Tag Archives: Inflation

Q 4 2020 Newsletter Video Audio Podcast Review of Year Events, Cause and Effects By John Kvale

Welcome to our Video and Audio Podcast Review of our Q 4 2020 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 here 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

Unlike the last two Newsletters which had very little economic and market related comments, this one is all about where we have been, what has occurred and where we may be going!

J.K. Financial q 4 2020 newsletter

Let’s get going!

Thanks in advance!

Q 4 2020 Newsletter

(YouTube)

As the spread of the Covid Virus occurred, Capital Market Participants in true anticipation form, voted with their feet and sold assets across the board well ahead of the eventual lock downs.

The largely followed S&P 500 (Larger US Companies) fell over 33% along with major international markets such as the German Dax falling over 35% and US Small companies represented by the Russell 2000, falling over 40%.

The most startling item of the drop was the speed at which this drop occurred, 27 days!

Ignoring the speed of these most recent declines is a bad idea as we need only look earlier in 2018 to see ANOTHER very fast drop.

The FOMC Steps In – Lowers Rates

By Mid-March as Capital Markets continued their descent, the FOMC (Federal Open Market Committee) led by Jerome Powell, dropped the hammer on interest rates by a full 1% to zero. During normal times, .25% is the usual adjustment as can be seen by the late 2019 and early 2020, non-crisis adjustments.

FOMC Adds More Fuel

Correctly using the financial crisis of 07-09 as the play book, the FOMC took the bazooka out, and starting buying assets to flood the markets with liquidity.  The current bazooka is much bigger (about 3 X) this time as can be seen by the difference in balance sheet increase of $1 Trillion in 07-09 versus the $ 3 Trillion and counting increase currently.

It Worked (Maybe Too Well), Capital Markets Took Notice

You know us to be very positive – all through the many negatives that have occurred !

You also know we will call it like we see it!

Markets have officially gone too far and are ahead of themselves, expect bumps and no extra risk taking is warranted at this time – CAREFUL!

We hope you enjoy … talk to you Next Year – 2021 !!!

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

September 2020 Podcast Video, Financial Planning and Capital Market Update – By John Kvale …

Hello and Welcome to our September 2020 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 Video

(YouTube)

September Review By John Kvale

Financial Planning Tip  –

Markets Gone Too Far

In a luckily timed post here in our August review and again here in September we mentioned that markets had gotten far enough ahead of themselves, we had to waive the white caution flag…

Oddly, within days of our original white waiver, markets slipped … always rather be lucky than good – markets breathed caution in the air quickly with a sharp 10% correction — Safety is still advised!

Capital Market Comments

Inflation & The FOMC

In a somewhat preliminary discussion on what might change market sentiment, not knowing it had already adjusted a bit, here , here , here we discussed inflation measures, the FOMC (Federal Open Market Committee) and their views along with our personal favorite inflation measure, Dallas Federal Reserves own Trimmed Mean inflation gauge.

Have a Great September Update!

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

The Fed, Economics, Interest Rates and Interest Rates Review Part 2 What would force the FEDs hand?

Well covered in Part 1, here, the FOMC (Federal Open Market Committee) and Capital Markets also believe currently that interest rates will stay low for longer …. maybe we are hopeful they are both wrong (No maybe, we are!) but there is one word that we know the FOMC cannot allow to get out of control …

Inflation !

With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent.

From FOMC statement September 16, 2020

Here is a great post from earlier on Dallas Fed calculated Trimmed Mean Inflation Measure, the FOMC’s favorite!

Triple the Bazooka – Who Let the Money Out!

During the 07-09 Great Financial Crisis, the FOMC then lead by Ben Bernanke, used the Feds balance sheet to purchase assets in order to lower rates, increase asset prices and calm markets….

This was unprecedented at the time….. Not today!

The current Bazooka is three times more ALREADY and will most certainly continue to grow in size and stimulus !

What if eventually the economy takes hold, and springs back to life –

Here is the traditional measure of inflation, Consumer Price Index from the BLS (Bureau of Labor Statistics) – again we like the afore mentioned Trimmed Mean and so does the FOMC!

Not to worry, we will be watching that 2ish % level closely…..

Inflation may occur, forcing the Feds hand at higher rates — time will tell!

Have a Great “FOMC and Interest Rates Part 2 Conclusion” 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

Sniff, Sniff …. Is that inflation I smell ??

On Tuesday of this week an economic report caught many by surprise. The Consumer Price Index.

CPI gets Hot !

CPI Econoday M over M CPI  6-17-14

If this continues, this is a VERY strong sign the economy is gaining traction.

The bars tell a better story than the line in the chart !

Inflation at reasonable levels is good, especially given the alternative (deflation) ….. Now “Goldilocks/Three Little Bears” ….. not too hot, not too cold….hopefully just right !!

We will review the winners and losers of inflation, but for now let’s watch and see if it continues!

Have a Great Friday!

John A. Kvale CFA, CFP

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225

“Wednesdays with Axel” …. Hard fast Austerity Choosers

In our continued series from our Private Client Roundtable event held earlier in the year, and our special guest speaker Axel Merk, we note a few countries that are making the hard choices, according to Merk.

Downward trending line = Hard Choice (Austerity)

Merk Central Banks Balance Sheet

Downward trending austerity driven line:

  • Bank of England
  • Sweedish Riksbank (Huge early adopters, 2010)
  • Europ0ean Central Bank

Note the upward, non austerity, possible “inflation way out” of the USA. Also worth noting, while Japan is all the rage, they have only begun the process of inflation and can go much farther by increasing their banks balance sheets.

Austerity Versus Inflation

Clearly, according to Axel, there are differing policy decisions on how to recover from the great world slow down. Those that are leading today, USA, Japan may not be the leaders tomorrow, as others are taking their medicine today through austerity measures, again according to Axel.

Time will tell if the easy way out or the hard way works…no matter the outcome, keeping a watchful eye is very important. Thanks for bringing this to our attention Axel!

Have a great Wednesday!

John Kvale

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225

“Wednesday’s with Axel” Short Sighted (Quarter End) ….. GOLD

In our continued series of “Wednesday’s with Axel” from our Private Client Roundtable, where we discussed your great questions from the field, and many other world economic events, this week we discuss Gold, as the timing our meeting coincided with the end of the quarter.

End of the Quarter, So What?

Gold 8-16-13

Take a look at this chart. It is very easy to see when the most recent bottom was put in for the shiny metal of Gold. The end of the second quarter just so happens to also coincide. Coincidence?? We do not think so. There were many rumors of large money management firms not wanting to show they owned Gold at the end of the quarter.

Gold as a fear gauge

Axel casually stated that Gold’s movement often is associated with fear. Fear rises, gold up and visa versa. We agree and hold gold just for this diversification reason.

Gold as a defense mechanism, Inflation

Axel believes inflation is the way out as we reviewed in our Inflation/Deflation post. Inflation puts the jets under Gold and other real assets as its tangibility becomes more important during inflationary monetary declines.

Gold Forever

In closing, Axel said he thought Gold could and should be owned forever. In this point we disagree, while Gold looks like a good asset class at the current time, we never say forever!!

Have a Great Wednesday!

John Kvale

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225

“Wednesday’s with Axel” Inflation or Deflation?

In our continued series from our Private Client Round Table with Axel Merk, founder of the Merk funds, this week we discuss Inflation or Deflation as a possible path to repair, growth, and prosperity.  This question was presented from you in advance (here for complete list of questions) and also discussed in great length.

Deflation

According to Axel, the people want deflation as a way out from much of the debt the world has accrued. (Especially speaking of the Greece and Cyprus’ of the world.) Deflation means a severe belt-tightening, most likely an economic recession/depression but is essentially hitting the reset button and wiping the slate clean.

Inflation

The governments of the world, want inflation as it is the smoother way out of debt and throws much of the burden on each country’s trading partner. Inflation will extend the problem for years if not decades, according to Axel, but will be the easier path to follow.

So what will it be?Axel Merk JK Financial Rountable Event III

Axel, admitting that no one knows for certain and any curve ball could change the outcome, his very strong belief is that inflation will win out. Read Japan! (Japan is attempting to inflate their way out of a two decade slowdown) Since the governments want inflation and it is the easier, but longer way out, this high road so to speak will be the winner, again according to Axel (If correct….Gold or hard assets anyone?)

So there you have it, another Wednesday with Axel!

Hope your week is going great!

John Kvale

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225

Five High Points from the Robert McTeer Private Client Event, a Party Crasher with a good Question

This most recent weekend the Robert McTeer private client event occurred. We will speak in much greater detail in our coming mid-year Newsletter but we wanted to hit a few of the high points while Mr. McTeer’s words were still fresh and the current economic situation most unchanged.

We also wanted to have a special thanks to clients, friends, and the party crasher, who actually asked a good question, but remains unidentified.  Thank you all and you too party crasher!

Donald and I compared our three high point notes, and with only one overlap, will bring you the top five with the first point being our collective overlap:

  1. The Fed’s credibility is key to holding current rates low. The natural inference would be that if the Fed lost credibility rates may move. I asked Mr. McTeer a direct question and will expand his thoughts in our Newsletter (DC & JK)
  2. Inflation in not inevitable (DC)
  3. The Tax Cliff of possible increased taxes and lowered government spending is estimated, by Mr. McTeer at a 7% GDP hit. Yes you read that correct, SEVEN PERCENT! (JK)
  4. Banks parking excess reserves at the Fed may prove a target for money supply fans. i.e. Get the money moving out of the Fed to get the economy moving (DC)
  5. “Those betting against Bernanke’s intelligence will lose!” A direct, unsolicited complimentary quote from McTeer (JK)

Great questions, great time, and great fun. We thank you all as we filled less than 90 minutes of a saturday into hard-core economic discussions.

Thanks Again to everyone !

JK

214-706-4300

www.jkfinancialinc.com