As we near our fantastic conclusion to our multiple part series on Interest rates (next post is the last) lets quickly review where we came from.
In our First Post here, we spoke of the basic yield curve and how it logically moves from lower left to higher right high to account for risk …. Recall if a buddy borrows $100 bucks and promises to pay it back tomorrow its a lot less risky than if he promises to pay it back next year… and you would rightly charge him more for the delayed time… The Basic Yield Curve!
In our Second Post here, we spoke of movement of the yield curve … basically a parallel shift upward in better economic times and a parallel shift lower during slower economic times – all other things being equal, which they of course never are…
In our Third Post here, we discussed the players and assets that might sit along the yield curve, attempting to make for a more REAL world example(s)
Today … Well, let’s get to it
Where the Federal Reserve (FOMC) Fiddles on the Yield Curve
For all practical purposes the FOMC/Federal Reserve can completely control the short end of the curve as shown on our graph… Special shout out to the 13 year old tennis player working with the new Apple Pencil (neat subject for another time)- for the updated colored graphs…. yea this is our weekend workings during rain on tennis days..haha
Post GREAT Recession of 2007-2009 the FOMC not only lowered their totally controlled short end of the yield curve – but took the unusual action of using government money to purchase assets of the longer term in order to push longer term rates down as well …
Blue is the normal yield curve – Green is the greatly lowered yield curve we have of late most recently been experiencing ….. Yea the short rate was essentially at ZERO – about what all of our checking accounts have been earning until just recently
Here is the lowering of rates graph:
It is essential that the FOMC eventually normalize the yield curve back to the original lower left upper right as keeping it unnaturally low for too long will likely lead to an overheating of the economy, not to mention over use of risk via leverage/loans …
Here is the Raising or Normalizing Graph we are currently experiencing:
Next up our conclusion, and most importantly it’s predictive behavior over the last six decades….
Have a Great “Rising 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.
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Why We don’t like to Move Money on Fridays – Break In – Inverted Yield Curve Update
Break In – On Friday the Yield Curve Inverted for about three hours – we have spoken at length on this subject, but want a little more time to see market participants reactions as well as Fed officials before making a current update.
As a reminder the Inversion of the Yield Curve has a strong recessionary signal some time in the future, frequently years in advance –
With a Newsletter already in print – coincidentally we had much talk about recessions, and even a definition. The two hour inversion did mess our Newsletter up a bit as until Friday it had not inverted – we will update you more with clarity soon!
Back to our regularly scheduled program/post…
Why we don’t like to Move Money on Fridays
As a weekend nears, specifically Friday … many’s favorite day of the week, we tend to dislike the movement of funds.
The reason is two fold:
There are of course times that money just HAS to move on a Friday, such as the closing of a home (in an abundance of caution, we frequently send funds on Thursday) or a last minute quick fill up of cash.
Regularly scheduled deposits are fine as the calendar determines this and being on such a regimented event, trouble is less likely.
Deposits or draws as we like to call them are a different story. When we are pulling funds from another account, we see the flow of funds from our end and can easily Shepard/see problems.
In a safe over sorry posture, look for us to recommend Thursday or our favorite day, Monday, for the movement of unscheduled funds.
Have a Great “No Friday Money Movement” 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
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Posted in Clients/Clients Only, Economy, Education, FOMC, Interest Rates, Investing/Financial Planning, Market Comments, Why
Tagged FOMC, Interest Rates, Inverted Yield Curve, Move money, Wire