Kyle Reise, Wealth Management Advisor

03/23/2023

https://video.foxbusiness.com/v/6323092798112 =show-clips

Home Depot co-founder Ken Langone makes a 'draconian' suggestion for the entire Federal Reserve board to resign.

03/22/2023

The show starts at 2:00pm.

I believe they should pause, but do not believe they will. The key will be in what they actually say regarding future hikes and of course how the banking system reacts to their decision over the coming week.

After extraordinary moves here in the USA and in Europe over the past two weeks helped prevent contagion from failing banks caused (mostly) by rates rising too fast, we finally had two days in a row of market stability. So, why not raise rates some more and see what happens? What can go wrong?

I believe the shock to the economy from the bank failures themselves will manifest itself over the coming months in the form of a deflationary wave. Banks are likely tightening their lending standards, corporations will likely accelerate layoffs and we have already seen many commodity prices come down as well as shipping costs.

According to the Kass Transportation Index February report, the year-over-year "Inferred Freight Rates" decreased -9.40%...and this is before the events of the past two weeks.
https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/february-2023

Everybody has an opinion on this situation and I am just sharing mine. What I do not want to see is another situation where the FOMC is forced to start dropping rates in six months or less which can lead to another round of speculative behavior.

I am not saying they they need to be done raising interest rates especially if the inflation data accelerates, although I think that is unlikely. I am just saying after raising 450bps in less than a year and in light of the recent bank turmoil a pause to further assess the situation is warranted.

The Fed will close its two-day meeting Wednesday with a heavy air of uncertainty.

03/20/2023

Let's just wait and see what happens after the FOMC meeting on Wednesday.

Despite bold proclamations about a return to stability, the sale of Credit Suisse to UBS does not appear to have laid to rest contagion concerns.

03/16/2023

Do they not see that by keeping rates low for too long and then going on a historic campaign of large rate increases that they broke something last week?

Apparently, the problem was a big surprise to the central banks. So, we are now seeing stress in the entire global banking system which we know was caused by rates rising too fast. The European Central Bank decides that they need to ignore the real-time threat of banks failing to stay focused on inflation numbers from last month before we knew that the banking system is stressed.

We just witnessed a major deflationary event that I believe will cause economic growth to slow, companies to increase layoffs and profits to potentially fall. In other words, the jolt to the banking system is likely to have a major impact on bringing inflation down.

In light of this and the fact that we do not know if the bank failures are over or not, why not just pause on the interest rate hikes? I am hoping the Federal Reserve agrees and chooses to pause during their meeting next week.

It can take up to 12-18 months to feel the "full" effects of raising interest rates in the economy. The Federal Funds Rate was at approximately 0% one year ago and is sitting today at approximately 4.50%. The recent inflation numbers are still too high, but the trend is lower and the stability of the banking system is the greater risk.

The FOMC should pause next week, but will they? That is the trillion dollar question.

Some market players questioned whether President Christine Lagarde would proceed with a hike, given recent shocks in the banking sector.

03/15/2023

https://www.youtube.com/watch?v=gtGRt9G0zQU

Danny Moses, Moses Ventures founder, on the banks, the Fed and whether you can trust this regional bank rebound. With CNBC's Melissa Lee and the Fast Money t...

03/13/2023

I 100% agree with this headline quote.

People who made investments in the equity of these failed banks have to accept their losses, but depositors that were within FDIC limits need to be made whole. I am actually surprised that they decided to protect deposits in excess of the current FDIC limits, but they indicate that all of the banks will be assessed to pay for it.

Based on the last paragraph of this article, “Any losses to the Deposit Insurance Fund will be covered by a special assessment levied on federally insured banks, according to a joint statement issued by the FDIC, Federal Reserve and Treasury Department”, think of this assessment as like being a member of an HOA in the North and you had abnormal amounts of snow and you went $15,000 over budget for snow removal. If you had 250 homes in your HOA, each home would be assessed $60 above and beyond your normal HOA fees to cover this unforeseen expense. In the same spirit, member FDIC banks will be assessed to cover any losses instead of taxpayers.

Nevertheless, I find it shocking that depositors threw caution to the wind and put more money than is FDIC protected in one bank. Even more shocking is how this was allowed and we were told as recently as last Tuesday that the economy is strong and interest rates may need to rise more than originally forecasted. There was no mention of stress to the banking system caused by rising rates and by the end of the week we had the second largest bank failure in history.

So here is the trillion dollar question. Is the FOMC still planning on raising rates next week? If rising rates was the straw that broke the camel’s bank at SVB and this lead to the government having to put emergency procedures in place over the week-end, is raising rates more next week a good idea?

That should be a rhetorical question, but the American people would like to know for sure sooner rather than later. I do not believe this event is over yet and I applaud the actions taken so far. However, I can’t see the logic in raising rates to fight inflation when banks are failing and you have to pledge emergency support to prevent contagion throughout the system. If we do not stabilize today, I believe the FOMC should come out ASAP and indicate that due to the recent stress in the banking system caused by rapidly rising rates, that they are pausing any further rate increases in order for the system to fully absorb what they have already done.

Keep the faith.

Kyle Reise, Wealth Management Advisor

"Investors in the banks will not be protected," Biden said. "They knowingly took a risk and when the risk didn't pay off, the investors lose their money."

02/01/2023

Isn't this "interesting"?

Gold demand soared to an 11-year high in 2022 on the back of "colossal central bank purchases, aided by vigorous retail investor buying," according to the World Gold Council.

01/05/2023

Economic uncertainty will lead to slightly lower mortgage rates in 2023, but home prices will remain high.

01/03/2023

You can defer $22,500 into your 401(k) for 2023, up from $20,500 in 2022. Here's why it's time to boost your contributions, according to financial experts.

12/22/2022

This may be one of the most important variables that very few are talking about.

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12/22/2022

Some stock market participants are betting against the Federal Reserve’s guidance on the future path of the economy, which is a potentially risky gamble.

12/20/2022

A little Christmas optimism.

"The charts, as interpreted by Larry Williams, suggest that Christmas is not going to be canceled for Wall Street," Cramer said.