Here we go again!
Despite every effort from the Federal Reserve to create inflation, today the Labor Department reported that the producer price index fell despite an expected gain.
So what's the driving factor here?
Well we keep being fist fed by Washington and the mainstream media, for what seems like the better part of a decade, that we are in some type of an economic recovery meanwhile wages are not rising, and the money velocity remains near historic lows.
The Federal Reserve is stuck.
At present the federal reserves balance sheet, that is the debt it is currently holding, is larger then the GDP of most countries on Earth.
The Federal Reserve has been talking about "normalizing" their balance sheet over the past several months, which would involve dumping the mortgage-backed security's on their balance sheet and stop reinvestment's of maturing long bonds.
In theory, the effect of normalizing their balance sheet would push interest rates higher however, as I have been saying for months I do not believe that the Federal Reserve is going to be able to normalize the balance sheet for the foreseeable future.
I still believe it is possible, (and likely), that the Federal Reserve will raise interest rates one more time this year, expect another 25 basis point hike to the federal funds rate later this year-then they are done.
Keep in mind as a Fed watcher myself, I have only been wrong one time with regard to the Federal Reserve's actions on interest rates ever since they have been talking about raising them status post the 2008 financial meltdown.
The Federal Reserve is going to keep their foot to the floor with regard to providing a backstop for the stock market, especially in light of recent Geo-political events.
I expect the Federal Reserve is going to keep pressure on the dollar for as far as the eye can see, in attempt to artificially create inflation. Moreover, the lack of wage growth and money velocity will keep the Federal Reserve's hands tied with regard to normalizing their abnormal balance sheet.
Gregory Mannarino @marketreport
Can you say stagflation here we come. I agree that they will raise rates another 25 basis points and you've been right on with their actions for a long time. It's simply a game of smoke and mirrors, but the real hurt people are feeling in regards to the weakening dollar couple with stagnant wages can only go on for so long.
The Fed is trying to have a Goldilocks moment. Reduce their balance sheet without crashing the market. I don't see how since the world's productive capacity has not kept up with their and every other central bank's balance sheet. If they do it slowly it will take them 20 years to get anywhere and that is hoping we don't have recessions within that time. They are trapped. Sure they can reduce a lot over a shorter time frame; say 5 years but then they will start affecting asset prices.
I never understood how the Fed thought they would get meaningful inflation. The US dollar is the reserve currency. We are mostly a consumer based society and we have a huge trade deficit. Therefore, any money printing would just drive up fixed asset prices here in the US and export the inflation we want to the world via our enormous trade deficit.
I have been stacking silver for a long time. I have seen a time when silver prices were rapidly rising, but the coin shops supply was falling. Today the price is down and supply is good. As they say "get it while supplies last."
Thanks Greg. Any thoughts on gold / silver up swing?
My hope and prayer is that President Trump gets rid of the Federal Reserve. It has done enough damage to the pocketbooks of Americans. The early 1900 dollar is now worth 3 cents or less. They are the greatest bubble creators of the Universe. The housing bubble was not enough pain for Americans so now they are doing the same with the Stock Market. Enough is enough! We have suffered enough! Basta!
Great analysis greg your articles really awesome.
Hi Greg, As always the insight you provide is helpful to so many. Nice to know you're always on top of this. Keep up the GREAT work brother and STEEM on!! Upvoted. :C)
Thx Greg
Awesome article greg my trading really improved after reading your posts.
Thank you
thanx sir to share on this full report labour and fedrel reserver like ur always reports
Post thanks
maybe u r right greg sir on I expect the Federal Reserve is going to keep pressure on the dollar
Gregory, thank you once more for sharing your knowledge and insight. Greatly appreciate it!
The economy is in tatters with the huge debts wracking up as well as the dollar constantly depreciating.
Thanks for the information Greg
You trying to "force" your will on the markets, Greg? Shame on you! :-) Just banked 150% on my remaining SPY put and 150% on my most recent DIA short entry. "Targeting" 118.75..as outlined here...
https://steemit.com/dia/@joejustjoe/8-3-17-diamonds-are-for-dumb-asses
DIAmonds are forever, Greg! Well, I'll hold the short til DIA 118.75 anyhoo. :-)
I'm glad to read your reviews. The Fed said they would reduce the balance sheet. I 'blindly' thought that they do what they say, but they have not started and you are probably correct that they won't start any time soon.
I agree that another rate hike is coming....
Keep posting because it helps those of us still learning how the 'hear' from the Fed, and how to 'watch' the market.
Btw, I will bet you a $50 lunch that there will be no more Fed rate hikes this year. ALL intrust rates adjustments will be made via "market driven" rates. And TLT is saying Greenspam was wrong! :-)
Oh, btw, I will be taking "market driven" rates higher soon. Right around the time I spalunk SLV. :-)
Noted; thank you Greg!
good work ur anyalesis for traders are very helpful
thanx @marketreport ti share its details with us exellent
I think you hit it spot on when you say, "The Federal Reserve is stuck". They have backed themselves into a corner and can't get out. If they raise rates, the market begins to tank. If they keep them low, at some point inflation is going to break out big time and hurt a whole lot of people. Keep up the great work Greg.
ur article on it good but i dont understand why they keep pressure on dollar
The fed will never reduce its balance sheet while ever things stay the same
I agree Greg. They want inflation. We could get at some point a hyper inflation too. Some countries have introduced negative interest rates. At some point this show has to end. Time will tell. Thanks for the update. - Troy
nice ur work mostly good and prdictions are also ur best work
That's not what the "facts"are saying as Greg just closed out his 5th straight losing trade here this morning. Only the trades he tells you about of course. Greg is doing MUCH better on the "hedge" trades he makes "behind the scenes"...which is basically him telling you that you should take the opposite side of the trades he posts at TradesChoice when you think about it. His next trade will be a winner though. "Has to be" by the law of averages. :-) Again, Greg....glad you have a sense of humor.
Crazy man! Markets are crashing and metals are smashing it -_-
Great stuff. I can expect that the Fed will do what is best for them and the Globalists.
A hike in Sept would probably give them 6 months before they start lowering them I guess.
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Upvoted and Resteemed.
You are awesome when it comes to picking the right direction with the FED.
You know your stuff there.
I just cannot wait till you tell us about the FED getting ready to lower those rates...
GOLD about to break through $1300...!!!
thanks for update.
I LOVE THIS MY BRO
Upvoted. I'll be resteeming this now :]
Good work........... @marketreport
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This is very interesting for all of us.
Yes, the Federal Reserve won't be able to normalize anything.
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east or west @marketreport analysis are simply the best.