Finance

Fed minutes reveal lively September debate about whether first rate cut should be big or small

Published

4 hours ago

October 9, 2024

Fed minutes reveal lively September debate about whether first rate cut should be big or small

There was a divide within the Federal Reserve about whether its first interest rate cut in more than four years should be big or small, according to minutes from the central bank’s September meeting released Wednesday.

A “substantial majority” of Fed officials supported lowering rates by 50 basis points at the last meeting, but “some” would have preferred to have lowered by 25 basis points and “a few others indicated that they could have supported such a decision,” the minutes read.

Those who argued for a 25 basis point reduction noted that inflation was still somewhat elevated, while economic growth was strong and unemployment low.

Several said a smaller cut would line up more with a gradual reduction in the policy rate that would be more predictable and allow more time to assess any impacts on the economy.

Those who argued for a jumbo-sized cut said a 50 basis point move would help sustain strength in the economy and the job market while continuing to bring down inflation.

Some even said there had been a case for a 25 basis point rate cut at the previous meeting in July, and that recent data offered even more evidence that inflation continues to drop while the labor market cools.

Some of this internal division at the Fed was made public on Sept. 18 as the decision to cut by 50 basis points was announced, with Fed governor Michelle Bowman dissenting and saying she preferred 25 basis points.

No Fed official has voted against a policy decision in two years, matching one of the longest such streaks in the past half-century. Moreover, no Fed governor has dissented on a rate decision since 2005.

The Fed’s rate-setting committee was also almost evenly split on the number of additional rate cuts expected this year, with seven policymakers favoring one additional 25 basis point rate cut before year-end and nine members favoring 50 basis points of additional easing. Two policymakers expected no more rate cuts.

Fed Chair Jerome Powell, in a press conference with reporters last month, acknowledged the dissent but also said there was “broad support” for the cut and a “lot of common ground” among his fellow policymakers.

Il presidente della Federal Reserve Jerome Powell tiene una conferenza stampa dopo una riunione di due giorni del Federal Open Market Committee a Washington, Stati Uniti, 18 settembre 2024. REUTERS/Tom Brenner — Fed Chair Jerome Powell, at last month’s press conference. (REUTERS/Tom Brenner) (Reuters / Reuters)

In the week since the decision, several policymakers have offered public support for a jumbo rate cut of 50 basis points, citing progress on inflation and a cooling job market.

Atlanta Fed president Raphael Bostic has said that residual concerns might have led him to trim by a smaller 25 basis points at the September policy meeting, but that would have ignored a recent cooling in the job market.

Minneapolis Fed president Neel Kashkari said he voted in favor of cutting by 50 basis points because “the balance of risks has shifted away from higher inflation and toward the risk of a further weakening of the labor market, warranting a lower federal funds rate.”

Chicago Fed president Austan Goolsbee also said he was “comfortable” with a 50 basis point cut, viewing it “as a demarcation” that the central bank is now back to thinking as much about achieving maximum employment as it is price stability.

But a stronger-than-expected jobs report released last week now has analysts wondering whether the central bank will curtail rate cuts or if it moved too quickly with a 50 basis point reduction. There are also worries that inflation could be re-elevated as a concern.

Fed officials will get a fresh reading on inflation Thursday when the Consumer Price Index is due out. That measure is expected to keep in line with what officials want to see.

Economists expect core inflation — which eliminates volatile food and energy prices the Fed can’t control — held steady on an annual basis in September at 3.2% from the same level in August. Month over month, CPI is expected to have grown by 0.2%, compared with 0.3% in August.

Some Fed officials are urging a gradual path to cuts as they look to balance downside risks to unemployment with continuing to bring down inflation.

Dallas Fed president Lorie Logan became the latest official to voice that view on Wednesday, saying in a speech that “a more gradual path back to a normal policy stance will likely be appropriate from here to best balance the risks to our dual-mandate goals.”

Powell made it clear in remarks on Sept. 30 that the central bank isn’t in a “hurry” to bring interest rates down and would prefer smaller cuts.

He also reiterated that the consensus of Fed officials outlined at the September meeting was for two more 25 basis point rate cuts this year, saying, “it wouldn’t mean more fifties.”

Other officials, including New York Fed President John Williams, St. Louis Fed president Alberto Musalem, and Chicago Fed president Austan Goolsbee, all have said recently they favor bringing interest rates lower “over time.”

At the September meeting, according to the minutes, officials said it’s important to communicate that lowering rates should not be interpreted to mean the Fed believes the economic outlook has soured or that the Fed will lower rates more rapidly than the path laid out.

“Some participants emphasized that reducing policy restraint too late or too little could risk unduly weakening economic activity and employment. A few participants highlighted in particular the costs and challenges of addressing such a weakening once it is fully under way,” the minutes read.

Almost all participants saw upside risks to the inflation outlook as having diminished, while downside risks to employment were seen as having increased.

While Fed officials generally viewed the job market as solid, some said that the recent pace of job increases had fallen short of what was required to keep the unemployment rate stable on a sustained basis, assuming a constant labor force participation rate.

Many said that evaluating the job market had been challenging, with increased immigration, revisions to reported payroll data, and possible changes in the underlying growth rate of productivity.

Several participants emphasized the importance of continuing to use disaggregated data or information provided by business contacts as a check on readings on labor market conditions obtained from aggregate data.

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Finance

Olmsted Falls finance director taking a look at consolidating city’s levies

Published

11 hours ago

October 9, 2024

Press Room

Olmsted Falls finance director taking a look at consolidating city’s levies

OLMSTED FALLS, Ohio — When it comes to going to the ballot box regarding levy renewals, Olmsted Falls residents are quite busy annually.

Take for instance this year when they’re being asked to approve two expiring five-year levies regarding the parks & recreation department (Issue 30) and the fire department (Issue 31).

These are just two of the city’s 11 levies, which is why new Olmsted Falls Finance Director Tom Reynolds recently said he will be taking a look at the pros and cons of potentially consolidating levies alleviate possible ballot fatigue for the constituency.

“Olmsted Falls has no permanent levies, no 10-year levies,” he said.

“We have 11 different small levies that are five years each and they’re staggered when they’re up. So we’re going to look at that.”

The finance director said he plans on examining future levy renewals, which depending on the mill rates may or may not save the community money putting the issues on the ball.

Olmsted Falls Mayor James Graven added, “Most cities probably have like four big levies. We have like 11 little ones.”

Reynolds noted the levies are needed to maintain the current level of basic city services with only about 10 percent of property taxes going to Olmsted Falls.

Aside from the November issues, the list of existing outside millage levies — no tax increase and no additional revenue can be collected — include a 1.30-mill road repair levy up in 2025, a .65-mill fire equipment levy up in 2025, a 1.30-mill police levy up in 2025 and a 1.90-mill fire levy up in 2026.

As far as inside millage levies, which are not up for vote, there’s the 2.70-mill general fund levy, .2-mill cemetery levy, .30-mill fire pension levy and .30 police pension levy.

“Depending on how we would do things, we’re going to be looking at that in the future,” he said.

Read more news from the Sun Post Herald here.

Finance

Tracking campaign finance data for Pennsylvania candidates

Published

19 hours ago

October 9, 2024

Press Room

Tracking campaign finance data for Pennsylvania candidates

From most to least transparent

Just as candidates run for different levels of offices, they are also subject to different levels of scrutiny.

The federal government has more resources than states or local governments to collect data and enforce campaign regulations.

The Federal Election Commission has a site where anyone can search contributions to campaigns for federal offices, like the presidency or Congress. The Pennsylvania Department of State has a search tool built with older technology to research donations in state-level races. At the local level, it’s up to cities and counties to decide how to make that data available to the public.

“When you go down the various levels of government, from the FEC down to state level down to local level, it just gets harder and harder,” said Stephen Medvic, a political science professor at Franklin and Marshall College.

Pittsburgh has a searchable database, and Montgomery County scans and catalogs finance reports. Most counties keep the records on paper in a filing cabinet, though they are available for public viewing.

“It’s very, very difficult for individual citizens to track that,” Medvic said. “So we really have to rely either on good government groups that keep track of this sort of thing or, obviously, journalists.”

How to keep tabs on a politician’s tab

The United States likely has the most transparency around campaign financing in the world, according to Kolodny. That’s even with organizations that support candidates but don’t have to disclose who their donors are. The practice is commonly called “dark money.”

The country also runs some of the world’s most expensive campaigns.

In addition to government-run websites, groups like the nonpartisan OpenSecrets help monitor money going into campaigns.

The site aggregates federal data and draws connections, allowing users to look up federal candidates and officeholders, donors or outside spending. It also operates a site for tracking candidates and officeholders at the state level, called FollowTheMoney. For people who are very curious about money in politics, OpenSecrets created a tipsheet to help with investigations.

It’s important for people not to jump to conclusions when looking at contributions, Kolodny said.

A person may see a contribution by a local business to a candidate, but that doesn’t necessarily describe the business’ political affiliation. Large employers tend to give money to incumbent candidates in the local area, she said, and that often happens without partisan consideration.

Looking at donations by partisan groups might be more useful to the average, and especially, the undecided voter.

Voters can also compare how much money is coming from small-dollar donations versus major donors or Political Action Committees. The amount of money in a race is also an indication of both how competitive the election will be and how important the seat is.

But for all the money in U.S. elections, money is not political destiny.

“Nothing will counter a well-orchestrated grassroots movement,” Kolodny said.

___

This story is part of an explanatory series focused on Pennsylvania elections produced collaboratively by WITF in Harrisburg and The Associated Press.

Finance

Is Lument Finance Trust, Inc. (LFT) the Cheapest Penny Stock to Buy Right Now?

Published

1 day ago

October 8, 2024

Press Room

Is Lument Finance Trust, Inc. (LFT) the Cheapest Penny Stock to Buy Right Now?

In this article, we will look at the 8 Cheap Penny Stocks to Buy Right Now. Let’s look at where Lument Finance Trust, Inc. (LFT) stands against other cheap penny stocks.

The economy of the United States has stabilized, with inflation continuously cooling down and the risk of recession overruled. The Federal Reserve cut interest rates on September 18, slashing them by half a point as a start to its first easing cycle in four years. The Federal Reserve statement said:

“The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance.”

However, Fed Chair Jerome Powell announced on September 30 that the recent aggressive half-percentage point interest rate cuts should not be interpreted as a sign that future rate cuts would also be as aggressive. Instead, they are likely to be smaller. Talking to the National Association for Business Economics, he said:

“Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course. The risks are two-sided, and we will continue to make our decisions meeting by meeting.”

Powell expressed confidence in the country’s economic strength, claiming that inflation is expected to continue cooling. He also indicated that if the economic data shows consistency in the coming days, two more rate cuts would likely materialize in 2024. These, however, are expected to come in smaller quarter percentage point increments. This trend goes against market expectations for more aggressive cuts and easing.

During a Q&A session after his speech in Nashville, Tennessee, he said that:

“This is not a committee that feels like it’s in a hurry to cut rates quickly. If the economy performs as expected, that would mean two more rate cuts this year, a total of 50 [basis points] more.”

Sustainable Growth Expected in Small Caps Amidst Market Shifts

On July 26, Nathan Moser, Managing Director and Senior Portfolio Manager at Impax Asset Management, discussed some long-term possibilities for small-cap stocks on Schwab Network. Talking about the recent changes in small stocks, he discussed the positive shift and noted that the recent rise in small caps appears more sustainable after years of struggle. This trend is primarily driven by strong inflows into ETFs and passive investment vehicles.

Despite short-term volatility, Mooser believes the market’s current move could last for years. He thus encouraged buying on market dips, while highlighting the need to focus on profitable, high-quality companies due to the potential risks typically associated with lower-quality stocks in small caps.

Our Methodology

We first consulted stock screeners from Finviz and Yahoo Finance to create an initial list of 15 publicly traded penny stocks with forward P/E ratios of less than 15 as of October 1, 2024. From this list, we selected the 8 stocks with the highest number of hedge funds holders as of Q2 2024, and used that as our ranking metric. The stocks we identified are profitable, have positive EPS growth, and are expected to remain profitable in the future as well.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

8 Cheap Penny Stocks to Buy Right Now

Lument Finance Trust, Inc. (NYSE:LFT)

Share Price: $2.52

Forward P/E: 6.33

EPS Growth This Year: 53.80%

Number of Hedge Fund Holders: 5

Lument Finance Trust (NYSE:LFT) is a real estate investment trust that invests in, originates, finances, and manages a commercial real estate debt investment portfolio. Its primary focus is transitional floating-rate CRE mortgage loans while emphasizing middle-market multifamily assets. It also invests in other CRE-related investments, including preferred equity, mezzanine loans, commercial mortgage-backed securities, construction loans, fixed-rate loans, and other CRE debt instruments.

The company’s mortgage loan investment portfolio comprises around 88 senior secured floating rate loans with around $1.4 billion in aggregate unpaid principal balance. Lument Investment Management, LLC externally manages the company. Lument Finance Trust (NYSE:LFT) holds a competitive advantage due to its expertise in the origination, underwriting, and active asset management of multifamily mortgage investments. It also boasts strong sponsorships from the broader Lument and ORIX platforms, positioning it as a value proposition in today’s public markets. Despite the current challenging environment, the company raised its common dividend by $0.01 in June. This represents a 14% sequential increase over Q1.

It also fully deployed its capital into strong, predominantly multifamily credits by the end of 2023. Since then, it has focused on actively managing its loan investment portfolio.

The company has differentiated itself from its market peers by focusing on middle-market multifamily credit, allowing it to deliver a stable and sustainable dividend to its shareholders and preserve shareholder capital. According to the company, multifamily, particularly middle-market multifamily, is expected to remain a strong-performing asset class in the long term despite a modest softening of multifamily fundamentals.

Lument Finance (NYSE:LFT) continually maintains a strong liquidity position, with around $65 million in unrestricted cash on its balance sheet. Persistent elevated short-term rates have allowed the company to produce attractive returns on its cash balance. Intentionally adopting a defensive cash position, Lument Finance (NYSE:LFT) has gained the flexibility to manage the more challenging credits in its portfolio.

Overall, LFT ranks sixth among the 8 cheap penny stocks to buy right now. While we acknowledge the potential of LFT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.

Disclosure: None. This article is originally published at Insider Monkey.