Editor's Note: Below is an interesting summary written by a Hedgeye subscriber who attended the recent Hoover Institution "Strategies For Monetary Policy" discussion, which featured prominent speakers from the Federal Reserve.
SYNOPSIS FROM YESTERDAY’S HOOVER FED MEETING:
"They can’t WAIT to cut rates. Like school kids waiting for the recess bell. Zero talk of the balance sheet repair. Zero talk of building up interest rates to have ammo to fight the next deflation scare. They seem to want to pre-empt all of that this year. Some of the presentations were downright scary...Actual quote: ”Just think how effective we could be if we could take rates to negative 6%!”
Lots of references to the limitations of the “Zero Bound”. Floors get in the way. It was like listening to PhD Physicists who don’t believe in gravity.
No concern that similar methods employed by the ECB and BOJ have produced little growth and little inflation.
Here is a stat I came up with that should make us concerned about the long-term viability of JPM’s share price:
Over the past twenty years:
Terrified of deflation. Disappointed that they have been unable to maintain a 2% inflation rate over the past decade.”
All told, we are keen to reiterate our bullish bias on Treasurys across the curve, TIPS, and equity bond proxies as part of our #Quad3 asset allocation.