Okay … That was quite the day, yesterday. Whatever the Fed and Janet Yellen said, the market liked. I will get to what they said in a moment, but I have to clear up what appears to be a common misunderstanding.

  • How about an article answering the following: Obama says “he’s” cut the debt in half, so why do we have to keep raising the debt ceiling?

I don’t need an article to clarify this – As far as I know, President Obama has not said he has cut the debt in half. He is well aware that our debt is some $18 trillion and climbing. What he has done, though, is cut our annual budget deficit considerably, which is what the US adds to the debt each year. This why we need to raise the debt ceiling each year – our debt is increasing.

Understand this, though, raising the debt ceiling does not add new debt; it simply gives Congress the ability to pay debt already incurred. If we do not raise the debt ceiling to accommodate debt already incurred, we default on our debt, which would mean incomprehensible global, financial disaster. Facts are important.

  • The Federal Reserve on Wednesday opened the door further for an interest rate hike as early as June, ending its pledge to be “patient” in normalizing monetary policy.

Isn’t this supposed to be “bad” news, relative to the contrary nature of the market in the last six months or so? Yet, the market jumped on the news.

  • But the U.S. central bank signaled a more cautious outlook for U.S. economic growth and slashed its projected interest rate path, in a sign that it remains concerned about the health of the recovery.

This, then, is correct, relative to the contrary nature of the market in the last six months or so. The market climbed because the Fed signaled caution. I think that is right?

  • While the Fed showed that it’s nearing a hike, fresh forecasts from the central bank revealed a more cautious view of the economic outlook. The Fed’s quarterly summary of economic projections cut its inflation outlook for 2015 and dramatically lowered its projected interest rate path, data known as the Fed’s “dot plots.”

Well, the above really clears things up, now doesn’t it? Enough already. The Fed Smed. If you want further thought on this, check out what Alex Manzara, a TraderPlanet contributor, has to say about the Fed and its forecasting ability (Thoughts On The FOMC Announcement).

As I have been writing, keep your eye on what is really important for the longer term – the economic and market fundamentals, two of which are now playing out in a positive manner for the US and global economy. Yup … The same two.

  • Brent crude oil fell back towards $54 a barrel on Thursday after Kuwait said OPEC had no choice but to keep production steady, refocusing the market on global oversupply.
  • The dollar rebounded broadly on Thursday after posting steep losses the previous session following a much more cautious Federal Reserve statement on interest rates than expected, as investors remained bullish on the greenback.

Finally, how can I end without mentioning that once-paramount and oh-so-important story that we were led to believe the market actually cared about?

  • Greece has been kept from bankruptcy by two international bailouts but now risks running out of money within weeks if it does not receive more funds. Greek banks reported the largest deposit withdrawals in a month, a sign savers are worried about the outlook for the country’s finances and institutions.

The EU is losing patience with this troubled child, and if Greece does not get its act together, the EU will force it out of the euro-currency block, thus, preempting Greece’s threat to leave. Now, that would be a not-so-fine end to the blustering that is Greece these days.

The good people of Greece might be pulling their money from banks because they are worried about their future, but you don’t need to worry about your financial future.

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Trade in the day; invest in your life …

Trader Ed