Tag Archives: FOMC

The FED Speaks Firm AGAIN, First Travels Ahead, Friday….

Our second lead article in the coming Newsletter is Titled “Don’t Fight the Fed” …

The general context is, the FED (Federal Open Market Committee) led currently by Jerome Powell have great control through interest rates (there it is again- they really are that important) when they lower eventually it becomes stimulus, and raise, headwinds….but this time with stimulus still sloshing around in the Economy… participants are being stubborn and fighting the FED

Powell Puts His Foot Down

This week FED Chair Powell firmly stated he will slow the Economy, and if needed via higher rates…

Maybe Participants are beginning to listen?

First Travels Ahead

Next week marks the first travels of the season…while not a Road Warrior, travels are enjoyable, this years have started a bit later due to the Merger…. but the anticipation is just as great ….

Ahhhh…. Today is a Friday…. Fall is beginning to find it’s way to our neck of the woods…. Enjoy and Talk Next Week… Likely a Newsletter and Video coming!

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

Fitch threatens more downgrades including the Symbolic Biggest bank, JPMorgan …. Not surprising, Interest Rates Move Up!

During the Great Financial Crisis (GFC) of 07-09 – (some ways seems like an eternity ago…others yesterday – ok, digressing again) Credit Conditions fell apart quickly and with little warning….

The big three Credit Agencies at the time and still today ….Moody’s, Fitch and S&P Global – then called S&P were late to the softening credit cycle and caught a tremendous amount of scrutiny for a lack of warning as Credit Conditions brought a tremendous amount of pressure to the Financial System…

In True Fooled me once like fashion, they are intent on NOT being late to the party this time.

Fitch Threatens Further Downgrades

With Fitch stepping into the credit Downgrade pool first followed quickly by Moody’s, Fitch is back again raising awareness with a symbolic threat to the largest bank in the US, JPMorgan…

Would not be surprised to see the lone silent Agency speak up soon, S&P Global, if for no other reason to save face in case there is a serious weakening….

Bond investors are taking the comments serious and repricing interest rates Higher/Bonds lower values to accommodate higher risk associate with the agency call.

Short term a little headwind on bond values… long term a HUGE advantage in the form of bigger coupons from our Safe Money – NICE!

Oh… Jerome Powell and the rest of his board members on the FOMC (Federal Open Market Committee) have their popcorn out as they happily watch this slowdown occur !

Have a Great “Higher Safe Money Rates” 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

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

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Robert Kaplan Speaks Candidly, Echoes Our Main Thoughts for the Newsletter – NICE – There is Still Stimulus out there and Higher for Longer!

The Forward-Guidance podcast review, recommended from one of my coveted study buddy groups, a week or so ago!

With downtime over the holiday weekend and the newsletter not being in print just yet… Robert Kaplan’s comments from a podcast came in very much in line with some of the articles in our coming Q 3 2023 newsletter, as such we had to bring you up to speed on this podcast.  NICE!

Recall Robert Kaplan was a Dallas Federal Reserve President, before getting caught up in a political issue and he along with several other members ended up resigning. 

What stands out about this podcast is the candor that Kaplan gives, which is what we are always looking for. Is it because this is a less than hugely popular podcast ? … although it will make my regular check for subject matter from now on, Or it is due to the resignation which would make Kaplan never available for public service again? …so he has nothing to lose period. Does not matter the reason his candor again is what grabbed attention. 

The just over one-hour podcast which can be found here (Forward Guidance), had three important points to bring to your attention: 

There’s still stimulus flowing in through the system- Again one of our articles in the coming Q 3 2023 newsletter speaks about the ERC or employee retention credit, Kaplan mentioned specifically talking to many mayors of many cities across the United States which have an abundance amount of stimulus capital still on their balance sheet that must be spent before 2025. hmmmmm 

Higher interest rates for longer should be the baseline assumption according to Kaplan– Again this is the subject matter of another of our newsletter articles. Kaplan speaks to the podcaster candidly and says capital markets even though we were just beginning a credit cycle (Tightening of lending standards, less loans, higher interest rates and lower margins, increased defaults all the intent of the federal reserve’s higher rates to slow the economy)- while capital markets and participants are pricing a lower interest rate at the end of 2023 and the beginning of 2024, Kaplan cautions participants to take Jerome Powell at his word. The only thing that would make him change his posture is some large event created by the further progress of the aforementioned credit cycle. 

It is a good old boys club– In an aha moment that we always thought existed, Kaplan slips and says his dissenting vote in September of 20 was a frowned upon event by Jerome Powell! However he quickly corrected himself and said I will let Powell speak for himself, but the rabbit was out of the hat, Kaplan realizing this went on to say that the general spirit of the FOMC (Federal Open Market Committee) is everybody agrees and falls in line with a distinct hierarchy of ranking. We could all remember and learn that there is a very much pecking order where the king is the chair, and the pawns are supposed to follow. 

Apologies for the length of this post, as mentioned with some time off and the dictation in hand, along with a total complement to our pending newsletter, wanted to bring this to your attention.

Have a great “Inside the Federal Reserve via Robert Kaplan” 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

Fed Watch… All Eyes (not on Vacation-haha) On FOMC (Federal Open Market Committee) Rate Increase or NOT – NOT being most likely … CME Fed Tracker Review …

With a Jerome Powell lead FOMC (Federal Open Market Committee) meeting this week (Announcement Wednesday to be exact) AND an economic projections due this announcement….

Let the Gaming Begin of a rate increase or not?

CME Fed Tracker – 70% Stay 30% Raise .25%

Left Graph is 70% and the markets pricing of a probability of NOT raising…

Right Graph is 30% and the probability of raising .25% or 25 basis points…

By the Way…. Of course the FOMC watches market expectations and know if they raise it will be a slight surprise…. 25 basis points is really nothing at this point, considering the meteoric rise in our rear view mirror….

Have a Great “Fed Fund Watch Week”!

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

Rates… Fastest Increase Review … Looking Forward for Effects … Newsletter Precursor …

This is an updated chart from our favorite buds Visual Capitalist

Last year we spoke of the speed of interest rate increases a lot… given the unique pace at which rates increased AND the super low level of (zero is about as low as you can go) starting point … it became a shock to the financial system….

So in all likelihood, rates are near their top for the foreseeable future….what lies ahead?

We will have more on this in the coming Newsletter but rates 500 times higher than they were just a few quarters ago AND looking to stay higher… there are major implications..

Debt/Financing costs higher =

Better safe investment returns aka Fixed Income/Bonds

More costs to debtors (lower returns for those using debt because of higher costs)

End of companies requiring very low costs to make profits

Have a Great “Fastest Rate Increase Effect” 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

The BTFP – Bank Term Funding Loan Program UPDATE, Created a new process of Banks Merge/Buyout …

Did you happen to catch the Financial System adjusting the way it does business right before your eyes?

No worry, if you said no… it was not super obvious, but worth a quick review for future knowledge…

So here we go!

BTFP- Bank Term Funding Loan Program Makes Adjustments to the Financial System

As we explained in great detail here in this post in March, the Federal Reserve set up a Backstop program for struggling banks. As several more banks have had issues, the creation of this program has changed the way mergers or buyouts will occur while this plan available.

If you are an acquiring bank, no matter desire, you would be crazy not to wait until your desired bank, if under stress, hits up the Federally backed program aka BTFP, as the Government essentially will guarantee much of the buyout once entering the program.

While it may seem unfair or counterproductive to price discovering markets and mergers, possible unintended consequences created from this program…. they are what they are … and look to continue until we are beyond the rain clouds….

Have a Great “Watch the Financial System Adjust” 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

Fed Week, Tough Decisions … New “Happy Bank” Back Stop Facility – The BTFP – Bank Term Funding Loan Program … Bank Headlines Continue – Reminder Thought On Late Cycle Headlines …

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 ..

Press Release

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

Important One Year Anniversary? … Technology Tethered Modern Day Spring Break Concludes… Newsletter Subjects and Neat Graphs but very little content YET … Friday On the Way Back Home soon!

Happy Anniversary Yesterday – Of What?

Long time followers will find this hard to believe ….. but it is true..

What was an important 1 year anniversary as of yesterday?

You’ve got this… but it is not easy…??

The FOMC (Federal Open Market Committee) commenced their FIRST rate increase one year ago, yesterday!

The important part of this is the lag affect … the US Economy is like an aircraft carrier, not a ski boat in that it changes directions SLOWLY! More on this soon… hey it is a Friday… let’s carry on! But worth thinking about …

Modern Day Spring Break

Tomorrow we head back… it was a super fun Spring Break, and in some ways work “Stuff” was even more productive…

Always glad to be available …. heck it’s never “Work” anyway!

Thanks to technology (note battery charger for cell in pic, no plug in this courtyard), the events of the last week were digested or maybe consumed is a better word… and as mentioned in the Mid-Week Wednesday post, were not completely surprising…

More to come as needed in this area!

Newsletter in Motion

The goal was to have the Newsletter complete, but the afore mentioned events took over and while much of the diagnostic graphs have been completed … the verbiage is not … hope my editor, who likes to get a head start does not see this…. oh well…

Have a Great Friday … Super Weekend and talk next week from the regular Saddle!

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

Banking is all about Confidence … Experienced Reminders and Hat Tip Advanced Analysis Part 2 the M2 Money Supply!

We will leave the drama headlines for other sources, as there are of course many that will come from the recent West Coast Bank Failure….

Being our second major Rodeo on this one, the Great Financial Crisis (aka GFC) of 07-09 the first, we are reminded of several things – This is NOT the 07-09 Crisis – Don’t go there

Here are some observations:

  • Risk happens slowly, then all at once (money moves faster than 15 years ago too!)
  • Fears may jump from one to the next during problem times- quickly
  • Events rarely repeat (lightening strike same place twice) but they sure do rhyme
  • It takes a long time for events to play out, not withstanding our first point (this is likely not over)
  • Banking is all about confidence … oddly most recently a storm in the south caused a loss of confidence in gas inventory in our neck of the woods… within hours all gas stations were out of gas! Sound Familiar?

Advanced Analysis Replay – Pat ourselves on the Back Here

Part 2 of our Advanced Analysis – Recall and Reminder – The M2 Discussion

M2 Turns Negative for the First Time and that’s a Long Time!

Posted on January 18, 2023 by John Kvale CFA, CFP | Leave a comment

There are tons of measuring sticks out there…. almost all of which we look at and follow, at least at one time or another…..

What grabs our attention is when the measuring sticks do unique things….or have never happened before!

Why are we watching this?

This draw down of money in the system may put pressure on certain risky players i.e. Companies that use Junk or High Yield Debt!

Closing Thoughts:

We mostly stay away from these “HOT” or maybe even Negative topics, but wanted to let you know we watch this, have spoken in advance of some of the risks, and are using past experience to help guide and monitor the situation!

Have a Great “Experience Matters” 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