The Fed Announces
The Federal Open Market Committee announcement:
The bond market meanwhile has already moved:
Daily Treasury Par Yield Curve Rates
Despite the media hype, this decision is of little consequence. Unless you’re a day trader or man a Wall Street bond trading desk, you’re better off ignoring it, as explained here. Better to watch the bond market than a lagging indicator. Not even anything Jay Powell says about future policy will matter much, because new data will have arrived by the time it’s made, and the bond market will have already gotten there first anyway.
All you really need to know is that the Fed has spent the past quarter century cheapening and incentivizing borrowing, and that the federal government has responded by doing it in spades. The Fed has boxed itself into a corner where it now falls under immense pressure to monetize this debt via yet more inflation, and there is no indication it has any of the that mythical independence to resist. Inflation begets inflation.
In case any doubt remains, consider that unemployment remains near multi decade lows and even the watered down official “inflation” stats are well above the Fed own inflated target and rising. Consumer prices, stock prices and gold prices are at all time highs. Yet the Fed is easing.
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It still amazes me how the amnesiac media can wring their collective hands about a loss of supposed Fed independence to fiscal pressure when only five years ago the Fed printed up trillions to accommodate trillions of deficit spending.
So how does Powell justify cutting rates when inflation is already above its target? Posit that policy has been “restrictive” and that the cut is just making it less so. Evidence that policy has been restrictive, however, is lacking. To the contrary, not only has consumer price inflation reversed higher, but asset price inflation has accelerated. Already bubbly stock prices continue to soar and gold has risen more over the past year than any time in decades. The dollar is in the dumps and financial conditions, which Powell used to emphasize, apparently no longer matter now that they don’t support his declaration that policy is restrictive. Instead Powell apparently plans to inflate with impunity and blame exploding consumer prices on tariffs.
Throwing the dog a bone?
Its only just begun………..
The bond market is nonplussed. Having been rallying nicely since mid January, it turned south today, hiking rates.
One day doesn’t make a trend, but this bears watching. Last fall’s Fed rate cuts were vetoed by the bond market. If this rate cutting campaign is likewise overruled by the bond market, it will be another sign of a failed Fed and yet more inflation ahead.
The Fed has made many mistakes over the years as documented in these pages. The last big one was in prematurely abandoning its inflation fight in 2023-2024, likely both to please Wall Street and support the incumbents in the election. (Some independence!) Its conundrum now is simply reaping the crop of weed seeds it has sowed.
Trump has major debts, you know what they going to do…Print BABY print
The US had nearly balanced its budget by the end of the twentieth century. The debt has been piling up since. Bush, Bush, Obama, Obama, Trump, Biden, and Trump again. Oh, and all the congresses, too, enabled and abetted by Greenspan, Bernanke, Yellen, and Powell. Each seemingly determined to outspend and outborrow or outprint his predecessor. It is an institutional disease. Now there’s nobody in the driver’s seat except forty trillion dollars of debt.
Investment implications remain unchanged. Doubline’s Jeffrey Gundlach stunned his CNBC interviewer by suggesting a 25% allocation to gold wouldn’t be unreasonable and that most of his stock holdings were non-US. Cryptoskeptic and though a believer in AI, he believes the big money has already been made and that the stocks are too expensive to offer much in the way of prospective returns. He was most bullish on so called emerging markets. Anything but dollars.
This generally aligns with my underweight of high priced US growth, overweight of dividends, quality and value, commodities including gold, and underweight bonds.
Gold (& Silver) getting KILLED!
Did the timing look funny to you? Gold surged higher when the FOMC announcement came out, then got smacked down within a few minutes, very sharply. If it hadn’t been for Treasuries doing about the same thing, I’d suspect Fed PR.
The surge was good enough though for a new all time high of $3705.66.
On further inspection, it looks more forex driven … the FOMC was a bit less dovish than feared, giving the dollar a forex boost. This would explain not only the selloff in gold and treasuries but also the outperformance of US versus XS stocks.
It doesn’t change the big picture though. The Fed can’t undo now what it spent years doing. That nearly forty trillion in UST debt is now a Frankenstein monster that won’t go away.
Re the suspension of Jimmy Kimmel, ABC has every right to refuse to broadcast what it chooses. But government pressure to do so would be a violation of the First Amendment right to freedom of speech.
Unfortunately this distinction usually gets lost in media discussion of free speech. The Constitution forbids the government from infringing on the right to free speech, not private entities.
https://www.yahoo.com/news/articles/brendan-carr-flagrantly-abused-powers-182512317.html
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.”
https://en.m.wikipedia.org/wiki/First_Amendment_to_the_United_States_Constitution
I recall Prez Regan & the DNC meeting at night in the White house to do business…..not anymore
You bet, Mike. Even Bill Clinton and Newt Gingrich found ways to work together. And managed to nearly balance the budget by the turn of the millennium. Pretty much downhill since.
Mega’s Dispatch from England:-Runaway train
Here in dear old blighty we are now at a point of “run away”. We are lead by a man who is more a passenger than Prime minster. Zero vision & beaten like a ship on the high seas making heavy weather.
His party is spliting apart, borrowing & spending is out of control & there is little light at the end of the tunnel. So far we returned 2 out of 50,000 illegals………..
Trump had his 2nd state visit, a very quick affair were he told Starmer & co to deal with the illegals & drill Limy drill the North sea…………
lets see wot happens
Ah………….news from Porsche
After telling us that they would NEVER EVER produce an ICE Boxster/Cayman…….we just had the news that they WILL offer higher end versions of the car with ICE.
So, no zero EV mandate…………its all going away 🙂
We will have a heterogenous vehicle market for the foreseeable future. No one-size-fits-all central planning mandates. People will be able to buy whatever form of motive power best suits their individual needs and wants.
Well, if there’s anything left of free markets, we will.
Even California has cried “Uncle!” after oil companies moved out and refineries started shutting down. I was actually hoping California would continue down its path to ruin so they could get a real taste of reality or, if they somehow succeed, show the rest of the country how it’s done. It never had to come to this. It should have been obvious right from the start that the state’s radical environmentalism (and I wonder if they even truly care about the environment) would lead to hardships, perhaps intolerable, for practically every Californian.
https://www.zerohedge.com/political/newsom-folds-greenlights-domestic-oil-production-california
California had an Atlas Shrugged moment.
I think the “Net zero” was just a western bankers scam to milk us & keep the 3rd World poor…….i think its failed.
Mining stocks – Bull vs Bear
Thorson for the bulls:
https://www.gold-eagle.com/article/gold-price-forecast-fed-easing-sets-stage-for-gold-surpass-4000-year-end
Radomski for the bears:
https://www.gold-eagle.com/article/we-saw-perfect-reversals-are-you-ready-for-perfect-moves
The bull-bear characterization may be a bit oversimplified; Thorson appears to be looking mid-long term, Radomski short-mid term; but they strike an interesting contrast no less. FWIW I’m more or less agnostic myself; although I own some mining stock funds, they’re a part of my stock allocation, not a way to invest in metals. Stocks of companies that mine metals are stocks. For my metals allocation, only metals will do.
Fuzzy minded financial media:
U.S. Investors Are Flush With Cash, and Happy to Keep It There
They have no choice. This is called fallacy of composition. While an individual can dispose of cash by buying other assets, investors as a whole cannot. If one buys, another must sell. The cash moves, but does not go away. The only way cash can go down is for the banking system to retire it. As long as the money stock is going up, that can’t happen.
Mike Wilson reading Finster?
“I think a better replacement is 60:20:20 stocks:bonds:commodities, with the commodities being mainly gold.”
https://financology.net/2025/09/06/fdi-update-2/#comment-7139
“Meanwhile, Morgan Stanley’s Chief Investment Officer Mike Wilson recommends investors build a 60/20/20 portfolio, with gold and Treasuries evenly balanced.”
https://www.gold-eagle.com/gold-expensive-not-yet
Michael Hartnett must be reading Finster too:
“Bank of America strategists, led by Michael Hartnett, said …
Asset price inflation begets consumer price inflation,” … emphasizing that U.S. household equity wealth has increased by $6 trillion this year.”
https://www.msn.com/en-us/money/news/trump-faces-growing-inflation-pressure-utilities-could-be-next-target-bofa-s-hartnett/ar-AA1MXTP2?cvid=68cf7d5d256d4fe59de3799e3bcac979&ei=19
Emphasis added. That inflation is first registered in asset prices and later in consumer prices has been a core Financology tenet since inception, but one rarely if ever acknowledged by conventional economics.
Gold $4,000 is it possible?
As USD->0, AU->♾️.
Gold gaining attention in the mainstream financial media:
A growing chorus of Wall Street icons has a message for investors: buy gold
So, Porsche WILL be selling gas powered Cayman/Boxster as well as the EV version………..that no one wants…..
Financial media are all abuzz over an HB-1 visa fee hike to $100,000. Crocodile tears for all the high tech workers who won’t be able to afford to move to America. The media’s editorial slant betrays who they represent. This money would come from employers, who have been exploiting these workers to lower their labor tab and pad profits. Someone hand me a hanky for these tired eyes … so sorry for poor, budget-challenged Apple, Alphabet, Amazon, Microsoft, Meta, Nvidia, Etcetera, that they might have to share some of their cheap labor booty with the American taxpayer. Just for the privilege of not having to hire American workers.
Yep, they keep telling us A.I will mean we don’t need these people………….
The feeling is progressively growing on me that AI is not so much as being demanded by the hoi polloi as being shoved down their throats. Nvidia honcho Jensen Huang was on CNBC earlier hammering the notion that AI will be in everything. If AI can touch it, it will be there. Implying of course whether you want it to be or not. This means if you want to do traditional computing, where you have a defined, reliable, input-output relationship, too bad. It will be gone, unavailable to you. That’s a lot of lost technology.
The issue of voracious energy consumption also came up. Regular folk may have to sit at home in the dark so that data centers can be brightly lit. They will have to compete with deep pocketed tech behemoths for increasingly expensive electricity.
AI is real and powerful, but to whom the benefits and power accrue and where the costs will fall are very open questions.
Are you getting a “Teddy Roosevelt” vibe coming off Trump?
Very much so. That rampaging Teddy Roosevelt image dawned on me a few weeks into this term and if anything has increased since then.
This is the time to buy refurbed computers that don’t have “built-in AI” AKA spyware. Nevertheless, Windows 11 is itself spyware – but I guess it’s at least a minor feature as opposed to a premier feature.
Linux users please disregard.
When i was at the Home office there was a data base that we used that we knew had a “Back door” & was being watched. Am told our IT guys had lots of fun putting misleading info on it…..on one occasion it triggered an “formal information request”………..We replied “Gee nice of you to ask for once”
I think Gold is looking over bought right now………….
Ditto. It just sliced through $3700 like it wasn’t even there. My crystal ball doesn’t see any big declines ahead, but a consolidation spell wouldn’t be the least bit surprising.
Zooming out a bit, the move from 2024 12 to 2025 04 was about +24%. A similar size move from August would take it to around $4020. No one should be surprised if it makes it that far before getting a real rest. A big round number like $4000 could prove sticky. I think it will act as a sort of magnetic attractor for a few months.
The catalyst for a setback could come with any CPI release. A hot CPI could take a little wind out of the Fed’s inflationary dollar destruction campaign and stall gold for a while. But let’s focus on the bigger picture … closing in on $40T of US.gov debt. Any such stall would only be temporary.
A catalyst for a surge could be a setback in stocks. That would give rise to Wall Street pressure on the Fed for more easing.
I had felt that way in the early part of this year when the price of gold first broke $3,000. On one of the threads here, I had commented that I was thinking about hedging my position. Fortunately, I did not. 🙂
Now that the price has gone even higher, I am no longer thinking about hedging. I’m not sure if this is greed or if it’s fear of my relatively large cash position losing a lot of its remaining purchasing power as this country seems hell-bent on squandering money on wars even if it is not a direct participant.
Related to precious metals, the precious metals equities have caught fire this year. Many stocks are up over 100% for the year including big, dumb companies that are poorly managed like Newmont which is a component of the S&P 500. It turns out that careful stock picking in the precous mining stocks over the past five or so years had, after what has transpired so far this year, given an excellent return that easily beats the true rate of inflation.
I remember some years ago reading that Jim Grant, who had been recommending the precious metals mining stocks as they were in his estimation very inexpensive while the rest of the market was very expensive, had suffered for years as the mining stocks either did nothing or went even lower in price. I had read he had gone on an exercise regimen to keep himself in the best shape possible as did not want to die before mining stocks started going up in price enough to prove he was correct.
Well, it looks like his precious metals mining stocks idea has paid off and there’s likely a good deal more to go. Only one other big thing in this business cycle remains unresolved and that is the massive bubble in practically everything. 🙂
Trump tells the Euro Nazi/City of London to get lost:-
“”I think Ukraine, with the support of the European Union, is in a position to fight and WIN all of Ukraine back in its original form… Good luck to all!”
Mega’s dispatch from England:- The Empire strikes zero
I been feeling a bit low the other day so i am deeply grateful to the British government for giving me a good hearty laugh. They produced a new policy document in way they say that regardless of UK economic decline Britain will remain a “WORLD POWER”!
After i picked myself off the floor & recovered some decorum i re read their thoughts. In a nut shell they intend to try to remain US “Bagman” following the US about the place to back them up. In other words they still hopeful that at sometime in the future they can, once again control US policy via they agents (Neo cons).
They are still in “de-nile”.
They can’t or won’t see that the US has moved on, its only going to do what it wants & Europeans are just vassal states with UK as “House Boy”.
In the meantime i greatly enjoyed Trumps little chin wag at the UN. He 100% right about Sharia law getting dragged in UK law……….A moment of truth is coming for Blighty & soon.
Gold getting ramped in the UK press…………
Copper the big winner today.
Gold/Silver up this morning
Whoa, Silver!
Up 7% on the week.
Platinum over 9%.
I see the former FBI head is getting charged as soon as this week…………..GOOD!
For too long the Rep,s have turned the other cheek only to then get punched……time to strike back & let the DNC now it can go both ways…..
A double edged sword. A lot of folks that were put off by the Dem’s tactics aren’t going to like them any better as Rep’s tactics. And it doesn’t help that the msm stand ready with their biased coverage. The US is already teetering on the verge of banana republic governance. Dems may have set some dirty precedents but the Reps can choose to validate them or not.
That said if the charge is valid and meaningful it should go forward. Administrative state corruption is a real problem and Trump promised to drain the swamp.
CATL the EV battery producer from China has begun MASS production of Sodium ion battery. It has 175wh/kg which is a match for LFP cheap battey. The Cost of an expensive NCM is $100 per KW/H, LFP more like $70 ish……….SI battery? $19!…… & they might get it down to $13 !!!!
They last 3-5 times longer, thus 20-30 years.
THe World is changing………….
Battery life is big. It costs an arm and a leg to replace batteries, so if they can get battery life up around vehicle life one of the main impediments to electric vehicle adoption will be cleared.
Silver & little silver continue to soar. SLV is up 7.97% from last week’s close and PLTM a whopping 11.19%.
Decent annual returns in less than a week.
It’s still early, but so far the market verdict on the Fed’s rate cut is not positive. The Fed cut its target rate on September 17, and the market has been hiking since.
The market controls the rates people pay on mortgages, car loans, etc. Not to mention the rates the Treasury pays on trillions of debt. Real world interest rates are not going down, they’re going up.
This echoes the pattern of last year, where rates actually rose in the wake of Fed target cuts. This pattern continued for several months.
The chart is of the broad treasury market fund GOVT. Declining prices denote increasing yields. The sharp dropoff corresponds to a spike in yields on the Fed announcement, with the continuing decline representing ongoing yield increases.
For a look at individual maturities, see the below. Notice that September 17 to date rates have increased across the entire maturity spectrum from one month to thirty years.
Daily Treasury Par Yield Curve Rates