I have a great deal of respect for Jeffrey Gundlach, who is head of Doubleline and has become known as the "bond king," supplanting Bill Gross of Janus (now) and PIMCO (formerly). At a lecture Monday morning, he discussed the latest actions of the Fed, which he thinks are unfortunate, to say the least.
While he made a number of comments, including an unnecessary comparison between the "looks" of Janet Yellen and Pete Carroll, who arguably called the worst play in SuperBowl history, the most damning comment was that the Fed thinks they raised short-term rates by a mere quarter-point or 25 basis points. That means the Fed thinks there was no stimulative equivalent to Quantitative Easing or QE. (Of course, if that was true, they would not have engaged in QE.)
By a formula I didn't catch (but would like to study), he thinks the end of QE was like an interest rate increase of 250-275 basis points. If so, the U.S. economy has endured a 3% hike in one year, which would crush most any economy. He expects the Fed will be forced to cut interest rates before they can actually increase them again. So much for the four interest rate hikes the Fed said they expect for this year!
I have written numerous times that we didn't need a rate increase, as neither unemployment nor inflation are problematic. Rates were raised merely to appease the Libertarian wing of the Republican Party, who has demanded interest rates be "normalized." If Gundlach is right, the Fed got bullied into really damaging America.
While he made a number of comments, including an unnecessary comparison between the "looks" of Janet Yellen and Pete Carroll, who arguably called the worst play in SuperBowl history, the most damning comment was that the Fed thinks they raised short-term rates by a mere quarter-point or 25 basis points. That means the Fed thinks there was no stimulative equivalent to Quantitative Easing or QE. (Of course, if that was true, they would not have engaged in QE.)
By a formula I didn't catch (but would like to study), he thinks the end of QE was like an interest rate increase of 250-275 basis points. If so, the U.S. economy has endured a 3% hike in one year, which would crush most any economy. He expects the Fed will be forced to cut interest rates before they can actually increase them again. So much for the four interest rate hikes the Fed said they expect for this year!
I have written numerous times that we didn't need a rate increase, as neither unemployment nor inflation are problematic. Rates were raised merely to appease the Libertarian wing of the Republican Party, who has demanded interest rates be "normalized." If Gundlach is right, the Fed got bullied into really damaging America.
