Fed Cuts Rates, but Projects Fewer Reductions Next Year
Federal Reserve officials projected just two rate cuts in 2025. Markets shuddered at the assessment, with the dollar soaring and stocks plummeting.
– Headlines from the New York Times
Here’s where the Federal funds target rate is in the United States. Inflation has eased notably, but remains above the Fed’s 2% target rate (2.7% as of November, up slightly from 2.6% in October). Unemployment is at 4.1%, relatively low. Mortgage rates are going to stay in the 6 to 7% range through 2025, say most analysts. [Graphic from CNBC]
It was November of 1899 in colonial Africa— in what is called South Africa today.
The Second Boer War had already started, on October 11.
The British government had rejected an ultimatum issued by the Boer republics of the Transvaal and Orange Free State.
The republics had demanded the withdrawal of British troops from their borders, primarily due to growing tensions caused by the discovery of gold in the Transvaal (Johannesburg today) and the influx of British “Uitlander” (foreigner) miners who were denied political rights by the Boer government.
The mint, where the republics produced gold coins for 1899, soon learned that the Kruger Pound dies for the 1899 coins were intercepted by the British in then-Lourenzo Marques in Mozambique (Maputo, today).
On the 2nd day of November 1899 at 10.30am, a single figure 9 was stamped at the bottom of the President’s bust on an 1898 coin, slightly overlapping the design. The coin is known today as ‘the single nine counterstamp’ or simply the ‘Single 9’, and is South Africa’s only one-of-a-kind coin.
This description from Heritage Auctions.com (the coin goes up for auction on Jan 13, 2025 in New York City): Republic gold “9” Pond 1898 MS63 Prooflike NGC, Pretoria mint, KM-Unl., Hern-ZP6. The indisputable ‘unicorn coin’ in the entire South African series, the “Single 9 Overstamp” 1898 Pond remains unchallenged in its exclusive solitude. A distinct variant of the 130-piece “99” Pond issue, the “Single 9” Pond reportedly changed hands in a private sale in 2010, for a value documented as “multi-million Rand” by Hern. Other industry sources detail a more precise figure of ZAR 20,000,000, which was the equivalent of US$ 2,700,000 at the average 2010 exchange rate. Possibly selected as the candidate for the overstamping for its gleaming ‘Prooflike’ appearance, this rarified treasure has been the prime target of South African experts for over a century. Translation: ‘Zuid-Afrikaansche Republiek’ is ‘South African Republic’ (an area north of the Vaal River and south of the Limpopo River and not to be confused with ‘Republic of South Africa’, which is all of modern-day South Africa and which came about only in May 1961, after the Union of South Africa gained its independence from Great Britain). The figure on the coin is President Paul Kruger, the leading figure in the movement to restore the South African Republic’s independence, culminating in the Boers’ victory in the First Boer War of 1880–1881. Kruger served until 1883 as a member of an executive triumvirate, then was elected President of the South African Republic.The gold price as of November 01, 2024 is $2,736.42 per ounce, a record high*. *In absolute dollar terms. When adjusted for inflation, the early 1980s is still the peak for gold, at some $3,200 per ounce in inflation-adjusted dollars. Translation: ‘Eendragt Maakt Mag’ means ‘Unity makes strength’.
The Federal Reserve cut interest rates on Wednesday by half a percentage point, an unusually large move and a clear signal that central bankers think they are winning their war against inflation and are turning their attention to protecting the job market.
– Jeanna Smialek writing for the New York Times
The ‘dot plot’: dots for each Fed official’s projection on where they expect the federal funds rate to be at the end of 2024, and at the end of 2025. The federal funds rate now stands at 4.9%. The dot plot shows the average projection for the end of 2024 to be 4.4%, and for the end of 2025, 3.4%. Graphic from the New York Times
Ahead of a key Federal Reserve meeting to set interest rates, employers added 142,000 jobs in August, fewer than economists had expected, and previous months were revised downward.
– The New York Times
Not a lot of new jobs in August, but unemployment ticked down to 4.2% (July: 4.3%), and average hourly earnings rose 0.4% in August compared to July. [Graphic from the New York Times]
The consumer price index, a broad-based measure of prices for goods and services, increased 0.2% for the month, putting the 12-month inflation rate at 2.9%, its lowest since March 2021. Excluding food and energy, core CPI came in at a 0.2% monthly rise and a 3.2% annual rate, meeting expectations. A 0.4% increase in shelter costs was responsible for 90% of the all-items inflation increase. Food prices climbed 0.2% while energy was flat.
– Reported by Jeff Cox on CNBC.com
The inflation figures were in line with what most economists were expecting. Even though the CPI at 2.9% is still some way from the Federal Reserve’s stated target of 2%, a federal funds rate cut of 0.25% in September is widely expected.Then there is this graph. The U.S.— under the Biden-Harris administration —has done far better than other G7 countries to bring post-COVID inflation under control. [Posted by Bill Prady @billprady on X]
It was a rough Monday for stock indexes across the world, but most economists think the US economy is just slowing down somewhat, and that a recession is not yet in sight.
Now it is already Tuesday in Japan, and it seems Japanese shares are clawing back most of their record losses from Monday (the Nikkei 225 traded about 10% higher early on).
The three major indexes are well down from their highs, but still up for the year. Dow Jones at 3% up (down from 9% upon July 17); Nasdaq at 8% up (down from 23% up on July 24); S&P 500 at 9% up (down from 19% up on July 16).
DETROIT (AP) — Tesla shareholders voted Thursday to restore CEO Elon Musk’s record $44.9 billion pay package that was thrown out by a Delaware judge earlier this year, sending a strong vote of confidence in his leadership of the electric vehicle maker. The favorable vote doesn’t necessarily mean that Musk will get the all-stock compensation anytime soon. The package is likely to remain tied up in the Delaware Chancery Court and Supreme Court for months as Tesla tries to overturn the Delaware judge’s rejection.
– Reported by Associated Press
How Much Money
How It Can Be Spent
$45
A decent meal and a beer at a restaurant
$450
Cheap air fare (USA to Europe)
$4,500
Business class air fare (USA to Europe)
$45,000
A brand spanking new Tesla Model 3 EV
$450,000
The very exotic 2018 Lamborghini Aventador
$4,500,000
“You can’t do anything with five, Greg. Five’s a nightmare. Can’t retire, not worth it to work.” - from a scene in Succession
$45,000,000
The most expensive house for sale in Seattle (in 2019)
$450,000,000
A very expensive superyacht just like Jeff Bezo's OR two Dreamliner 797-8 jets
$4,500,000,000
Provide Medicaid (healthcare) for 1.4 million Americans for a year
Happy Friday.
The Dow Jones Industrial Average closed above 40,000 for the first time today. Is the US stock market overvalued? I asked the AI chat bot Chat GPT.
Yes— by a lot, was the answer (with some caveats, see below).
Caveat emptor
– Latin for ‘buyer beware’: the buyer’s responsibility to do due diligence before purchasing a good or service.
I’m happy to report that the inflation rate (over the last quarter) for my favorite breakfast cereals is 0%.
I buy these online, though.
The difference between the online and in-store price can be enormous, at least here in my neck of the woods (neck of the city).
Kellogg’s All Bran: $4.98 online vs. $8.49 in-store (+70%).
McCann’s Steel Cut Oatmeal: $6.98 vs. $13 in-store (+86%).
The Federal Reserve has signalled that a series of disappointing inflation readings are likely to mean US borrowing costs remain higher for longer. The Federal Reserve bank held interest rates at 5.25 per cent to 5.5 per cent, a 23-year high that has been in place since the summer of 2023.
– Reporting from the Financial Times
So – six months to go to the 2024 general election here in the United States.
Will a convicted felon be on the ballot for President of the United States?
Will the Fed have started to cut interest rates by then?
Will the Israeli hostages be free— and the war in Gaza be over?
What about the war in Ukraine? (I don’t think so).
Will the highly pathogenic bird flu virus A(H5N1) have mutated and become a threat to humans?
Another month, another burst of better-than-expected job gains. Employers added 303,000 jobs in March on a seasonally adjusted basis, the Labor Department reported on Friday, and the unemployment rate fell to 3.8 percent, from 3.9 percent in February. Expectations of a recession among experts, once widespread, are now increasingly rare.
– Talmon Joseph Smith writing for the NY Times
It was the 39th straight month of job growth. And employment levels are now more than three million greater than forecast by the nonpartisan Congressional Budget Office just before the pandemic shock.- Talmon Joseph Smith writing for the NY TimesLower-wage earners, for their part, are experiencing a job market less hot than a couple of years ago, when switching jobs in search of better pay and benefits frequently garnered double-digit percent raises. The market is, however, still providing opportunities for earnings growth not seen since the late 1990s, according to key Fed measures.- Talmon Joseph Smith writing for the NY Times
I scrolled through a bunch of crypto stamps listed on my regular online stamp marketplaces last night.
Should I buy some? Just one, for fun?
They go for $15 to $50— or more, each.
They may be worth a lot more 5 to 10 years from now.
Hmm. No, I decided. Not yet, anyway. (I don’t own any cryptocurrency, either).
Crypto stamps are valid for postage, but they are really aimed at collectors— collectors of digital works of art, or of the collector’s interests (digital comics, video clips, tweets, emails).
The buyer gets a physical stamp, as well as a digital version of it, that has a non-fungible token (NFT) associated with it. (NFT: a unique cryptographic token that exists on a blockchain, and that cannot be replicated.)
United States Postal Service sold some Day of the Dead ‘Forever’ stamps in 2021 with NFTs associated with them.From Austria Post’s website: Crypto stamp 5.1 Lion The Crypto stamp is the world’s first stamp with a digital twin (NFT) in the blockchain. Launched in 2019 with Crypto stamp 1.0, it continues to evolve with each subsequent edition. With over 1 million crypto stamps today, it is one of the world’s most successful and consistent crypto and NFT projects. The King of the Crypto stamp series, the majestic Lion, proudly continues the celebrated legacy of animal motifs. The Crypto stamp 5.1 Lion, a unique and imaginative creation, stands out with its digital twins showcased in five captivating colors..A crypto stamp offering from Liechtenstein, the German-speaking, 15 mile-long principality between Austria and Switzerland.Crypto stamp from Croatia.
The S&P 500’s (.SPX) forward price-to-earnings ratio— a commonly used metric to value stocks— rose to 20.4 times this week, a level last reached in February 2022, according to LSEG Datastream. That puts it far above the index’s historic average of 15.7.
It isn’t unusual for valuations to climb along with stock prices, and equities can stay expensive for a long time before returning to more moderate levels. Still, some investors believe the index’s growing multiple has made buying into the broad market a less enticing proposition. The S&P 500 has surged 21% since late October, making new record highs along the way.
It briefly crossed the 5,000 level at the end of Thursday’s session, before closing just below the mark.
– Lewis Krauskopf reporting for Reuters
There was excitement on the CNBC channel today in the run-up to the close, but the S&P 500 ultimately closed just below 5,000. The “Magnificent Seven” stocks— Apple AAPL, Microsoft MSFT, Alphabet GOOGL, Amazon AMZN, NVIDIA NVDA, Meta Platforms META and Tesla TSLA— now account for almost 30% of the S&P 500 index.
The classic example of a soft landing is the monetary tightening conducted under Alan Greenspan in the mid-1990s. In early 1994, the economy was approaching its third year of recovery following the 1990-91 recession. By February 1994, the unemployment rate was falling rapidly, down from 7.8% to 6.6%. CPI inflation sat at 2.8%, and the federal funds rate sat at around 3%. With the economy growing and unemployment shrinking rapidly, the Fed was concerned about a potential pick-up of inflation and decided to raise rates preemptively. During 1994, the Fed raised rates seven times, doubling the federal funds rate from 3% to 6%. It then cut its key interest rate, the federal funds rate, three times in 1995 when it saw the economy softening more than required to keep inflation from rising.
– Sam Boocker and David Wessel writing for Brookings.edu, Sept. 14, 2023
They all turned out to be wrong— those economists and money managers that opined a year ago that we would have a recession here in the United States by now.
The year is almost out, and jobs are still being added to the economy.
Lydia DePillis writes in the New York Times: Employers added 199,000 jobs last month, the Labor Department reported Friday, while the unemployment rate dropped to 3.7%, from 3.9%. The increase in employment includes tens of thousands of autoworkers and actors who returned to their jobs after strikes, and others in related businesses that had been stalled by the walkouts, meaning underlying job growth is slightly weaker.
Seattle is reportedly dead last on a list of large cities for spending on holiday gifts, per person. (The city’s 10.25% sales tax and relatively few shopping malls are given the blame.)
Nevertheless— I trust that the the profits from retailers had moved from the red to the black by this Black Friday.
It is sunny but chilly here in the city this weekend (high of 46°F /7°C today). Here’s looking west towards the Olympic mountain range from Republican Street and 13th Avenue East, a few minutes before the sun set at 4.24 pm.
The US economy added 336,000 new jobs to payrolls in September: about double what analysts had expected.
The stock market fell at first (the Fed may have to keep hiking interest rates), but by the early afternoon, the stock market decided that the initial sell-off was overdone, and by the end of trading the Dow Jones Industrial Index was up by 288 points (0.87%).
Here’s how September’s job number compares with other months. The unemployment rate is steady at 3.8%, according to the Labor Department. Even though hourly wages have risen faster than inflation, housing unaffordability is still a growing problem. [Graph and text from the New York Times]
The estimated $1.55 billion Mega Millions jackpot for the Tuesday night drawing is one of the largest in U.S. history.
The odds to win the big prize is about 1 in 302.6 million.
Yes, you could buy 10 tickets and make it 1 in 30.26 million, but you would still be much more likely to be killed by an asteroid (1 in 1.6 million).
Update Tue 8/8: The largest jackpot in Mega Millions history, worth an estimated $1.58 billion, was secured in Florida on Tuesday night.
The winning ticketholder can choose between the massive $1.58 billion jackpot paid in annual payments or a one-time cash option worth an estimated $783.3 million.
The winning numbers were 13, 19, 20, 32, 33, and the gold Mega ball 14.
– From the New York Post.
The sign in the 7-11 store on 15th Avenue East here on Capitol Hill. Is $ 1.55 billion too much of a good thing? That $5.2 million prize for the Washington State Lotto would come in handy. Should one take the lump sum, or the annuity option? From CNBC: Andrew Stoltmann, a Chicago-based lawyer who has represented several lottery winners, says 95% choose the lump sum option, which he describes as a “big mistake.” There are three “big drains” on lottery winners: bad investments, relatives who ask for money and overspending, according to Stoltmann.
The rate hikes have slowed down to 0.25 % increases, and it will take 6 months or more before the full effect of all the hikes are felt by consumers. By some estimates US consumers are burning through $100 billion per month of piled-up pandemic-era savings and government support. (Six months to go, then that’s gone). Also, many people still have home loans and car loans— and debt— taken out at very low 2022 interest rates.
The Federal Reserve raised the federal funds rate by a quarter percent today, to a range of 5.0-5.25%.
From the Wall Street Journal: Powell didn’t rule out another rate rise at the central bank’s September meeting, but he emphasized how much the central bank had already done along with the amount of time it can take for monetary policy to cool inflation. “We’ve come a long way. Inflation repeatedly has proved stronger than we and other forecasters have expected, and at some point that may change,” Powell said. “We have to be ready to follow the data, and given how far we’ve come, we can afford to be a little patient, as well as resolute, as we let this unfold.” Fed officials have been concerned that underlying price pressures may prove more persistent as a solid labor market allows workers to bargain for higher pay, making it harder to get inflation down further.
Happy Friday.
Apple is worth an eye-popping $3 trillion as of today.
(Microsoft is valued at around $2.5 trillion).
Apple’s stock closed Friday at $193.97, up 2.3% on the day and valuing the company at $3.05 trillion. Much of Apple’s current resilience rests on the strength of its iPhone, which accounts for around half of its annual sales. [Reporting & graphic from the Wall Street Journal]
