Marks says the Fed funds rate should exceed inflation to maintain a positive real rate.
“If inflation's two, then the Fed funds rate should be higher than that so that there's a positive real Fed funds rate.”
Marks predicts Fed funds rate will normalize between two and four percent, not zero to two.
“rates are likely to be between two and four, not between zero and two, the Fed funds rate. And, you know, between zero and two is, an emergency measure.”
Marks characterizes Fed interventions as price controls that induce excessive risk-taking when money is artificially cheap.
“And the Fed manipulations are a form of price controls. You know, they control the price of money. And if Fed puts money artificially cheap, then it induces behavior like risk taking.”
Marks calls Fed rate setting a form of price controls that forces investors into riskier activities.
“And the Fed manipulations are a form of price controls. You know, they control the price of money.”
Marks argues artificially cheap Fed money forces investors into riskier activities when safe returns are too low.
“And if Fed puts money artificially cheap, then it induces behavior like risk taking. It forces people into riskier activities because the returns on safe activities are so low.”
Marks identifies October 1, 2022 as the turning point when Fed dovishness began driving market optimism.
“I'll say since 10/01/2022, which is a special date for a reason, it's when the Fed turned more dovish.”
Marks sees no reason for the Fed to cut rates given the economy is performing fine.
“I don't see any reason to cut rates. I don't think this economy needs stimulus. The economy is doing fine.”