What a ridiculous sham. Every few weeks the financial community ‘heart beat’ stops for a few seconds to find out what pronouncements will be handed down from the mount at the latest Federal Reserve meeting.
To say there’s been some blood spilt in the energy pits is an understatement. Since the start of the month the S&P energy sector is down nearly 16% while the financial sector is up nearly 7.5%, quite the pair trade during the month of July.
Who hasn’t heard of the Federal Reserve’s vaunted interest rate policy group, the FOMC? We’re all aware that this group is constituted of Fed Governors who meet every-so-often and at the conclusion of their meetings, make an “announcement” regarding their target for short term interest rates or the Fed Funds Rate.
My past three WrapUps have been devoted to counterbalancing the financial Pollyanna folly that the worst is behind us; this will be the fourth.
Financial institutional losses are mounting as mortgage portfolios are written down as home prices continue to decline and foreclosures continue to rise. Highlights from a Bloomberg article shown below illustrate the dire housing situation.
First, let’s slip out the back, Jack, and try to wrap our heads around the unfolding situation. Last week, spooked investors, ‘got off the bus, Gus,’ sending the share prices of Fannie Mae [FNM] and Freddie Mac [FRE] down more than 45% on the week and more than 75% on the year.
Those most pessimistic on the economy and stock market have been proven right over and over again over the last year and a half, with those who listened to their calls for caution preserving their wealth instead of watching it evaporate, which has been the fate of those following the permabulls.
Investors would do well to remember Sir Isaac Newton’s first law of motion that states an object in motion will stay in motion unless an external net force acts upon it.
The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system.
It sure looks that way as the stimulus checks have begun to filter into the economy with minimal effect. The month over month retail sales growth has picked up modestly recently, however the year over year growth rate continues its downward trend and is likely to continue south as the affect of the stimulus checks fade.