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Federal Reserve 2014 Forecast
Jim’s 2014 Forecast
FEDERAL RESERVE 2014 FORECAST
If you believe the FED forecast then they’re going to finish the taper by the end of the year.
They’ll finish the taper by November or December, then there will be a period of time, and then they’ll normalize rates and reduce the balance sheet in 2015.
The problem is that the FED has the worst forecasting record in economics. There’s no reason to believe the FED forecast.
These are the same people who have been wrong five years in a row.
JIM’S 2014 FORECAST
The FED has tapered into weakness.
The employment situation is dismal.
The labour force participation fell off a cliff.
Yellen is guided by an economist named Andrew Levin at the Boston FED. Levin makes the point, which Jim agrees with, that the inertia of getting someone back into the labour force is much greater than it is to take an unemployed person to take a job.
An unemployed person is job-ready, but if someone is out of the labour force then they’re on the couch watching basketball. That situation has a higher bar for easing.
With GDP we have negative growth in the first quarter.
All the indications are bad.
All these indications indicate more monetary easing, BUT Bernanke tied Yellen’s hands, and this is a very hawkish board of governors at the FED.
They have three vacancies, so the board is over-weighted to the regional board presidents because we’re missing three governors.
This may become a more dovish board in 2015.
If the data comes in bad the FED may pause the taper in July. If they get to September and they’re still tapering then Jim expects them to see it through.
He believes they’ll begin new asset purchases in 2015.
The stock market and housing markets are in a bubble, and are propped up by zero interest rates. The New York Stock Exchange leverage is at an all time high.
Jim suggests that people do what Warren Buffett is doing — get out of cash and into natural resources and hard assets.
Buffett bought a railroad, he bought oil and he bought natural gas.
The Gods of the Copybook Headings
words by Rudyard Kipling and music by Elaine Diane Taylor
copyright 2009 Intelligentsia Media Inc.
All rights reserved.
Available on iTunes.
Another Week on Wall Street
words and music Elaine Diane Taylor
© 2013 Intelligentsia Media Inc. All rights reserved.
from the album Coins and Crowns available on iTunes