Summary: * Tuesday's podcast was titled, "Will She or Won't She?" referring to whether or not Janet Yellen would announce an interest rate hike for the first time in almost 7 years * Today we got the official answer: "No." * For the 54th consecutive time, the Fed has left interest rates unchanged at zero * What is even more amazing, in the Q&A immediately following the announcement, Janet Yellen admitted that she could not rule out the possibility that interest rates would stay at zero forever * A reporter asked her if the Fed may be trapped at zero forever * Among the excuses the Fed used was problems in overseas markets, which opens up a grab bag of excuses for the Fed conveniently explain why it is not going to raise rates * I said from the beginning the Fed has no intention of raising rates * They also mention that these problems may spill over into the U.S. economy * She also mentioned additional problems in the labor force: wages, people re-entering the workforce and more full-time jobs * That is not going to improve in the next three months, yet the Fed is still pretending that it could raise rates in October or December * Yellen is also no ruling out that the Fed could keep interest rates at zero forever, so who cares about what she won't rule out? * Janet Yellen answered the reporter's question by saying, " We don't think we are going to be in that situation, however I can't rule it out." * So the fact that she is not ruling out an October or December rate hike means nothing, because she also can't rule out zero interest rates forever * What else does this tell you? * She is concerned that rates will be at zero for a long time * Janet Yellen believes that the Fed could actually keep interest rates forever * They won't even stay at zero for the end of this decade because ther is going to be a currency crisis that forces the Fed to raise rates * The only reason the Fed has maintained the illusion of control for so long is that the market is believing them * When They figure what the Fed is really doing, then it is over with * Then the dollar will tank, creating upward pressure on inflation * They will have to raise rates; market will not give them a choice * Janet Yellen does not know this * Another reporter asked her if the Fed will adjust their policy if inflation gets to inflation sooner than anticipated * Yellen went out of her way to state that 2% is the target, but not the ceiling * I think the Fed does not have a ceiling, but the market does * Another interesting discussion was regarding the balance sheet * The Fed can't start shrinking the balance sheet until they raise rates * Yellen admitted that since rates are still at zero, they are pushing back the time when the Fed will begin shrinking the balance sheet * If the Fed never raises rates, then it can never shrink its balance sheet * The Fed may never raise rates on its own volition: I know eventually they will have to raise rates * And then it will be a complete catastrophe * But everybody is still pretending everything is great, maybe the Fed will raise rates in October of December * Here's another interesting development: the market was up all day but it sold off down 65 points. A pretty big reversal. * Ultimately the Fed will have to officially take rate hikes off the table * What kind of bad news will they need to do that? * We got bad news today: Housing Starts were significantly below estimates and the prior month was revised down * Bloomberg Consumer Comfort Index had its second lowest week in a year * The worst number that came out was Philly Fed - was expected to come in at +6, but actually came in at -6 * The biggest miss in 4 years * Given all this bad news, the Fed, under normal situations would be lowering rates * I believe at some point we will see weakness on the jobs numbers * I also believe this holiday season will disappoint
