Tag Archives: Draghi

Very Busy Latest Friday: China hits the jets, Draghi continues the talk, U.S. prepares to raise rates

Talk about a busy day, Friday November 21, 2014 marked a day of cross currents from around the world. With 75% of the globe either in recession or teetering on the edge, chiefs continue to push economies forward.

Surprise: China Lowers Rates

For the first time since 2012, China announced (surprisingly) a rate decrease in order to spur their economic growth. This is similar to with what the US has done to overcome the great 07-09 recession.

China Benchmark Rate

Global markets, caught off guard, smartly rallied, led by the emerging market/smaller economic countries. This makes sense as China is a great consumer of their goods and services.

Mario Draghi Continues to talk Interest rates lower in the European Union

For the very same reason, encouraging economic growth, Draghi the head of the European Union, on Friday also continued his push to jawbone rates lower. Lower rates act as a stimulus in most cases.

Draghi’s words were expected, however he emphasized in stronger terms, that he will coordinate a method to lower rates. His nemesis is multiple economies chugging along at differing speeds, all tied together via the Euro/common currency.

U.S. on the way out ?

Hoping not to jinx the situation, interestingly, the US is on a different page and has higher rates in it’s sights, if the economy continues to mend.

Our belief, while on an island with only a few fellow professionals, higher rates might just be the ticket, and not cause any major headwinds.

The good news, we all get to see how this works out, shortly, in the next few quarters.

Domestic capital markets are still frothy!

Have a Great Monday!

John A. Kvale CFA, CFP

PS Short week, but lot’s to say …

8222 Douglas Ave # 590
Dallas, TX 75225  

Sir, You Will Need to Pay Us $100 to Deposit that $100k In Our Bank! … WHAT?

Oh…and we are not going to pay you ANY interest …..  Are you Kidding?


Draghi Announces First Ever Negative Interest Rate

In an unprecedented aggressive move to push loans into the market, European Union chief Mario Draghi announced banks holding excess reserves will PAY .10% on their reserves …. or earn a NEGATIVE (.10%.)

Here are a couple of other items included in his stimulus plan:

  •  Sterilization/Forgiveness of bad loans
  •  Lowering of their benchmark rate to .10%
  •  And Lowering of their Marginal rate to .40%

Here is what a negative interest rate looks like, note the terrible mistaken INCREASE in 2011:

EU Rates

With fancy acronyms behind our names (CFA, CFP) we are students of fundamental investments and free markets. Such government interventions, including our own governments’ forcing of lower rates, has made it challenging to separate fundamentals from froth and induced increases in capital markets. (Long winded way of saying, fundamentals are not as important AT THE MOMENT.)

We have taken note of the EU’s actions and may begin to lean slightly more
towards our friends across the pond.

What a terrific time to have an international interview and a pending detailed article coming in the next Newsletter!!

Have a Great Monday! … I am still on the Road

John A. Kvale CFA, CFP

8222 Douglas Ave # 590
Dallas, TX 75225