Politics – Page 41 – Digital Finance Analytics (DFA) Blog

Too Late Bankers: Too Late!

Reflect on this for a moment. Four more years. The Senate voted 80-19 last week to confirm Jerome Powell for a second term as chairman of the Federal Reserve, in a bipartisan vote that was largely expected.

19 senators voting against confirmation consisted of Republicans who weren’t happy with Powell’s performance on inflation, but also a sprinkling of progressive Democrats like Elizabeth Warren who objected to him for not doing enough on other things, like bank regulation or climate risk.

People give Powell a lot of credit for following the playbook of his predecessor, Ben Bernanke, when faced with the challenge of the COVID-19 pandemic—print money like crazy and hope for the best.

It worked, except we now have runaway inflation, perhaps due to an excessive amount of money creation.

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An Outside In View Of New Zealand Housing

New Zealand Housing makes an interesting case study, given the Central Bank there started lifting rates last year, following a strong period of credit driven price growth.

Now the IMF has reported on the state of play, and they highlight the risks in the system. https://www.imf.org/en/Countries/NZL

In its latest review of the New Zealand economy, the IMF has had a close and detailed look at the housing market. The housing market they say constitutes a risk in view of borrowers’ vulnerability to rising mortgage rates, high household debt, and banks’ exposure to housing.

The IMF says that financial stability risks from a sharp downturn in the housing market are limited given high bank capitalisation, “but pockets of vulnerability, particularly amongst recent borrowers, may exist”.

“More broadly, there is likely to be a larger impact on consumption through wealth and sentiment effects. In a scenario of a marked housing correction, macroeconomic policy support may be needed to avoid second round effects and a pronounced downturn.”

Go to the Walk The World Universe at https://walktheworld.com.au/

The Whipsaw Market Weekly Update

The latest edition of our finance and property news digest with a distinctively Australian flavour.

In our weekly review, we reflect on a chaotic week in the markets, from stocks, to crypto, even as stocks rallied at the end of the week in financial markets thanks to Federal Reserve Chair Jerome Powell’s reassurance that bigger rate hikes would be off the table for now even after the hot inflation readings of the past few days. Separate comments from San Francisco Federal Reserve president Mary Daly also backed half-percentage point rate increases at each of the central bank’s next two meetings. There is a clue to why we are seeing so much craziness.

After sinking almost 20% from a record and flirting with a bear market, the S&P 500 saw a broad-based rally on Friday. It still posted a sixth straight week of declines — the longest losing streak since June 2011. The NASDAQ 100 outperformed amid a rally in giants like Apple Inc., Microsoft Corp. and Amazon.com Inc.

Meanwhile, Elon Musk caused chaos over his takeover offer for Twitter Inc., first claiming his bid was “temporarily on hold” and then maintaining he’s “still committed” to the deal — sending the social-media giant into a tailspin. Tesla Inc. jumped. Treasuries fell with the dollar.

Despite the strong gains on Friday, many traders aren’t yet convinced that equities have reached a bottom after a selloff that shaved $10 trillion from US stock values in 18 weeks. Instead, they say investors should still brace for volatility as the Fed’s ability to fight price pressures without causing a hard landing may depend on factors outside the central bank’s control. Frankly forecasting is a mess.

Back in January, stock strategists known for their enduring optimism expected the S&P 500 to add 5% in 2022.Bond strategists weren’t any more prescient. Interest rate strategists and economists were calling for 10-year Treasury rates to rise to 2% by June. Yields took out that level in early February and have touched 3.2% this month.

Go to the Walk The World Universe at https://walktheworld.com.au/

Housing Policies In The Balance: With Steve Mickenbecker

I discuss the announced housing policies from the two major parties with Steve Mickenbecker from Canstar. Are they worth the paper they are written on?

Steve Mickenbecker is in Canstar’s Group Executive Team, bringing more than 30 years of experience in the Australian financial services industry. As a financial commentator for Canstar, Steve enjoys sharing his expertise across topics such as home loans, superannuation, insurance, mortgages, banking, credit cards, investment, budgeting, money management and more.

https://www.canstar.com.au/team-members/steve-mickenbecker/

Go to the Walk The World Universe at https://walktheworld.com.au/

The RBA’s “Gotcha” Moment Has Real Life Consequences!

The fact is the RBA has been off the pace in terms of forecasts, and strategy, and as a result they are not lifting rates into a slowing economy to try to tackle inflation which they partly created.

In addition, the latest Statement on Monetary Policy shows real wages are set to decline over the next couple of years, while overall growth will decline, despite a (artificially) low unemployment rate.

Time for a proper review of the RBA – how do we make the Governor and his team more accountable. Being embarrassed is not enough!

Go to the Walk The World Universe at https://walktheworld.com.au/