FED increases the rates by quarter point in nearly a decade: Well Done Janet

FED has increased the rates in nearly a decade making rates range bound between 0.25-0.5. This is fantastic since the rates should have been increased much earlier. This would mean that money will still continue to come to equities looking for higher yields since the increase was long expected.  Many people would forecast end of precious metals with rise in the value of dollar especially Gold which is a non yielding asset.

But you could also say that the debt woes in the world is far from over. Gold has always been seen as a safe haven and with still a lot global uncertainty both in geopolitical crises in Asia as well as low global growth esp. in Europe, it would be wrong to dismiss Gold as an investment asset class going forward.

Analysts would argue that rise of US dollar, collapse in commodity prices, rise in labor costs could do more harm with rise of interest rates, however this has been known for long. It would have been imperative on part of corporates to be more conservative with bonuses to their top management while be more equitable with wealth generation to mid level and other employees. The recession which would have been a long one after credit crises of 2008 only got postponed due to QE. The excessive printing of money has not seen a huge impact in proliferation of funding in sectors which its was intended to especially corporate lending as well as generating supply side inflation.

Regardless of what steady increase in FED rates would mean for fixed income market, Janet should keep on increasing the rates. Its time for the financial markets to understand their long overdue party is over, be more prudent in their risk taking and adjust their business & revenue model accordingly. It is time for financial markets to Accept their situation which its very obvious they never or tried not to accept, Adapt their business and revenue model which includes a limit of the bonus which top management receives as well as be more prudent in hiring to get a better perspective of the value add they have generated in the society, Reinvent themselves and Innovate in the right direction. Innovating does not mean that you make such complex instruments that only a few can understand the risks involved in trading or using these structures which results in a casino market. The world has to know that the best way to live life is to live a life within your means, within your livelihood.

Ultimately its a net zero sum game, people who have to do nothing with financial industry pay for the risk taking behavior of few people in the form of bailouts with taxpayers money.

In the end there is no free lunch and its been going on for sometime.

My congrats to Janet for doing the right thing and hopefully she will continue to do so going forward.

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