A while back we mentioned the FOMC – Federal Open Market Committee, lead by Jerome Powell were in a Pickle .. as at that time one of their regional banks had a research report out that GDP- Gross Domestic Production -Economic Growth indicator – was dropping fast and they were going to raise interest rates against a hot CPI = Consumer Price Index – blunt inflation gauge which would exacerbate the situation.
Fast forward to today and that Pickle is not any better…. maybe even more dill! With the afore mentioned Part 1 Advance Analysis M2 review showing dramatically dropping or the pulling of liquidity out of the system, bank fatigue has been seen and felt and here our comments on Banks being a slave to confidence for solvency.
On Wednesday of this week, March 22. 2023 the FOMC is bound by their goal of slowing that sticky inflation we are all seeing, especially at the grocery store, and best measured by the CPI … BUT, this additional rate increase will add fuel to the fire of less liquidity, AND on top of that our neighbors across the pond just raised rates .50% last week, albeit from a much lower 3.00 to 3.50% rate….currently the US rate is 4.75% …
We did say Pickle ? Right….
Enter the BTFP – Bank Term Funding Loan Program – Happy Bank Program
On March 12, 2023 the Federal Reserve Created the BTFP as another backstop for possible Bank Fatigue ..
March 12, 2023
Federal Reserve Board announces it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors
For release at 6:15 p.m. EDT
This new program is a sort of Fed Discount Window on Steroids, meant to improve Bank confidence.
Quick History–
Long ago the FED (going back in loose form to the 1920’s – the start of the Fed) started a program for Bank help during stressful times, the Fed Discount Window –
Fed Discount Window –
- Operation of last resort for a bank
- Overnight deposit help
- Anonymous for two years
- 30 day length, but historically has been lengthened to 90 days
- Pledge of assets for security – Treasury Securities of all Maturity among other items that are held at par (even value, no gain or loss) or better
BTFP – Bank Term Funding Loan Program
All of the above but the following additions:
- On Year in Length maximum holding period
- Pledge of asset securities that may be less than par aka at a loss
The last bullet is the most important and lending a helpful hand from the Fed’s fastest in history rate increase…. as mentioned repeatedly, increase of rates are a headwind to Fixed income aka Bonds, especially longer term bonds….
Some Banks may be seeing a need for immediate liquidity due to loss of confidence and liquidity drain, so this new program essentially gives them liquidity to meet those demands if needed and may have negative assets due to the fast fast rate increases!
Headlines Continue
While this is being written – Sunday late morning in between Newsletter Articles, UBS a Swiss neighbor of Credit Suisse has made a much telegraphed offer to buy their friend out… no idea what the market will make of this starting tonight as overseas markets open…. but something just crossed the mind that we have mentioned many times before…. and may be applicable….
“Headlines are always the worst near the end of the Cycle!”
Have a Great “Heads Up for a Busy Week” 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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July 2023 Audio Video Review – RMD Reminder -AI – Cyber – FOMC on the Brakes – Financial Planning and Capital Market Review – By John Kvale CFA, CFP
Hello and Welcome to our July 2023 Financial Planning and Capital Market Update!
If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!
Newbies –
We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets thoughts and current events!
Hope you enjoy!
BREAK IN – CLIENTS – Early RMD
July 2023 Video
YouTube
Financial Planning Tip(s)
AI – Artificial Intelligence Update – Great but Not Saving the World
In this timely post (in our humble opinion – IMHO) we revisit the latest rage… AI – Artificial Intelligence – very similar to Dot.com in our opinion… So we try to clarify…
Oh… Here is a GREAT YouTube resource for explaining AI – Christopher Penn a Marketing Expert we have long followed
From the Post:
AI – Artificial Intelligence Today explained
Program assigns a number to all the words in the English Language – other languages too of course.
Cluster of huge computers located somewhere inexpensive scans everything it can get its eyes on, and tags the patterns of the numbers from the words it has scanned…
Not kidding, this is it!
Cyber Reminder –
They are at it again…. Watch out!
Capital Market Comments
Go Powell Go – Rates a 24 Year High – Both Feet On the Brakes!
Careful what we ask for….
Have a Great Day, Talk to You at the End of August !
John A. Kvale CFA, CFP
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Posted in Audio, Economy, Education, General Financial Planning, Interest Rates, Investing/Financial Planning, Market Comments, Monthly Review, Podcast, Video
Tagged AI, AI Explained, Christopher Penn, Cyber, FOMC, John Kvale, Monthly Review, Rates