"BMT Investors" Bulletin Board

[kscarbel2]

"There is no risk-free path for policy as we navigate this tension between our employment and inflation goals. The decision to lower rates was a close call. I can make a case for either side. A reasonable base case is that the effects of tariffs on inflation will be relatively short-lived, effectively a one-time shift in the price level. Our obligation is to make sure that a one-time increase in the price level does not become an ongoing inflation problem, but with downside risks to employment having risen in recent months, the balance of risks has shifted."

Fed Chair Powell

Powell downplayed dissenting votes against Wednesday’s decision to lower interest rates again, but a slew of finer details from the meeting revealed just how divided the central bank has become. He  pushed through the quarter percentage point cut not only over the objection of a few voters. A much larger group of regional Fed bank presidents who participated in the debate but weren’t among this year’s voting roster also opposed the cut.

 

 

 

 

 

 

 

 

 

 

 

 

 

[mowerman]

The whole thing sucks if you’re paying 6-700,000 for a house these days that is not a whole lot we could do about it …off the subject but I remember years ago California auto insurance was way out of control I was paying 8,000 a year on my U model and somebody did something about it … it dropped to half that years later now this place is the same way no but there’s so many stupid  people here now I can hardly blame insurance companys for socking  it to us … don’t even wanna get into that lol 

[mowerman]

Pretty much  lots of people lining  their pockets with that extra interest while  the rest of us are paying the price … it would probably take a lifetime to straighten out all the issues we have here 

[kscarbel2]

"Good news used to send the stock market up......and that's the way it's supposed to be."

President Trump

 

From -43:00

 

[kscarbel2]

The oil stocks are pricing in an attack.

“It is my assessment that a strike will take place,” a high-ranking Israeli Defense Force (IDF) official told The War Zone. “The key variables – timing, method of execution, and the identity of participating forces, whether U.S. assets, the IDF, or additional coalition elements should they be involved, will be subject to strict and aggressive compartmentalization.”

“Likewise, the final decision to proceed with execution rests with a single individual alone,” the official added, referring to Trump.

https://www.twz.com/news-features/military-buildup-in-the-middle-east-continues-including-what-trump-describes-as-a-big-flotilla

[kscarbel2]

Financial Times  /  January 28, 2026

Investors are betting the Trump administration will run the economy “hot” ahead of midterm elections, with buoyant stocks and a weaker dollar reflecting expectations of strong growth and rising inflation.

A string of robust economic data has defied predictions of a slowdown in the US, sending credit spreads to the tightest levels of the century and helping stocks hit fresh record highs this month.

At the same time, there is a growing belief that President Trump’s tax cuts, deregulation push and campaign for lower interest rates will add more fuel to the economy this year, as the president seeks to bolster support ahead of November’s congressional polls.

“There is a carefully engineered plan to have the US economy humming into the summer,” said T Rowe  price's Arif Husain.

Trump boasted last week in Davos of “exploding” US growth, after figures showing GDP expanded at an annualised rate of 4.4 per cent in the third quarter of 2025, powered in part by the AI boom.

The Atlanta Federal Reserve’s GDPNow model is forecasting an acceleration to 5.4 per cent in the final quarter of last year.

Despite the economy’s rude health, investors expect the Federal Reserve to cut interest rates later this year under chair Jay Powell’s successor, who is set to take over in May. Higher spending and tax cuts in the president’s flagship “One Big Beautiful Bill”, passed last year, are also expected to further juice growth in 2026.

Trump administration advisers say a productivity boom will also help fix one of the economy’s weak spots — a cooling labor market.

“We have seen massive gains in output that are being driven by productivity; you should soon start to see a pick-up in jobs,” says Joe Lavorgna, economic counselor to US Treasury secretary Scott Bessent.

According to Bank of America’s recent global fund manager survey, the proportion of investors expecting the economy to strengthen over the next year, as well as expectations of an economic “boom”, are both at the highest level since mid-2021.

The extra stimulus for an economy that is already motoring has buoyed the stock market, with the S&P 500 closing in on 7,000 points for the first time and the domestically focused Russell 2000 far outstripping the blue-chip index this month. However, it has also left investors bracing for another wave of inflation amid expectations that the new Fed chair will support Trump’s desire for lower interest rates.

Two-year US break-evens, which provide a reading of the market’s expectations for short-run inflation, have risen from 2.25 per cent in December to 2.68 per cent.

But political pressure for extra spending when the economy already looks healthy is clear. JP Morgan's Karen Ward says “We’ve got mid-terms approaching in November, that will lead to more pressure for more vote-winning stimulus measures.”

Spending on AI build-out is expected to keep rapidly expanding in 2026, while Trump’s tax bill includes measures to incentivize investments in machinery and factory equipment. It also means tax cuts for many American workers; Ward expects $440 billion will be returned to US households through tax refunds this year.

Stronger than expected economic data has led investors to modestly rein in their rate cut bets in the early weeks of the year, with two quarter-point reductions expected in 2026.

A Senate-led backlash to a Department of Justice probe into Powell has damped concerns that Trump will be able to appoint a close ally to head the world’s most important central bank. However, some analysts worry the central bank will succumb to the president’s calls for deeper rate cuts ahead of the November mid-terms.

MUFG's George Goncalves is expecting 3 or 4 cuts this year, partly a reflection of the new Fed leadership. “Based on fundamentals there is room for two more cuts,” he said. “But I’m factoring in the politics.”

Carmignac's Kevin Thozet says the addition of new household subsidies and lower interest rates into the already-strong economy are reasons to be “cautious” on long-term US Treasuries and the dollar. “If the economy does not need this reflationary push, Trump does, in order to win the midterm elections. All of this, however, is expected to come at the cost of higher long-term rates and downward pressure on the dollar."

[mowerman]

With all this going on, I’m surprised my investments are staying pretty steady. I’ll take it.

[kscarbel2]

Federal Reserve officials left interest rates unchanged, pointing to improvements in the US economy as they signaled a more cautious approach to potential future adjustments.

The Federal Open Market Committee voted 10-2 Wednesday to hold the benchmark federal funds rate in a range of 3.5%-3.75%. Governors Christopher Waller and Stephen Miran dissented in favor of a quarter-point reduction.

[kscarbel2]

President Trump has chosen former Federal Reserve Governor Kevin Warsh to head the US central bank when Jerome Powell's leadership term ends in May.

Republican U.S. Senator Thom Tillis has said he will not support any of Trump's Fed nominees amid the ongoing criminal probe into Powell. It has also opened the door to the possibility that Powell, who called the criminal probe a pretext to pressure ‍the Fed into setting monetary policy as the president wishes, may opt to stay on at the Fed as a governor even after his term as central bank chief is up in a bid to safeguard it from political capture.

 

A lawyer and distinguished visiting fellow in economics at Stanford University's Hoover Institution, Warsh believes the president is right to press the central bank for steep rate cuts, and has criticized the Fed for underestimating the inflation-busting potential of productivity growth supercharged by artificial intelligence. He has called for a broad overhaul of the central bank that would slim its balance sheet and ease bank regulations. Warsh, 55, was nearly named to the job in Trump's first term before being passed over for Powell, and since then has kept a steady ⁠public profile through speeches and essays that have taken Powell ⁠and his colleagues to task for their management of the Fed's balance sheet, interest rates and other actions.

[kscarbel2]

Warsh's War on Fed "Groupthink"

Breitbart  /  February 4, 2026

In March 2016, Kevin Warsh stood before the National Association for Business Economics and delivered what may be the most blistering critique of Federal Reserve decision-making ever offered by a former Fed governor. The speech, titled “Challenging the Groupthink of the Guild,” laid out a comprehensive indictment of how the Fed conducts monetary policy.

“The clustering of economic forecasts reveals conformity of views inside the Fed,” Warsh argued. He noted that estimates among Federal Open Market Committee (FOMC) participants were “very closely aligned” and “closely match the outputs of the staff forecast.” This wasn’t just an academic concern. The Fed’s internal groupthink was “deepening the groupthink among other stakeholders, including outside economists, Wall Street pros, and business leaders.”

Five years later, the Fed’s catastrophic miss on inflation vindicated Warsh’s diagnosis. An institution more open to challenging the transitory inflation narrative would have tightened sooner. An institution less obsessed with achieving consensus and more open to internal dissent would have been better prepared to navigate our post-pandemic economy.

Warsh’s most fundamental critique targets the Fed’s devotion to economic models that consistently fail to predict reality. He uses a provocative historical analogy: the Fed’s attachment to its models resembles the centuries-long adherence to Ptolemaic astronomy, which placed the Earth at the center of the universe despite mounting contrary evidence.

“When the real economy fails to comport with their heralded model-based forecasts, they judge that the error invariably belongs to the real world,” Warsh observed. The Fed explains away persistent forecast failures as “headwinds” – temporary factors that will soon dissipate. But “seven years of headwinds suggests a problem not with the weather, but the climate.”

The dominant models employed at the Fed and establishment macroeconomists are, in Warsh’s assessment, “at best, a way station between Ptolemy than Copernicus.” They systematically underestimate the importance of global economic developments, largely ignore the financial sector despite the 2008 crisis, and assume markets are efficiently priced, at least when prices are rising.

The problem isn’t that models are useless. “All economic models are wrong, some are useful,” Warsh acknowledges. The problem is treating model outputs as gospel rather than as rough guides that should be heavily supplemented with judgment and market signals.

Perhaps no phrase is more sacred in modern Fed communications than “data dependent.” Warsh calls it potentially “the most dangerous words in the conduct of monetary policy.”

Why? Because what counts as “data” for Fed purposes is “anachronistic, backward-looking, and subject to massive revisions.” The monthly employment report that moves markets has standard error bounds “about equal to the net estimate.” The February 2016 report showed 242,000 jobs created, but that estimate was “statistically significant… plus or minus 100,000.”

Moreover, policy affects the economy “with long, variable and uncertain lags.” As a wise central banker once told Warsh: “Policymakers must move early because they are late.”

Instead of obsessing over backward-looking official statistics, Warsh argues that the Fed should pay more attention to market prices, which offer “contemporaneous insight into the real economy.” In particular, watching the prices of commodities—especially metals—would improve the performance of monetary policy. The Fed should “focus our countercyclical policies on the left side of the decimal point, not the right side.” That is, the Fed should be responding to large, persistent changes in economic activity, not “fiddling with measures of the NAIRU” to explain away inconsistent data.

Warsh saves special scorn for the Fed’s proliferation of forecasts. In 2015, FOMC members provided “more than 70 individual point estimate forecasts” and gave “about 62 formal ‘economic outlook’ speeches. That was double the number from a decade earlier.”

“To what end, exactly, this proliferation of forecasts?” Warsh asks. “The Fed has not forecasted a US recession accurately 12 months before its arrival since WWII.”

Paul Samuelson famously quipped that “Wall Street indexes predicted 9 of the last 5 recessions.” Warsh’s retort: “That is better than 0 for 12, the Fed’s post-war batting average.”

The forecasting obsession carries massive opportunity costs, Warsh contends. “The economic brain trust at the Fed is a precious public resource. It ought not to be squandered by repeating outputs of broken models.” That talent should be “aimed squarely at the toughest, most consequential economic issues of our time.”

Warsh’s critique connects to his broader concern about Fed mission creep. The central bank kept promising its extraordinary policies would deliver broad prosperity but that never happened. The Fed’s QE worked through a “wealth effect” — and “the wealth effect works best for the wealthy.” While household wealth increased impressively “for those who already possessed financial assets,” Warsh noted that “about half of American households have no accumulated balance sheet wealth.” QE was a non-entity for most Americans whose purchasing power and wealth is less exposed to the flood of liquidity it created.

It’s tempting to think of Warsh’s nomination as a puzzle: Trump wanted a dove but picked a hawk, as some have said. But this assumes the only thing that matters is where rates go. Warsh has consistently argued for looking at market signals and real-time information, engaging in robust internal debate, and avoiding forward guidance that locks the Fed into a path. That framework is compatible with a range of rate decisions.

And lately he has signaled that he thinks the central bank should look past any tariff-induced price hikes and that improved productivity can raise output growth without raising inflation, precisely the rejection of Phillips Curve thinking he articulated in 2016.

The real question isn’t whether Warsh is a hawk or dove. It’s whether his analytical approach will improve Fed decision-making. The establishment types endorsing Warsh and the populists who are concerned are both likely to be surprised by Chairman Warsh’s policies.

[67RModel]

End the Federal Reserve completely. It has long outlived its usefulness. Its legal existence is highly questionable and its motives, as it pertains to the average citizen, are dubious at best.