Connect with us

Larry Summers Withdraws, Probable Boost for Equities

Published

on

Larry Summers

Larry Summers

In a letter addressed to U.S. President Barack Obama on September 15th, Lawrence “Larry” Summers withdrew his name from consideration to succeed Federal Reserve Chairman Ben Bernanke, whose term is to end on January 31st. Mr Summers served in both the Clinton and Obama administrations.

In the letter, Mr Summers cites as his reason for withdrawing an “acrimonious” confirmation process that “would not serve the interests of the Federal Reserve, the Administration, or ultimately, the interests of the nation’s ongoing economic recovery.”

Money managers and economists perceive that Yellen would be more dovish than Summers.

The withdrawal comes after heated and vocal protests by senate democrats against his possible nomination. Separately, a group of 350 economists were against a nomination for Mr Summers, sending a letter to President Obama that urged him to consider Janet Yellen instead.

Economists and media outlets were more concerned with his perceived role in the most recent financial crises. They were especially critical of his high-praise of the repeal of certain provisions of the Glass-Steagall Act in 1999 and for his pre-crisis success in helping to prevent increased regulation of the derivatives markets.

Janet Yellen, a likely nominee, is professor emeritus at the University of California, Berkeley. She served as the president and CEO of the Federal Reserve Bank of San Francisco from June 14, 2004 until 2010. If nominated and confirmed, she is expected to continue policies similar to those of Ben Bernanke. This may be good news for Wall Street. A CNBC September Fed Survey taken last week revealed Wall Street professionals in a 5-to-1 margin preferred Janet Yellen over Larry Summers for the Fed post. Money managers and economists perceive that Yellen would be more dovish than Summers. A Yellen nomination would be a continuation of easy money policy, thus keeping equity markets afloat.

Maiden Lane I Ends, Federal Reserve Aims to Shrink Balance Sheet

Published

on

The U.S. Federal Reserve’s balance sheet has been set to decline automatically since 2017, as the central bank has been liquidating funds from its US$ 4 trillion in Treasury bonds and mortgage-backed securities. As holdings matured, the Fed refrained from reinvesting them. This amounts to US$ 40 billion in monetary tightening monthly. Meanwhile, interest rates have slowly, and continuously, risen. The maturation of these Fed assets could exert upward pressure on long-term yields.

Mortgage rates, applications, and home sales have been falling, likely due to the rising rates. While rates are still historically low, U.S. President Trump has criticized the rate hikes. However, the Fed has no interest in changing course, and rates are set to continue to rise. According to Fed meeting minutes, “The Chairman suggested that the Committee would likely resume a discussion of operating frameworks in the fall.”

The size and content of the Fed balance sheet going forward will be a point of discussion for Chairman Jerome Powell. While there is no end in sight for the Fed’s plans to tighten economic policy, changing conditions may warrant further examination. With the U.S. stock market thriving, there is no indication that tightening has had a material impact on the economy. However, conventional wisdom asserts that the Fed will raise rates “until something breaks.” Market commentators have also suggested that, in the event of an emergency, the Fed will have a harder time stepping in due to the size of its balance sheet. A large part of the Fed’s monetary strategy is based around communications, and Fed-watchers have made a habit of hanging on every word. The Fed announced a shrinking balance sheet well in advance, and made gradual moves in that direction. The process has been smooth thus far. The Fed’s tightening will reach its peak, US$ 50 billion, in October. It is unclear exactly how much stimulus is still needed in the economy to reach the Fed’s 2% inflation target. The Fed’s easing policies have been criticized for the lopsided benefits they provided, more for Wall Street than Main Street. However, the easing will reduce their role in the market.

The End of Maiden Lane I

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

QIA Gets a New CEO

Published

on

Sheikh Abdullah Bin Mohammed Al-Thani exited as CEO of the Qatar Investment Authority (QIA). He has been appointed as minister of state by Amiri Order No. (4) of 2018.

Mansoor bin Ebrahim Al-Mahmoud is appointed as the new CEO of QIA. He held positions in various organizations such as CEO of Qatar Development Bank and worked at Qatar Museums.

Continue Reading

SWFI First Read, September 19, 2018

Published

on

QIA Eyes Investment in Chinese Lender Lufax

The Qatar Investment Authority (QIA) is in talks about a possible investment into Shanghai-based Lufax, one of China’s largest online lenders. The seller of the possible stake is China’s Ping An Insurance (Group) Co. Ltd. Lufax’s official name is Shanghai Lujiazui International Financial Asset Exchange Co. Ltd.

Wealth Funds Back Hotpot Giant

[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Continue Reading

Popular

© 2008-2018 Sovereign Wealth Fund Institute. All Rights Reserved. Sovereign Wealth Fund Institute ® and SWFI® are registered trademarks of the Sovereign Wealth Fund Institute. Other third-party content, logos and trademarks are owned by their perspective entities and used for informational purposes only. No affiliation or endorsement, express or implied, is provided by their use. All material subject to strictly enforced copyright laws. Registration on or use of this site constitutes acceptance of our terms of use agreement which includes our privacy policy. Sovereign Wealth Fund Institute (SWFI) is a global organization designed to study sovereign wealth funds, pensions, endowments, superannuation funds, family offices, central banks and other long-term institutional investors in the areas of investing, asset allocation, risk, governance, economics, policy, trade and other relevant issues. SWFI facilitates sovereign fund, pension, endowment, superannuation fund and central bank events around the world. SWFI is a minority-owned organization.