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INTERVIEW: Yellen Says Nothing Surprising, But Crushes Social Media Stocks -Former Miami Fed Chief

By Debbie Carlson of Kitco News
Tuesday July 15, 2014 12:40 PM

(Kitco News) - Federal Reserve Chair Janet Yellen’s testimony in front of Congress Tuesday yielded no big surprises regarding monetary policy, leaving the overall stock market little changed.

Dorothy Weaver, chief executive officer of Collins Capital, and former Miami Federal Reserve Bank chairman, called Yellen’s written and spoken testimony “predictable and well-stated. I don’t think there were any big surprises coming out of the testimony today.”

By and large financial markets took Yellen’s comments in stride because her commentary is essentially a continuation of what she’s said before, Weaver said. One stock market sector, however, was pummeled by something Yellen wrote, rather than said.

“The only thing, and it wasn’t in her oral comments but in her written testimony, was where she made mention of biotech and social media (stocks’ valuations) getting stretched. And there was a quick response by those stocks. It’s very unusual for her to get to that level of specifics,” she said.

Many of those stocks fell sharply on her written testimony. Yellen also singled out concerns about high-yield products and leveraged loans but those didn’t see the same type of selling.

Gold prices fell, although sources attributed that more to technical-chart based selling as August gold futures slipped under the psychologically important $1,300 an ounce level.

Yellen also remained consistent on several points, including unemployment, Weaver said.

“Clearly the unemployment rate is very important. It is near and dear to her heart. She has been very consistent in her comments about trying to drive down the unemployment rate,” Weaver said.

Weaver said by not targeting on specific numbers, it gives Yellen some flexibility about how to achieve improved employment, which is part of the Fed’s mandate. “I don’t see her changing her focus on trying to continue to drive down the unemployment numbers,” she said.

With the Fed likely to end its quantitative easing program in October, the focus now becomes the $4 trillion that sits on the Fed’s balance sheet and the timing of the next rate hike. Weaver said by having a large balance sheet and keeping the Fed Funds rate low, it continues to send a message of accommodation.

Yellen brought up the forecasts of some of the individual Fed governors and the outlook for the first rate hike to come sometime around mid-2015, Weaver said. As far as the bonds bought in the asset-purchase program, Weaver said the Fed doesn’t necessarily have to pay them off, but can let them “roll off the balance sheet” as they mature.

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By Debbie Carlson of Kitco News; dcarlson@kitco.com
Follow me on Twitter @dcarlsonkitco



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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