Question:Why is Fed Waiting til March 4 Increase

https://www.cbsnews.com/news/interest-rate-hike-federal-rese…

Fed appears poised to hike interest rate in March in effort to tackle inflation

https://www.msn.com/en-us/money/markets/inflation-still-runn…
Inflation Still Running Hot in December Ahead of Fed’s Move to Hike Interest Rates

A key measure of Inflation followed closely by the Federal Reserve showed Friday that prices rose at an annual rate of 5.8% in December, driven by a nearly 30% hike in energy costs, the Commerce Department reported.
Excluding energy and food, the core personal consumption expenditures index rose 4.9% annually, Both the overall and core indices rose at a higher rate than in November

https://www.cnbc.com/2022/01/10/goldman-predicts-the-fed-whi…
Goldman predicts the Fed will hike rates four times this year, more than previously expected
Hatzius thinks those converging factors will cause the Fed not only to raise rates a full percentage point, or 100 basis points, this year but also to start shrinking the size of its $8.8 trillion balance sheet.

Is this a case of too little, too late?

3 Likes

Why are they waiting? To see if they obtain the desired effect without actually doing anything.

As noted before, the markets move on hype and hysteria.

Example, today 3M is being hammered, down $7.63-4.52%. What happened? Judgement for ear plugs: $110M.

3M hit with $110 million verdict in latest U.S. military earplug trial

The two men are among the nearly 300,000 service members and others who have sued 3M claiming they suffered hearing damage

The trial was the 11th so far to reach a verdict. Plaintiffs in six trials, including Thursday’s, have won more than $160 million combined. Juries sided with 3M in the five others.

https://finance.yahoo.com/news/3m-hit-110-million-verdict-23…

The Fool piles in to the hysteria parade.

This $22.5 Million Legal Loss Could Be a Huge Problem for This Dividend Aristocrat
Industrial giant 3M just lost a big legal case, and it helps explain why investors are so downbeat on the shares.

https://www.fool.com/investing/2022/01/28/this-22-million-le…

Reality check, 3M had a net income last year of nearly $6B.

Steve

2 Likes

I like the company 3M, but “the largest federal mass tort litigation in U.S. history” sounds serious. Amazing how one bad decision (buying Aearo Technologies in 2008) could possibly bankrupt a $100B company. Not likely, but possible.

possible loss:
(300,000/2)0.5$20M = 150k * 10M = 1500B
or
300k * $1M = $300B.

Because the taper is more significant than raising rates.

The rate hikes are a last resort to be gauged after the taper’s results.

It really is not such an “emergency”.

1 Like

I like the company 3M, but “the largest federal mass tort litigation in U.S. history” sounds serious. Amazing how one bad decision (buying Aearo Technologies in 2008) could possibly bankrupt a $100B company. Not likely, but possible.

Do what Honeywell did with Garrett, when they spun it off, and burdened it with all their asbestos liability. At least Garrett had an ongoing business, with products and revenue, vs J&J dumping all it’s talc liability off onto an entity with no business, no assets, and no revenue, that declared BK the day it was formed.

Steve

5 Likes

J&J named their bankrupt spinoff LTL Management LLC. I guess LOL was already taken. “Texas two-step” chapter 11 strategies will be judged by the courts, but I don’t expect any quick resolution. The US Congress is still trying to decide what to do about asbestos, and the US Supreme Court has dealt with several asbestos-related cases. But asbestos affected many companies, and so these single company defective product lawsuits might be resolved quicker. Lawsuits are one path for a company to go bankrupt, but maybe some companies are too big to go bankrupt.

— links —
CASE SUMMARY: Johnson & Johnson Pulls Trigger on Texas Two-Step Bankruptcy for Talc Liability; LTL Management Enters Bankruptcy Supported by Proposed $2B Fund, 10/15/2021
“Similar “Texas two-step” chapter 11 strategies aimed at shedding tort liabilities have been employed in the DBMP, Bestwall and Aldrich Pump bankruptcy cases, all currently pending in the Western District of North Carolina bankruptcy court.”
https://reorg.com/johnson-johnson-bankruptcy-filing/

Chapter 11 - Bankruptcy Basics
“A chapter 11 case begins with the filing of a petition with the bankruptcy court serving the area where the debtor has a domicile, residence, or principal place of business.”
https://www.uscourts.gov/services-forms/bankruptcy/bankruptc…

Bankruptcy Grifters, April 1, 2021
“This Article is the first to call attention to the growing prevalence of bankruptcy grifters in mass-tort cases… This Article proposes specific procedural and substantive safeguards that would deter bankruptcy-grifter opportunism”
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3817530

Mass Exploitation, last revised February 5, 2022
“Modern mass tort defendants—including Johnson & Johnson, Purdue Pharma, USA Gymnastics, and Boy Scouts of America—have developed unprecedented techniques for resolving mass tort cases… The aggregation of these maneuvers may allow culpable parties to sequester funds outside of the bankruptcy court’s purview and then rely on statutory loopholes to suppress victim recoveries… This is one of the most controversial legal issues in the country today”
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3929647

Congress Fails to Vote on Asbestos Ban Legislation, October 07, 2020
https://www.asbestos.com/news/2020/10/07/asbestos-ban-vote-s…

Asbestos and the Law
“By the early 1990s, more than half of the 25 largest asbestos manufacturers in the US, including Amatex, Carey-Canada, Celotex, Eagle-Picher, Forty-Eight Insulations, Manville Corporation, National Gypsum, Standard Insulation, Unarco, and UNR Industries had declared bankruptcy… Asbestos-related cases increased on the U.S. Supreme Court docket after 1980 and the court has dealt with several asbestos-related cases since 1986… Several legislative remedies have been considered by the U.S. Congress but each time rejected for a variety of reasons.”
https://en.wikipedia.org/wiki/Asbestos_and_the_law#Civil_law…

1 Like