FOMC minutes, Jobless claims and Thanksgiving philosophy

Minutes of the FOMC meeting which took place on 4 and 5 November have been released. The meeting itself was overshadowed by the US elections and didn’t create any ripples in the markets. Minutes of the meeting which are made available to the wider public after a gap of three weeks though had elicited interest as market participants wanted to know what is on the mind of decision makers at the Fed. To remain accommodative on the asset purchase side there were three options, first is to buy more bonds, second is to buy the same amount but increase the maturity of the bonds and third is to buy the same amount and same maturity but over an extended period. As per the minutes Fed officials are open on all these options and not ruling anything out. For markets this is non-negative news.

The second news item was on US initial jobless claims which rose for the second week running. The number came in at 778,000 with an increase of 30,000 over the last week. Initial claims indicate how many new people have lost their jobs this week whereas the continuing claims are those people who have been unemployed for more than a week. The pre covid weekly initial jobless claims data was steady around 250,000 which actually reflected a natural churn rate in the economy.

On the Brexit front again some fissures appeared as the EU threatened to pull out of the talks. EU Commission President Ursula von der Leyen said that the bloc is prepared for the UK to leave without a trade deal. But if there was a threat to the deal it was not actually visible in the pound price which is hovering around 1.34 close to its yesterday’s levels only. However the Euro logged some gains trading at 1.1925 currently.

Today US Markets are closed on account of Thanksgiving. And any discussion of thanksgiving is incomplete without discussing the Thanksgiving turkey. Philosopher Karl Popper and later Nassem Taleb in his books made the gentle bird famous through their writings. Popper’s essential insight was on being sceptical of the knowledge which we gleam from our observations, technically called inductive knowledge. The turkey anecdote is presented like this: the bird is fed handsomely on a daily basis for a month prior to Thanksgiving. Every day it gets up and marvels at the generosity of its human master. Just before Thanksgiving day its belief his highest. Then comes the final day and post that there is nothing left of the turkey to marvel. Popper says that people should be sceptical of reasoning that starts from the examination of a specific number of cases and then leading to a universal conclusion. In the context of markets, it is prudent to be sceptical in times of euphoria. Past returns don’t guarantee future gains.

The domestic markets are open today. The rupee trades at 73.84 and has so far shied away from the kind of gains which other EM currencies have shown. This despite the huge inflows on the FPI counter. The November FPI inflows are close to 58000 Cr INR so far.