Do Not Listen (To The Fed) by Marilyn Cohen, CEO of Envision Capital Management – Bond Smart Investor
Under no circumstances should you listen to the Fed. Cover your ears and maybe hold your nose–this Fed and their Fed-speak is so out of touch, so out of tune, that we deem their words white noise.
In the past the saying, “Don’t fight the Fed,” were words to believe in. Not now. Their huffing and puffing about raising interest rates—perhaps in September—cannot be believed.
I am not a keeper of the numbers but I cannot remember the last time the Federal Reserve raised rates just before an election.
And the economy! Oh Lordy that ephemeral growth and inflation they’ve been yammering about is nowhere to be found. GDP growth second quarter of 1.2%…now there’s something to be in awe of. After all the QEs, after bond rallies globally, nothing appears to be the antidote to lumbering, low growth both in the US and other developed economies. We are looking straight at the Japanification of the US. Whoever coined that word hit the bull’s eye.
The amount of global sovereign debt with negative yields is something around $12.5 to $13 trillion depending on the record keepers. And debt yielding between 0%-1% is roughly $14.5 trillion. Money gravitates to the highest yield and that’s in the US. Yes, our very own bond market. So Fed and your camera ready Presidents, say what you want. Huff and puff about raising rates. I won’t listen. Neither will the bond market.
When credibility is lost it is hard to regain. Interest rates will linger low for longer.
About Marilyn Cohen
Marilyn Cohen is one of the financial community’s most respected fixed income securities experts. She has been a Forbes magazine columnist for 21 years and is author of Surviving the Bond Bear Market: Bondland’s Nuclear Winter published by John Wiley & Sons, Inc. Marilyn is a sought after expert appearing on Nightly Business Report, CNBC, Fox Business News, National Public Radio and other business shows as well a frequent authoritative source for the Wall Street Journal, New York Times and Barron’s. She is the CEO of Envision Capital Management, Inc. a money management firm specializing in separately managed fixed income portfolios for individuals. Minimum account size is $500,000.