Now What (after the rate cut)?

Source: Maher/Daily Reckoning

“The Federal Reserve has lowered interest rates for the first instance in 11 years…A 25-basis point rate cut it is. In its own telling: In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2–2.25%. The Federal Reserve also declared an immediate and unconditional halt to quantitative tightening today — two months ahead of schedule…Do not consider today’s rate cut a retreat, he insists: Let me be clear: What I said was it’s not the beginning of a long series of rate cuts… When you think about rate-cutting cycles, they go on for a long time and the committee’s not seeing that… You would do that if you saw real economic weakness and you thought that the federal funds rate needed to be cut a lot. That’s not what we’re seeing. Powell instead labelled today’s cut a ‘midcycle adjustment to policy’…But the market says otherwise.Federal funds futures presently give a 60% chance of another cut in September. But a 100% chance by November…The rate hike cycle is over. “Normalization” is no more. We do not know when we will see normal again… if ever. By our lights, the global economy is in for hard sledding. Reams of economic indicators suggest today’s conditions are worse than in September 2007 — at the doorstep of crisis. These include global manufacturing data, economic surprise indexes (how economic data meet expectations) and financial conditions…In each instance you will find a woeful comparison against 2007…Come the [Fed] announcement, the market took a sip of Powell’s near beer… and spit it back in his face. All major indexes plunged into red numbers…But even if the Federal Reserve cut 50 basis points, we expect heavy weather soon enough. As we have maintained, recession is likely within three months of the first rate cut that ends a cycle…Thus the hourglass begins dripping sand. By early November it may run out.”

Your 5-point plan for surviving the coming stock-market downturn 

Source: Marketwatch

“It’s time to lighten up on stocks to prepare for the gathering storm. I’ve been telling subscribers of my stock newsletter Brush Up on Stocks to get out of dubious trades, get off margin, raise cash and be extra judicious about entering new positions…It does makes sense to tilt your portfolio to a more defensive posture….It’s all about sentiment. Investor are getting too bullish…When investors are excessively bullish it means two things – both bad for stocks. 1. Investors are close to being fully invested. So they have less buying power on the sidelines to drive stocks higher. 2. Very bullish investors are overconfident and complacent. This makes them more prone to ‘surprise.’….It’s time for the following five tactics. 1. Raise cash. Cash is the cleanest defense against downturns….2. Favor ‘high-quality’ companies. Consider businesses that have good attributes like solid free cash flow and pricing power….3. Buy gold. Gold is the ‘go to’ safe haven asset that typically does well when market turmoil increases….4. Favor defensive areas. Two examples: Consumer staples and utilities….5. Stay in medium-term positions. It’s too hard to time market moves because you have to get two decisions right: the buy and the sell.”


U.S. economy misses Trump’s 3% target in 2018 

Source: Reuters

“The Commerce Department said on Friday that gross domestic product increased at a 2.9% rate last year, confirming an estimate which was published in March. The department’s annual revisions to GDP data also showed the economy growing 2.5% in the 12 months through the fourth quarter of 2018, down from the previously reported 3.0%….The downgrade to the 2018 year-on-year measure to below 3% may well irk a commander-in-chief who has been quick to blame the U.S. Federal Reserve in particular for actions he sees as stymieing his growth agenda. The Fed meets on interest rates next week, and Trump has already been jawboning policymakers to cut borrowing costs, which he says would allow the economy to take off ‘like a rocket ship.’….Economists estimate the economy’s growth potential, or the pace at which it can expand without generating too much inflation, at around 2%….Growth in the first quarter of 2018 was revised up to a 2.5% annualized rate from 2.2%. Second-quarter growth, which prompted Trump’s mission accomplished declaration, was cut to a 3.5% pace from a 4.2% rate. Growth in the third quarter was slashed to a 2.9% rate from a 3.4% pace. Fourth-quarter GDP growth was lowered to a 1.1% pace from a 2.2% rate.”


Gold To Be Revalued In New ‘De Facto’ Gold Standard 

Source: Zero Hedge

“The United States wants its fiat dollar system to prevail for as long as possible. It has every interest in preventing a ‘rush out of dollars toward gold,’ as happened in the 1970s. Since then bankers have been trying to exercise control over the precious metal’s price. This war on gold has been ongoing for almost 100 years but gained traction in the 1960s with the forming of the London Gold Pool, whose members included the US, UK, Netherlands, Germany, France, Italy, Belgium, and Switzerland. Today Washington may consider it useful to bring back gold to support the dollar. Some U.S. insiders have even been calling openly for a return to the old way of doing things. Neo-conservative Robert Zoellick, the former president of the World Bank, wrote an open letter to the Financial Times in 2010 entitled ‘Bring Back the Gold Standard.’ A 2012 study by the Chatham House gold task force suggested that the metal could be added to the International Monetary Fund’s special drawing right….Clearly gold is making a remarkable comeback to the world financial system. A new gold standard is being born without any formal decision. At least that is how Ambrose Evans-Pritchard, an influential international business editor of The Telegraph, described the ongoing efforts by countries to lay their hands on physical gold: ‘The world is moving step by step toward a de-facto gold standard, without any meetings of G20 leaders to announce this.'”


Yes, you can un-retire and go back to work. Here are 3 financial signs it’s time to do it 

Source: USA Today

“We decided to climb Pikes Peak, and after we parked and made our way to the trailhead with our friends, my wife ominously blurted ‘there’s no turning back now.’ She was wrong. Sixty minutes later, I was on my way back down the mountain by myself…One of the most difficult and courageous decisions a person can make is to stop and turn back. This is also true for retirement….Retiring from retirement, and reentering the workforce is not a popular solution. But as you’ve grown to understand over the years, what’s right isn’t always popular. There are a few telltale signs your retirement isn’t working, and you’d be better served to turn around and reset the math. 1. 10% pace – If you’re depleting your assets at a pace of 10% or more annually, you could be in big trouble….2. If you’re going into debt – On the surface, it’s not bad if your net worth is decreasing during retirement, but if the decrease comes from an increase in debt, you’re in trouble….3. Change in family structure – When you retired, you likely made your decision based on a snapshot of your life. If your picture has changed, specifically in the event of death or divorce, reentering the workforce may be necessary.”

Trader Warns “The Fed Is Poised To Make Its Latest Policy Error” 

Source: Zero Hedge

“It’s a busy week ahead, and, I guess, only one thing matters. The Fed is poised to make its latest policy error. The U.S. fares particularly poorly in recent reports. By some official measures it ranks worst in the developed world. So, naturally, as the FOMC views the world, anything they can do to get the stock market higher seems like just the prescription. They are going to trickle down on the little people because, in the words of Chairman Jerome Powell, the improvement in employment has, ‘started to reach communities at the edge of the workforce.’ It’s starting to take hold, they are sure of it. Their models insist that it works….Stocks will continue to be attractive as the concept of earnings multiples becomes largely irrelevant in a world of negative interest rates. Something is better than nothing. But that hasn’t and won’t be a way to conduct social policy….Most interesting, is the inability of Treasury yields to move in either direction. Especially since we expect more QE from Europe imminently.”


Why Silver Will Be a Better Bet Than Gold if the Precious Metals Rally Continues 

Source: TheStreet

“Anyone bullish on precious metals should consider silver…The white metal tends to see far more volatility, which is an advantage for traders in an up-trending market. Plus, silver prices are still playing catch-up with gold based on historical price analysis…In a bull market, volatility is okay as long as it is upward trending volatility, which is exactly what we see right now in the precious metals market. In such a case, savvy traders should take a more volatile route….Silver tends to outperform gold when the market is moving up, just like small caps frequently outperform large caps in an equity bull market….Silver production is overwhelmingly the result of miners pursuing other minerals such as gold and copper. In 2018, 74% of silver production was the result of this so-called secondary production, according to the Silver Institute….Silver prices are also low now when compared to gold using something known as the gold-silver price ratio. Currently one ounce of gold trades for 87 times the value of one ounce of silver. Historically, that ratio has been in the range of 40 to 80, says Matthew Miller, a mining analyst at New York-based research firm CFRA. Or in other words, gold is now trading at a premium valuation to silver based on history.”


The Capital One Breach: What It Means for You 

Source: Wall Street Journal

“In this latest massive consumer-data breach, a hacker accessed the personal information of 100 million Capital One credit-card customers and applicants in the U.S. and six million in Canada. The breach stands to be one of the worst for U.S. consumers because of the type of financial information that was accessed. This valuable consumer financial information can be used to figure out the identities of the most creditworthy or affluent consumers and open a card or loans in their names. Here’s what you need to know if you have a Capital One credit card or have applied for one in the past, and how to protect your accounts and information. Sensitive identity information about consumers and small businesses who applied for Capital One credit cards between 2005 and 2019 was exposed. So if you have a Capital One credit card, or have applied for one in that time frame, your information is part of this data breach. The information leaked includes names, addresses, ZIP Codes, phone numbers, email addresses, dates of birth and self-reported income, the bank said. Consumer data including credit scores, credit limits, balances, payment history and some transaction data are also part of the breach. Also exposed were about 140,000 Social Security numbers and 80,000 linked bank account numbers….There are three things those who either have a Capital One credit card or applied for one should do immediately. First, freeze your credit….Then, change your passwords….After that, set up two-factor authentication for all your financial profiles and online accounts.”


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