The price of Gold knocking on the door of $1,300 as the spec longs continue to add on to their positions. Helping the price of Gold this morning is a weaker U.S. Dollar and lower bond yields across the globe.
Lawmakers are back from their thanksgiving recess to debate the proposed tax bill.
Many economists are questioning if a tax cut is necessary as it would only modestly boost economic growth, significantly increase the national debt and give the richest Americans the largest tax cut.
There are a handful of Senators to watch, especially Senator Bob Corker and John McCain, who seemingly are opposed to anything the President is behind.
Federal Reserve Chair Janet Yellen said this past Tuesday that the biggest challenge facing the Central Bank in the coming years will be to craft an interest rate policy that avoids putting the economy thru a “Boom-Bust” cycle.
She said that going forward, the Fed will be faced with a delicate balancing act. It will need to move rates up at a pace that allows the labor market to improve and inflation to move toward the Fed’s target. This while not delaying hikes to the point where the Fed is forced to push rates up so quickly that it threatens to throw the country into recession.
“Moving monetary policy too slowly…has risks,” Yellen said, particularly if unemployment, already at 4.1 percent, the lowest in nearly 17 years, begins to fall even more quickly. That could trigger a sudden jump in inflation, forcing the Fed to respond with more aggressive rate hikes that could spell the end of the current economic expansion, already the third longest in history.
Yellen said Fed officials remain puzzled as to why inflation, which had begun moving toward the Fed’s two percent target, has retreated for several months this year.
Nonetheless if you look at the CME Fed Watch tool, by next year at this time there is a chance we will be looking at a 2 percent Fed Fund rate. Puzzling as it is, I wonder how that will happen if the Fed target inflation rate is not met.
Wall Street analysts from the likes of Goldman Sachs and others are predicting double digit corporate earnings in 2018. These predictions must be on the minds of the Fed Board going into the December meeting. Currently the odds of a Fed hike in December stands at 92 percent.
The question remains, if this economy starts to heat up how fast will the Fed respond with future rate hikes?
One must be concerned when everything looks “SO” good to the Wall Street investor. The VIX Index is near all-time lows. Wall Street economists predicting an all-time high in consumer spending this holiday season. Consumer confidence is up, everything just looks so rosy.
Is this crazy market enthusiasm getting into everyone’s head, making them think everything is fantastic? Are the politicians in Washington exciting the middle class with a so called “greatest tax cut for the middle class in the history of this great nation”? Is everyone going Cryptocurrency mad pumping, billions of dollars into a product they really don’t understand?
But wait, did anyone forget the latest household debt figure is at an all-time high of 13 trillion dollars. Did we also all forget about our country’s debt at over 20.5 trillion and still growing? (And according to some Washington insiders this tax plan will add an additional 2.2 trillion dollars to the national debt.)
And we still haven’t come up with a Health plan or addressed the crumbling infrastructure facing this nation.
I’ll call this phenomenon the “Disneyland vacation syndrome.”
Everyone always gets excited planning this trip and when the day comes to hit the park, the excitement is at its peak. You have a fantastic time enjoying every bit of the vacation, but when you come home and reality sets in and you see the bill and depression sets in.
The current Wall Street narrative is no different. Eventually everyone will be faced with paying the piper with higher taxes and cuts to Social Security, Medicare and all other entitlements. Because after all, unless you are a multimillionaire you just can’t spend every day “The Happiest Place on Earth.”
Have a wonderful Monday.
Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals. This document is for information and thought-provoking purposes only and does not purport to predict or forecast actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein are current opinions as of the date appearing in this editorial only and are subject to change without notice and cannot be attributable to Dillon Gage. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. This information is provided with the understanding that with respect to the opinions provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. You may not rely on the statements contained herein. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.