The Fed's Political Decision-Making

 Is the Fed too eager to raise rates?

https://lnkd.in/e5Vz4fS5
As Mr. Sandhi points out, the Fed is in an unenviable position in its choice of decisions. If it allows the economy to surge ahead, inflation may become institutionalized, while slamming on the breaks can tip the world's economy into a recession of unknowable depth and duration. This decision has many unknowns, including the relative importance of various factors in maintaining inflation at high levels and the unknown impact of a labor market undergoing structural changes. A central question is whether a wage-price cycle is inevitable if the Fed resists a dramatic rise in interest rates. And yet, despite the uncertainties, the Fed is hell-bent on pursuing an all-or-nothing approach. Mr. Sandhi convincingly argues that public opinion may be a decisive factor. In the public's perception, economic pain is preferable to high inflation. However, it remains to be seen if opinion remains the same if the coming recession turns out to be deep and prolonged and only has a moderate impact on inflation.

Cryptocurrencies Find a Home as an "Asset Class"

 https://on.ft.com/3QA2Zxr

Crypto has gone through a number of transfigurations in the past decade from a medium of exchange, to a disrupter of traditional payment systems, to a hedge against inflation and instability. None of these have outlasted the hype. Its latest incarnation is as an asset class and trading vehicle, initially for wealthy and institutional investors as illustrated by the offerings from Fidelity, Charles Schwab, and, most telling, BlackRock's inclusion of Bitcoins on its vaunted Alladin system. Given crypto's notorious volatility, regulatory uncertainty, susceptibility to fraud, and changing hype, this relatively new embrace of cryptos should be adopted cautiously or avoided until it proves itself as a reliable asset class. #cryptocurrency # #BlackRock, #Fidelity, #CharlesSchwab, #assetclass, #investing, #bitcoin, #Alladin, #alternativeinvestments, #ezrazask, #binance, #assetmanagement, #assetallocation

Correcting a Poor Valuation

 https://on.ft.com/3RHadAr

Correcting Poor Investor Decisions: Another way to view this decline in valuation is as a correction of the overvaluation that led to the overinflated valuation in the first place, a common occurrence with internet-based technology. The fact that we have seen this before in the dot.com bubble does not speak well of the decision-making process of venture capital firms and other investors. #fintech #valuation #internet #investments #decisionmaking #investmentdecisions #financialbubbles

FinTech Haphazard Valuations

 FinTech Haphazard Valuations

​https://on.ft.com/3RHadAr
The immense decline in the valuation of FinTech companies, pegged at around 50%, reflects the overly optimistic assessment of the firms' future profitability, especially in the outlook for future revenues.  This is a chronic problem in the valuation of newer high-tech companies where little or no performance data exists.  The same problem occurred during the dot-com period in the late 1990s.

Investment Strategies for a New Era

 ​https://www.ft.com/content/05d0324f-e216-47ff-973e-c22f660edf22​

The era of the Great Exasperation arrives for investors
This article lays out the changes in the investment climate brought out by recent changes in economics, economic policy, and the difficulty of finding investment strategies that work in the new environment. Many of the trends he identifies are sure to be with us for the medium term.  One result is to undermine the tools that investment managers have used for decades and that generated acceptable risk/reward returns. The end of this era undermines many of these tools as well as the underlying premises. Investment professionals may be better off changing investors' expectations than attempting to use old tools in the new environment.

Is the Fed Causing a Recession?

 

https://www.nytimes.com/2022/07/07/opinion/inflation-recession-the-fed.html?smid=li-share

Krugman argues that inflation fears have been overblown and that there is evidence that inflation is subsiding. His argument is that the Fed is overreacting by signalling that it intends to continue to aggressively raise interest rates raising the prospect of an unnecessary recession. However, this mornings U.S. jobs report shows gain of 372,000 in non-farm payrolls, exceeding economists’ estimates for a 275,000 increase. The unemployment rate remains unchanged at 3.6%. This report may undermine Krugman's analysis and give a green light to the Fed's view that the economy is overheated and inflation may be incorporated into people's expectations, triggering a self-sustaining inflation. The bottom line is a likely hefty rise in interest rates later this week (0.50% and possibly 0.75%). The risk will then shift to to a recessionary outlook. With all the political and economic problems facing the world, a recession in the world's largest economy would be pouring gas on afire. #ezrazask #inflation #economicpolicy #federalreserve #employment #politicaleconomy #recession #stagflation

Will Central Banks Keep Their Resolve to Raise Interest

 ​https://www.ft.com/content/23c3a3a7-b2da-412c-8050-bdad986fde21

​Central Banks and the Fight to Curb Inflation
European and US central banks have jointly stated that fighting inflation is their top priority and they will follow a high-interest rate and tight monetary policy, partly in recognition that they overshot their long-lasting easy money policy. However, it is easy to state a policy but may be difficult to follow, especially if the economies go into a dive. Based on their past record of accomplishment it is possible that the banks will cave and compromise on their strategy

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