Fed Chair Plots Course in Short Term and Discusses Impact of Supply Chain on Inflation (Building Ideas Into Theory)

One of the best ways to understand national policy and investment community direction is to watch the actions of the Federal Reserve and the policies they set forth. Much of what they do is based on analysis and forecasting of markets to determine which policies are going to help the nation reach its economic and fiscal potential. Economics can be complex and full of lots of different formulas (I tried a few....) but there is also some good old fashion management technique/experience in the process of forming guidance for the rest of the nation (Remember that numbers are fictitious by nature but we put meaning to them as units of actual something in our environment such as employment opportunities, money availability, etc...that anchor back to the beginning of trade and barter systems. These numbers represent environmental/actual experiences and activities and thus valid calculations can project out with relative accuracy what would happen to real activities in the market; assuming no nonlinear events occur. They are calculated forecasts based on past research into historical economic data. Thus, metrics are only as good as the knowledge and awareness of "real" activities on the ground and that takes an experienced group at the very top to ferret out a workable number. Thus, fictitious calculations meet with subjective experience and social negotiation to create a magic interest rate number! 🧙 .....and that is necessary to model the market and encourage private investment to follow suit. Market management is partly base on the large influence of Federal Money and the guidance banks/investors need to set their course in alignment with those policy changes.💨). There is a careful analysis the Federal Reserve does before setting a rate that will influence lending and investment in the economy and in turn what you might pay on your credit card bills. (BBC Fed Interest Rate Explanation). 

Supply Chain Bottlenecks:

Federal Chair Jerome Powell stated GDP increased 6.4% over the first half of the year and forecasts a lower second half of the year. Inflation is expected to be high in the short run and then moderate a few months down the road (I think he means a few months). Some inflationary pressures are related to bottlenecks in the global supply chain that is limiting short-term supply that pushes product prices upward. (I'm working on some theoretical stuff so I'm trying to relate what the Fed is doing and how my models would be impacted by such changes.) Reducing supply chain risks and costs may mean revamping and shortening those chains (U.S. Can and MX) and making them more adaptable to world/geographical events. Theory of Constraints and Adaptive Supply Chains Environ Events and Manufacturing and Great Lakes Shipping Infrastructure.

Delta County Infrastructure
Start Ups/Invest?

Constraints and bottle necks impact the entire economic system through interruptions in activity in multiple chains. For example, supply constraints and worldwide shortage of semiconductors are making it difficult for car manufacturers to build their vehicles and/or develop the next generation of vehicles. Michigan has a large representation of auto and tech manufacturers whose business models rely on consistent and quick delivery of resources. From a geographic standpoint Michigan is an ideal location for this type of advanced manufacturing and can capitalize on its current strengths such as abundant natural resources, Great Lakes waterways/ports, skilled/intellectual labor, and infrastructure that supports the earlier generations of manufacturing industries (Should be revamped for advanced industries but the basic structure is there. Connecting people to the "net" and building high innovative clusters can be helpful in fostering faster development.). Some of our current supply chain difficulties rest in our previous trends of moving development of key economic engines overseas leaving us in a more difficult position today in supplying our own essential needs. Of course, we can build back relatively quickly by putting innovative advanced next generation technologies at the forefront of our fiscal consciousness through business-government policy collaboration that draws together entrepreneurs, companies, ideas and resources in the same time and space. 

One of the best ways to gain a more detailed understanding of what Fed Chair Powell states is by reading 'Transcript of Chair Powell’s Press Conference Opening Statement September 22, 2021'.

Stock Reaction to News

Investors and executives watch Fed activities closely to determine what their next step should be and where the most solid returns lay. An article by Jonathan Ponciano entitled, 'Stocks Rally After Fed Sticks To $120 Billion Monthly Stimulus' provides a solid analysis of how stocks and investment reacted to Federal Chair Jerome's Powell's Press Release 09-22-21.  Stocks rallied as investor fears of a government policy change may impact the current investment markets. The Federal Open Market Committee Press Release indicated they will maintain A low interest 0% and 0.25% rate will keep investments (The Fed has some info on Lift Off and Natural Interest Rate. I think that is what he is referring to.🤷)

Ethics and Fed Discussion

Another topic that came out of the meeting was ethics and some questionable trade by key Fed officials. Integrity throughout the entire socio-political spectrum is important and maintaining trust (which is what the dollar is built on.) is what keeps the entire system open to positive economic trajectories. There also some discussion on the potential for new/updated rules of senior Federal Officials and trades that may/could be impacted by their policy decisions.🙅 For more information on those trades and who you may want to read Thomas Franck's article, 'The Fed will change trading rules for officials to keep public’s trust after controversy, Powell says'  

Regulations:

Regulations and Long Term Strategy

Regulations are often opposed by business but they are a necessary evil to ensure that business and community members are working toward the same goals and considering wider stakeholders in their decisions. At the same time, if not thought out well it can limit the business climate. It is important to review legislation regularly, streamline when helpful, and either remove or revamp that which is hampering business and national development (Keeping in mind the ultimate stakeholders the people.). We need regulations but we need them to foster ethical practices in business as well ensure the interests of wider stakeholders are considered in a way that still enhances business investment and development. (It is important that when our business and government act in ethical ways the overall benefits to society and to their growth prospects increase. Research has supported, which I'm not going to dig out now zzzz, that corruption/intentional mismanagement leads to decline for business and government. Being transparent and honest and is important and I think Federal Chair Powell is doing that and has made a genuine commitment to maintaining that public trust.  Reducing Ineffective Legislation and "Honest" Govt. )   

Side note:

The Working Economic Hub

In my generic hub-cluster map we would find that the supply chain would limit some of the availability of natural resources. Lower interest rates would also encourage investment and borrowing to start businesses within the Delta County Model and reverse the capital outflow per World Report FDI. Its really generic and could go into significant depth to all of the transactions that would occur but it sort of looks like that. Federal policy matched with tax benefits for R&D within these clusters might be something interesting to explore and create an investment hedge against outflows and international market disruptions while at the same time improving business infrastructure in the U.S.. Venture Adventure Cap and Attracting Start-Up Firms, 1920's Again Morgan Stanley (Or Other) Pro Social Invest, "Connect" UP, Small Business Backbone, Economic Structure Synergy,  Unfinished Transactional Cluster Theory In theory you want to try and "wrap the bow" making the theory self contained. I'm kind of working on connecting the dots from material extraction through a complex chain of "most likely" events that leads to a "most likely" outcome. 😩 Yikes....self reflection.....I need more exciting pursuits. Still haven't ruled out Mount Everest. 

Sorry for spelling and grammar errors....its a blog not an academic paper. 

Federal Reserve issues FOMC statement

(This is copied cut and past. but you may review the actual release HERE) 

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen. The sectors most adversely affected by the pandemic have improved in recent months, but the rise in COVID-19 cases has slowed their recovery. Inflation is elevated, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.

Implementation Note issued September 22, 2021

JP Morgan 2021 Mid Year Investment Outlook-Market Direction

Government, Investments, Entrepreneurship

and Manufacturing as a Growth Strategy in

Digital Economy.

The markets are what greases our economic machinery. Reviewing reports from big investment banks like JP.Morgan helps us get an idea of what the markets are going to look like in the near future. I'm spending more time exploring different stocks and options within the global market to determine growth value and possible unexplored avenues of investment and development (i.e. trends and cluster development to meet those future needs. Delta County, MI as my working model.). That also doesn't include watching how stocks prices and global markets react to government decisions and natural phenomenon (There is always underlining logic/mechanics to animal spirits and even to seemingly random events.)

The report JP Morgan 2021 Mid Year Investment Outlook provides three things investors should look at...

1) Which markets are more geared toward the global recovery?, 

2) Which markets are more geared toward the next cycle’s themes, like inflation, technology and the rise of the EM middle class? and  

3) Where is the valuation starting point most favorable for the recovery and expansion ahead?

Some of the sectors that are most likely to grow are also considered hedges against inflation. They indicate cyclical sectors like energy, financials, industrials and materials are exposed to improvements in the real economy (Some of these might fit within my model DC Multi-Cluster). Hedging helps protect investors if purchasing power decreases through inflation (Disclaimer...I'm not giving investment advice...go talk to your broker. I'm looking more to understand some market issues but some of the information may be value to readers and people who study/follow business.) You can look at a dated report on long-term hedging strategies.

Developing Higher Education Systems that Discover and Enhance Latent 'Gifted" Talent

We are in a new era that has long left behind the chalk boards and pull down maps we so fondly remember learning from in classrooms without air conditioning (Go back further and people sat under trees.🌲🌳🌴). We are now in a time when virtual education has rises and will someday likely be parallel to traditional schools (at least for some degrees. STEM education will likely still need campus for the "hard" sciences. That also doesn't discount some of the benefits of being on ground and socialized into the educational system. Proximity and face-to-face is a rich environmental and channel expansion great for learning. What we can say is that education/communication is not limited to physicality but can be expanded beyond that.) What the era of big data allows is for the discovery and fostering of those with latent gifted potentials to better ensure they move to actualized performance for the benefit of themselves and their nation (i.e. an alternative form of service). 

This isn't about elitism as there is a certain percentage of the population that will have these traits and they don't get to select them or opt out of them making them both an enhancement and at times a disability due novelty and lack of mentors (Sometimes minorities of minorities with limited self-awareness.). There are young college students with unexplored latent multiple intelligences that could be enhance not only for their personal development, community development but even national development. (or perhaps a rare rare few with multiple Gardner's Intelligences and who have mastered their environments to reach the Debrodski's 5th Development Level through their Overexcitabilities. This is all pretty hypothetical when you reach this level because of a lack of examples and being in an era where people didn't understand the concepts nor did the unpublished geniuses leave marks of their behaviors.  From a controversial product of his time perspective Galton in 'Hereditary Genius' 1869 or came up with the idea of how genetics can play a part. He unfortunately didn't understand perfectly the nature of biology and how similar strains run through every race and thus there is no such thing as an "inferior race". I think in the future further DNA testing will defunct those outdate notions among the "learned" in society. Galton was right on family hereditary issues but failed to understand environmental factors and why certain eras and societies "documented" more genius. Pushing our best and brightest into unchallenged lives of mediocracy is a wasted national resource and unfair to them. As a nation we haven't focused on developing our "out of the bell curve" minorities (of any background) and instead leave gifted programs for the well-to-do school districts for students that get high grades on standardized tests but aren't necessarily gifted with latent underdeveloped potentials. No matter the race, religion, gender when we find high potential gifted students we should consider opening the doors to personal and national development through better online/ground discovery. "Giftedness" moves beyond IQ into the other intelligences but you can get a glimpse of how environment can impact development in exploratory learning.). 

(Heyden) Problem Solving

One of the biggest differences is the ability to take in more information through sensory processing that allows for increasingly complex thinking (Less black/white dualistic heuristics.). Additional information creates precocious development that isn't always easy for people to see or understand leading to all types of judgements and confusions. Because of heightened sensory information they are able to take in additional information that others usually filter out and/or don't process leading to the development of internal cognitive models of their world through what is termed the "Eagle Eye" (We all do this naturally but some build their own models versus primarily borrowing models/explanations making them a wellspring of new ideas that can lead to successful businesses and/or new discoveries; maybe both.)

The Director Francis Heylighen of ECCO - Evolution, Complexity and Cognition research group from Vrije Universiteit Brussel states, "Giftedness, the potential for exceptional achievement, is characterized by high intelligence and creativity. Gifted people exhibit a complex of cognitive, perceptual, emotional, motivational and social traits......" (Heylighen, 2006 para 1).

"Flow" of Performance (Heyden)

Online education offers new opportunities to understand, select and enhance abilities through the development of learning environments that allows students to self explore and in turn develop fields of interest through their natural interests and overcoming staged challenges. That will require the ability to uncover the uniqueness of problem solving, more variability in the line of development, and opportunities to explore particular topics that may have merit thereby giving some sense of direction when they leave. That can come about through the connecting of industry needed skills/competencies to every increasing difficulties through catered educational development and greater awareness through self assessments (All of course possible in the online and offline world.)

Galton stated, "In conclusion I wish again to emphasis the fact that the improvement of the natural gifts of future generations of the human race is largely, though indirectly, under our control. We may not be able to originate, but we can guide."

Heylighen, F. (2006). Characteristics and Problems of the Gifted: neural propagation depth and flow motivation as a model of intelligence and creativity. (1 ed.) Brussels: ECCO Working Papers. Brussel. http://pespmc1.vub.ac.be/Papers/GiftednessModel.pdf

Bill to Honor Navy Corpsman Steve Andrews Passes House

It appears H.R. 1281 to honor Steve Andrews passes House of Representatives. Its a straight forward bill designed to honor the life of a a valued community member in Northern Michigan's 106 District . You can read the actual document on Congresses webpage here. Who is Steve Andrews? I looked him up and came across an interesting article Petoskey News that outlines his life as Navy Medic that saved countless lives and was awarded the Navy Commendation Medal and Purple Heart. After service he/wife started Sturgeon River Pottery, supported teams and artists in the area. 

What we find is that Steve Andrews served his country and then served his community and is an example for many of us to follow. This is why naming and honoring helps us remember those did well and gave honor to themselves and country. Yet it does more...it also provides the next generation with a social learning opportunity through role modeling.

Bergman's Bill to Honor Navy Corpsman Steve Andrews Passes House (Taken from district news letter)

Washington - Today, H.R. 1281 unanimously passed the U.S. House of Representatives. This legislation, which Rep. Bergman introduced, will name the Department of Veterans Affairs community-based outpatient clinic (CBOC) in Gaylord, Michigan, as the ‘Navy Corpsman Steve Andrews Department of Veterans Affairs Health Care Clinic." The bill will now head to the Senate for consideration. Working together with Andrews' family and friends, Rep. Bergman successfully garnered the support of Michigan veteran service organization chapters and the entire Michigan Congressional Delegation to prepare this CBOC designation for House approval. Prior to the passage of the bill, Rep. Bergman spoke on the House Floor. You can hear the full speech here. The Gaylord CBOC is located at 2782 S. Otsego Avenue, Gaylord, Michigan and opened in Summer 2020. The 18,362 square foot CBOC provides outpatient primary care, mental health, telehealth, laboratory services, home-based primary care, women’s health and whole health. Background info: Steve Andrews (October 15, 1949 ~ January 28, 2017) entered the U.S. Navy in 1967 as a Hospital Corpsman then subsequently served at the U.S. Naval Hospital on Guam and as a medic with the 1st Marine Division and Marine 1st Force Reconnaissance Company in Vietnam. For his actions in combat in Vietnam and for saving the lives of countless Marines, he was awarded the Navy Commendation Medal and received the Purple Heart. Following his military service, Steve worked as an entrepreneur and was later elected to the Michigan House of Representatives, representing Northern Michigan's 106th District. Steve served Northern Michigan for two terms and then turned his efforts to building his family and business. Steve coached and was a father figure to thousands of kids in baseball, football and more. He additionally served on the board of trustees of North Central Michigan College and was president of the Petoskey Regional Chamber of Commerce.

bergman.house.gov

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Biden Speaks on Economy (09-16-21) Taxes, Business, and Community

A speech from President Biden a few days ago on the economy that I missed that seems interesting from a policy standpoint. I'm not going to comment on much other then on the general concept of tax reform, business balance, and sense of community/national orientation. What I can say is I believe there may be other ways of designing taxes, outside of our norms that may make more sense in a global digital economy (Here is a calibrated tax plan I'm thinking about but isn't yet fully vetted.). In this case, the President is discussing more of the issue of imbalances between corporate taxes and middle class taxes and then leads into a few more concepts.

There should be a balance between the needs of small, medium and large businesses to create a resilient economy where the "mix" strengthens the entire system (opportunity, innovation, business diversity). When there are different types of businesses run by lots of different people of different backgrounds we have a more natural way to bring people into full economic engagement, speed up innovation as through knowledge transference, and develop stronger global PR presence as THE country where opportunities are present (...and with universalizing our core American values people know they can trust us to stand by those principles creating greater trust in the general American system that creates more opportunities for economic international growth.)

I can also say that I agree on the concept of corporations and the American people needing to create a sense of community. Social and business connections are important in helping executives feel connected to hardworking people and in turn seek to help their communities develop and flourish. The rest of the arguments I will leave for our political structure to agree, disagree, etc... with. (It may be possible to think of essential arguments and find similarities between the different political ideologies that leads to new ways of reworking those experiences/beliefs to find a pathway that appeals to the most stakeholders; business and people of my primary concern.)

China Evergrande Group Failure-Causes and Concerns

A debate has risen on what happens when a large Chinese real estate/lending (real estate is about lending, appreciation, and rent) company fails in the post-Covid global market. We may be seeing a default with stock sell offs at China Evergrande Group that could indicate its on the brink of insolvency. The company appears to be overleveraged and unable to be able to pay its debts (its crashing on itself from a lack of liquidity and complexity). Fox News's article, 'China's Evergrande: What to know' and Bloomberg's 'America’s Corporate Bond Binge Interrupted by Evergrande Tumult' offer some insight into why Evergrande might fail and its implications for world markets if it does (The news  appears to show that there was a growing problem for at least the past year reaching back perhaps 10 years.). 

If we look at examples in history we will find that very large bedrock real estate/financial institutions that fail can have an impact on the overall stability of other companies within the housing/finance sector and other sectors that hold debt and rely on those services (i.e. contractors). Large defaults can sometimes lead to other associated defaults of suppliers, debt holders, associated businesses following similar strategies, etc... down the economic vine (If you traced companies contracts, debt holdings, executive connections, physical/virtual holdings, etc. you might be able to determine which company(s) might also wobble or fall and in turn what sectors. Theoretically anyway as such information isn't always available. I didn't actually look in this case because its not really the point. It could also show too close a connection between Chinese government officials and corporate executives that didn't allow for proper course correction when it became an issue earlier. Rigidity of strategy, even when its not in the best interest of the company, its shareholders, and public stakeholders could indicate  that there are unintended others are realizing the benefits. It will be interesting to see if Chinese officials will probe if/when a massive default occurs and if that info will be public and could that something new. I'm curious how they handle that differently then how we handled Lehman Brothers.) It is believed that the U.S. is somewhat shielded from the brunt of the immediate aftereffects but what happens with China may be something a little different and we can wait and see. 

What will be interesting to see is how the same strategy used over and over moves into a downward trajectory (a leverage trap they couldn't get out of) and if such large defaults limit/adjust Chinese expansion strategies in the short run because of other financing issues. China Evergrande is an interesting case to watch and see why they may have used the wrong strategy way too long, the market has shifted under their feet, or could it be a hint China itself is struggling with creating net positive/equilibrium because of a COVID-Trade War-Expenditure-Market imbalances. If you read the Harvard Business Review's 'Seven Ways to Fail Big' discussing large American companies that have failed, they often do so in context of improper strategy to market environment indicating potentially other problems that may not be obvious (There is almost always another layer of "Why?") 

It does leave me a kind of question to think about, "How could the U.S. put itself in a position to capitalize on certain market voids and ripples that might occur?" In all situations there are different ways to leverage markets. (At least from what I read) 🤔 

White House Press Secretary Jen Psaki Press Briefing (09-20-21)

Keeping up with the news......Watching the press briefings helps us to understand what changes we can expect and some of the problems we are facing as a nation. It also highlights potential strategies forming in real time (I'm thinking more as to the process of strategic decisions when information is ambiguous, the basic assumptions used to make those decisions and what the differences are between the last and present administration. Essentially I just want to understand the process.🤓). No matter who is the president there are lots of unknowns and as things emerge we understand the environment better and in turn create greater awareness potential strategies to put the U.S. in the best economic, social, strategic position.