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Taylor to Fed's Dudley: "Are you kidding? No one knows what you're doing."

"William Dudley, the president of the New York Fed, argued Thursday at a panel discussion at The Brookings Institution that the U.S. central bank has been transparent. “I don’t really understand what’s unclear right now,” Dudley said.

If the economy continues to grow above trend, the unemployment rate will continue to fall and give the Fed confidence that inflation will move higher, Dudley said. This will allow the U.S. central bank to begin to raise interest rates, Dudley said.

Stanford University economist John Taylor, a well-known expert on monetary policy, who was on the panel with Dudley, shot back: “Are you kidding? No one knows what you’re doing.”

Confidence in the Fed eroding bit-by-bit and they're oblivious - they'll never, ever admit failure, even for a minute.


  • OTCRX Market Commentary
    "Despite the equity market sell-off over the past several months, there are positives in the current macro environment as the housing market continues to
    recover, non-residential construction spending appears robust, nonfarm payrolls are increasing, and the consumer is benefiting from lower gasoline prices.
    Meanwhile, household net worth is at record highs and consumers’ personal balance sheets have improved relative to the past. Equity market valuations have
    become modestly more attractive and bullish sentiment has declined providing a better set-up for equity markets.
    However, we see clouds lingering on the horizon. We believe it is important to realize that for over six years, both equity and bond markets, have marched higher
    with almost no volatility. Any weakness in the markets was bought aggressively as the Federal Reserve injected liquidity into the system. We think the market
    environment we have witnessed since 2009 is changing.
    In our view, it appears that we are now at the stage where the unintended consequences of the Federal’s Reserve ultra-accommodative policies are becoming
    more visible. Emerging markets took advantage of low interest rates to issue record amounts of US dollar denominated debt and now many of these emerging
    markets are faltering with deteriorating economic growth combined with weakening currencies. Low cost debt fueled a significant malinvestment boom by oil
    companies that were willing to frack shale at any cost which ultimately drove a collapse in oil prices with sizeable job layoffs now ensuing. Broad based
    commodity price weakness is now working its way throughout the entire industrial economy as witnessed by cyclical stocks trading near 52 week lows.
    Interestingly, Evercore ISI research recently published data highlighting the acceleration in U.S. employee layoff announcements – typically witnessed in the
    later stages of a business cycle.

    Considering the sharp move lower in equity markets recently, we would not be surprised to see some price appreciation near-term. Yet, we believe that many of
    the lingering uncertainties in the marketplace are not going to go away in the immediate future, and this will likely continue to drive increased volatility in both
    equity and fixed income markets over the remainder of the year.
    As we enter October, we have approximately 15% of the fund in cash which we are looking to deploy into our highest conviction long ideas"

    From Seeking Alpha Oct 16 2015, 14:48 ET | By: Stephen Alpher
    "The recent increase in spreads combined with the lack of liquidity in high yield generally means greater opportunity to deploy our $17 billion in dry powder," Blackstone CEO Stephen Schwarzman said on his company's earnings call this week.

    After years of buying just about any paper put out there, writes Lisa Abramowicz, investors are showing some restraint and skepticism ... and that's a good thing - especially so for those with cash who have been waiting for a correction.

    Original Article from Bloomberg October 16, 2015 — 10:27 AM CDT
    Failed Bond Deals. Why Worry?: Lisa Abramowicz
    Lisa Abramowicz
    U.S. junk debt has gained 1.9% so far in October, with the higher-ranked paper doing way better than the lowest-rated. "The fact that some companies are finding it more difficult to borrow is as it should be," says Abramowicz.

    It’s not as if investors have abandoned high-yield bonds altogether. They piled $1.3 billion into such funds last week, according to data compiled by Wells Fargo analysts. Bond buyers are just being more selective, sifting through the pile, aware of the fact that risky bonds are actually risky.

    This is why yields on U.S. high-yield bonds have swelled to 7.9 percent, from as low as 5.7 percent in June 2014. This debt is starting to look attractive to some longtime, experienced investors, including Blackstone, one of the world’s biggest distressed-debt investors.
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