Author: WhatNowDoc

Cheese – The Truth about the Fed

I really can’t do better today than to quote, in full, today’s bulletin from Adrian Ash of the BullionVault:

Crackers
from Adrian Ash
Head of Research, BullionVault

FORGET the glut in crude oil, copper, cargo ships or Chinese steel capacity.

Cheese. There is too much cheese, says Bloomberg.

That is why the price of US cheddar cheese blocks…a tradeable asset, apparently…fell to new 5-year lows yesterday. Cheese futures for December delivery hit their lowest price since April.

“We’re making a lot of cheese and not selling a lot of it,” says one dairy manager.

“So it’s all going into storage for the moment.”

This cheese glut, of course, is the global economic environment into which the US Federal Reserve last night raised its key interest rate.

Hence the humming and hawing in the Fed’s accompanying statement, forecasts and press conference.

Yes, rates have been too low for too long. Yes, financial assets have been bid up to untold records…squashing the yield they offer to nothing…as the glut of money which zero rates have created forced otherwise cautious savers into all manner of half-baked “collectibles” and “luxury goods” at auction…

…not to mention real estate, high-yields “junk” bonds and investment scams.

So the Fed basically promised that “lift off” from zero would start in 2015. That made yesterday’s rate-rise a 100% certainty if markets weren’t to collapse on a loss of confidence in everything Janet Yellen ever says.

But this rating-hiking cycle…the first begun since 2004…is not like any rate-rising cycle the world has ever seen before.

First it starts from near zero. Second, the rest of the world (besides US Dollar-pegged Hong Kong) is going in the other direction…either sitting tight at record lows (like a raft of central bank decisions already today)…or cutting further (like Taiwan did overnight).

Third, but most crucially, it’s a rate rise which the Fed doesn’t want to make and doesn’t believe it should.

Because…thanks to all the gluts in oil, copper and cheese…inflation is missing. And while a strong labour market is one half of the Fed’s mandate, the other half is stability in consumer prices. Which the Fed says means 2.0% inflation. And which…by a remarkable coincidence…the entire Fed policy team unanimously says will be the pace of inflation in the “long run”.

But its other forecasts? These people voted 9-1 against raising rates in October. With nothing changed, they voted 10-0 yesterday to hike after all.

Really, these folks don’t know what they’re doing. They’re making it up as they go along.

Most of the time this doesn’t matter. Because the world gets by regardless and in spite of them.

But every so often…as in the 1970s or say 2008…the world suddenly spots the problem.

This confidence game is a con trick. Fingers crossed the markets don’t notice.

Adrian Ash
Head of Research, BullionVault
There, you’ve been told.  It’s all about cheese.

A Fine Human Being

Yesterday I learned this world lost one of its best.  I learned of it belatedly and I am very affected by the news.  Prof. Andy Burroughs was one of those very special human beings.  He was clever, exceedingly clever but he was also a very nice person, a warm and caring doctor, an exemplary physician who did not always display what is commonly referred to as a good bedside manner.  Do I care?  Not one jot.  He wasn’t one to waste words, in my experience.  His skill, his knowledge, his clinical rationale, his curiosity and his decisive actions spoke volumes.  From the moment I met him I knew this was a physician I could trust.  I respected his analytical approach, I related to it entirely, it comforted me, I knew this was someone I could surrender to.

I had read up on him widely before we met so I had high expectations and he didn’t disappoint.  His wikipedia entry did not exist at that time but a man this good has a lot of references so that was no hindrance to me.  When I found that he studied under Sheila Sherlock  (who did have a page then and much more besides) I knew he was going to be someone special.  When we first met I asked if what was written about her was true and he replied that it was all true but not all of it had yet been written.

Of his achievements and background I am not qualified to speak but this obituary  written by Professor Roger Williams, CBE, Director, Institute of Hepatology, London is a fine one.

What it and all other literature I can find today fails to mention is how this wonderful man died.  It’s a very important piece of information especially to me.  To die aged just sixty years old is a travesty, especially when one is this special, when one has done so much to save the lives of so many others and to improve the lives of countless more.  What I learned today, a full one year and nine months after the event, is that as a cruel irony , given his world-beating expertise in this area, The Prof died of pancreatic cancer.  Very few people survive that one, even when surrounded by the absolute best that medical science has to offer.  In Prof Burroughs’ case he survived very much longer than most, over a year, and like the exemplary individual he was, he continued working, helping others in need, until very close to the end.  I’m sure in some way that it helped him to do that. I’m equally sure that I wasn’t the only one blissfully unaware of his condition because that would be like him too.  Discretion.

Such was my respect for him that I decided to ask something of him that I thought was a real stretch, one very few in his esteemed position would have spared a thought for.  I asked him if he would, in the absence of that historic icon, the family doctor, assume the role of GP to my wife so that I could be sure that her disparate clinical needs were being looked after by someone I trusted.  I wrote him a long letter and without fuss or comment he simply adopted that role.  I can’t imagine I’ll ever get that lucky again, lucky enough to find such an eminent and skilled doctor humble enough to accept such a role.  Such a fine human being.  Thank you Andy Burroughs, Prof.