Oops! We Thought the Fed Was LOWERING Interest Rates

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Unleash Prosperity Hotline
Issue #1121
10/10/2024
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1) Oops! We Thought the Fed Was LOWERING Interest Rates
Ever since investors started pricing in the Federal Reserve's "jumbo" 50 basis point cut in the federal funds rate, most other interest rates have...RISEN.

That's not supposed to happen.

But you can see that so far, the market reaction to the Fed's announcement three weeks ago has been the opposite of what was expected.

The 10-Year Treasury was about 3.6% when the Fed cut, and is now above 4%.

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We see a similar upward movement with the Treasury's 30-year bond.
Mortgage rates were supposed to fall, but those rates are headed north too, hitting 6.6% this week and making monthly payments on a new home less affordable.

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Why is this happening? One answer is that even though the CPI rate was down in September, inflation has risen sharply in the last two weeks (This rise was not reflected in the inflation number released this morning).

The commodity index that we showed last week is now up 9% since the Fed rate cut.

There's a useful economic lesson here. The Fed doesn't have some magical fairy dust it can sprinkle over the economy to make it grow faster. We know this revelation may be unsettling to some of our Wall Street friends who believe the opposite. Markets should and ultimately do determine interest rates – not the wizards at the Fed.

The Fed should simply keep the dollar stable in value and inflation rates low. Leave the financial markets alone.

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2) Sierra Club's "Dirty Truth" – There is NO Green Energy Transition
The White House has been boasting of a $1 trillion taxpayer "investment" in renewable energy. Yet as we've shown on these pages, we still meet 80% of our energy needs from old-fashioned and irreplaceable fossil fuels.

Now, the Sierra Club has issued a scathing report entitled "The Dirty Truth" about utility energy generation, and it confirms what we've been saying: the exalted green revolution isn't happening:

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The utilities studied scored 29/100 in the Sierra Club's Dirty Truth Report, earning a D. These utilities have only improved their overall score by 12 points since 2021.

By 2035, the report finds utilities plan to deploy "clean energy" to replace half of current fossil fuel generating capacity – but load growth will far outpace those deployments. Expected natural gas deployments keep rising to make up the difference:

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So this raises an awkward question for the Biden team: how do you spend hundreds of billions of taxpayer dollars and not move the needle at all? What kind of "investment" is that?

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3) The Longshoremen Declare War on the Machines

Just think of how many farm jobs today if only no one had invented the tractor!

That’s the same logic of the International Longshoremen's Association, who, with White House help, won big in their three-day port strike. Its members got a 62% raise over six years.

But that’s not the end of the story and they may not be done with their threats to shut down the eastern seaboard. Another crippling strike could begin after a cooling-off period ends on January 15.

What’s their next grievance: automation! Harold Daggett, the 78-year-old ILA president, tells his members. "Someone has to get into Congress and say, 'Whoa, time out.' This world is going too fast for us. Machines got to stop."

He's backed up by Senator Bernie Sanders who says: "Billionaires in the shipping industry must not be allowed to get even richer by replacing port workers with robots."

Next thing you know kitchen help in restaurants will protest electric dishwashers and the typewriter operators' unions will try to ban PCs.

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The United States has prided itself on being the technology capital of the world. But thanks to this kind of union resistance, we have some of the least modern and efficient ports in the industrialized world. The World Bank's annual ranking of trade gateways rates the Charleston port 53rd most efficient in the world. And that’s the highest-ranked port in the country! Part of this is due to union work rules and part is due to substandard automation.

Ironically, while the union boasted that 50,000 of its members were on strike, only half of that number actually work in the ports ([link removed]) . The other 25,000 collect royalties NOT to work, under an agreement struck when the union opposed a previous round of technological change: containerization.

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4) Chicago Mayor Wants to Borrow $300 Million So the Schools Can Hire More Social Workers and Counselors

When we last updated you on the never-ending school crisis in Chicago, Mayor Brandon Johnson had demanded that Chicago Public Schools CEO Pedro Martinez resign. Why? Because he refused to fund teacher union demands for salary increases, by taking out $300 million in high-interest-rate loans. Now the entire school board has resigned in opposition.

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In a feisty press conference, Johnson explained what he wants to do with all that borrowed money:

I am just bold enough and honest enough to say out loud that what we have to do is make sure that every single child, -- no matter what school, no matter what zip code -- has social workers, counselors, nurses, mental health providers, sports and extracurricular activities. And that should be the case for every school district in Illinois.

Huh?

Notice he didn't talk about making sure kids have access to the best schools. He didn’t say anything about shutting down failed schools. He didn't even say he wanted to hire excellent teachers to improve student achievement in a city with some of the worst test scores in the country.

Instead, he wants to expand the school bureaucracy – what we call "the education blob." Sure that will help - the unions.

Then, when Johnson was challenged where the money would come from, he accused those who opposed his loan of being the equivalent of Confederate slaveholders during the Civil War.

"You have a mayor who's going to raise taxes, fees, fines, and whatever else he's going to raise in order to pay back his friends, which is the Chicago Teacher's Union," says African-American City Councilmember Anthony Beale. "He's going to bankrupt this city under the auspices of, 'I'm a Black man.'"

Our advice: if you live in Chicago and have kids, get out of Dodge as fast as you can.

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5) There Are Some Things Hurricane Victims Just Won't Buy – No Matter How Desperate
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CORRECTION: Yesterday we ran an electricity price chart that eagle-eyed readers noted had a misplaced decimal point. The trend and analysis were valid, but the price was labeled per kilowatt-hour even though it was per 10 kilowatt-hours. We regret the error.

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