New ArticleYesterday, Chairman of the Federal Reserve Board, Jerome Powell began the first of his two part testimony before Congress. Yesterday, before the House Committee on Financial Services, today before the Senate Banking Committee. The Fed Chairman provides this testimony twice a year, and it is perhaps the most important and detailed presentation by the Federal Reserve of their current monetary policy. This is all part of a process by the Congress to fulfill their oversight obligation of the Federal Reserve. But it is also an opportunity for the Fed Chairman to outline what he sees in the economy, and how the Fed is seeking to meet its twin goals of full employment and stable prices. And on those two measures, things have been looking very good for a long time now. Unemployment, the flip side of the employment coin, is at or near historic lows. Meaning that the Fed's objective of full employment is on target. Inflation is also well under control. In fact the economy has operated so long with low inflation, that the Fed would actually like to see inflation heat up just a little, to help provide some additional price momentum in the economy. Now its important for investors to be aware of these Macro Dynamics of the economy. These two factors, full employment and low inflation, combined with growing corporate earnings, have made up the dominant driving factors of this bull market in stocks, which has now reached 11 years. One of the longest bull markets in history. The only reservation Powell seemed to have for the domestic economy, was the softening he noted in the manufacturing sector. Although he does not see that as significant right now. However, when he turned to the Global Economy he noted the weakness in both the European and Asian Economies. This weakness began back in 2018, according to Powell. And was due to a slump in Global Manufacturing, trade tensions, and political unrest in several countries. That comment on “Trade Tensions” was no doubt, Powell's way of saying that he's not entirely on board with the Trump Tariffs. Here Powell also acknowledged the potential impact of the Coronavirus in China. An imporant recognition, that the Fed may need to be accomodative in its monetary policy if this pandemic should continue to grow. Finally, and most importantly from my perspective. The Chairman acknowledged that the Fed's Balance Sheet transactions should be consistent with their monetary policy. In fact a special adendum to the testimony on this topic was provided by Chairman Powell. Briefly stated this is a recognition, by the Fed, that their actions in buying or selling securities, needs to be roughly equivalent with their interest rate policy. If the Fed is being accomodative by lowering interest rates, they should also be accomodative in their open market actions. In other words don't lower interest rates, while you withdraw funds from the system. This is a big deal. And about a year ago, during that period the Fed called “Normalization” the Fed's interest rate action was mildly restictive, but its open market action were dramatically restrictive. Drawing down system reserves rapidly. So that while from an interest rate perspective it looked like not too much was happening. From a reserve perspective, there was dramatic tightening going on. This statement by the Fed Chairman will do a long ways in having a consistent Fed Policy going forward. So Part 2 of the Fed Chairman's Testimony before the Senate Banking Committee will take place this morning at 10am eastern time. #3

None of this is news to any of you who have worked in a large corporation or bureaucracy: a new boss comes in, and the old line establishment is dead set against him. Oh, there doesn't have to be any particular reason, they just don't like change. And so they begin to slow walk everything, to cut against his objectives, and generally make life miserable for the new leader. For the past 3 years we've seen the same thing aimed at President Trump. Only this time the steaks in this struggle are much higher. When you consider that Trump is the Chief Executive of a work-force of over 2 million people, perhaps this should come as no surprise.

None of this is news to any of you who have worked in a large corporation or bureaucracy: a new boss comes in, and the old-line establishment is dead set against him.

Oh, there doesn't have to be any particular reason, they just don't like change. And so they begin to slow walk everything, to cut against his objectives, and generally make life miserable for the new leader.

For the past 3 years we've seen the same thing aimed at President Trump. Only this time the steaks in this struggle are much higher. When you consider that Trump is the Chief Executive of a work-force of over 2 million people, perhaps this should come as no surprise.

But what was surprising is the resources and personnel that these dissidents were able to muster. We've all seen the numbers on the Special Counsel's investigation, $32 million expended, 19 full-time lawyers and full-time FBI Agents all dedicated to the Mueller Investigation.

But that was only the first wave of dissent, the second was the recently concluded Impeachment and Trial of the President.The point is, that we've been living under a split Presidency. With President Trump heading in one direction, and the entrenched bureaucracy headed in the opposite.

For many of us, myself included, this has been a real education in the scope and power of these civil servants. I confess, that I always held the naive assumption that when the President changed, every 4 or 8 years, so did the entire government.

After the last 3 years' experience, it is now clear that nothing could be farther from the truth. In fact, in many respects, it is the un-elected, and thereby unaccountable bureaucrats, who really administer the nation.

My experience of working for a large corporation should have taught me better. I've seen a similar situation from the corporate side.

And so it came as no surprise to me when I saw Colonel Vinman escorted from the White House the other day.

When administrations change in corporate America, Friday's often become moving day. With corporate execs carrying their little white storage boxes out the door, escorted by building security. This would especially be the case if one of those execs had spoken out so publicly against the CEO.

What's happening here, for the first time in his Administration Trump is now getting down to the level where policy is implemented. To the level where many of the President's proposals are actually put into action. And I have little doubt that this will be but the first move in many.

For investors the bottom line is this: this Administration was bound to head in one of two directions. The first was to be ineffective and ultimately fail. As the apparatchiks cut their proposals to pieces.

Or the second direction, the one that looks like its underway, is to do what successful corporate managers do every day. Get rid of those in the old guard who will not sign on to the new administration.

And finally: As long as the Administration's policies remain on-balance pro-business then this consolidation will be seen as a positive for investors.