Chair Powell to the Markets: ‘I Really Mean It’ … At the Economic Club of Washington, D.C., Fed Chair Powell said the Federal Open Market Committee members think that they need to increase rates more than once and then hold rates high for an extended period.
What it means— It’s like the boy who cried wolf, except he is the wolf. Chair Powell and his fellow committee members have the absolute authority to impose higher overnight rates on the economy, and they’ve told us in no uncertain terms that this will happen. And yet, investors don’t believe them. First in the aftermath of the press conference following the monetary policy meeting on February 1 and again after Powell’s remarks this week, investors pushed the markets higher, as if the Fed were done with rate hikes and on the verge of rate cuts.
Last fall, many were calling for a smaller rate hike in December and then another, smaller hike in February, followed by a pause. The Fed has taken the pause off the table. Powell and the other talking Fed heads can’t tell the world that they will raise rates this close to their next meeting and then take a pass without damaging their credibility. They have at least one more increase to go before they step aside. Bond investors believe this is likely, given the falling rate of inflation and wage growth.
However, Deutsche Bank’s private banking arm expects the U.S. 10-year Treasury yield to be 4.20% by year’s end with no cut by the Fed due to persistent inflation. Regional Fed Presidents Kashkari and Bostic made speeches this week reinforcing the Fed’s intent to continuing moves to higher rates. DoubleLine’s Sherman opined the risk is too high to join the bond rally.
Major Oil Companies Post $219 Billion in Profits for 2022… The combined profits of ExxonMobil, Chevron, BP, Shell, Equinor, and TotalEnergies more than doubled the $100 billion booked in 2021.
What it means— European leaders already have imposed windfall profit taxes on energy companies, while President Biden took the firms to task for using their profits to enrich shareholders through buybacks and dividends instead of investing.
Left unsaid is that EU leaders and American politicians who are now calling for higher taxes and investment were nowhere to be found when these same companies were losing money at the start of the pandemic. Also, company executives would be derelict in their duties to shareholders if they didn’t take at their word government officials who want to destroy their businesses by demanding the switch to renewables. The pressure to convert to EVs and eliminate fossil fuel is economically unrealistic.
Egg Prices Fall by more than 50% from December Peak… Nationally, average wholesale egg prices reached $4.65 per dozen on December 19, 2022 but had fallen to $2.01 by February 6, 2023.
What it means— According to the CDC, the avian flu has affected 47 states, resulting in the culling of more than 58 million chickens. The dramatic drop in supply without a commensurate fall in demand led to wholesale prices jumping more than 200% from the recent multiyear average of $1.50 per dozen. The recent jump in egg prices led to myriad memes that showed people “flaunting their wealth” by purchasing shopping carts of eggs or professing their love by presenting their partner with eggs instead of jewelry. But don’t expect retail prices to fall quickly. Like gasoline prices, egg and other commodity prices tend to move up quickly but drop slowly.
Researchers Prove That Men Compensate for Perceived Physical Limitations with Sports Cars… Researchers at the Department of Experimental Psychology, University College London, surveyed 200 men ages 18 to 74 to test the hypothesis that men with a perceived certain physical “shortcoming” were more likely to buy sports cars. The researchers misled the test subjects about the average size of certain male anatomy, and then asked them to rate the desirability of different vehicles. Men who were told that average measurements were larger (leading them perceive that their personal attributes were below average) were more likely to pick sports cars. Those told the opposite were less likely to pick sports cars. And apparently, after age 29, the desire to buy a sports car was more pronounced.
Data supplied by HS Dent Research
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