GAMCO Investors Inc (NYSE:GBL) CEO Mario Gabelli is predicting the Ides of March; that fateful day of March 15, when Julius Caesar was assassinated in 44 B.C, will prove fateful, if slightly less so, 2,059 years later. Gabelli believes that’s the day the Fed will finally hike rates after six years of near-zero rates. The GAMCO Investors Inc (NYSE:GBL) Chairman and CEO spoke with Bloomberg this morning about the Fed’s recent comments, and whether they would affect his investing strategy.
“No, but it puts an emphasis on the table they gave that said that 18 months from now, the Fed funds rate will go up, therefore NIMS, Net Interest Margins Spreads, will widen, finally, and so the market has already started anticipating that with the banks and financial sectors, and companies that have large cash balances from clients, so you’re seeing that,” Gabelli said.
While the Fed reassured that rates will stay low, and stuck to the “considerable time” language they have previously used to describe how long they will do so, they have also set a more aggressive timetable on rate expansion, to 3.75% by 2017. Given that the Fed likes to raise rates in quarter-point moves, that suggests a rapid series of 13 rate hikes between now (or as Gabelli predicts, between March 15, 2015) and 2017.
The aggressive hikes caught many by surprise, though the GAMCO Investors Inc (NYSE:GBL) CEO said it will be a “long overdue” return to historical norms. The 3.75% rate would be a return to early 2008 levels, before they slid to near-zero in the wake of the financial crisis, from which they’ve yet to be raised. Officials had predicted an average rate of 2.5% for the end of 2016, which has now been adjusted upward to 2.75% to 3%.
Relating to the investing strategy of Gamco Investors Inc (NYSE:GBL), Gabelli expressed that a drop in the long term capital gains rate would be far more intriguing in terms of providing them with incentive to sell off long-term assets and make changes in their positions.
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