What we’re reading (2/16)
“Fed To Raise Rates 25 Bps In March But Calls For 50 Bps Grow Louder” (Reuters). “The U.S. Federal Reserve will kick off its tightening cycle in March with a 25-basis-point interest rate rise, a Reuters poll of economists found, but a growing minority say it will opt for a more aggressive half-point move to tamp down inflation…now that the economy has recovered its pre-pandemic level, all 84 respondents in a Reuters poll taken Feb. 7-15 expected the Fed to raise the federal funds rate by at least 25 basis points at its upcoming March 15-16 meeting.”
“Note to the Federal Reserve: Don’t Panic About Inflation” (The New Yorker). “Contrary to what many people seem to believe, the Fed doesn’t have a magic wand to bring down inflation quickly and painlessly. It can’t unclog the ports, procure more semiconductors, or persuade millions of Americans who have dropped out of the labor force during the pandemic to return to work….[w]hat the Fed does have the capacity to do fairly quickly, if it gets things wrong, is crash the housing market, the stock market, and the economy.”
“Financial Issuers Are Storming The Bond Market With Floating-Rate Sales” (Bloomberg). “Large banks are tapping the investment-grade bond market in droves, selling floating-rate securities that are in high demand as the Federal Reserve prepares to raise interest rates…[t]he sales come as rapidly rising Treasury yields have caused steep losses for longer-duration bonds. That’s driving investors toward debt that pays interest that can increase, an appealing quality as the Fed looks ready to hike rate beginning in March.”
“Expect A Return To More ‘Normal’ Investing Where Stock Picking Is Rewarded, Goldman Sachs Says” (CNBC). “‘We believe that we are entering a new environment where the influence of technology is rapidly broadening to impact virtually every industry,’ [Paul Oppenheimer] the [Chief Global Equity] strategist [at Goldman Sachs] said. ‘Moving forward it will become less easy to differentiate between what is and what is not a technology company, and this should broaden out the opportunities across more sectors.’”
“Charlie Munger Expects Index Funds To Change The World—And Not In A Good Way” (Wall Street Journal). “Charlie Munger doesn’t think Larry Fink should be running the world. Mr. Munger, the billionaire vice chairman of Berkshire Hathaway Inc. and Warren Buffett’s business partner, said the rise of index funds like those run by Mr. Fink’s BlackRock Inc. has resulted in an ‘enormous transfer’ of the power to sway corporate decision making. That shift will ‘change the world,’ he said, and not for the better.”
