Tag Archives: FOMC

December 2021 Financial Planning and Capital Market Review – By John Kvale CFA, CFP

Hello and Welcome to our December 2021 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!

December 2021 Video

YouTube

Financial Planning Tip(s)

First In Back to Basics Series – “The Emergency Fund”

In the inaugural post of a neat (well we think so) new idea, here in our Back to Basics series we discuss the all important Emergency fund.

This series is a review of the basics, and will serve as somewhat of a semester study of the Financial Planning foundations all the way to more advanced topics later in the series…. We plan on a mid month release of each part and somewhere south of double digit parts…. possibly with a video added to each for additional insights…. thanks in advance for sharing with those who may find this series helpful….

With the FOMC holding rates low currently, we remind that the Emergency fund is NOT investment funds, and as such may earn little if any interest in the current environment…. but that is ok, it needs to be safe, safe safe and very liquid!

We also discuss the size of the Emergency fund, depending on your situation!

FHFA Raises Conforming Mortgage Loan Amount

This post came to us due to the much larger than normal increase in the confirming (non-jumbo) loan increase amount. We have spoken at length on inflationary increases in a variety of assets, this includes homes and this much larger than normal increase in the non-jumbo Mortgage amount to $647,200 will be helpful in allowing more entry to many into the Residential Housing market, here is the actual article. and here is the link to the FHFA announcement…..

Capital Market Comments

Interest Rates and the FOMC – On Two Different Pages at Time of Post

With such importance on interest rates, the possible raising of the rates and the FOMC’s (Federal Open Market Committee) adjustment of rates…..

This post on FOMC’s rate increases, versus what the Markets are pricing in, was at the time very different. With Markets pricing in an increase in mid year of about 20% and AT THE TIME FOMC members saying a late 2022 if at all increase.

Fast forward to today and both the markets and the FOMC are saying a 60% increases in the Fed funds rate around March may be in the cards…. hmmmm

Have a Great Day, Talk to You at the End of January!

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

Bond Markets and Participants Say Raise Rates Mid 2022, FOMC Says WAY later (EOY 2022), Who is Correct?

Why this is important? Bond Markets are signaling a much faster interest rate increase(s) than Fed Speak… Someone is going to lose this game of chicken… Only time will tell us who?

Frequently, Wall Streeters (my nick name) are quoted as saying the smartest guys in the room are the Bond Markets/Participants.

Some of this rhetoric comes from the simplicity of a bond. Basically you have a time to payback (term) and risk of the asset (Quality i.e. Aa to junk).

With less to focus on, bonds and their players/participants are thought to have greater clarity…. However, in recent years (working on a decade now) the FOMC (Federal Open Market Committee) led by Jerome Powell currently, have been making direct purchases of bonds, causing possible distortions and lack of true free market discovery….

Well Maybe!

Recent Two Year Treasury Yields Rise Dramatically

Throwing water on the theme that the FOMC has taken TOTAL control of the bond market, this recent move in the 2 year treasury is signally to the FOMC by bond folks, they expect (and want) rate hikes sooner rather than later….. Hmmmmm

CME (Chicago Mercantile Exchange) FOMC Watch Tool

This neat CME Fed Watch Tool … overlays the current interest rates with a graph to show an expected increase time probability…

The way to read this chart is the orange represents the chance of a FOMC rate increase… March of 22 showing about a 20% chance of a FOMC rate increase….

Push forward to June 22, just two months later, and the probability of at least a .25% increase moves to about 80%!

The thing is, the FOMC is saying maybe one increase very late next year (2022), but certainly not the bond market/participants.

Wait too long and the FOMC may miss their chance to raise … raise too early (not likely at this time) and it could cause an unexpected headwind for the economy.

Let’s grab some popcorn and see who wins this tug of war!

Have a Great “Fed versus Bond Market” 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

Reviews of FULL Two Days of Virtual Gathering…. Cyber, Inflation Transitory NOT, Interesting Fatigue from Event…

Last week the team happily carefully gathered and divided to maximize our time at a two day Virtual Conference that is usually “In Person” lasts about a week, and is located in alternating years on the West Coast and then the East…

The conference lasted two days (Tuesday and Wednesday 10 am-3 pm) and was a straight (small morning break of 20 minutes, but no lunch break or bathroom break) five hours each day, with overlapping events except for several “Main” general sessions such as a talk with Ben Bernanke….

The method of attack was for each of us to choose what looked the most interesting and if there was an accidental overlap of desired events, one change to a different session. Oddly, and maybe this speaks to each of desires and roles, we rarely overlapped… there were a few sessions that were “Full” , for the record not sure how a virtual session can get full, but oh well…

As of this time, the sessions are not up for post live review so our review here is part for our own notes (living diary) and mostly for your shared knowledge …

Cyber Threats and Interesting Home Threat Note

Regular followers know we take Cyber security VERY seriously, and just by chance yours truly ended up in lengthy Cyber Security sessions on both days.

Key Takeaways from an office standpoint were more two factor authorizations (extra step of logging into important programs that includes a text to cell)

For the record over the weekend after telling the team last week “I always have my cell” a chance package delivered to the office led a trip up to the office with the cell in the car and the need to log into an important program….. Guess I DON’T always have my cell…haha

A new interesting reminder for those that work from home at all was a statement “If your home router is older than three years and especially if not a commercial router, you may be unsecure!” This of course led to a quick review of each of our home set ups with the note of having a now 14 year old gamer, and a complete security review of all at home security was completed…. just for extra security additional security was set up along with a special at home “Guest Wifi” rather than the family’s for friends who may carry unwanted programs into the network…

Inflation Less Transitory than Thought

Jerome Powell, chair of the FOMC (Federal Open Market Committee) during a speaking event last week mentioned that the coming inflation may be less transitory than initially expected…

Recall this was the main debate at the Mauldin SIC conference early in the Second Quarter as mentioned here and in our Q 3 2021 Newsletter..

Several guests, most notably Lizanne Saunders echoed this thought during a fast speaking opening session…

The basic thought originally was the CPI line below would roll over quickly, now more are thinking it may last longer, especially with the afore mentioned FOMC on record to allow without intervention…

Interesting Observable Fatigue from Event

This was one our first events of this length and without much of a break, we all noted an interesting (high) level of fatigue. It seems like there would be no reason for any tiredness given sitting in front a computer for 10 hours in two days, but is sure was.. heck we were not participants, only observers…

Will keep a tab on this moving forward, sure others have experienced the same, but our first notable occurrence.

Have a Great “Virtual Conference” Update!

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

September 2021 Financial Planning and Capital Market Review – By John Kvale

Hello and Welcome to our September 2021 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 and current events!

Hope you enjoy!

September 2021 Video

YouTube

Financial Planning Tip(s)

Email Providers

In this post, we spoke to the safety of signing your name to the biggest email providers if possible for your own safety….

Of course not all names will be available, but if yours is, it is a great idea to take it, even if you never use the email platform… think scammers acting as you!

Capital Market Comments

Jerome Powell Gets Angry, Taper Coming

In this market related post, we noted that Powell, head of the FOMC (Federal Open Market Committee) was very stern in taper talk as well as the following quote from us:

“On another totally different and non-market related and non-economic related topic several federal reserve members had transactions over the past year that were not optically good for the federal reserve. One of the members is our very own favorite Robert Kaplan who had multiple large transactions in securities that the federal reserve was involved.

While we will voice no opinion on this … Jerome Powell was very stern surprisingly, and in our mind so stern that it could be an occupational loss for some of these members. It will be interesting to see what comes out of this, but this is not the end of it and once again Powell was very angry and forceful on this point.”

Unfortunately, Kaplan our favorite announced his retirement as well as the other board member, before the end of the day after our post!

Have a Great Day, Talk to You at the End of October!

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

Q4 2021 J.K. Financial, Inc. Newsletter … Video Audio Podcast Review ! By John Kvale CFA, CFP

Welcome to our Video and Audio Podcast Review of our Q4 2021 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.

Click the Download button below, for a direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page

BREAK IN – We hope you see videos in the email notification, but if not, you may click on the code for the actual video…hence the dual videos, hoping one works on your cell!

Let’s get going! We hope you enjoy!

Q 4 2021 Newsletter

(YouTube)

Irrational Expectations

An article that just kept giving us more great information:

Kyle Bass Most Important Predictions

  • Oil hits $100 per barrel this year … due to mal investment over the last 7 years.
  • The Federal Reserve will continue to support the markets with continued purchases.
  • We push through the Delta Variant and there is a REAL re-opening effect that works its way through the economy

We hope you enjoy … talk to you at the beginning of the year !

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

Federal Reserve Detailed Analysis from Last Weeks Announcement … A Very Stern Jerome Powell

As mentioned in our Preview Post last week, we have been watching the FOMC as their posture is due to change with regards to the stimulus put in motion early last year….

Jerome Powell Gets Tough

Recall as the economy was shut down last year the FOMC chaired by Jerome Powell and its members moved interest rates on the short end of the curve to zero and commenced a $120 billion per month purchase of treasuries and mortgage back securities. Both of these moves were to help stimulate the economy and to stabilize the capital markets.

Meeting their goal of stabilization and a much-improved economy the FOMC are ready to shift policies and unless any major economic or other disruption occurs Powell made it very clear that he expects policymakers to begin decreasing the $120 billion per month purchases, and if all goes well to have completely stopped monthly purchases by mid-2022.

As mentioned in some of our prior posts this message has been floated by multiple fed presidents and Capital Markets seem to be taking this news in stride, much to participants and reserve members’ pleasure.

Much of the mainstream media seemed to report that there was no major change in policy or tone to which we disagree.  In listening to Powell especially in his interviews after the pre-plan reading of notes, he seemed much firmer and resolved to stop the monthly purchases and the tone in his voice in our minds, let us know if this would occur in the very near future.

As has been mentioned before many of our fellow professional investors have long desired this happened many months ago, but no matter, it appears that it is about to occur slowly and diligently, and capital markets are accepting.

On another totally different and non-market related and non-economic related topic several federal reserve members had transactions over the past year that were not optically good for the federal reserve. One of the members is our very own favorite Robert Kaplan who had multiple large transactions in securities that the federal reserve was involved.

While we will voice no opinion on this … Jerome Powell was very stern surprisingly, and in our mind so stern that it could be an occupational loss for some of these members. It will be interesting to see what comes out of this, but this is not the end of it and once again Powell was very angry and forceful on this point.

Bottom line we would expect a taper, slow lane of monthly purchases to commence shortly and will be watching interest rates which have already made some moves as well as capital market participation.

Have a Great “About to Taper” 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

Federal Reserve Preview, Month End Next Week (Fast Month!) … Friday … Ryder Cup Weekend

FOMC Preview

Knowing the FOMC is at an inflection point on changing posture (Monthly Asset Purchase slowing i.e. Taper) we have paid greater attention as of late in order to keep our own thoughts as clear as possible and actually avoided much of the main stream analysis for the very same reason….

Next Week we will dig into the FOMC’s most recent statement and discuss Jerome Powell’s virtual post announcement interviews with reporters… there were some juicy stuff to review, actually not associated with the FOMC’s statemen.

Month End Already- Wow…

Several Months last year seemed to drag by so slowly, you would think they are never going to be over… Not this year, it is flying, just the way we like it, busy, fast, fun and furious!!

Next week is the end of the month, we will have our Newsletter Video, the afore mentioned Fed talk and possibly the end of the month video too…. Haircut time.. haha

Friday Ryder Cup

Ahhhh, but today is a Friday heading into a US versus the other guys weekend of Ryder Cup

Enjoy your Friday and your weekend!

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 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:

  • Delta hurting travel, and leisure, Dallas Fed US GDP estimate 6.5 down to 6 because of delta
  • Slow workers with Jobs, Aug jobs number not surprised Sept slower than expected, JOLTS showing work avail, fear of delta keeping away,
  • 3 mill folks left workforce since 2-20, 1.5 milion left for care of kids – matching problem work
  • Supply demand on materials,  PCE will be 4% PCE headline will be 2.6% 2022-
  • Economy recovering slow Q3 but still growing, 3% inflation 2021
  • Economic Fits and starts bc delta- vaccine, booster, masks help but
  • High frequency mobility data not falling, folks adapting and managing through
  • Business expect supply demand last longer than thought
  • Worker demand higher pay, higher absence, reluctant to come back to labor force
  • Mid to small business tougher time with employee—Larger Businesses more flexibility
  • Broadly all businesses raising prices and they will stick

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

Kaplan Town Hall/Newsletter Preview Breaking News … Friday … Sports Begin …

Another Fantastic Kaplan (Dallas FOMC President) Town Hall

On Wednesday evening of this week, Robert Kaplan did another Town Hall …. Pretty sure this is our third or fourth to attend so there is some continuity working as we can hear changes, continued thoughts and just a general getting to know Kaplan…

The most BREAKIN NEWS from the talk, was Kaplan saying the following…

“If there are not major changes in the Economy before our next meeting on September 22, 2021, I will suggest taper is announced and it begins in October of 2021!”

This was a big (so soon) enough statement that we were surprised not to see any public media discuss yesterday….

We will dig into Kaplan’s comments next week in a deeper fashion and the possible outcomes should this statement come to fruition.

Newsletter in the Works

The Newsletter is coming right along, we have found some greater details from our Expectations Post Earlier in the Quarter, along with our candid comments…

On a personal note, if you ever want to know how fast a Quarter can go, do an all original Newsletter every 90 days… All Great, but really seems like we just completed the last one…. Time is flying I guess!

Friday

Ahhhh, it is a VERY late summer Friday heading closer to fall… Sports is getting into full force…


Enjoy your Friday and Weekend – Talk Next 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

Thoughts and Forecasts From Kyle Bass … Oil $100/Barrel By Year End 2021 ?

The summer garnered a new found passion towards Podcasts…. While we do our Monthly reviews and Newsletters in an Audio, Video, Podcast like format…. Most podcasts are an hour or longer, making for interesting deep dives into the discussion, especially if the person(s) talking are very intelligent in the specific material….

Hat tip JP for the shove in sharing your favorites…. I have taken the ball and run with it!

In another crossing with this interesting investor, Kyle Bass, on a paid podcast platform, specifically for professional investors…. we highlight Mr. Bass’ current thoughts…

Six years ago, we highlighted his thoughts here in our post and in reviewing his comments, his bets were very correct!

Forecasts and Future Expectations from Kyle Bass

Once again, like we did six years ago, in our public Diary of sorts, we outline Kyle’s thoughts for future reference …. so here we go:

  • The Federal Reserve will continue to support the markets with continued purchases.
  • Federal Reserve feels responsible for Capital Markets … i.e. Every Federal Reserve member has a Bloomberg Investment terminal on their desk and post public talks, Fed members go back to their office to check the markets reactions to their comments.
  • Much more inflation than actually as printed by CPI – (Consumer Price Index) Example of car price increases up 300% over last thirty years, but CPI auto costs increased 5% over that period.
  • Cost of Food increases may cause social inequity problems.
  • Oil hits $100 per barrel this year … due to mal investment over the last 7 years.
  • Short term interest rates not to go higher than 1.5% and long term (10 year) rates will not go higher than 2.5%. i.e. Bernanke Helicopter speech outlines the difficulty in raising rates a lot once they are at a lowered level for some time.
  • We push through the Delta Variant and there is a REAL re-opening effect that works its way through the economy (Hope this is correct!)

These were actually done in order of the Podcast (basically taking notes while listening) but the most interesting in our opinion are the last three points…

Marked as Forecast, which we have had a lot of lately…will review for accuracy in the future!

Have a Great “Kyle Bass” Forecasting 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