Dawn J. Bennett, host of Financial Myth Busting with Dawn J. Bennett, recently interviewed Jeff Snider on her radio show. Snider is the Head of Global Research for Alhambra Investment Partners and has authored and published several detailed investment reports that clash with the established opinion presented by the media. In his interview with Dawn J. Bennett, Snider discusses his take on the federal funds rate hike.
On the subject of the rate hike, Snider says he doesn’t think the market is ready for what’s occurring. “I don’t think the market is ready for pretty much anything that’s going on right now. Any small change, and it seems like everybody’s nervous about what that may be. And I think with monetary policy it’s probably that much more amplified given that there’s so much uncertainty about what it might mean as far as accommodation and main stream views of what accommodation actually is or might be,” he explains.
Bennett notes that a policy error might actually end all the bubbles and allow the U.S. to almost reboot the system, and Snider agrees.
“I actually think that what the Federal Reserve actually does is largely irrelevant,” says Snider. “And the Fed doesn’t actually have any direct control over even the money supply. And mostly what they’re doing is just policy communication.”
He continued, “If you look at the Federal funds market itself, it’s a shell of what it used to be. The Federal funds rate for that matter is basically irrelevant. There’s very little volume in Federal funds at all. So when they’re raising or lowering the Federal funds rate, it’s more about trying to signal psychology and market sentiment than anything else. So I don’t think they actually much control over the market.”
Snider suggests that the Federal Reserve needs to let the markets decide what the correct value of money is and where stability is. He says Federal Reserve Chair Janet Yellen must understand that stability is the most important factor here— not just the artificial centralized stability the Feds try to impose, but real monetary stability.
He continued, “We used to talk about things like the strong dollar. The strong dollar had nothing to do with whether it goes up or down, the strong dollar was the fact that the financial system and the economic system were stable enough that nobody went through convertibility and allowed the dollar to remain as the bedrock association of the economy. We don’t have that anymore, in fact everything that the Federal Reserve does or any other central bank does is the opposite of stability. So that’s where it all needs to start. We need to have monetary stability. We don’t need to worry about what the Federal Reserve is debating in each and every policy meeting, that should be the farthest thing from investors’ minds when they think about what they’re doing insofar as their portfolios.”
To view Snider’s complete interview with Dawn J. Bennett, click here.