Tag Archives: Interest Rates

All Eyes on Interest Rates … Rate Run

We have been watching interest rates closely as well as a local born inflation gauge called the Trimmed Mean put out by our Own Dallas Federal Reserve….

Interest rate movement can be a predictor of better times ahead… Think reopening and also of future inflationary waves…

Here is a shorter termed graph of the 10 Year Treasury Yield….

Purposely a shorter term graph to exaggerate the recent movement…

Next up, we fly much higher to the ten thousand foot level to show you while rates are moving, they are far from sky high….

Higher rates can be a headwind to markets… fast moving higher rates would have a high probability of disruption…

Watching Rates and Inflation

Slower, gradual, less jittery rates may be just what the Dr. ordered… not too hot, not too cold…

We will be watching!

Have a Great “Watching 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

Interesting Interest Rates Chart a Historical View and a Super Short Term View with Noted Movement

We spotted this neat chart last week from our friends once again at Visual Capitalist … here

Worth noting … we were close to these levels in 1945 as can be seen on the chart…

While the above is a more descriptive 200 year chart, we just could not help ourselves in showing a much shorter but encouraging one month chart of the same ten year treasury noted above …. again, VERY short time frame, but we like the upward movement….

We crow a lot about interest rates, but they really are VERY important…

Have a Great “Interest Rate 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

street-cents

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

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

The Fed, Economics, Interest Rates and Interest Rates Review Part 1

On Friday, we gave you a preview of this post and in completing it over the weekend, it became a bit longer than expected, so we are doing a two part series.

Some of this is also in our coming Newsletter, but with more turf here, we can dig a little deeper, especially in a two part series…

Mid week last week the FOMC (Federal Open Market Committee) led by Jerome Powell and company released their estimates of where interest rates will be over the next several years.

This chart, known as the Fed Dot Plot, represents a dot for each voting member …. looks like there is a ton of group think going on as everyone is pretty much in agreement on the near term view and with a variance of only one percent in the longer term view – far right (One vote at 2% and two at 3%)

This chart from our Friends at JPMorgan includes not only the FOMC estimates but what the Capital Markets are assuming – (This estimates comes from the Futures Market and is easily ascertained)

Market estimates can and do change quickly.

Here is a blow up of the far right portion of the graph – Orange is market expectations again from the futures market and Purple is long run assumptions.

So markets think that rates will stay low and the FOMC also agrees.

Is there any reason that the FOMC would HAVE to raise rates?

Yep, one word ….

Inflation!

In Part 2 we will discuss …

Have a Great “FOMC and Interest 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

FOMC Speaks, Preview Analysis – Newsletter Update – Friday …

On Wednesday September 16, 2020 the FOMC (Federal Open Market Committee) led by Jerome Powell announce their updated thoughts on the Economy and their expectations….

FOMC Preview of Rates and Economic Data

Knowing its a Friday, we are making this a Preview of a more detailed article coming next week…

Here is the FOMC expectations of where rates will be for the next few years… aka Fed Dot Plot

Lower for longer is THEIR expectations…. but there is an inflation assumption embedded here….. hmmmm

Newsletter Update – Speaks to Rates and Inflation

We speak on this very subject in our coming Newsletter – which once again is different from what we have done before….

The coming Newsletter is a review of what has happened over the year so far and actions and assumptions similar to above and what the ramifications of these decisions may be looking forward…

Given the thematic review, this Newsletter is one big flowing review and analysis…

We think you will like it!

Friday

Ahhhh…. today is a Friday heading into a much excitable College Tennis Tournament for the 15 year old in Aggie land… fingers crossed….

Enjoy your day, your weekend, and your time with friends, family and those special in your life!

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

Meet the Trimmed Mean Inflation Gauge … A Measure to Keep Watch

With the FOMC (Federal Open Market Committee) led by Jerome Powell and company at their most recent meeting, made the following comments:

On price stability, the FOMC adjusted its strategy for achieving its longer-run inflation goal of 2 percent by noting that it “seeks to achieve inflation that averages 2 percent over time.” To this end, the revised statement states that “following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.”

The updates to the strategy statement explicitly acknowledge the challenges for monetary policy posed by a persistently low interest rate environment. Here in the United States and around the world, monetary policy interest rates are more likely to be constrained by their effective lower-bound than in the past.

Let’s Decipher these Comments and Bring On the Tracking

The comments above, were understood by many/most on Wall Street to mean rates will be allowed to stay lower for longer and the 2% inflation rate is not a hard line number….

The following is the Trimmed Mean Inflation Rate completed by our very own Dallas Federal Reserve, just down the street from us!

It is basically taking the far outliers in any report out and calculating the number. This rate is one of the most watched inflation numbers by the FOMC!

Here are the actual numbers- watch that 2% number!

When rates go up, it is a headwind for Capital Markets …

Let’s keep a watchful eye on this… we are tracking you Mr. Trimmed Mean.

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

Deep Dive on Interest Rates and Yield Curves … With Helpful Comments … New Fancy Fonts and Colors

Alright, if the title did not scare you off… hope not, we wanted to review the current state of interest rates, with some helpful (in our humble opinion IMHO) comments !

Here we go!

Deep Dive on Interest Rates

First up the US 1 Year Treasury

Think of this as your checking account interest with a little extra earnings … hence the one year time frame.

Seems long ago with all the worlds events, but not too long ago we were in the mid 2% range, currently at .12% ….

Many say we will be in this lower range for a long time, short sighted in our minds, but time will tell!

Next up the US 10 Year Treasury

Think of this as our proxy for mortgage rates, long term inflation and general economic growth expectations.

Not so long ago, in the mid 2% zone looking like we were headed to 3% … today .64%.

Many of the same folks saying we will be here for a long time. We will see!

10 Year Treasury Versus 90 Day Treasury – The Recession Predictor

Not sure if it was luck or just prophetic markets, but when this chart drops below zero (AKA Yield curve inverts) frequently a slowdown comes !

Inversion much of 2019 and then again during the early stages of the lock down.

Take special note of the spike in late March… recall that was when investors tossed their “safe” fixed income investments out the door because they had not other assets they wanted to sell … after the initial spike, normalcy returned.

US versus UK One Year Rates

Thought this was very interesting ….

This most recent interest rate cycle was shallow compared to historical norms, notice how the UK rates were even more shallow.

Many other countries could be inserted here as well with the same result

There you have it, a deep dive on domestic interest rates, yield curves and international comparisons….

Last Friday a new “Block Editor” was forced upon us … think of it as a makeover for all publishing/editing tools on our blog – initially HATED it….but upon further review we are getting used to it and hope you like some of the new fancy features – Like the Big A to start the post!

Have a Great “Deep Dive Interest 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

Q 1 2020 Extended (12 Page) Newsletter Video Audio Podcast Review By John Kvale

Welcome to our Video and Audio Podcast Review of our Q 1 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 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

Let’s get going!

All New Pictures, Intro and Exit Music !

Q 1 2020 Newsletter

Click for PDF/Printable Version

 

Is Inheritance Taxable ?

This, our lead financial planning article for the newsletter-  With the subject of inheritance and the taxability of it occurring multiple times in the most recent quarter, the idea for this article spawned.

After completing the initial article, a continuation article idea also occurred which made the second part of the inheritance subject matter about being separate property.

We hope you enjoyed both articles and this was our lead financial planning articles.

All about the Car

In another fun personal financial planning two – part article, long desired, but fearful of writing …this article discusses the car, should you buy or lease and how to do so. Again, a second article occurred at a chance meeting in an airplane with a former law officer watching me finish the first article on the airplane!

In doing the research for these articles we ran across a really cool car research site, and mentioned some great buying resources as well.

Recession Thwarted – Capital Market Thoughts

To ignore new evidence in our minds is silly even if it goes against the grain of what you may have been saying!

In this article we review a CFA speaker’s slide about lowering rates during a recession and his conclusion. Bottom line, we’ve not been a big fan of lowering rates during economic growth, but an inverted yield curve which is highly predictive of a coming recession, along with lowering of rates, according to the speaker and the enclosed chart leads to a thwarting of the recession.

We hope we are wrong on this one and the speaker is correct!



Reach back to last year’s taxes in savings you can do now

In this article we discuss the remaining tax savings ideas that we can do this year, that will help last year’s taxes-

  • The SEP – Simplified Employee Pension
  • HSA – for the Health Savings Account
  • IRA – An oldie but a Goodie if it’s available to you
  • Roth – While not a tax saver you can do it now for last year’s taxes
  • Itemized itemize itemize – With today’s high standard deductions you may not be able to itemize but we remind that it’s a good idea to stay in shape as it’s likely these itemize deductions may come back in the future

We hope you enjoy … talk to you in the Spring !!!

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

Shhh … FED Quietly Pauses … Finally

The FOMC (Federal Open Market Committee) led by Jerome Powell, quietly paused this week.

FOMC No Change

Mid-Week, the FOMC announced no change in their controlled short term interest rate.

12-16-19 Fed Funds Rate

We have been vocal about not lowering rates moving forward, to keep some gunpowder for the next recession.

After a market desired multiple small lowering of rates earlier this year, this week, the FOMC effectively did nothing, and did not disturb Capital Market Participants… finally.

They also made no future promises, again, with market blessings…

We like it!

Have a Great Friday!

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