Fed Punishing Savers
After two rate cuts in three months, billionaire hedge fund founder Leon Cooperman has fired a shot at the Federal Reserve’s interest rate policy. The Goldman Sachs veteran and founder of Omega Advisors says the Fed is “screwing savers” with the rate cuts.
He joins others who wonder why rates are being cut while the economy remains in a record-long economic expansion. Financial writer Michael Snyder asks, “Why does the Federal Reserve keep slamming the panic button over and over if everything is okay?”
Reports that Elizabeth Warren poll numbers are rising has Cooperman warning that “They won’t open the stock market if Elizabeth Warren is the next president. You don’t make the poor people rich by making rich people poor.”
Cooperman may have been exaggerating for effect, admitting that they will still open the market if Warren wins, but it will be “a helluva lot lower. It would be a bear market and they go on for a year and go down 25 percent.”
Meanwhile, when the monetary authorities war on dollar savers with currency destruction, gold and silver represent superior alternatives for real savings.
Still More on Negative Rates
Denmark’s second largest bank has announced that beginning later this year it will introduce negative interest rates for its largest depositors. Jyske Bank will charge 0.75 percent per annum for corporate and private client depositing more than 750,000 Danish kroner ($111,100 US).
Why, exactly, anyone would pay someone else to borrow their money, is more than a mystery. It is a symptom of monetary manipulation that has gone completely off the rails.
Switzerland, long a paragon of monetary and financial prudence, has gone off the rails as well. Its UBS ban will charge the same negative rate on deposit more of more than 2 million Swiss francs.
When Japan began imposing negative interest rates, hardware stores reported a run on safes. It stands to reason: if cash in the bank is a wasting asset, avoid the banks.
But bear in mind that paper money still carries a much larger risk of depreciation no matter where you store or save it.
Beware the October Stock Market
On the evidence we believe the stock market is being floated on Fed policy and not on economic reality. Indeed, the level of corporate debt is so high that there is a real risk of a prairie fire of defaults and bankruptcies sweeping corporate America in the event of a and economic downturn.
In any case, as September comes to an end, we want to warn stock market investors of the October effect. Goldman Sachs is warning about October volatility, which is says runs 25 percent higher than other months dating back to 1928,
The October 1987 crash saw the market fall almost 23 percent in a single day. Goldman Sachs tells its client that “October volatility is more than just a coincidence. We believe it is a critical period for many investors and companies that manage performance to calendar year-end.”