Taper (but no) Tantrum! Why not? [Ep. 97]

Aug 30, 2021

Ask episode

Chapters

Transcript

Episode notes

Jay Powell announced his central bank is satisfied (enough) with the economy's direction. Thus, the Fed will soon be 'tapering'; lessening the 'monetary stimulus'. What did bond-money markets say? Did they have a tantrum? No, because they don't believe what Jay believes.

-----SEE EPISODE 97-------
Alhambra YouTube: https://bit.ly/2Xp3roy
Emil YouTube: https://bit.ly/310yisL

-----HEAR EPISODE 97-----
Vurbl: https://bit.ly/3rq4dPn
Apple: https://apple.co/3czMcWN
Deezer: https://bit.ly/3ndoVPE
iHeart: https://ihr.fm/31jq7cI
TuneIn: http://tun.in/pjT2Z
Castro: https://bit.ly/30DMYza
Google: https://bit.ly/3e2Z48M
Spotify: https://spoti.fi/3arP8mY
Pandora: https://pdora.co/2GQL3Qg
Breaker: https://bit.ly/2CpHAFO
Castbox: https://bit.ly/3fJR5xQ
Podbean: https://bit.ly/2QpaDgh
Stitcher: https://bit.ly/2C1M1GB
PlayerFM: https://bit.ly/3piLtjV
Podchaser: https://bit.ly/3oFCrwN
PocketCast: https://pca.st/encarkdt
SoundCloud: https://bit.ly/3l0yFfK
ListenNotes: https://bit.ly/38xY7pb
AmazonMusic: https://amzn.to/2UpEk2P
PodcastAddict: https://bit.ly/2V39Xjr

----EP. 97 TOPICS--------
00:10 Intro: Jay Powell announced it anticipates its purchases of US Treasury bonds will slow.
00:48 Financial press puts the Federal Reserve upon a pedestal of omnipotence, competence.
03:29 A previous Fed "taper", in 2013, resulted in a so-called tantrum. But was it, really?
08:13 Knut Wicksell told us 114 years ago that rising interest rates signal a healthy economy.
10:34 Markets are not considered reliable leading indicators by technocrats at the Fed.
13:24 Leading market indicators include: sovereign bonds, eurodollar futures, the US dollar.
14:57 In mid-August it was clear there would be no tantrum if there ever was a taper.
18:16 Fed officials demurred to define what maximum employment is last year, but now...
20:11 (Fed officials believe that inflation surges are and will be transitory; so does Jeff).
21:01 ...but now, Fed officials believe maximum employment is within sight; achievable.
22:34 Maximum employment will be considered only after Fed inflationary targets are achieved.
25:42 The US labor force participation rate may not return to pre-pandemic conditions.
29:49 The US unemployment rate has detached itself from the US participation rate.
32:31 Mainstream expectations were for rising US Treasury yields after the Fed's taper news.
38:30 Bond yields did not rise after the taper announcement -- no tantrum.
40:38 US debt ceiling deadlines (2011, 2013, 217) caused/correlated with monetary turbulence.

----EP. 97 REFERENCES----
Tapering The Truth: https://bit.ly/38oyvcW
Taper *Without* Tantrum: https://bit.ly/38sdMVH
The Fed’s True Love: He Tapers Me, He Tapers Me Not: https://bit.ly/3yrOaCT
As Fed Focuses on Taper, It’s About To Get (a lot?) More Interesting In Bills: https://bit.ly/38n2Sk8
Alhambra Investments Blog: https://bit.ly/2VIC2wWlin
RealClear Markets Essays: https://bit.ly/38tL5a7

-----------WHO-------------
Jeff Snider, Head of Global Investment Research for Alhambra Investments and Emil Kalinowski. Art by David Parkins. Podcast intro/outro is "1AM OMW" by Ballpoint from Epidemic Sound.