral downwards, and the US dollar is stronger than almost any other currency which makes US exports expensive and pressures the US economy in a myriad of ways.

Adem Tumerkan 4 years ago Author's comment

I also dont think it is the sole reason either.

But mentioning China, they had a similar volatile and our markets also plunged in August, just as the crowd as positive the Fed would hike rates - then they didnt and markets rocketed.

The data is clear, we are in a recession.

Alot of the issues you just named are symptoms of a strong dollar in my opinion (or atleast the strong dollar added to the damage).

Currency Trader 4 years ago Member's comment

Agreed, well done.

Gary Anderson 4 years ago Contributor's comment

Amazing that.25 percent hike is destroying liquidity. Must be a pretty fragile financial system.