Courtesy of Pam Martens.
Jeffrey Gundlach, DoubleLine CEO, Tells CNBC’s Bob Pisani What He Thinks the Fed Is Really Up To With Its Interest Rate Talk
The Federal Open Market Committee (FOMC) of the Federal Reserve will release its monetary policy statement at 2 p.m. today against a backdrop of extraordinary global events since its last statement on December 17. Since that time, deflationary forces have picked up steam in the 19-member Eurozone forcing the European Central Bank to announce a large scale quantitative easing program to buy up government bonds in the hope that the added liquidity will spike spending and inflation.
A political earthquake has also been unleashed by the Coalition of the Radical Left, known colloquially as Syriza, seating their candidate, Alexis Tsipras, as Prime Minister in Greece. The win came on a platform to end austerity and renegotiate the terms of the Greek bailout. This is causing spasms in stock and bond markets in Europe over concerns it could lead to Greece’s exit from the Euro or cause other debt-laden Eurozone members to ask for similar concessions.
Here at home, tremors have been picking up pace since the December FOMC meeting. Large corporations have been announcing big job cuts: American Express, 4000; Coca Cola, 1600 to 1800; IBM, at least 2000 with rumors suggesting the number is far higher; Schlumberger, 9000; Baker Hughes 7000; U.S. Steel 750.
Part of the downsizing problem is the global economic slowdown but another serious headwind for U.S. based multinational corporations is the strong U.S. dollar which has gained about 20 percent against other major currencies over the past eight months. A strong dollar hurts U.S. based multinationals’ earnings and can erode market share by making their products and services less competitively priced for consumers in foreign countries who are making their purchases in weaker currencies. U.S. companies which have already blamed the strong dollar for crimping earnings include Procter & Gamble, Pfizer, DuPont and Goodyear.
U.S. multinationals know they have the Fed to thank for the dollar’s strength. The Fed’s persistent chatter that it plans to raise interest rates later this year on the premise of improved economic conditions here at home has put a prop under the dollar and led much of the world to believe that the U.S. is back to its goldilocks economy – not too hot and not too cold. Neither Wall Street On Parade nor DoubleLine CEO Jeffrey Gundlach is buying that spin.
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