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Thread: Powell Warns Of "Rising Leverage & Elevated Valuations"; Dudley, Rosengren: QE (Or More) Will

  1. #1

    Powell Warns Of "Rising Leverage & Elevated Valuations"; Dudley, Rosengren: QE (Or More) Will

    Federal Reserve reversing on their aggressive stance to raise rates?



    Powell Warns Of "Rising Leverage & Elevated Valuations"; Dudley, Rosengren: QE (Or More) Will Be Back

    Ahead of Fed Chair Powell's first semi-annual monetary policy report to Congress next week (brought forward to 2/27), The Fed has released his prepared remarks warning that "valuations are still elevated across a range of asset classes" and fears "signs of rising non-financial leverage." To wit:

    Looking at the key topic of inflation, and the labor market, the Fed found that U.S. labor market is "near or a little beyond" full employment in early 2018, and that while the pace of wage growth has been modest, "serious labor shortages'' would probably give it an upward push.

    Ironically, and paradoxically for an "economy beyond full employment", the Fed observes that "the pace of wage gains has been moderate; while wage gains have likely been held down by the sluggish pace of productivity growth in recent years."

    Regardless, the Fed clearly is concerned about labor supply-demand imbalances, and has even added a new word: serious, as in "serious labor shortages would probably bring about larger increases than have been observed thus far."

    In a separate special section on financial stability, the Fed notes that overall vulnerabilities in the U.S. financial system remain moderate, while noting some spots where things are warming up. These include signs of increased leverage to the nonbank sector, noting greater provision of margin credit to equity investors such as hedge funds.

    More at link: https://www.zerohedge.com/news/2018-...be-back-powell

    For those who watch the bond markets, you know that it EXPLODED after these notes were released. Some say artificially, but that is another discussion.

    Are we starting to see the seams splitting from all the artificial market propping? We are starting to see asset hyperinflation taking it's first steps. Curious about opinions both for and against this notion.
    "Self conquest is the greatest of all victories." - Plato



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  3. #2
    Ironically, and paradoxically for an "economy beyond full employment", the Fed observes that "the pace of wage gains has been moderate; while wage gains have likely been held down by the sluggish pace of productivity growth in recent years."

    Regardless, the Fed clearly is concerned about labor supply-demand imbalances, and has even added a new word: serious, as in "serious labor shortages would probably bring about larger increases than have been observed thus far."
    Well, I think the polite term for that is 'balderdash'.

    In any case, they intend to keep inflating this bubble. I'm inclined to say it will blow sooner or later. And when it does, the bang will be heard around the world.
    Quote Originally Posted by Swordsmyth View Post
    Ron is wrong...
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    Amash is wrong...

  4. #3
    Quote Originally Posted by acptulsa View Post
    Well, I think the polite term for that is 'balderdash'.

    In any case, they intend to keep inflating this bubble. I'm inclined to say it will blow sooner or later. And when it does, the bang will be heard around the world.
    Looking around the world, you're more right than you may know. The Canadian Housing bubble seems to be in full blown "pop", and Deutsche Bank seems to be in a major meltdown. And considering Deutsche Bank is sitting on a $46 trillion Derivative Portfolio (the world's biggest such portfolio) which is around 12% of the world's total notional value of derivatives outstanding....well, if the Central Banks don't bail them out (and many hold the position they're unable to) then that could be a trigger of some very bad things.
    "Self conquest is the greatest of all victories." - Plato



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