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Wednesday, September 12, 2018

The Fed goes MAGA

Stock markets elsewhere are tanking while the indices of our stock market are at or near record highs, life is tough elsewhere.

Graham Summers, Chief Market Strategist of Phoenix Capital Research, credited the Federal Reserve in part for saving our bacon.

"While US stocks have continued to move higher courtesy of capital flowing into the US as a result of the Fed’s policies, the rest of the world is entering a meltdown," he wrote.

Summers credited the Federal Reserve raising its interest rate to 2%.

"This is happening at a time when MOST of the world is still posting NEGATIVE yields. Put simply, the Fed is making US debt EXTREMELY attractive to capital at a time when other nations are PUNISHING their debt holders.As a result of this, capital is moving into the US propping up our markets, while the rest of the world collapses," he wrote.

Because the American economy is robust under President Trump, the Federal Reserve can raise interest rates to a 10-year high of a paltry 2%. 

2% sucks but it is better than less than zero percent, which is what money earns elsewhere.

But two other factors are at play. Our stock market now is a better and more secure investment than elsewhere. Also, the Republican Tax Cuts and Jobs Act of 2017 makes repatriating overseas profits fiscally sound for American companies.

While the rest of the world suffers Hurricane New World Order, we are a safe harbor.

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15 comments:

  1. In spite of the increase in rates, home affordability is higher than it has been since 2009.

    http://idiosyncraticwhisk.blogspot.com/2018/08/housing-part-318-affordability.html

    This is Trump's economy, and everyone knows it, even if they insist otherwise.

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  2. If Dems take the House, they shut will shut it down.
    Vote like your livelihood depends on it!
    JimNorCal

    ReplyDelete
    Replies
    1. Trump has a pen and a phone. He can veto bills passed by a Democrat House that might barely make it through a Republican Senate. What Trump won't get is more of what he wants, which means two years of legislative stalemate and an impeachment intended to overturn the 2016 election.

      Delete
  3. I'm old enough to remember when that 10-year was 12%.

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    Replies
    1. Home interest rates hit 23% during Jimmy Carter's reign of terror. Can't remember the Fed rate, but above 12%!!

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  4. Stock markets go down as well as up. There is a lot of shorting going on now. But over the long haul we are still the best game in the world and will stay the way as long as the party of Barack stays out of power.

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    Replies
    1. The more shorting the better. That just boosts the market to new highs. (Short sellers get the big squeeze.)

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  5. This is what happens when you have someone who understands business and finance.

    I love it when a plan comes together.

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  6. Mayhaps someone might explain why people would invest money in a place where there is a negative interest rate. So you put your money there and they take part of it each year? What's up with that?

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    Replies
    1. I believe it was considered safer? Maybe. And these are advanced European democracies where this was happening. Trying to control inflation IIRC. -- BJ54

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  7. All those economy guys that always preface everything with "unexpectedly" thought the interest rate hike would put a damper on the stock market. Trump wins again. The coyotes are wondering what happened.

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  8. If the midterm elections are lost for the right, there is always Trump. He'll not sign anything what the dems dominated senate will generate.

    That said is that the world seems to have profited for so long from America, that's not the time to or adapt or sink.

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  9. And good news for all savers - and currently retired people - who lost ground during the last decade due to the Fed printing money like crazy at 0% interest.

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    Replies
    1. Yes! To my fellow old people: Let's vote Republican so that the Fed can raise rates and give us a decent return on our savings!

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  10. According to the Labor Department's Bureau of Labor Statistics Consumer Price Index, which most people believe seriously understates inflation, if for no other reason than that so much Federal income and payments are adjusted to it, from September 2017 to August 2018 the inflation rate was 2.16%. So we're still in a period of negative interest rates and financial repression in the US. But we continue to be the least worst place to park your money, and have gotten better at that.

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