Yellen warns of another potential financial crisis: ‘Gigantic holes in the system’

“I think things have improved, but then I think there are gigantic holes in the system,” Yellen said Monday night in a discussion moderated by New York Times columnist Paul Krugman at CUNY. She said regulators can only address such problems at individual banks not throughout the financial system. So I do worry that we could have another financial crisis.” Current Fed officials have pushed back against criticism that their reforms are making the system riskier, saying they are making the system


“I think things have improved, but then I think there are gigantic holes in the system,” Yellen said Monday night in a discussion moderated by New York Times columnist Paul Krugman at CUNY. She said regulators can only address such problems at individual banks not throughout the financial system. So I do worry that we could have another financial crisis.” Current Fed officials have pushed back against criticism that their reforms are making the system riskier, saying they are making the system
Yellen warns of another potential financial crisis: ‘Gigantic holes in the system’ Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-11  Authors: steve liesman, justin chin, bloomberg, getty images
Keywords: news, cnbc, companies, holes, fed, potential, regulatory, yellen, system, gigantic, crisis, think, things, financial, warns, current, york


Yellen warns of another potential financial crisis: 'Gigantic holes in the system'

Former Federal Reserve Chair Janet Yellen told a New York audience she fears there could be another financial crisis because banking regulators have seen reductions in their authority to address panics and because of the current push to deregulate.

“I think things have improved, but then I think there are gigantic holes in the system,” Yellen said Monday night in a discussion moderated by New York Times columnist Paul Krugman at CUNY. “The tools that are available to deal with emerging problems are not great in the United States.”

Yellen cited leverage loans as an area of concern, something also mentioned by the current Fed leadership. She said regulators can only address such problems at individual banks not throughout the financial system. The former fed chair, now a scholar at the Brookings Institution, said there remains an agenda of unfinished regulation. “I’m not sure we’re working on those things in the way we should, and then there remain holes, and then there’s regulatory pushback. So I do worry that we could have another financial crisis.”

In the wake of the financial crisis, some agency regulatory powers were vastly expanded, but others, for example, the ability of the Fed to lend to an individual company in a crisis, were curtailed. Current Fed officials have pushed back against criticism that their reforms are making the system riskier, saying they are making the system more efficient.

Speaking in London in June 2017, shortly after leaving office, Yellen had said she did not believe there would be another financial crisis in our lifetimes because of financial reforms. However, she did warn at the time about the deregulatory efforts just then underway.

WATCH: The Next Recession: Europe could ‘infect us’ says former Dallas Fed president Richard Fisher


Company: cnbc, Activity: cnbc, Date: 2018-12-11  Authors: steve liesman, justin chin, bloomberg, getty images
Keywords: news, cnbc, companies, holes, fed, potential, regulatory, yellen, system, gigantic, crisis, think, things, financial, warns, current, york


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Gold steadies near 5-month peak on subdued dollar

Gold prices were steady on Monday, having touched a fresh five-month peak early in the session, as the dollar weakened after a soft U.S. jobs report fuelled speculation that the Federal Reserve may stop raising interest rates sooner than expected. The Fed is widely expected to raise interest rates at its Dec. 18-19 meeting, but the focus is on how many rate hikes will follow in 2019. Gold tends to gain when rate hike expectations recede because lower rates reduce the opportunity cost of holding


Gold prices were steady on Monday, having touched a fresh five-month peak early in the session, as the dollar weakened after a soft U.S. jobs report fuelled speculation that the Federal Reserve may stop raising interest rates sooner than expected. The Fed is widely expected to raise interest rates at its Dec. 18-19 meeting, but the focus is on how many rate hikes will follow in 2019. Gold tends to gain when rate hike expectations recede because lower rates reduce the opportunity cost of holding
Gold steadies near 5-month peak on subdued dollar Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-10  Authors: simon dawson, bloomberg, getty images
Keywords: news, cnbc, companies, subdued, prices, fed, gold, slipped, analyst, jobs, near, ounce, peak, dollar, interest, rates, 5month, steadies


Gold steadies near 5-month peak on subdued dollar

Gold prices were steady on Monday, having touched a fresh five-month peak early in the session, as the dollar weakened after a soft U.S. jobs report fuelled speculation that the Federal Reserve may stop raising interest rates sooner than expected.

Spot gold inched up 0.1 percent to $1,248.59 per ounce, as of 0813 GMT, after hitting its highest since July 11 at $1,250.55 earlier in the session.

U.S. gold futures rose 0.1 percent to $1,253.4 per ounce.

Weak data points from the United States have been putting pressure on the dollar index which is proving to be positive for gold, said Ajay Kedia, director at Kedia Commodities in Mumbai, adding that: “we expect a resistance level of $1,270 before the upcoming Fed meet.”

The dollar slid against the euro and the yen after data showed U.S. non-farm payrolls increased by 155,000 jobs last month, below economists’ median forecast of 200,000 jobs, and the wage increase was softer than expected.

Some Fed policymakers have struck a cautious tone about the economic outlook, possibly flagging a turning point in the monetary policy.

The Fed is widely expected to raise interest rates at its Dec. 18-19 meeting, but the focus is on how many rate hikes will follow in 2019.

Gold tends to gain when rate hike expectations recede because lower rates reduce the opportunity cost of holding non-yielding bullion. Lower interest rates also tend to weigh on U.S. yields and the dollar, in which gold is priced.

“There is also some safe-haven demand coming back in gold,” said Argonaut Securities analyst Helen Lau.

Global stocks extended their slump on worries over slowing growth and fears that a fresh flare-up in tensions between U.S. and China could quash chances of a trade deal.

“A number of tailwinds are in place for it (gold) to move significantly higher during the month including falling U.S. interest rates, a declining or at least a stalling dollar, wobbly U.S. equity markets,” INTL FCStone analyst Edward Meir said in a note.

“Over the course of December, we see prices trading between $1,230-$1,285 per ounce.”

Meanwhile, holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.20 percent to 759.73 tonnes on Friday.

Spot gold may rise into a range of $1,258-$1,266 per ounce, as it has broken a resistance at $1,245, according to Reuters technical analyst Wang Tao.

Among other precious metals, spot silver was down 0.2 percent at $14.59 per ounce, while palladium slipped 0.6 percent to $1,216.52.

Platinum edged 0.2 percent higher to $791.40 per ounce. Prices had slipped to their lowest since Sept. 12 at $779 in the previous session.


Company: cnbc, Activity: cnbc, Date: 2018-12-10  Authors: simon dawson, bloomberg, getty images
Keywords: news, cnbc, companies, subdued, prices, fed, gold, slipped, analyst, jobs, near, ounce, peak, dollar, interest, rates, 5month, steadies


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If the Fed doesn’t raise rates this month, the market could panic, Cramer says

The Federal Reserve could cause “panic” on Wall Street if it reneges on its widely anticipated December interest rate hike, CNBC’s Jim Cramer said Friday. “Because he’s promised a rate hike, [Fed Chair Jerome Powell] risks stirring a wave of fear if he doesn’t tighten,” Cramer said as stocks fell on weaker-than-expected jobs results and trade worries. “It would be wrong to tighten, but if he doesn’t give us a full quarter-point rate hike, it will cause a panic,” the “Mad Money” host said. In fai


The Federal Reserve could cause “panic” on Wall Street if it reneges on its widely anticipated December interest rate hike, CNBC’s Jim Cramer said Friday. “Because he’s promised a rate hike, [Fed Chair Jerome Powell] risks stirring a wave of fear if he doesn’t tighten,” Cramer said as stocks fell on weaker-than-expected jobs results and trade worries. “It would be wrong to tighten, but if he doesn’t give us a full quarter-point rate hike, it will cause a panic,” the “Mad Money” host said. In fai
If the Fed doesn’t raise rates this month, the market could panic, Cramer says Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-07  Authors: elizabeth gurdus
Keywords: news, cnbc, companies, rates, month, doesnt, cramer, wrong, fed, raise, trade, investors, interest, market, tighten, panic, rate, hike


If the Fed doesn't raise rates this month, the market could panic, Cramer says

The Federal Reserve could cause “panic” on Wall Street if it reneges on its widely anticipated December interest rate hike, CNBC’s Jim Cramer said Friday.

“Because he’s promised a rate hike, [Fed Chair Jerome Powell] risks stirring a wave of fear if he doesn’t tighten,” Cramer said as stocks fell on weaker-than-expected jobs results and trade worries. “Investors will start presuming that something must be wrong, very wrong, that things are worse than they thought.”

But even if the central bank decides that it’s worth taking a more data-dependent approach after the weaker jobs data, its chief has put himself in a difficult position with his recent statements, Cramer said.

“No one wants the Fed to tighten going into a slowdown, especially when we might be in a tariff war around the globe. People want the Fed to be flexible. Thanks to his previous comments, though, Powell’s in a lose-lose situation,” he said, pointing to Powell’s remarksthat interest rates were “just below” where they should be.

“It would be wrong to tighten, but if he doesn’t give us a full quarter-point rate hike, it will cause a panic,” the “Mad Money” host said. “I hate to say it, Mr. Powell, but, here goes: I told you so.”

In fairness, Cramer said he “totally” understood why the Fed would raise interest rates this month, citing still-strong Purchasing Managers’ Index reports, healthy retail sales and close-to-full employment.

“The fact is, though, the economy’s slowing and the stock market sure shows it. […] That’s why it’s so skittish,” he explained. The major averages have endured drastic intraday swings this week as investors fretted about a host of economic pressures, including but not limited to the U.S.-China trade dispute.

Earlier this week, a “yield curve inversion” between the three- and the five-year Treasury yields also set off warning bells on Wall Street and spurred a sharp sell-off in stocks.

“Maybe a creative Fed chief could square that circle by holding off on a rate hike, but maybe selling some of the long-term bonds that they’ve been sitting on since the financial crisis — a different kind of tightening that would fix the inverted yield curve situation,” Cramer said. “Although, … ideally, you don’t want any tightening and the Fed would simply sit tight.”

All things considered — including the S&P 500 index turning negative for the year — investors should prepare for more market swings in the coming weeks, the “Mad Money” host warned.

“I think we’re going to have to slog through these volatility sessions for a bit, as there are all sorts of difficult crosscurrents here” including U.S.-China trade relations and the weakness in shares of stock market bellwether Apple, he said.

“And, of course, an errant Federal Reserve that’s backed itself into a corner when it comes to the next rate hike,” he added. “Get used to these crosscurrents, because this is the new normal, at least for now.”


Company: cnbc, Activity: cnbc, Date: 2018-12-07  Authors: elizabeth gurdus
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Markets are turning up the heat on the Fed to dial back rate hikes

Futures markets Thursday pointed to a 68 percent probability of an increase before 2018 ends. That’s still high, but it’s the lowest chance since late August, when the stock market was experiencing some minor choppiness. The latest adjustment has come as the market worries over the prospects of economic growth after a robust year. Markets are thus expecting the Fed to alter its projections for three rate hikes in 2019 and another one or two in 2020. While pricing in the strong chance of a Decemb


Futures markets Thursday pointed to a 68 percent probability of an increase before 2018 ends. That’s still high, but it’s the lowest chance since late August, when the stock market was experiencing some minor choppiness. The latest adjustment has come as the market worries over the prospects of economic growth after a robust year. Markets are thus expecting the Fed to alter its projections for three rate hikes in 2019 and another one or two in 2020. While pricing in the strong chance of a Decemb
Markets are turning up the heat on the Fed to dial back rate hikes Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-06  Authors: jeff cox, adam jeffery
Keywords: news, cnbc, companies, fed, chance, markets, dial, rate, worries, pricing, heat, hikes, market, end, economic, range, turning


Markets are turning up the heat on the Fed to dial back rate hikes

Futures markets Thursday pointed to a 68 percent probability of an increase before 2018 ends. That’s still high, but it’s the lowest chance since late August, when the stock market was experiencing some minor choppiness. The likelihood also dipped to around 69 percent in mid-November as Fed officials were busy walking back some of the hawkish talk from central bank Chairman Jerome Powell in early October.

The latest adjustment has come as the market worries over the prospects of economic growth after a robust year. Movement in the bond market is pointing to some worries ahead, as shorter-dated yields are marginally ahead of longer-dated counterparts, often a sign of a slowdown ahead.

Markets are thus expecting the Fed to alter its projections for three rate hikes in 2019 and another one or two in 2020. In fact, there’s nearly a 50-50 chance indicated that by December 2019, the Fed will take back one of its increases and end up in the same range as the end of 2018.

“The Fed will stop hiking and will lower forward guidance, but, given the level of rates, the transition period that has begun will continue both in the US and elsewhere in the world,” Blitz said. “Markets will consequently stabilize but remain volatile while traditional economic guideposts will prove less valuable. Risks abound.”

While pricing in the strong chance of a December hike, implied pricing in the market shows a funds rate of just 2.6 percent by the time 2020 rolls around. That translates to a target range of, at most, 2.5 percent to 2.75 percent, or one more from the 2.25 percent to 2.5 percent range that a December move would bring.


Company: cnbc, Activity: cnbc, Date: 2018-12-06  Authors: jeff cox, adam jeffery
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A flattening yield curve means it’s time to worry, but not panic, top economist says

The yield curve has flattened to its lowest level since June 2007 with the 10-year Treasury note yield only around 10 basis points above the 2-year note. “The yield curve has almost always forecasted the direction of trend growth, meaning when the curve flattens, growth with a lag tends to slow and vice versa when the curve steepens,” LaVorgna told CNBC’s “Trading Nation” on Tuesday. The yield curve inverts when shorter-term Treasurys yield more than longer-term Treasury yields. Still, while the


The yield curve has flattened to its lowest level since June 2007 with the 10-year Treasury note yield only around 10 basis points above the 2-year note. “The yield curve has almost always forecasted the direction of trend growth, meaning when the curve flattens, growth with a lag tends to slow and vice versa when the curve steepens,” LaVorgna told CNBC’s “Trading Nation” on Tuesday. The yield curve inverts when shorter-term Treasurys yield more than longer-term Treasury yields. Still, while the
A flattening yield curve means it’s time to worry, but not panic, top economist says Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: keris lahiff, brendan mcdermid, getty images, loic venance, afp, kcna, thomas barwick getty images, source, lawrence mcdonald
Keywords: news, cnbc, companies, lavorgna, 2year, projections, yield, flattening, panic, treasury, recession, worry, yields, fed, takes, means, curve, economist


A flattening yield curve means it's time to worry, but not panic, top economist says

One key recession indicator is flashing a warning signal to investors.

The yield curve has flattened to its lowest level since June 2007 with the 10-year Treasury note yield only around 10 basis points above the 2-year note.

Joseph LaVorgna, chief economist of the Americas at Natixis, says the move has him “very worried” about what comes next.

“The yield curve has almost always forecasted the direction of trend growth, meaning when the curve flattens, growth with a lag tends to slow and vice versa when the curve steepens,” LaVorgna told CNBC’s “Trading Nation” on Tuesday.

The yield curve inverts when shorter-term Treasurys yield more than longer-term Treasury yields. The relationship between the 2-year and 10-year yields is often used as a barometer of investor expectations for economic growth.

Still, while the flattening yield curve is cause for concern, it’s not yet time to panic, says LaVorgna.

“Typically the 2s/10s has roughly a 16-month lead from when it inverts to a recession and it could be even longer than that,” he said. “Much will depend on what the Fed does.”

The Federal Reserve’s rate moves tend to influence the short-end of the curve, including the 2-year Treasury yield, more quickly. Expectations of a hawkish Fed that hikes too aggressively could tip the short end of the curve higher than the long end.

“If the Fed relents later this month and takes off some of those dots, it takes away some of those aggressive rate-hike projections, the yield curve will then stop flattening, it might steepen out a bit, and that would be a sign the economy, at least in the markets’ mind, has some more room to run,” LaVorgna said.

The Fed is widely expected to raise interest rates at its meeting on Dec. 18-19. Fed members will also release their dot-plot projections, which could ease concerns over how aggressively the central bank will move next year.

“Nothing is preordained. The curve isn’t saying there’s a recession imminently. It says that one is going to happen at some point on the horizon. What the Fed does from here, though, will be central to whether those market fears are realized,” he said.


Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: keris lahiff, brendan mcdermid, getty images, loic venance, afp, kcna, thomas barwick getty images, source, lawrence mcdonald
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Merrill Lynch says it’s bearish on the market until it sees the ‘Big Low’

The stock market slide won’t turn around in 2019 until rate hike expectations for the Federal Reserve stop rising and earnings estimates for companies by analysts stop falling, according to Bank of America Merrill Lynch Global Research. “We expect to turn tactically bullish once peak rate and trough EPS expectations signal ‘The Big Low.'” In Asia, the Shanghai Composite is trading in a bear market, down 26 percent from its 52-week high. During the first three quarters of 2018, S&P 500 earnings j


The stock market slide won’t turn around in 2019 until rate hike expectations for the Federal Reserve stop rising and earnings estimates for companies by analysts stop falling, according to Bank of America Merrill Lynch Global Research. “We expect to turn tactically bullish once peak rate and trough EPS expectations signal ‘The Big Low.'” In Asia, the Shanghai Composite is trading in a bear market, down 26 percent from its 52-week high. During the first three quarters of 2018, S&P 500 earnings j
Merrill Lynch says it’s bearish on the market until it sees the ‘Big Low’ Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: fred imbert, samxmeg, getty images
Keywords: news, cnbc, companies, fed, sp, 2019, trough, earnings, bank, expectations, sees, lynch, market, big, merrill, low, rate, bearish, stocks


Merrill Lynch says it's bearish on the market until it sees the 'Big Low'

The stock market slide won’t turn around in 2019 until rate hike expectations for the Federal Reserve stop rising and earnings estimates for companies by analysts stop falling, according to Bank of America Merrill Lynch Global Research.

“The ‘Baby Bear’ market on Wall St that began in 2018’Q1 not yet over,” Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch Global Research, said in a note to clients. “We expect to turn tactically bullish once peak rate and trough EPS expectations signal ‘The Big Low.'”

Markets around the world have been increasingly volatile this year. The S&P 500 entered a correction in October, falling 10 percent from an all-time high hit on Sept. 21. In Asia, the Shanghai Composite is trading in a bear market, down 26 percent from its 52-week high.

Two of the main culprits for the wild ride on Wall Street have been worries about tighter monetary policy from the U.S. central bank and fears that corporate profits growth will slow down.

The Fed has raised rates three times in 2018 and is expected to hike once more later this month. The central bank also expects to raise rates twice in 2019. Rate-hike fears were somewhat quelled last week after Fed Chairman Jerome Powell said the central bank’s benchmark rate was “just below” neutral, hinting at fewer rate hikes down the road. But BofAML expects the Fed to hike four times in 2019, Hartnett said.

Corporate earnings have grown sharply this year. During the first three quarters of 2018, S&P 500 earnings jumped by at least 25 percent on a year-over-year basis. Fourth-quarter earnings are also expected to be strong. However, the growth rate is likely to slow down as a boost from lower corporate taxes in the U.S. fades. Globally, PMIs and a weaker export cycle in Asia point to earnings growing by less than 5 percent in 2019 from more than 15 percent in 2018, according to Hartnett.

“We believe asset prices will find their low once rate expectations peak and EPS expectations trough,” Hartnett said. “A rally in emerging-market currencies, the KOSPI (Korea Composite Stock Price Index), copper, [and] global industrial stocks would confirm China/global EPS expectations at a trough; a rally in REITs, homebuilders & semiconductor stocks would confirm Fed rate expectations peaking.”

Hartnett says investors should buy next year the iPath S&P 500 VIX Short-Term Futures ETN (VXX), which rises along with the Cboe Volatility Index (VIX) futures, as a way to benefit from the continuing volatility. The instrument has risen 31.7 percent in value this year, handily outperforming the S&P 500.

He also advises investors buy into Brazilian, Russian, Indian and Chinese stocks while shorting the popular FAANG trade, which is made up of Facebook, Amazon, Apple, Netflix and Google-parent Alphabet. The strategist also recommends buying the SPDR S&P Homebuilders ETF (XHB).

Subscribe to CNBC on YouTube.


Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: fred imbert, samxmeg, getty images
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Three experts weigh in on what to expect from a flattening yield curve

The yield curve hit its flattest level in more than a decade this week, contributing to the Dow plunging more than 800 points on Tuesday. A flattening yield curve is traditionally viewed as a sign of slowing economic growth, which could signal a recession is near. “If the economy does slow,” he asks, “does it stop the inflation progression?” Moynihan does note that the yield curve is good at predicting recessions, but questions whether the relationship is one of causation or the result of outcom


The yield curve hit its flattest level in more than a decade this week, contributing to the Dow plunging more than 800 points on Tuesday. A flattening yield curve is traditionally viewed as a sign of slowing economic growth, which could signal a recession is near. “If the economy does slow,” he asks, “does it stop the inflation progression?” Moynihan does note that the yield curve is good at predicting recessions, but questions whether the relationship is one of causation or the result of outcom
Three experts weigh in on what to expect from a flattening yield curve Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: tyler bailey, jaap arriens, nurphoto, getty images, adam jeffery, brendan mcdermid, kcna, thomas barwick getty images, source, lawrence mcdonald
Keywords: news, cnbc, companies, fed, curve, growth, slow, moynihan, flattening, rate, weigh, experts, yield, strong, economy, expect, does


Three experts weigh in on what to expect from a flattening yield curve

The yield curve hit its flattest level in more than a decade this week, contributing to the Dow plunging more than 800 points on Tuesday. A flattening yield curve is traditionally viewed as a sign of slowing economic growth, which could signal a recession is near.

Here’s what three experts say could happen next:

· Leuthold Group chief investment strategist James Paulsen has one big question. “If the economy does slow,” he asks, “does it stop the inflation progression?” It’s a question that may give market bulls pause heading into the final weeks of the year. “The path for the bull is getting really narrow because you could fall off on too weak or too fast [growth] here.” But it’s not all doom and gloom, as Paulsen says a great opportunity to get into the market could be on the horizon. If inflation pressure slows down, “maybe we scare everybody — ‘a recession’s coming’ — and that might be a great buying opportunity for one more run.”

· Bleakley Advisory Group chief investment officer Peter Boockvar puts the Fed in the spotlight. “Just as the Fed picked up their rate hike pace from one per year to three per year in the beginning of 2017, we started to see the inversion,” says Boockvar. He also notes that 80% of the rate hike cycles dating back to World War II have pushed the U.S. economy into a recession. But what is it about the U.S. economy that makes it vulnerable to these hikes? “We are a credit-sensitive, credit-dependent economy, so if the cost of capital goes up, it’s naturally going to slow growth.”

· Bank of America CEO Brian T. Moynihan has what he calls a “half full, half empty view” of the situation. “We feel very good about the U.S. economy. The prediction is we’ll slow a little bit, but underneath that is a strong growth rate that we feel very strong about,” says Moynihan. “Unemployment, wage growth, all the factors are very strong, including small business enthusiasm.” Moynihan does note that the yield curve is good at predicting recessions, but questions whether the relationship is one of causation or the result of outcomes based on Fed rate hikes. Regardless, he remains optimistic, saying, “The reality is — what you’re seeing underneath is a prediction that next year’s economy is going to grow.”

Bottom Line: The flattening and potential inversion of the yield curve probably indicates an economic slowdown, but there are still indicators of continued growth ahead. Investors should take a wait-and-see approach.


Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: tyler bailey, jaap arriens, nurphoto, getty images, adam jeffery, brendan mcdermid, kcna, thomas barwick getty images, source, lawrence mcdonald
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‘Trumponomics’ writer Art Laffer: I am a ‘huge fan’ of Fed chief Powell’s handling of interest rates

Federal Reserve Chairman Jerome Powell, often criticized for increasing interest rates by President Donald Trump, has been effective at the helm of the nation’s central bank, conservative economist Art Laffer told CNBC on Wednesday. “I’m a huge fan of Powell’s,” said Laffer, formerly an economic advisor to presidents Trump and Ronald Reagan. The Fed later this month is expected to raise rates for the fourth time this year. Powell last Wednesday said that rates are “just below” neutral, perhaps i


Federal Reserve Chairman Jerome Powell, often criticized for increasing interest rates by President Donald Trump, has been effective at the helm of the nation’s central bank, conservative economist Art Laffer told CNBC on Wednesday. “I’m a huge fan of Powell’s,” said Laffer, formerly an economic advisor to presidents Trump and Ronald Reagan. The Fed later this month is expected to raise rates for the fourth time this year. Powell last Wednesday said that rates are “just below” neutral, perhaps i
‘Trumponomics’ writer Art Laffer: I am a ‘huge fan’ of Fed chief Powell’s handling of interest rates Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: matthew j belvedere
Keywords: news, cnbc, companies, fed, president, laffer, trumponomics, writer, powells, handling, fan, huge, told, powell, hes, rates, tax, trump, trade, interest


'Trumponomics' writer Art Laffer: I am a 'huge fan' of Fed chief Powell's handling of interest rates

Federal Reserve Chairman Jerome Powell, often criticized for increasing interest rates by President Donald Trump, has been effective at the helm of the nation’s central bank, conservative economist Art Laffer told CNBC on Wednesday.

“I’m a huge fan of Powell’s,” said Laffer, formerly an economic advisor to presidents Trump and Ronald Reagan. “I think he’s done a great job in normalizing interest rates.”

Trump, who actually appointed Powell as Fed chief, has repeatedly railed against hiking rates too aggressively, blaming Powell most recently in a Washington Post interview last week for stock market declines and GM’s planned plant closures and layoffs.

The Fed later this month is expected to raise rates for the fourth time this year. But the path next year is up for debate. After its September rate hike, the Fed projected three rate increases into 2019. The current target range for the central bank’s benchmark federal funds rate, which banks charge each other for overnight lending, stands at 2 percent to 2.25 percent.

Trump’s Post interview on Nov. 27 came one day before Powell appeared to walk back his comments from Oct. 3 that rates were a “long way” from so-called neutral, which for October led to the worst monthly stock market losses in about seven years.

Powell last Wednesday said that rates are “just below” neutral, perhaps indicating that concerns about much higher rates may no longer be warranted. The market then rallied three out of the next four sessions.

On Monday, which saw stocks on a two-session winning streak, Treasury Secretary Steven Mnuchin told CNBC that the president was pleased with Powell’s latest speech.

However, on Tuesday, the Dow Jones Industrial Average tanked nearly 800 points, or 3 percent. It was the biggest decline since October’s rout as investors worried about a bond-market phenomenon that’s historically signaled a possible economic slowdown. Lingering worries around U.S.-China trade were also to blame. The Dow and S&P 500 were able to stay out of a correction. But Tuesday’s decline sent the Nasdaq back into correction territory.

Co-author of the book, “Trumponomics: Inside the America First Plan to Revive Our Economy,” Laffer said he’s “very optimistic” about the economy, describing the Trump tax cuts as “kicking in beautifully.” The Laffer Curve, named after the economist, is a theory that basically argues that increasing tax rates beyond a certain point becomes counter-productive for raising tax revenue — and that when taxes are too high, tax revenues actually sink.

Laffer said he hopes the administration tackles runway government spending as its next agenda item. “If it is, I don’t see any reason for a recession. I think we’re going to continue on a long prosperous path with the sky’s the limit.”

On CNBC Tuesday, Commerce Secretary Wilbur Ross said the U.S. economy is in good shape. He blamed the media for stoking worries about a slowdown.

However, Laffer said he’s concerned about the uncertainty surrounding U.S. trade relations with China. “Watching all this play out in real time is terrifying to me.”

Over the weekend, Trump and Chinese President Xi Jinping reached a truce in their bilateral trade war, agreeing to a 90-day period of no new tariffs on each other’s goods as talks continue.

Mnuchin told CNBC Monday he’s hopeful the Trump-Xi trade cease-fire can be turned into a “real agreement” to address what the president feels are unfair trade practices by the Chinese. Ross said on CNBC Tuesday that Trump got “very good” assurances from Xi on trade.

(The New York Stock Exchange and the Nasdaq were closed Wednesday for the funeral of George H.W. Bush, the nation’s 41st president. They reopen Thursday on a normal schedule. U.S. stocks futures, which closed at 9:30 a.m. ET, reopen Wednesday evening at 6 p.m. ET.)


Company: cnbc, Activity: cnbc, Date: 2018-12-05  Authors: matthew j belvedere
Keywords: news, cnbc, companies, fed, president, laffer, trumponomics, writer, powells, handling, fan, huge, told, powell, hes, rates, tax, trump, trade, interest


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Dollar weakens as US bond yields fall, trade tariff postponement supports riskier currencies

The dollar slipped in Asia on Tuesday as U.S. Treasury yields fell to three-month lows, a sign some investors were wagering the Federal Reserve would slow the pace of its rate hikes. The U.S. 10-year Treasury yield fell to 2.94 percent on Tuesday, its lowest level since mid September. “Falling U.S. yields are a negative for the dollar, especially versus the major currencies,” said Rodrigo Catril, senior currency strategist at NAB. Catril added that U.S. Treasury yields are near crucial technical


The dollar slipped in Asia on Tuesday as U.S. Treasury yields fell to three-month lows, a sign some investors were wagering the Federal Reserve would slow the pace of its rate hikes. The U.S. 10-year Treasury yield fell to 2.94 percent on Tuesday, its lowest level since mid September. “Falling U.S. yields are a negative for the dollar, especially versus the major currencies,” said Rodrigo Catril, senior currency strategist at NAB. Catril added that U.S. Treasury yields are near crucial technical
Dollar weakens as US bond yields fall, trade tariff postponement supports riskier currencies Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-04  Authors: tyrone siu
Keywords: news, cnbc, companies, trade, dollar, yuan, tariff, weakens, fall, yield, treasury, fed, versus, rate, fell, postponement, yields, riskier, currencies, supports


Dollar weakens as US bond yields fall, trade tariff postponement supports riskier currencies

The dollar slipped in Asia on Tuesday as U.S. Treasury yields fell to three-month lows, a sign some investors were wagering the Federal Reserve would slow the pace of its rate hikes.

The weakness in the dollar comes against the backdrop of a temporary truce in the US-China trade conflict, which has bolstered investor confidence in riskier currencies versus the safe-haven greenback.

The U.S. 10-year Treasury yield fell to 2.94 percent on Tuesday, its lowest level since mid September. The difference in yield between the U.S. 2-year and 10-year tightened to its smallest since July 2007.

The two-10-year yield curve is a key focus for investors as an inversion is seen as predictor of a U.S. recession. A yield curve is said to be inverted when yields on longer-dated maturity bonds are lower than shorter-dated maturity bonds.

The yield curve has flattened as continuing interest rate hikes send short-dated yields higher, while longer-dated Treasuries are supported by tepid inflation and slowing global growth.

“Falling U.S. yields are a negative for the dollar, especially versus the major currencies,” said Rodrigo Catril, senior currency strategist at NAB.

Catril added that U.S. Treasury yields are near crucial technical support levels, a break of which could add further pressure on U.S. yields and the dollar.

The dollar index, a gauge of its value versus six major peers, was off 0.23 percent at 96.8.

The dollar had been supported for most of 2018 by a robust U.S. economy and a relatively hawkish Fed, which is widely expected to raise its policy interest rate later this month.

Markets have priced in an 87 percent probability of a rate hike at the Fed’s Dec. 18-19 meeting.

The dollar came under pressure last week when the market took comments from Fed Chair Jerome Powell as signalling a slower pace of rate hikes.

A more dovish tone from the Fed last week has led markets to question how many times the central bank will hike rates in 2019.

“Given data remains strong, we think the Fed will hike twice in 2019 and that’s more than what the market is pricing in right now…we remain moderately bullish on the dollar,” said Nick Twidale, chief operating officer at Rakuten Securities.

Currencies such as the Chinese yuan, which were battered in the US-China trade war, are expected to trade stronger versus the greenback in the coming weeks as investor sentiment improves.

The dollar fell 0.5 percent against the offshore yuan to 6.8375. On Monday, it lost 1.07 percent, its steepest percentage fall since Aug. 25.

“For now, it seems China has got the best out of G20 and we expect the yuan to remain supported,” added Twidale.

However, he warned that markets need to see a further easing in trade tensions for the risk-on rally to continue.

The Australian dollar gained 0.3 percent in Asian trade at $0.7376. The Reserve Bank of Australia kept its policy cash rate unchanged on Tuesday in a widely expected move.

The yen traded at 113.13 to the dollar, with the greenback losing 0.4 percent versus the Japanese currency.

Elsewhere, sterling was gained 0.2 percent to trade at $1.2744 due to broad dollar weakness. On Monday, the pound fell below $1.27 for the first time since Oct. 31.

Sterling has posted losses for three consecutive weeks as traders bet that British Prime Minister Theresa May will not be able to pass her Brexit deal through parliament on Dec. 11.


Company: cnbc, Activity: cnbc, Date: 2018-12-04  Authors: tyrone siu
Keywords: news, cnbc, companies, trade, dollar, yuan, tariff, weakens, fall, yield, treasury, fed, versus, rate, fell, postponement, yields, riskier, currencies, supports


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The thing the bond market most feared is beginning to happen

The bond market sees storm clouds on the horizon, despite the trade ceasefire between President Donald Trump and China. And in this time, the longer duration 10-year yield has gotten closer and closer to the yield on the 2-year. An inversion of the 2- and 10-year yields has been a reliable recession indicator in the past. The move higher in September was seen as an important step into a new range, in reaction to Fed rate hiking. “Normally, I think the bond market people are geniuses but not toda


The bond market sees storm clouds on the horizon, despite the trade ceasefire between President Donald Trump and China. And in this time, the longer duration 10-year yield has gotten closer and closer to the yield on the 2-year. An inversion of the 2- and 10-year yields has been a reliable recession indicator in the past. The move higher in September was seen as an important step into a new range, in reaction to Fed rate hiking. “Normally, I think the bond market people are geniuses but not toda
The thing the bond market most feared is beginning to happen Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2018-12-03  Authors: patti domm, michael nagle, bloomberg, getty images
Keywords: news, cnbc, companies, beginning, fed, rate, points, feared, happen, market, thing, think, yields, 2year, inversion, 10year, bond, yield


The thing the bond market most feared is beginning to happen

The bond market sees storm clouds on the horizon, despite the trade ceasefire between President Donald Trump and China.

But not all strategists agree with the dire warnings, though they do note some unusual behavior.

On Monday, the difference between the 10-year Treasury yield, at 2.97 percent, and the 2-year yield, at 2.82 percent, dramatically narrowed by 5 basis points, the biggest one day move since late March. On Tuesday, the gap narrowed even more to as little as 13 basis points as the 10-year hit 2.95 percent.

Traders have been watching the difference between the yields on various Treasurys for months, along what is called the yield curve between the longer and shorter-term bonds. And in this time, the longer duration 10-year yield has gotten closer and closer to the yield on the 2-year. If the two should flip, and the 2 -year yield actually rises above the benchmark 10-year, that inversion would be a signal of a recession.

The two yields are currently just under 14 basis points apart, the narrowest since around the time they last inverted in June 2007. What’s worrisome for some is that on Monday, the difference between the yields on the 3-year and 5-year, and those of the 2-year and 5-year, inverted.

“It speaks to the potential for the 2s and 10s to invert,” said Ian Lyngen, head of U.S. rate strategy at BMO.

The timing could vary, he said, depending on the cycle. But it’s typically a matter of months, not days or weeks, when such an event could happen. “That might put 2s and 10s inversion on the table by the end of the year, and if not, then around the March FOMC meeting,” Lyngen said.

A lot of this is traders reading tea leaves. An inversion of the 2- and 10-year yields has been a reliable recession indicator in the past. Not all inversions have led to a recession, but recessions have always been preceded by inversions, according to Michael Schumacher, director of rate strategy at Wells Fargo.

Between 1988 and 2008, inversions of the 2s and 10s were followed by recessions about 24 months later, according to Wells Fargo.

The 10-year Treasury yield briefly dipped below 3 percent just after Fed Chairman Jerome Powell spoke last week for the first time since Sept. 18. The 3 percent level is a psychological milestone that the 10-year has spent much more time below than above since the financial crisis. The move higher in September was seen as an important step into a new range, in reaction to Fed rate hiking.

Some say pensions are buying the 10-year because with higher stock prices, they have closed their funding gap and now are looking for safety plays. There is also talk of heavy buying from Asia, and some traders point to short-covering.

Others point to reduced fears about inflation, making the 10-year more attractive. They also note that the 10-year yield will move lower with the German bund, which yields just 0.28 percent, and that central bank purchases of assets continue to depress yields.

“I wouldn’t pay too much attention to that particular move but I think the front end is more interesting,” said Schumacher. He pointed to comments from Fed Vice Chairman Richard Clarida and said the market appears to be ignoring him. “If you listened to Clarida, he said in a nutshell that central banks have to worry about inflation going too low. That would imply to me a less aggressive Fed tightening, and you think that would drive down the front end down.”

Source: Wells Fargo

The 2-year yield is most reflective of Fed policy, and it is at the same level it was roughly at before Powell last Wednesday said the Fed was close to neutral, implying fewer rate hikes.

“There’s something going on with worries about growth, not withstanding this trade deal,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group. Boockvar said the fact that the agreement to hold off on new tariffs for 90 days while U.S. officials negotiate with their Chinese counterparts has now created a 90-day period of uncertainty.

“If I’m a company, I must just hold off until the second quarter to make a decision. That could slow growth, just sitting and waiting. Maybe that’s what the bond market is sniffing out,” said Boockvar.

Before the financial crisis, the 2s to 10s curve first inverted briefly at the beginning of 2006, then again in the middle of that year. Its last inversion was in 2007.

As the bond market reflected fear, stocks rallied Monday on the trade ceasefire. The Dow was up 287 points, or 1.1 percent.

“The last time we inverted…the party kept going on,” Boockvar said. “The credit markets were in flames but the stock market went on to an all time high in October 2007…They thought the Fed was going to save the world.”

Boockvar said Fed officials have argued that a more realistic curve to watch is the 3-month to the 10-year because the 3-month more closely reflects the fed funds rate. That difference between the two was nearly 60 basis points. But the market watches the 2-year and the 10-year curve.

“Normally, I think the bond market people are geniuses but not today,” Schumacher said. “Does it really think there’s a recession coming? I don’t think so.”


Company: cnbc, Activity: cnbc, Date: 2018-12-03  Authors: patti domm, michael nagle, bloomberg, getty images
Keywords: news, cnbc, companies, beginning, fed, rate, points, feared, happen, market, thing, think, yields, 2year, inversion, 10year, bond, yield


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