Tags: Expert: | Fed | Finished | Raising | Rates

Expert: Fed Finished Raising Rates

Thursday, 29 December 2005 12:00 AM

In a Wednesday installment of his daily trading blog Black Swan Currency Currents, Jack Crooks takes a different view of this week's yield curve inversion.

He says that, rather than portending a recession, the yield curve swing means the Federal Reserve is done raising interest rates.

"A 2/10 inversion is upon us," he writes. "If history be our guide, it tells us the Fed is almost done."

Citing a report by Maria Fiorini Ramirez Inc., an independent global economic and financial consulting firm, Crooks says that 2s/10s have inverted three times since the mid-'80s.

"In each of these cases, the first session in which 2s/10s inverted came one-four months before the final tightening move."

Crooks says that for months, many believed that the European Central Bank's stance would be "one and done" in terms of tightening.

"But now the mantra building regarding the Fed is 'one more and done,'" he adds. "The new Fed mantra comes at a time when the old mantra may have to be altered."

Mainstream media outlets have made it quite clear that they feel the U.S. is too dependent on foreign oil.

Our oil dependency is a topic that finds it way into most articles about Iraq or Israel and is usually discussed in any reports about prices at the pump reaching new highs.

But what you don't hear is that the lack of new American refineries may be the largest impediment to U.S. energy independence.

And bureaucratic bungling has made the situation worse.

According to the UPI, the United States has not permitted construction of new refineries in 25 years - and that has caused the country to become terribly dependent on foreign facilities.

"In a manner reminiscent of how U.S. dependency on foreign crude oil developed, the United States is becoming increasingly dependent on foreign petroleum products like gasoline and heating oil refined from crude oil, the feedstock that refineries process into gasoline, diesel, jet fuel and heating oil," says the UPI.

The report cited Scottish consulting firm Wood Mackenzie, which discovered "that there are about 100 refining expansion projects representing as much as 12 million barrels a day of new capacity being built globally - nearly all outside the United States."

UPI says that Saudi Arabia - the global leader in crude oil supply - continues to build oil refineries, thus cementing its position as an oil leader.

But it's a different story in the United States. 

"No refinery has been built in the United States since 1976, most due to 'regulatory barriers' and the not-in-my-backyard attitude of communities around the country," says the UPI, citing the Wall Street Journal.

After yet another thin day of trading this holiday week, U.S. stock index futures were trading flat early on Thursday.

Few indicators are moving the markets, although the jobs number (unemployment claims rose by 3,000 this week) came in at expected levels and many traders are awaiting today's home-sales number. 

Victor Pugliese, managing director and head of New York equity trading at First Albany Corp., told Reuters that jobless claims were "pretty much in line with consensus" and that things would probably be pretty quiet depending on that data.

"If the oil number is much worse than they're expecting you could get a little action, but don't expect to see a lot. For many people, Monday was the last day of the year."

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In a Wednesday installment of his daily trading blog Black Swan Currency Currents, Jack Crooks takes a different view of this week's yield curve inversion. He says that, rather than portending a recession, the yield curve swing means the Federal Reserve is done raising...
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2005-00-29
Thursday, 29 December 2005 12:00 AM
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