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Bonds Win Again
Bonds and Currencies win again. Interpreting the Fed minutes, it would seem the Fed has no intention of reducing the balance sheet starting in September, and one could argue from reading the statement it might not even be in 2017. Â Directly from the minutes:
Fed Minutes:
Members agreed that, at this meeting, the Committee
should further clarify the time at which it expected to
begin its program for reducing its securities holdings in
a gradual and predictable manner. They updated the
postmeeting statement to indicate that while the Committee
was, for the time being, maintaining its existing
reinvestment policy, it intended to begin implementing
the balance sheet normalization program relatively soon,
provided that the economy evolved broadly as anticipated.
Several members observed that, in part because
of the Committee’s various communications regarding
the change, any reaction in financial markets to such a
change would likely be limited.
It has my belief since April that the Fed would not unwind the balance sheet in 2017, and today’s minutes seem to confirm that theory. The Bond market from the very beginning did not fear such a thing. Let’s go to the video tape: From our premium member area on April 6.Â
The Interpretation
From reading today’s statement, it seems clear, that Fed will first look to stop its reinvestment policy and then look to pare down its balance, only after it has fully communicated how it will be done. Yields moved slightly lower on the news to 2.23 on the 10-Year.
10year by Scorpio244 on TradingView.com
Tomorrow a look at The Death of the Department Store a special look at why Department Store are antiquated and for the most part no longer need.Â
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With the Dollar once again back to weakening.
10year by Scorpio244 on TradingView.com
While equities, well, as usual, had no clue what was even going on.
S&P 500 by Scorpio244 on TradingView.com
Because if it had, it would have known this the best possible scenario for a bull market. Low Rates, Low Inflation, and Earnings growth. Ya can’t get a much better set up than that.
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Michael Kramer and the Clients of Mott Capital own shares of GOOGL and NFLX
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.