One of our favorite Federal Reserve Presidents Dallas’s own Robert Kaplan had another Round Table discussion the most recent Monday night….
Those with great memories may recall my fiasco when listening to his Round Table discussions and accidentally raising my hand for a live question…. good news, avoided that this time! haha
Elephant in the Room – Inflation or Not?
While leading with stats and updates, the review order has been changed due to the very end of the discussion and importance…
Recalling from the Mauldin SIC conference of the last two weeks and and once again here we are…. Elephant topic for Kaplan – Inflation or Not?
(Have you ever been on a call or virtual visit like this and wondered who else is on? – Am I wasting my time here? Or is this a good use of the late evening? – See callers below for answer!)
Live Callers
After about four or five live callers, the moderator announce, “Our next caller is Byron Wien!” – WHAT!
Wien is an 88 year old veteran of the Capital Markets and currently Vice Chair of Blackstone the largest money manager in the US!
What is he doing listening to a Dallas Reserve President at this time of the night – he is one hour later!
In a no nonsense, direct question, Wien asks or more insists “There is inflation and it is coming faster than officials think! What are you guys going to do?”
Kaplan answers directly that he thinks tapering monthly purchases along with increasing of rates should come “Sooner Than Later!”
This statement was repeated more than any other statement and even at one juncture, Kaplan stated “I said this in March and have seen nothing to change my view!” Sooner Rather than Later!
Kaplan goes on to say ” It is better to let off the accelerator and coast and possibly tap the brakes rather than staying on the accelerator and having to jam the brakes quickly!” We Agree!
Last up from the live call ins :
Robert Sakowitz – Concerns about shipping and port trouble- his personal example of $2600 pod now costing him $8000- (Has to be passed on somewhere? right?)
Based on our research and his question, most likely a multi generational retail magnate!
Both calls were concerning inflation, with several others concerned the FED has stayed to long and their mandate has been met!
Interesting Stats from Kaplan
2 million worker age 55 and over retired since Covid, dropping a valuable portion of the workforce
1.5 million women left workforce to care for children- Wow !
Texas and the surrounding Dallas Fed Area High School Superintendents on average graduate 85% of seniors and now only 60% – creating a shortage of skilled workers –
Taper and Policy – How can FED withdraw without market disruption? SLOOOOWLY
Learned from 07-09 – Telegraph in advance and give market time to absorb
What signals will use for taper – FOMC in Dec of 2020 agree that substantial further progress (Kaplan believes this statement is key and is very open to be used and interpreted many ways)
Input supply demand imbalances – metals, food, wages, PCE of April – June – elevated levels – uncertain of how long will persist
Believe inflation run at 2% and anchored there-
11 million barrels of Oil last year, thinks can only to to 11.25 million per day- fossil fuel here for decades longer, maybe not at the same level as prior but will not go away
Great Final Question from the Moderator
What Keeps Me Up at Night? (Recall same exact question of Buffet at annual meeting and the EXACT same answer)
“No textbook for this recovery, this is unlike any other recovery we have ever had- no prior example – We must manage the risk be nimble if possible !”
There you have it… Local Dallas Fed President echoing a lot of things we have been hearing, spoken of and discussed here!
Good News – Time will Tell and it will not be a long time (quarters, not decades)
Have a Great “Kaplan Update” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Robert Kaplan Dallas FOMC President Town Hall Analysis and Update, New York President Williams Chimes in, Wall Street Journal’s Favorite Fed Reporter Too – Taper Transition to Begin
While not sure why all Federal Reserve Chairs do not do this type of event … there are an even dozen Fed Banks scattered across the country for roots in various geographic areas, we are very happy our local favorite, Dallas’s own Federal Reserve Bank President, Robert Kaplan has started his own town hall event.
Think this is our third or fourth attendance, with the first as mentioned here, becoming an accidental question…
Incidentally at this event, the first three questions were from acquaintances… Great Minds I guess!
Another Robert Kaplan Town Hall Update New York Fed Williams Chimes in
The most important item mentioned in this town hall was that Kaplan supports a taper of the 120 billion monthly purchases of Mortgage and Treasury bonds as soon as October, with an announcement in two weeks at the September 22, 2021 Fed meeting.
Luckily with the delay of the weekend to produce this full post, New York Federal Reserve (debatably the most powerful bank) Chair John C. Williams in a speech via video conference to St. Lawrence University said the following:
“There has also been very good progress toward maximum employment, but I will want to see more improvement before I am ready to declare the test of substantial further progress being met. Assuming the economy continues to improve as I anticipate, it could be appropriate to start reducing the pace of asset purchases this year. I will be carefully assessing the incoming data on the labor market and what it means for the economic outlook, as well as assessing risks such as the effects of the Delta variant.”
Wall Street Journal’s Go To Reporter Pens Friday Article
Then the following story hit the Wall Street Journal Friday, September 10, 2021 by the Fed’s favorite go to reporter, NIck Timiraos..
NIck runs with a November 2021 Taper Transition and a 15 Billion per meeting drop off from the current 120 Billion monthly purchase…
What to Watch – Longer Term Interest Rates, Markets Themselves
If this is true, and the FOMC does begin taper, we will need to keep a sharp eye on interest rates, especially the longer end i.e. 10 year treasury.
Near then end of 2018, the FOMC began lowering asset purchases AND raising rates at the same time… Markets protested with a sharp 20% drop, causing Fed members to reverse course.
Kaplan and other officials are reiterating that just because the Taper may begin, interest rate increases are not on the horizon yet.
Recall in our very recent Kyle Bass review, where Fed officials are known to carefully watch the Capital Market reaction to their comments. If as true as Bass thinks, Fed officials will be watching close!
Other Kaplan Notes from the Town Hall:
Apologies for the length of this post … this was a combination Reporter, notes and collection of various data points…
A smooth transition is very important, and long desired by many in the investment community, buckle up and let’s see how it goes!
Have a Great “Smooth Taper Transition” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Posted in FOMC, Forecast, Interest Rates, Investing/Financial Planning, Market Comments
Tagged Dallas FOMC, FOMC, Interest Rates, John Williams, Kaplan, New York FOMC, Nick Timiraos, Rober, Wall Street Journal