Going hiking with Yellen can be dangerous

To no surprise to anyone on the Street, Janet Yellen raised rates Wednesday by 0.25% to a range between 0.75% to 1.0%.

I will not address the two or perhaps three more rate hikes for this year that Yellen spoke of since we do not deal with fantasies here.

I had been writing that while the stock market was riding high, the underlining economy was not and I thought a hike now would be ill-advised.

But I was not the only one. The Atlanta Fed’s GDPNow — three hours before the Yellen announcement — lowered its projection for Q1 2017 GDP to 0.9%. Remember at the end of Feb. it had the projection at 2.5%.

That’s a huge move in two weeks, but all you need to look at is the data released over those two weeks to understand the problem.

Consumer spending — 70% of GDP — has fallen to decade lows off of the holiday spending numbers, which were dubiously high when released by retail trade organizations. Bankruptcies and store closures across the board tell of a different environment, with big name stores closing by the hundreds. It can’t be long before mall operators like Simon Properties join the fray.

Washington gridlock is putting a damper on the post-election market enthusiasm. While President Trump speaks about “tremendous” opportunities, his agenda is looking more like a 2018 opportunity than 2017. So the markets may run out of hopium very soon.

Hiring appears to have turned a corner, but as the Trump tax-plan agenda is pushed off the funds to pay for the new hires may not be allocated and positions left unfilled.

Yellen in her press conference afterwards said that the Fed would not be paring down its balance sheet anytime soon, which tells me that it is still rolling over debt as it matures back into the markets to keep the wheels spinning. This means that bonds — and equities indirectly — still need a safety net under them.

So the Fed raises into this maelstrom but the saving grace is that Yellen & Co. will have one extra move down should the economy need to be more accommodative with credit.

Can’t fault the Fed for that.


A letter bomb exploded at the IMF offices in central Paris  Thursday and one person was slightly injured, police sources said.

The Paris police department said an operation was ongoing at the offices of the IMF and World Bank after a person was hurt following the apparent explosion of a suspect package.

“An envelope exploded after it was opened and one person was slightly injured in the offices of the IMF,” one police source said.

IMF chief Christine Lagarde called the blast a “cowardly act of violence.”

The incident, just six weeks before a presidential election, comes as a militant Greek group Conspiracy of Fire Cells claimed responsibility for a parcel bomb mailed to German Finance Minister Wolfgang Schaeuble on Wednesday.

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