E Market Briefing For Monday, Oct. 16

Crippling concerns proliferate but have not crushed this market’s rather tenacious ability to maintain its reliance in the face of uncertainty. One real irony is that despite the geopolitical concerns and even peaking ‘confidence’ among consumers and investors, you don’t see equivalent economic gains.

The sanctions that exist could be said almost lesser toward Iran, and more toward those resisting the global market advance, unjustified by real growth, but buttressed by ‘fear’ of central banks (in the US and abroad) to normalize rates as they put it. Sure it’s because of reasons other than growth; and we have argued why they’ve also perpetuated the long-run low rate policies. 

On Friday, outgoing Vice Chairman of the Federal Reserve, Stan Fischer (a mentor to central banks and bankers globally for years) actually affirmed my view of these policies. He glibly noted (in a CNBC interview) that ‘low rates in pace do allow keeping a bit higher Debt than otherwise could be done’. 

I’m presuming that means than ‘could be done’ without really pointing out a real problem being ‘debt service’ costs if you have both high debt and high interest rates. To me that’s been an inhibitor of snugging-up policy for years and it’s got them in a corner, given the impossible debt service levels ‘were’ rates to go meaningfully higher. That’s why they are so ‘moderate’ in there oft-proclaimed desire for growth or inflation to justify raising rates. 

There is a also-debated topic of growth not triggering inflation; but it requires going back to another era (like the 1950’s and in some ways this is similar), for hopes to see that persist. It would also require energy prices staying low. And there you have today’s (also bandied-about) story that Saudi Arabia is considering ‘shelving’ the Aramco IPO coming next year. That’s denied but it is an interesting consideration.