Monthly Archives: May 2022

Business Articles, Economics, Finance Articles

“What is Quantitative Easing?”

Today your going to learn “What Quantitative Easing is?”

About a Month ago I was invited to a ACG (Associated Corporate Growth) Reception and the first person I meet turns out to be a very nice guy named Chad G. Chad is just no ordinary average finance guy, he is a respected leader and a experienced Portfolio Manager. Chad is the Senior Vice President and Portfolio Manger for Waddell Reed’s High Income Fund. But meeting him you would never know he manages a huge Asset. He’s just a fantastic nice guy. As soon as I meet him? We immediately connected and began talking shop all about Corporate Finance, M&A, and his work in Asset Management. These are incredibly advanced topics. But very interesting to me.

Talking shop with other Finance Professionals is something that usually does not happen to me as a Entrepreneur here in Kansas City. Most people look at me like I am talking Greek. But here in front of me is a SVP of a Major Kansas City Asset Management Company and Fund. Chad could easily speak my new language of Finance. And truth be told that was really awesome to me. It made connecting with him all that more interesting and dynamic. Thanks Chad! It truly is a Privilege to connect with you Good Sir!

Why was this connection unique to me? Usually I do have a very difficult time meeting and connecting with others who work in Financial Services here locally in Kansas City. But this night would be very different. The entire presentation on the Mergers & Acquisitions state within Kansas City was truly impressive. CC Capital Advisors did a fantastic job presenting. If you missed my article about Kansas City’s best Investment Bankers? Read that (HERE)

The Bond Market Explained By Video

Quantitative Easing Described?

For most out there reading this Post? I will most likely need to describe what Quantitative Easing is in simplistic terms. And please don’t mistake this article as “Quantitative Tightening” thats the reverse of Easing. And a different article.

What does Quantitative Easing Mean?

Quantitative Easing is when the Central Bank approves the creation of Money. This money is invested into Government Bonds. These Government Bonds are held by Banks. These Banks are then able to begin lending to Small Businesses and Individuals. And this in theory will stimulate the United States Markets.

How Quantitative Easing help the Economy?

This is all theory based, it’s only based on what the Economy Academics have brought to the table to explain how this may work. But in general. We don’t know. But what we do know is Quantitative Easing is supposed to stimulate the American Economy when it looks like the Economy is about to freeze or fail from lack of capital being traded.

Quantitative Easing is supposed to stimulate the Economy in three ways.

The federal government auctions off large quantities of Treasurys to pay for expansionary fiscal policy.5 As the Fed buys Treasurys, it increases demand, keeping Treasury yields low (with bonds, there is an inverse relationship between yields and prices).

QE Keeps Bond Yields Low

Treasurys are the basis for all long-term interest rates. Therefore, quantitative easing through buying Treasurys also keeps auto, furniture, and other consumer debt rates affordable. The same is true for long-term, fixed-interest debt. When mortgage rates are kept low, it supports the housing market. Low rates on corporate bonds makes it affordable for businesses to expand.

QE Attracts Foreign Investment and Increases Exports

Increasing the money supply also keeps the value of the country’s currency low. When the dollar is weaker, U.S. stocks are more attractive to foreign investors, because they can get more for their money. It also makes exports less expensive.

QE Could Lead to Inflation

The only downside is that QE increases the Fed’s holdings of Treasurys and other securities. For example, before the 2008 financial crisis, the Fed’s balance sheet held less than $1 trillion. By July 2014, that number had increased to almost $4.5 trillion

WARNING – Some Financial Experts Warn Quantitative Easing could create out of control inflation, and possibly “HYPERINFLATION”.

The more dollars the Fed creates, the less valuable existing dollars are. Over time, this lowers the value of all dollars, which then buys less. The result is inflation.

Inflation doesn’t occur until the economy is thriving. Once that happens, the assets on the Fed’s books increase as well. The Fed would have no problem selling them. Selling assets would reduce the money supply and cool off any inflation.

The Following Three Ways QE could stimulate the Economy was borrowed from “THE BALANCE ARTICLE”.

I do hope you learned more on the topic what Quantitative Easing is today? And I also hope you learned more about the Basics of the Bond Market in the Video.

In conclusion of today’s post it was important for me to share my story of connecting with Chad. Chad’s professional career is certainly involved with the Bond Market. Which in turn is related to Quantitative Easing. But regardless I had to introduce him somewhere. And today’s post made the most since. I genuinely hope you learned a few things today. And as always Stay Tuned. You never know what it right down the road on this journey I am on inside Finance.

Thanks for Reading! GODSPEED.

JS

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Business Articles, Investing, Investment Banking, Mergers and Acquisitions

The Federal Reserve Raises Interest Rates

The Federal Reserve raises it’s Benchmark Interest Rates by half a percentage point which is the most aggressive action since the US is facing highest inflation rates in 40 years. Behold a new term for most? “Quantitative Easing”

After much anticipation, fan fare, and business news speculation due to rising costs within the market and easy access to cheap margin debt? The Fed convenes and finally comes out and say’s “It’s time to raise the Fed’s Interest Rates.”

The last time the Fed Raised Interest rates were in 2018. Quantitative Easing is now working by pushing more money into the economy by way of the Central Banks buying more Government Bonds through individual banks which lends money to businesses and individuals.

Ok! But What does raising the interest rates mean? After yesterday’s press conference, the Federal Reserve’s Chairman Mr. Jerome Powell began informing the Press and the Finance community. Today’s Information and Report from the Good Reporter Mr. Jeff Cox, The Business News Editor of CNBC. FULL ARTICLE

“The Federal Reserve will begin to Raise Interest rates by a half a Percentage point per the markets anticipation. When asked, The Fed’s Chairman Jerome Powell had to say about this historic increase?

“Inflation is much too high and we understand the hardship it is causing. We’re moving expeditiously to bring it back down,” Fed Chairman Jerome Powell said during a news conference, which he opened with an unusual direct address to “the American people.” He did touch on the burden of inflation on lower-income people, saying, “We’re strongly committed to restoring price stability.”

Furthermore the Feds Chairman say’s, “The American economy is very strong and well-positioned to handle tighter monetary policy,” he said, adding that he foresees a “soft or softish” landing for the economy despite tighter monetary policy.

It’s likely according to the Chairman Powell’s opinion and comments on this interest rate hike, “Their will be many Fifty 50-Basis Points rate increases are coming soon. But likely not more aggressive than that.”

When you stop and consider how the Fed will begin raising the Interest rates in detail? It will look like this. They will start by raising the Interest rates by Half a percent in the first stage. Then raise again to the Three Quarters range of a Point. Then another quarter percentage of a point, Equaling the Full 1.0 percentage point. The video below demonstrates the numbers in detail.

With all the free flowing margin debt that has been free flowing for years? It makes sense the Fed is wanting to take the steps and transition raising the debt interest rates instead of a sudden hike. This ensures markets are not suddenly impacted to the point of panic. Rolling out stricter policy for a soft landing on the American People and Investors. This also begins to address the Inflation that is beginning to be out of control. But here are some more in depth facts from the report.

In conclusion we will need to sit back and see how things begin to work. It’s never easy to accept the Party’s over with easy free cash. But as time moves on I have a suspicion the market wont rise above what the market can handle. That is just my 2 cents

  • In addition, the central bank outlined a program in which it eventually will reduce its bond holdings by $95 billion a month.
  • This undoubtedly is the largest rate increase since the fed relaxed rates in 2000, and the inflation of American Debt has pressured the Fed to begin the process restricting Debt Rates.
  • Fed Chairman Jerome Powell underlined the commitment to bringing inflation down but indicated that raising rates by 75 basis points at a time “is not something the committee is actively considering.”

Thanks for reading todays Post on this Historic Event we have all been anticipating and speculating on for quite some time. If you have anything worth the time to add? Please comment below,

GODSPEED
JS

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Entrepreneurs

7 Veterans Who Became Entrepreneurs After Military Service

One of the great things about being a Veteran is having a Network of War fighters you can call on when doing a Article like this. As such I feel it’s fitting to name a few Veterans doing some big things.

First I would like to start off with a Natural leader, a Leadership Teacher, who trained myself to be a servant to others and especially to the community. He is fast becoming the go to man Law Enforcement and Civic Leaders Call to train their teams in Leadership.

Article:

Coming Soon.

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