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Fed lowers 2014 GDP projection, but 2015 and 2016 hold

  • Along with the policy statement, comes new economic forecasts from the Fed, and 2014 estimated GDP growth is cut to 2.1-2.3% from 2.8-3% (the weather). The projections for 2015 and 2016 GDP growth remain at 3-3.2% and 2.5-3%, respectively.
  • Even with a reduction in the 2014 GDP forecast, the Fed sees the unemployment rate range falling to 6-6.1% from 6.1-6.3% previously forecast. The 2015 UE rate estimate is lowered to 5.4-5.7% from 5.6-5.9%, and 2016 to 5.1-5.5% from 5.2-5.6%.
  • The 2014 core inflation forecast is lifted to 1.5-1.6% from 1.4-1.5%. 2015 is now 1.6-2% from 1.7-2%, and 2016 is 1.7-2.0% from 1.8-2.0%.
  • The "dots" are on page three of the report and - as earlier reported - they've moved up and to the right a bit, suggesting a slightly earlier/faster pace of rate hikes.
  • Janet Yellen's press conference (webcast) begins at 2:30 ET.
Comments (58)
  • Weighing Machine
    , contributor
    Comments (726) | Send Message
     
    What a bunch of clowns
    18 Jun 2014, 02:19 PM Reply Like
  • sunwindgeo
    , contributor
    Comments (329) | Send Message
     
    So where does the all important "rate" decision fall? What does it mean? They are waiting for J. Yellen to "explain"?

     

    The truth is most of these big "street" pundits are as clueless as we are.
    18 Jun 2014, 02:22 PM Reply Like
  • Captain Pike
    , contributor
    Comments (786) | Send Message
     
    Actually wrong interpretation of the timing, in March it was 1-13-2 and now it is 1-12-3 which means one member switched from 2015 to 2016 for the start of int rate increases.

     

    Their long term numbers are still high, as these folks, just folks like most on here, don't seem to get the energy portion of the mix or the true unemployment picture.
    18 Jun 2014, 02:30 PM Reply Like
  • sunwindgeo
    , contributor
    Comments (329) | Send Message
     
    Maybe got left/right confused, but how does that even apply? Dots moved to right?Huh?
    18 Jun 2014, 02:58 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    Inflation is running at 2.5 to 3% right now, as higher oil starts feeding inro gasoline and diesel , and the rest of the items seem to be rising on a fairly broad front: the real question is - will the Fed ever react to rising inflation - or make excuses ( transitory, geopolitics, weather etc) - ie. nothing to with them.
    18 Jun 2014, 02:34 PM Reply Like
  • Captain Pike
    , contributor
    Comments (786) | Send Message
     
    Higher oil is a temporary condition, due to the lousy pricing function we have now, which reacts to speculation and headlines. In reality we will be awash in energy in the years to come. Long term it is level to downward pressure.
    18 Jun 2014, 02:39 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    Right, thats exactly what I expect the Fed would say as well. the question is - lets say, this "temporary condition" persists for some strange reason that does not conform with your beliefs about the future evolution of shale production , Iraq output etc - what will they do?
    I suspect, as usual , when Beliefs come in direct conflict with Facts , usually the Beliefs win.
    18 Jun 2014, 02:51 PM Reply Like
  • Captain Pike
    , contributor
    Comments (786) | Send Message
     
    I really don't think belief is necessary when you read the facts about actual production numbers, well output, tanker car demand, and so on combined with Solar production numbers and efficiency increases. Not to mention all the other facets of the pie not touched upon because of the simp in the WH. Did I forget Tesla?
    18 Jun 2014, 03:07 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    I have always followed the Cleveland fed's median CPI. Its currently rising at 2.3% yoy. The increases in yesterday's CPI report were pretty broadly based.
    So, its not just oil, even though I tend to believe the risk to oil prices is higher rather than lower - global demand continues to grow, and I suspect shale may turn out to not be the panacea that we all hope for.
    18 Jun 2014, 03:21 PM Reply Like
  • Gary Jakacky
    , contributor
    Comments (2727) | Send Message
     
    I fervently and honestly pray for the day when we don't hold fed chair peoples in thrall, and can concentrate on earnings, markets, technologies, valuation, entrepreneurship....an... OTHER than Washington bureaucrats and financial narcissists.
    18 Jun 2014, 02:35 PM Reply Like
  • Michael Clark
    , contributor
    Comments (9501) | Send Message
     
    Growth is weaker than expected; taper continues; and rates will be raised earlier than thought. Is this good news for stocks? Stocks rally because....Yellen did not break down on camera and admit no one at the Fed knows what they are doing?
    18 Jun 2014, 02:36 PM Reply Like
  • june1234
    , contributor
    Comments (3066) | Send Message
     
    whatever she said TLT is looooooving it as Maxwell Smart might have said. treasuries and stocks working together forward, so bipartisan of them
    18 Jun 2014, 02:54 PM Reply Like
  • KeithRichards
    , contributor
    Comments (31) | Send Message
     
    The unemployment rate will be zero, but nobody will be working. That's the future if the Fed has its way.
    18 Jun 2014, 04:39 PM Reply Like
  • Swisser998
    , contributor
    Comments (133) | Send Message
     
    Bring on the rate hikes, I want to buy bonds again.
    18 Jun 2014, 05:01 PM Reply Like
  • Deja Vu
    , contributor
    Comments (1377) | Send Message
     
    Keep handing out the welfare and the "disability" checks. Soon no one except a few will be working. Employment will be 100% for those who want to work. Those who don't want to work can sit around smoking pot, whining about "fairness", "inequality", "paying it forward" and in general abusing those who work, while taking their money. When there isn't enough money to be taken, the Fediots will print more and more.

     

    This is going to end well...
    18 Jun 2014, 06:54 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Why is everyone so unhappy that the markets are up?
    18 Jun 2014, 07:35 PM Reply Like
  • Swisser998
    , contributor
    Comments (133) | Send Message
     
    Because the market is on Fed-induced steroids, or human growth hormones, or some sort of magical drug. And there will be a reckoning soon...I swear. Maybe by 2022.
    18 Jun 2014, 10:05 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    That's soon, indeed.
    19 Jun 2014, 12:09 AM Reply Like
  • mr clark
    , contributor
    Comments (652) | Send Message
     
    in some areas home prices (and rents) are up 50% in 3 years - how do they get 2.5% inflation? hell my favorite cereal just went up 70cents in a year, almost 15% jump there

     

    really odd math...
    18 Jun 2014, 07:51 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Mr Clark, I know this is shocking, but inflation is calculated as a weighted average for all kinds of goods and services across the country.
    18 Jun 2014, 09:03 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    Yes, the Cleveland Fed calculates median inflation is rising and now is at 2.3% y/y, the highest level since 2009.
    But, Yellen said today that inflation is not an issue and talks like she would like to do her best to make sure inflation rises from today's levels which she views as dangerously low.
    Your cash balances are earning zero. ( -2.3% in real terms).
    18 Jun 2014, 10:13 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Sine cash is earning -2.3%, shouldn't rational people invest in stocks and bonds?
    19 Jun 2014, 12:09 AM Reply Like
  • Michael Clark
    , contributor
    Comments (9501) | Send Message
     
    Macro: but it excludes rises in housing costs, rises in college tuition, and rises in health-care costs and health-care insurance premiums. We (our government) has designed an inflation index that ignores the greatest INFLATION IN DEBT in the history of the world. How is that possible?

     

    Mr. Clark is right. It's a sham, dedicated to perpetual low interest rates.
    19 Jun 2014, 03:21 AM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    Stocks could decline 20, 30 , 50%. Bonds too. I believe that would be an even more negative real return than cash.
    The universe does not guarantee that there will always be at least one asset that will provide positive real returns.
    19 Jun 2014, 11:43 AM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    RS055, Why stop at 50%? Why not 150%?
    19 Jun 2014, 02:09 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    Because 50% declines have happened with some regularity - for example in 2008. on the other hand a 150% decline is impossible - unless you live in an alternative universe.
    19 Jun 2014, 02:25 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    So a one time event (2008) is now representstive of regularity. I am always amazed at how the minds of some investors work.

     

    How many other times have S&P500 dropped by 50%?

     

    I said 150%, because claiming regular 50% losses is just as ridiculous as a 150% loss.
    19 Jun 2014, 02:45 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Housing is included in the CPI. College tuition is optional. Not everyone has to go to college. Health care is included as well.

     

    Why should debt level be included in inflation? It's called Consumer Price Inflation. Like, price. As in, price, not debt.
    19 Jun 2014, 02:53 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    150% loss is impossible arithmetically.
    50% losses happen every now and then
    20% losses are pretty frequent
    10% loss : its a rare year that does have one of these.
    19 Jun 2014, 03:05 PM Reply Like
  • VTH
    , contributor
    Comments (156) | Send Message
     
    Hi MI, on a serious note, is there a hidden meaning when Yellen out-rightly neglected the inflation data and said its noise. How come they are not even acknowledging its on upward trend. And, neither she acknowledged the UE numbers. On top of it GDP forecast is reduced, and not even talking about the rate hike. I guess, accommodative policy is good, but is it not the market now priced in for very good year ahead. May be others point is, hence, market is vulnerable now.
    19 Jun 2014, 03:09 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    If yellen were to acknowledge that inflation is starting to pick up - the next question , about 30 seconds later, would be - so what are you planning to do about it.
    And they really will not do anything about it. Even when they "raise rates' it will not do a thing to slow things down. Why? Because the way they plan to "raise rates" is by paying banks more on their reserves. this is the first time in Fed history that this approach is going to be tried - and IMHO it wont work.
    19 Jun 2014, 03:14 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    50% loss happened once. In 2008. Is that the new definition of now and then?
    19 Jun 2014, 06:51 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    http://bit.ly/QtDuMF

     

    VTH, If you look at the monthly inflation numbers from say Jan 2010, and then try to fit a line, you will then see what Yellen means by noisy. There is no upward trend, in fact there is a downward one. In general, i goes up, it goes down, and bounces back and forth around the mean of 2.05%. Monthly numbers are inherently noisy. you have to look at the long term picture. One month does not a policy make.

     

    I think we are going to have a very good year for a few years now. This is what happens when an economy comes out of a recession. And this one was a bad recession, so we are likely to have many years of uptrend.
    19 Jun 2014, 07:00 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Raising rates are in the FAR future. Let's not worry about that right now.
    19 Jun 2014, 07:01 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    Dont worry - I wont happen to you - just sell after you are down 20%.
    19 Jun 2014, 07:02 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    How long have you been a permabear RS055?
    19 Jun 2014, 10:36 PM Reply Like
  • VTH
    , contributor
    Comments (156) | Send Message
     
    MI, Thanks for the comments.
    20 Jun 2014, 12:40 AM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    Iam not a perma anything. Good luck to you and peace!
    20 Jun 2014, 12:57 AM Reply Like
  • lords
    , contributor
    Comments (97) | Send Message
     
    How did we get there accounting gimmicks.
    -- corp debt us alone 14trillion yes was 6Trillion in 2008 more the doubled. Borrowing at a rate of 1.3-1.5trillion a year.
    -- margin debt all time high about 550billion
    -- top 20 stocks in mkt cap makeup 35-40%. AAPL 550B XOM 450, GOOG 390B, MSFT 350B. Etc.
    -- everyone is buying index when Schiller PE is : 29 and fake PE is 20 in 99 percentile in terms of valuations.
    -- salaries are moving up while real inflation is met then 5% a year.
    18 Jun 2014, 08:51 PM Reply Like
  • 1GreatCFA
    , contributor
    Comments (1135) | Send Message
     
    Can't buy back shares forever. Then there'll be no stock market. Eventually someone will come to the inescapable conclusion that people just aren't buying as much useless crap anymore because they cannot afford it...because wage growth for the 99% hasn't kept pace with inflation. Thanks Al, Ben & Janet.
    18 Jun 2014, 09:02 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    1GreatCFA, We need a hard core market crash, right?
    18 Jun 2014, 09:04 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    yes. And, you are confident you will get out in time? Plenty of time? Why did 99% of my friends who were so giddy with joy that could hard stop hugging themselves , and who looked at the grumpy guys with a mixture of pity and amusement - in 1999-2000 , why did they ride those puppies down all the way - like Cisco from 80 to 10? Why?
    Because they were convinced that having a 75% share of the router market when the internet was growing at 20% .... per month, was a no brainer. So, when Cisco went to 70, they bought more 9(it worked so great from 1997-1999), when it went to 60 they bought even more. When it went to 50 they were puzzled and decided to wait and see. When it went to 40, they thought the market was just crazy and it was too cheap to see. then it plunged to 10 - and they were asking me for confirmation that it would be stupid to sell now right? Moreover what was often a 4100K+ investment had dwindled to nothing. So they did not sell. Rode it all the way down.
    18 Jun 2014, 09:16 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    I don't know about CSCO. I do know about highly accomodative monetary policy.
    19 Jun 2014, 12:12 AM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    I was simply giving you a real life example of why intelligent folks would ride a stock market decline all the way down. The psychology of it.
    The question everyone needs to answer honestly is , when they would get out if the market declines. Because your brain will play all manner of tricks to keep you in.
    19 Jun 2014, 11:45 AM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    I think I get the logic now.

     

    1) Stock market can go down any time
    2) It went down 50% in 2008 (once in a lifetime event) therefore 50% downturns are routine now
    3) Hence everyone should sell

     

    Did I get that right?
    19 Jun 2014, 07:02 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    where were you in 2001-2002? nasdaq went down over 90% that time.
    19 Jun 2014, 07:20 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    As for your point #3 - "everyone" cannot sell. In fact very few people can sell. If everyone sold - the market would go down 90% tomorrow. Its why everyone did not sell in 1999 at the peak of the dot-com era. its the reason everyone did not sell their over-leveraged houses in 2006. Or everyone sell their Asian stocks in 1997 . or their Japanese stocks in 1989.
    You need to take a look at some historical charts - and dont just look at S&P500, look at various assets around the world. Its much more educational than watching CNBC.
    19 Jun 2014, 07:25 PM Reply Like
  • RS055
    , contributor
    Comments (3091) | Send Message
     
    Why do you think that 2008 was a "once in a lifetime" event ? How do you know that?
    look - anything can and does happen in speculative markets. its up to each of us to determine a strategy that protects our capital from extreme losses - so we can live to fight another day.
    To keep repeating that a 50% decline is impossible is not a risk management strategy - it just sets you up to keep rationalizing and making excuses all the way down.
    19 Jun 2014, 07:38 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    The NASDAQ doesn't reflect the broader market. S&P500 does.
    19 Jun 2014, 10:33 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    I have a real job with no time to watch CNBC. But I will promptly take a few days off and research all major market crashes worldwide to conclude that the US market is going to crash tmrw.
    19 Jun 2014, 10:34 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    I think 2008 is a once in a lifetime event because it is the only time in S&P500s 60+ year lifetime that it went down 50%.

     

    You want to define your risk management strategy using a 6-sigma event. That's fine, but please, don't call it the norm. Call it very unlikely, and a risk management strategy based on it Chicken Little strategy.
    19 Jun 2014, 10:35 PM Reply Like
  • Rock228
    , contributor
    Comments (994) | Send Message
     
    MI - technically you are correct but we have had 3 47% or more falls in the last 40 years. 1973-1974 -48%, 2000-2002 47%. Pretty darn rare but not a once in a lifetime event. No one knows when the next one will come but until it does enjoy the liquidity wave higher! Don't worry, be happy and make money.
    20 Jun 2014, 09:45 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    Spot on. As long as there is a liquidity wave, it makes no sense to not be bullish. That's what the bears don't understand.
    20 Jun 2014, 11:34 PM Reply Like
  • lords
    , contributor
    Comments (97) | Send Message
     
    Facts Feds cannot deny and know it:
    -- corp debt in USA 14trillion up from 6.5T in 2008. Growing at 1.4-1.5trillion a year.
    --PE 20, real PE Shiller PE 29, all time high.
    -- everone is buying the index so risk concentration is very high. 10 companies make up 25-30% of the mkt cap. APPL 600B, xom 460B, Goog 390B, msft 350B and so on. All of them are highly price in terms of future growth, they cannot grow at 15% -25% for sure that's what the PE indicates. These are in almost make a big chunk of the efts.
    -- Margin debt all time high 600Billion.
    -- leverage again all time high.
    -- trading Volumes very Low most of the trading is done via algos. Only way they makes money is squeezing shorts. So do not short the mkt.
    -- national debt all time high 19 trillion.
    -- muni debt close to all time high.
    -- inflation is higher than Feds state, look at food, health, oil, education, housing anything is almost doubled in the last 10 years.
    -- people should start saving in cash both bonds and stocks are over valued. Good time to exit and sit tight until the year end.
    -- corporates are issuing debt to buy high priced stocks. This does not change the state of the company. Growth rates are close to 2% but expectations are 5-10 times that. Not going yo happen.

     

    All the negatives are ignored by the algos. It's time to quite the mkts here. May be another few % up from here max.
    18 Jun 2014, 09:08 PM Reply Like
  • minecanary
    , contributor
    Comments (596) | Send Message
     
    The answer is that the Fed's day in the sun is almost done. World events are about to end their games and we are going to be on the receiving end of the policy decisions...not dictating them to everyone else.
    18 Jun 2014, 09:41 PM Reply Like
  • Macro Investor
    , contributor
    Comments (9050) | Send Message
     
    By whom?
    19 Jun 2014, 12:12 AM Reply Like
  • Michael Clark
    , contributor
    Comments (9501) | Send Message
     
    Yes, minecanary. And they should be living in a cell next to Bernie Madoff soon, along with their cronies from the Wall Street banks and from Washington D.C. Sweep out the old. The status quo is bankrupt. Use the rico laws to get back all the money they stole over the last decade and more.
    19 Jun 2014, 03:22 AM Reply Like
  • Aikman
    , contributor
    Comments (140) | Send Message
     
    Rate hikes will be faster... so why did the 10year rate go down yesterday in reaction to this news? I'm getting burned with my TBT, I'm gonna sell them today. Long term chart is scary
    19 Jun 2014, 07:46 AM Reply Like
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