Did the Fed blink?

CNBC’s Jim Cramer opined that Jerome Powell, Chairman of the Federal Reserve, has blinked. In early October Powell stated that he thought current Fed rates were far short of the “neutral” rate that neither stimulates nor dampens the economy, implying more rate hikes for 2019. Yesterday, Powell said that the rates were close to the neutral rate. Equity markets loved that news and stock prices soared.

Say what you want about Jim Cramer’s on-air histrionics, but he is a VERY smart man and was very successful running a hedge fund. He has been critical of the stance of Powell and the Fed regarding interest rates and the US economy. It looks as though Powell has listened to Cramer, either explicitly or implicitly.

I think it is a sad state of affairs that more Americans know who Kim Kardashian is (I don’t care if I spelled her name correctly) than who Jerome Powell is. Ignorance is NOT bliss!

FWIW, Cramer does not believe that China is a “friend” of the US. I believe that China, at least in their own hemisphere if not both, wants to be the dominant world power. Whether they can accomplish that goal before their population gets really old is an open question, in my opinion. (FYI, in 2017 the US trade deficit with China in goods AND services amounted to 1.7% of US GDP. I guess you can decide whether or not that’s a significant number.)

I love cars, but I live in the real world. As much as I despise politics, what large national governments do affects us all whether we realize it or not.

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In an episode of the original Top Gear, the hosts stated their opinion that Lancia has built more great cars than any other company in history. On this day in 1906, Lancia was founded.

https://i0.wp.com/cdn.hiconsumption.com/wp-content/uploads/2017/12/1974-Lancia-Stratos-HF-Stradale-0-HERO.jpg

From hiconsumption.com a picture of the Lancia Stratos, one of the most successful rally cars in history. I really like the look of this car except for the box handle spoiler at the back of the roof.

 

https://timedotcom.files.wordpress.com/2017/11/1975-lancia-fulvia.jpg?quality=85

From thedrive.com a picture of a Lancia Fulvia. A recent episode of Wheeler Dealers featured this model.

Fiat purchased Lancia in 1969. At first, the Lancia name stayed “independent” and the production of a model like the Stratos was a manifestation of that “independence.” Eventually, Lancia models really became badge-engineered Fiats.

At this moment I believe the only model with the Lancia name is the Ypsilon “supermini” built on the Fiat Mini/Fiat 500 platform. If Wikipedia is to be believed, then Lancia production has declined dramatically: from 300,000 cars in 1990 to 60,000 in 2017. Lancias were sold officially in the US only from 1975 to 1982. As I have written before a Stratos model recently sold on Bring a Trailer for $440,000.

 

I’m sorry, but does any other place exist where one can read a discussion of Fed policy AND about the Lancia automobile? If you like this blog, PLEASE tell your friends and share the blog URL (https://disaffectedmusings.com). Thanks.

 

P.S. From corvetteblogger.com comes this news about the key fob and LOGO for the C8 Corvette being unearthed from an FCC filing. Very big news, IMO.

 

#somanycarsjustonelife

#disaffectedmusings

 

Mittwoch Mishmash

Mittwoch, as in middle of the week, is the German/Yiddish word for Wednesday.

If you couldn’t tell I watch CNBC quite a bit in addition to viewing their website more than occasionally. Before the Federal Reserve increased the Federal Funds rate in December, 2015 after seven years at zero, CNBC devoted much airtime to when the Fed would finally start raising rates. One regular guest, who worked for an investment banking firm and who shall remain nameless, was insistent the Fed would not raise rates in 2015 or even in 2016. This person was almost crazed in insisting the Fed was not going to raise rates. I’m convinced “they” thought that rising rates would destroy the stock market and, therefore, hurt the company’s investments. This person looked quite embarrassed on the air the day after the December, 2015 rate hike.

So, what has actually happened since the Federal Reserve started raising rates in December, 2015? Through yesterday, the S&P 500 has increased 40 percent for an average annual compound rate of return of 13%, not including dividends. Can you get a 13% annual return in a bank? Yes, bank deposits are insured whereas stock market returns are not. Yes, many Americans are not invested in the stock market. (An aside: I believe that many who don’t save/invest are wasting their money. That is, for many people/families who don’t save/invest it’s more a matter of they won’t than they can’t. That’s my story and I’m sticking to it.) Still, nearly three years of rate hikes have not hurt the stock market.

Even at CNBC, which is supposed to be a credible source of financial information, people make statements based on personal bias and not based on empirical evidence. Everyone join in: neither people nor their institutions are perfect. I guess I could rant about the obsession with the yield spread between 2-year and 10-year US Treasuries and point out that the real predictor of US recessions is actually the 3-month/10-year spread, but I won’t.

 

From this CNBC article comes this chart of annual growth in US retail sales:

2007: 3.3%

2008: -0.5%

2009: -3.6%

2010: 3.1%

2011: 5.0%

2012: 3.7%

2013: 3.1%

2014: 4.3%

2015: 3.5%

2016: 3.3%

2017: 3.9%

I showed this chart because 1) personal/family consumption is approximately 70% of GDP and 2) since the end of the “Great Recession” the growth of retail spending has been quite steady. The average growth rate for 2010-2017 was 3.7% and the standard deviation was just 0.6%.

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Who owned this car?

According to this article from Automobile Magazine this beautiful 1963 Lincoln Continental was the last car owned by Pablo Picasso. The car was shown at the Grand Basel event in, where else, Basel, Switzerland. From the Automobile Magazine article, “…Grand Basel, a highfalutin auto expo that borrows a page from Art Basel’s playbook: take the crème de la crème in rolling sculpture, light them like a Rembrandt, and celebrate them in a gallery-like space without the distraction of hard sunlight, cluttered surroundings, or gawking throngs.” The Grand Basel exhibition will actually be in Miami February 22-24, 2019 and will feature American cars.