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Bonds & Interest Rates

The Fed May Show Trump No Love

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Posted by Peter Schiff - Euro Pacific Capital

on Friday, 21 July 2017 07:03

Peter SchiffTypically, U.S. Presidents are wary of claiming stock market performance as a referendum on their success. Most have seemed to understand that taking credit also means accepting blame, and no one would want to make the tortured argument that the positive moves reflect well on their presidency but that the negative moves do not. But Donald Trump has shown no reluctance to make any argument that suits his political purpose of the day, no matter its absurdity, and no matter if he has to contradict the arguments he made last year, or last week. Perhaps he assumes, as most investors seem to, that the risks are minimal because the Federal Reserve will jump in to save the markets if things turn bad. But in binding his performance so closely to the markets he overlooks the possibility that the Fed will be far less charitable to him than it was to Obama.

The Federal Reserve's Quantitative Easing program, which lasted from the end of 2008 to October 2014, was specifically intended to push up asset prices by lowering long-term interest rates and reducing financial risk. This provides a good explanation why the stock market gained nearly 200% from the bottom in March 2009 to October 2014 despite the fact that the U.S. economy persistently performed below expectations during that time.

Many people, myself included, argued that once the stimulus was removed stock prices would have to fall. Two and a half years later that has yet to occur. Although U.S. stocks are no longer rocketing upwards like they were during the QE era (the S&P 500 is up just 19% since the program wound down completely in November 2014), they have yet to experience any type of meaningful correction. Certainly market observers sense danger, but with the Federal Reserve cavalry always ready to ride to the rescue (as they did in January of 2016), markets have been free to drift upward.



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Bonds & Interest Rates

An Orgy of Canadian Debt

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Posted by Philip Cross

on Friday, 14 July 2017 10:35

brokenpiggy

Between 2006 and 2016, Canadian household debt grew by $932 billion (or 85 per cent); governments by $755 billion (or 83 per cent); non-financial corporations by $713 billion (or 98 per cent); and financial corporations by $778 billion (or 93 per cent)... CLICK HERE for the complete article



Bonds & Interest Rates

1st interest rate hike in 7 years

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Posted by Barrie McKenna

on Wednesday, 12 July 2017 10:56

rate increase

The Bank of Canada is hiking its key interest rate for the first time in seven years, joining the U.S. Federal Reserve in starting the process of undoing nearly a decade of easy money.

The bank raised its overnight lending rate to 0.75 per cent from 0.5 per cent Wednesday, citing “bolstered” confidence that the Canadian economy has finally turned the corner after years of sputtering growth... CLICK HERE for the full article



Bonds & Interest Rates

Interest Rate Hike: 3 Ways It Affects Your Finances

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Posted by Tori Floyd, Yahoo Finance

on Tuesday, 11 July 2017 10:54

Capture

It’s all but confirmed that the Bank of Canada will raise its key interest rate later this week. That prospect has many Canadians on edge, unsure of what to expect.

A report from RBC last week forecast that if interest rates were to rise one percentage point over the next year, it would mean households would end up paying an additional two cents for every dollar of income to serving debt. That amounts to the average Canadian household (with a median income of $78,870) paying about $130 more each month... CLICK HERE for the complete article



Bonds & Interest Rates

Will Trump Fire Yellen or Vice Versa

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Posted by Michael Pento - Pento Portfolio Strategies

on Friday, 07 July 2017 07:51

trump-yellenCitigroup’s Economic Surprise Index just hit its lowest level since August 2011. But this level of disappointment has ironically emboldened the Fed to step up its hawkish monetary rhetoric. The truth is that the hard economic data is grossly missing analyst estimates to the downside as the economy inexorably grinds towards recession. This anemic growth and inflation data should have been sufficient to stay the Fed's hand for the rest of this year and cause it to forgo the unwinding of its balance sheet.

But that's not what’s happening. Ms. Yellen and Co. are threatening at least one more rate hike and to start selling what will end up to be around $2 trillion worth of MBS and Treasuries before the end of the year--starting at $10 billion each month and slowly growing to a maximum of $60 billion per month.

But why is the Fed suddenly in such a rush to normalize interest rates and its balance sheet? Perhaps it is because Ms. Yellen wants to fire Trump before she hears his favorite mantra, “you’re fired,” when her term expires in early 2018. It isn’t a coincidence that these Keynesian liberals at the Fed started to ignore the weak data concurrently with the election of the new President.



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