1) Yes to a Fed Rate Cut – But Sorry it Won't Save the Economy
It's time. But a go-slow approach makes the most sense to us.
Inflation has finally subsided for now. Our four favorite measures almost all point to dollar stabilization. Finally. It only took three and a half years and a 20% permanent rise in the price level.
Commodities. After shooting into the stratosphere in 2021 and 2022, the CRB index is now pretty flat indicating no imminent signs of inflation.
TIPS Spread. Has inflationary expectations at just a shade above 2% (the Fed target rate) over the foreseeable horizon.
Ten-Year Treasury. It's at 3.63% today down from 5% a year ago.
Gold Price. This one worries us. The gold price is getting close to $2,600 an ounce – which is 50% higher than two years ago. This could be due more to international turmoil than inflationary expectations.
The good news for investors is that a rate cut is coming tomorrow. The bad news: it won't fix the underlying structural economic problems of runaway government spending and debt and the threat of economically debilitating tax increases.
2) Speaking of the Fed…Senate Liberals Beg Fed for 75 Basis Point Cut
Elizabeth Warren, Sheldon Whitehouse, and John Hickenlooper sent Fed Chair Jerome Powell a public letter begging for a big rate cut right before the elections:
Dear Chair Powell:
We write today to urge the Federal Reserve (Fed) to cut the federal funds rate, currently at a two decade-high of 5.3 percent, by 75 basis points (bps) at the Federal Open Market Committee
(FOMC) meeting on September 17 and 18, 2024. Given the Fed's confidence in inflation moving
towards its target of 2 percent and data indicating slower job growth, now is the time to swiftly
move forward with rate cuts.
Wait. We thought the Fed was supposed to be free of political interference.
A new Ernst & Young study on tax policy finds uncertainty about the tax code reduces productivity in three out of four businesses.
This is an amazing revelation because Ernst & Young is an accounting firm that makes money off of tax complexity.
Over the last 10 years there have been more than 4,000 amendments or revisions to the tax code. The Internal Revenue Code with supplements is now 70,000 pages long – or about 90 times longer than "Gone With The Wind".
Why?
The E&Y study suggests more than a million jobs could be created with a smarter and more stable tax code.
We're for the Steve Forbes flat tax, which benefits everyone in America who resides outside the swamp.
4) House to Vote This Week on Banning Biden EV Mandates
Michigan Rep. John James's H.J. Res. 136 is slated for House floor consideration this week. The bill would block and ban the key EPA rule that functionally mandates national electric vehicle market share by model year on a schedule just two years behind California's full ban:
These mandates are set to wreak havoc in the auto market. Right now less than one in ten new car sales are EVs. And as we've reported the big car companies are canceling EV production – not expanding it.
After the vote, we'll know how many House members are in denial regarding the wildly unrealistic Biden EPA mandates. Our view is that the best way to destroy the EV market (and the overall auto industry) is to mandate that car buyers have no other choice but to purchase them.
CORRECTION: Yesterday, we goofed. We said: "American Family Business Alliance estimate that the number of families that will have to pay estate tax will double or triple – and those aren't billionaires we are talking about." The group who did the study is "Family Business Coalition".
