저자: Kevin · 외국인
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2020년 8월 19일 공개된 7월 FOMC 의사록을 요약. 레포 잔액 0으로 금융시스템 정상화, 인플레이션은 낮으나 디플레이션 우려는 완화, 중소기업 대출 여건 악화와 정크본드 등급 하향 확대, 추가 재정부양 필요성 강조. 영상 중간에 무료 주식·보험 등 광고 다수 포함.
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Hello everyone, it's me, Kevin. The minutes of the Federal Reserve's July meeting have just been released. So, let's find out what the Federal Reserve Board Committee thinks about the state of our market. What is happening with inflation, business, credit, etc. Let's get straight to the point. I'm going to lay it all out.
I read every word in this report, and, my friends, it just came out. So let's look at it together. By the way, don't forget to get two free shares from Weeble. You just deposit $100 and they give you two free shares. You can take all that money if you want, if you don't want to stay there. And don't forget to get life insurance in just 5 minutes.
Lauren and I have it. You can pay with Apple, Android. Both of these links are below along with some great links to apps. Let's move on to the content. So when I do these reviews, I like to jump right into the text and show you exactly what I highlighted. This doesn't mean I have it all, but I do my best.
So, let's begin. Obviously, they've mentioned many times that the virus is going to have a big impact on the future of the economy, and obviously we have weaker fundamentals in these stocks of recovering companies. So be careful if you speculate on stocks of recovering companies. Personally, I think that about the best thing to do is to consider swing trading speculative stocks of recovering companies.
I don't know how many we can buy and hold now. It will be like your retail, your hotel business, your airlines, etc. The Federal Reserve says they no longer have any outstanding balances on their repurchase agreements. In English, this means that the monetary system is actually functioning again. We had a huge problem with this back in September of last year, when the Federal Reserve had to step in because interest rates had risen to about 10%.
We want stability here. We don't want the Federal Reserve to have outstanding balances here, and right now they don't have any . So that's good. This is a return to normal. It's a little more stable. Obviously, the economy itself is not normal, but from a monetary systems perspective, this is a good sign.
The Federal Reserve's balance sheet has shrunk somewhat because of this. Okay, let's move on to the next page. Now let's talk a little about inflation. It is clear that inflation has decreased significantly. We are seeing disinflation, meaning lower inflation than usual. We don't see deflation. Part of that is because , well, obviously , there's not a lot of spending happening in certain sectors of our economy , and oil prices are much lower because, well, there's less demand for travel right now, which tends to drive down oil prices.
So, certainly low inflation, but there are no serious concerns about deflation, er, deflation right now. We'll actually see another note on this in a moment . In fact, a consumer survey conducted by the University of Michigan finds that inflation expectations will remain low over the next 5-10 years.
The Federal Reserve, however, likes to use a three-year measure, and they predict that inflation will also remain relatively low for the next three years. Furthermore, they indicated that real net income declined after the stimulus somehow disappeared. So, we saw that real disposable income, the money that people can spend, increased in April with the stimulus, and then declined in May.
This is expected. And we saw that income from wages and salaries grew strongly again in May. This is very good. Eh, now they're starting with the good stuff. There are definitely some problems here. One of the problems they continue to cite is that business investment has not begun to recover. So most businesses are still too insecure to actually start thinking about expanding their business.
Later in this PDF they suggest that if we had more incentives, maybe businesses would actually consider expanding and hiring. So many businesses are just trying to survive this. They also mentioned that, uh, nominal business spending on non-residential construction outside of drilling and mining fell further in May.
So, other than the housing market, which is booming, and other than mining and drilling, everything else is contracting, probably like commercial activity and so on, because of construction and commercial real estate spending, and that's not surprising. Industrial production increased, and was actually led by automobiles and related parts after the extended shutdown of automakers from mid-March to April.
So, actually, because, you know, car dealerships reopened after being closed in mid- March and early April, they started to see some decline in car sales. I can never get this French company's name right. It seems to be Pu Pujo. In any case, they are actually testing a direct-to- consumer sales model, just like Tesla.
Uh, that's really interesting. And Tesla is n't actually testing it. I think Tesla just does that. You go to their website, buy a car, get something like a car. Uh , and now they're trying to do it in Europe too. So we'll see if this becomes the norm, replacing the dealership model . But in any case, car sales and production increased because of this.
State and local government procurement has declined significantly. This is not surprising. Government salaries have also been reduced. It's also not surprising because these state and local governments are completely exhausted. Uh, and that's why there's this discussion going on in Congress right now about getting more funding for them.
The nominal US international trade deficit has increased. Basically, what stands out here is that exports have decreased more than imports. So everything was reduced, but we produced less than we imported. In other words, uh, and this is, so to speak, a trend lately. Okay . As for sentiment, it appears that the improvement in sentiment has been offset by concerns about the spread of the coronavirus within the country and its uncertain impact on future economic development.
Good. In other words , the Federal Reserve is finding that people are very excited in early June, early July, that the pandemic is ending. But then, when we started seeing the number of cases increase again, people got upset again. No wonder . We are currently observing a general trend towards a decrease in the number of cases.
This is recorded here on August 19th. Obviously, this Fed document is a bit behind. This tells us what they were thinking at the end of last month. Hmm, but it's still very instructive to see what exactly they pay attention to. That was really interesting. And that is why I am reading this report. The recovery was reportedly driven mainly by investors' interpretation of recent economic data.
Here you go. Which indicates that the risk of deflation has decreased. Now we will also talk about negative rates. Look. Look at this. It decreased somewhat, uh, and also due to improved market liquidity. In other words, there were concerns that instead of just worrying about low inflation, we could actually move into a deflationary, uh, market, which is really bad because that's when deflationary spirals start.
It is becoming difficult to get out of debt. And generally, when prices fall, people postpone spending. And this only repeats a more difficult market or a more difficult recovery. So, in other words, we don't want to see deflation. Some inflation is actually good. Um, it looks like the metrics that they're looking at, such as market implied forward rates for 2021 and 2022, remain somewhat negative.
In other words, the market expects very low inflation throughout 2021 and 2022. This is consistent with what the Federal Reserve believes. The Federal Reserve also said that people seem to know, based on their comments in the markets, that the Federal Reserve has no plans to set negative interest rates.
There was a period when we talked a lot about, oh my God, is the Fed going to have negative interest rates? And the Fed says they have no plans to introduce negative rates, and the market doesn't really think seriously that the Fed will have negative interest rates. Again, this is just a reiteration of the Federal Reserve saying, "Hey, look, we don't see any chance of seeing negative rates." And the market seems to understand that even though future targets may look negative, right now it seems like everyone just realizes that we're going to have very low inflation for the next few years.
So, no huge inflationary pressures that people are looking for or looking at right now. The volatility index has been rising and falling, and it is expected to rise again, and it is already rising again before the elections. Obviously, we expect to see significant volatility ahead of the election. In general, uh, many, uh - markets managed by the Federal Reserve are credit-stable.
Credit quality of non-bank institutions. Basically, any company that is not a bank has gotten even worse over the intervening period. Basically, it looks like the business took a pretty big hit in June and July, with a significant amount of speculative debt being downgraded in June. So, more junk bonds.
They also say that defaults in June were also high, and market indicators of future default expectations have also deteriorated somewhat. Now, a deterioration usually means that default expectations have worsened. That is, they believe that there may be more defaults, meaning we may see a few more bankruptcies.
I do n't know why they have to make it so complicated to write. In any case, the Municipal Markets Finance Commission , blah blah blah, remained compliant. Good. Uh , cities and towns across the country are also starting to see credit quality deteriorate as they run out of money. Financing conditions for small businesses remain tight.
Yes, that's not surprising. I mean, except for the Public Consumer Protection Program ( PPP) and, well, maybe existing small business loans. It is very difficult for small businesses to get loans right now. And this is partly due to the fact that small business lending performance has deteriorated significantly, and short-term delinquencies are comparable to the levels of early 2008.
This was right before the recession, the 2009 recession. Oho. And the crash at the end of 2008. So not a very good sign in the business sector yet. There are many concerns in business. Particular concerns obviously arise in small businesses. Commercial real estate financing has resumed. Overall, the real estate market appears strong.
Uh, the Federal Reserve also buys a lot of mortgage-backed securities, both commercial and, well , regular residential mortgage-backed securities. This helps maintain cash flow. However, they find that loans continue to flow to borrowers with higher credit ratings. So, if you haven't improved your credit score yet, friends, get an Apple card or something.
We have it. Take the Apple Card. Get yourself a credit card. It doesn't matter what it is. Just pay it off every month. Don't use this as a license to spend. Don't take it if you don't intend to pay it off every month. It's something like margin on stocks. Sometimes you just need to turn off margin so you're not tempted to use it.
I understand. I have the same problem. That's why I invested my money in M1 Finance. And I wish they would sponsor me so I could say that. Uh, okay. The staff assumed it was an added incentive...Oh, look at that. Although the staff assumed that additional fiscal stimulus measures would be taken beyond those expected in June, meaning the people at the Fed said, "Oh yeah, we'll have more stimulus in August." Oops.
No. Despite that, they said that the substantial, uh, stimulus from the CARES Act and the eventual expectation of more stimulus really helped support the economic recovery. Surprisingly, the very expectation of more stimulation can help. But now it feels like the rug is being pulled out from under our feet because Congress sucks.
Inflation forecasts will recover during 2021 and 2022 . Yes. Then these are their general expectations. This is consistent with what they said earlier. However, this sounds a bit confusing because they previously said that they thought inflation would remain low between 2021 and 2022 . But they say they expect inflation to rise slowly during 2021-2022.
And remember, they expect interest rates to be low through 2023, which really means they probably expect inflation in 2023, which is consistent with what they're saying here. Staff believed that the more pessimistic forecast was no less plausible than the baseline forecast. In other words, it is entirely possible that we will see another round of closures and restrictions on social interaction later this year, leading to a decline in GDP and a rise in unemployment.
They believe this scenario is as likely as a normal vaccination and recovery from this pandemic. So they're like flipping a coin. They say, " Uh, pandemic or not?" Oh my God. Uh, okay. What else do we have here? Then we have participants who observed that with this recovery, household spending probably recovered at about half the previous decline.
Consumers bought goods, including cars , other durable goods such as washing machines, refrigerators, right? Especially products sold online. This is very important. The online game is so huge now, and that's why Amazon is becoming huge. Uh, what else do we have on household spending behavior? Participants pointed to information from contacts in the area and high-frequency indicators such as credit and debit card transactions and mobile phone location tracking, suggesting that consumer spending growth has likely slowed.
Evil. So basically it's kind of like imagine this. Hooray. Everyone is spending again. Oh, wow. Hugo. Why...Why do n't they spend that much anymore? We really wanted it to continue, but it's not happening. Uh, that's about where we are now, and that's partly because the number of these cases increased in late July.
We'll see how the reopening of schools will affect us. Also, uh, in terms of sentiment, they see a recovery in consumer spending, but less improvement in the business sector. This is what we've heard before. Mainly high levels of uncertainty and risk, supply chain issues, employee absenteeism in some cases.
Small businesses have come under significant pressure. Fiscal support was uncertain. Oil demand is still low, excess supplies, low oil prices. The pace of decline in initial claims for unemployment benefits has slowed in recent weeks. Er, in other words, the unemployment rate is not falling as fast as we would like.
The pace is slowing down a bit. Prospects for further improvement in the labor market will depend on a broad and sustained business recovery. However, obviously we know that, uh, the pandemic is completely controlling this. And they reiterate here that African-American and Latina women, in particular, bear a disproportionate share of the economic hardship caused by the pandemic.
Okay, what else do we have here? In their comments on inflation, participants generally believe that the negative impact of the pandemic was more than just offsetting the pressures caused by supply constraints. Supply chain constraints. That's it. So, while there are problems in the supply chains of businesses, especially grocery stores, there is a lot less spending happening right now, so the likelihood that we will see inflation anytime soon is very, very low, and they expect inflation to remain well below their 2% target.
Then they talk about how accommodating they are, how things are regarding the virus recovery, and we may see more bankruptcies. This is a kind of warning to Congress. And then they always criticize Congress. Fiscal policy support will be necessary to stimulate rapid improvements in labor market conditions.
So, you want the unemployment rate to go down? Then give us some of that stimulus money. OK? Especially for business. Rates obviously remained at their target level of 0%, but we already knew this from the moment this meeting was held. This is just a summary of what they add here. Low inflationary pressure, and so on.
That's it. Check out the courses I've linked below. Get two free shares from Weeble and get life insurance with the links below. Thank you very much for watching this Federal Reserve update, and I'll see you in the next one, friends.
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