Lisa Beilfuss

The Fed was always going to cut more aggressively than many believed. A good time to re-up this Praxis article, and related thread, from March:

Comparisons to Jay Powell as Arthur Burns 2.0 are unfair—to Burns, who led the Fed from 1970-1978 and is often referred to as the worst Fed Chair ever. Powell’s callous comments in Jackson Hole about transitory inflation reveal a lack of appreciation for the damage the Fed has done to the dollar and American prosperity. Burns’s published diaries at least show he was troubled by the inflation of his tenure.

Rate cuts may worsen the commercial real estate market more than help it, posing an under appreciated problem for banks and investors. Great article by ⁦@JWPopeo⁩ barrons.com/articles/small…

Thanks @LisaBeilfuss for pointing out this indicator. With only 1 false positive in 1969, it's risen past 10% once during every recession since 1953 with lags of 0-7 months from the recession start. It just gave a signal in April, suggesting a recession may have started by then.

The latest article Praxis subscribers received, before the Fed announced plans to slow the pace of balance-sheet runoff. The narrative is that slowing quantitative tightening, or QT, allows for prolonged balance-sheet shrinkage after the Fed doubled its portfolio in response to the pandemic. In reality, slowing QT is the start of an easing cycle that will be in full swing sooner than many appreciate.

Thanks! This is from the article: Kansas City Fed researchers in Oct warned that banks’ unrealized losses have rendered many banks nearly insolvent. They essentially concluded that the banking system needs a slowdown insofar as lower interest rates are necessary to boost securities valuations.

@LisaBeilfuss Love this..I would add that I think there is a chance that Powell has more concern than he admits regarding a potential commercial real estate/banking event in the next couple quarters and that may explain a portion of dovish bend…reasonable?

Fed easing will be more aggressive than investors expect. Why? A thread

END/ For the full article, and to read more about the intersection of investing and economics, visit @PraxisFinPub at: praxisfinpub.com

/11 When interest paid is considered as a cost borne by consumers and included in the CPI–as was the case before the index’s 1983 redesign–inflation still stood at 9% in Nov. One interpretation: high rates themselves are actually pushing up household inflation.

This is right, and it is why Fed easing will happen sooner than Powell says.