OT: Stock and Investment Talk
- Thread starter RU-05
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Just checking in to see if everyone is still calling for Q4 rate cuts?
10Yr 5 handle says hi!
10Yr 5 handle says hi!
I don't think and haven't believed a rate cut will happen in '23. First, the unemployment rate has remained below 4% (almost full employment) in the face of the FED raising rates. Second, preserving the ability to lower rates in the face of future economic challenges (for example the increasing default rate of commercial office buildings in the RE sector) allows the FED to "keep its powder dry" if it needs to use that tool/the ability to lower rates in the (near) future.
And speaking "historically" rates are still "low". I graduated Rutgers in '90 and my first job was at Bear Stearns working in the tax free bond and bank stock sector. Back then we had AAA NJ Turnpike Bonds that had a 7% tax free coupon. I think my first mortgage had a rate that started with a "9". Rates are not historically high.
Just my $0.02 And for context below is the Fed Funds Rate in the US since the 50's. We are not at any type of historic high.
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Rate cuts will begin in Q1 or Q2 of 2024 as PCE core inflation reaches 2%. The Fed already said they will move back to neutral regardless of economic conditions. This obviously makes perfect sense.I don't think and haven't believed a rate cut will happen in '23. First, the unemployment rate has remained below 4% (almost full employment) in the face of the FED raising rates. Second, preserving the ability to lower rates in the face of future economic challenges (for example the increasing default rate of commercial office buildings in the RE sector) allows the FED to "keep its powder dry" if it needs to use that tool/the ability to lower rates in the (near) future.
And speaking "historically" rates are still "low". I graduated Rutgers in '90 and my first job was at Bear Stearns working in the tax free bond and bank stock sector. Back then we had AAA NJ Turnpike Bonds that had a 7% tax free coupon. I think my first mortgage had a rate that started with a "9". Rates are not historically high.
Just my $0.02 And for context below is the Fed Funds Rate in the US since the 50's. We are not at any type of historic high.
You are also correct on the historic view of rates. Markets can and will boom in a 4-5% environment. No problem.
the amount of debt in circulation today vs when rates were historically high is almost inconceivable and the only way that worked for this long was suppressed rates for the better part of the past 20 years. If interest rates rose to anywhere remotely near historical highs the world economy wouldn’t go into recession or depression, it would fail entirely which is something that hasn’t occurred since the advent of Keynesian Economics.
So, there is a little wiggle room on the topside for addition rate increases if needed, but nowhere near what people think may be possible.
So, there is a little wiggle room on the topside for addition rate increases if needed, but nowhere near what people think may be possible.
I'm no economist but wouldn't we have to compare the amount of debt to the size of the overall economy, and not just nominal debt in circulation. May be a moot point as I think I've read that debt as a % of GDP is at an all time high as well.
Yes, the relative size of debt is more important than the absolute value. Lots of people freak out about the numerator but forget about the denominator.
:)
As @Crazed_RU pointed out I think context, specifically interest as a percentage of GDP, is important. But you are correct our interest payments as a percentage of GDP are entering in to problematic territory. As you can see below projections toward 2030 are heading towards historically high levels.
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Is that the right chart? That's debt payments vs. federal spending, not GDP.As @Crazed_RU pointed out I think context, specifically interest as a percentage of GDP, is important. But you are correct our interest payments as a percentage of GDP are entering in to problematic territory. As you can see below projections toward 2030 are heading towards historically high levels.
No problem! I can't imagine us improving the situation without massive reforms to entitlement programs. But that's a topic for another thread. :)
The plot thickens! :)
finance.yahoo.com
State Street Bets on Fed ‘Dramatically’ Cutting Rates Next Year
(Bloomberg) -- State Street Global Advisors is betting against the higher-for-longer mantra sweeping across global bond markets.Most Read from BloombergKey Taiwan Tech Firms Helping Huawei With China Chip PlantsWhy a US Recession Is Still Likely — and Coming SoonWall Street Fear Gauge Ratchets...
From what I've read we're probably already in a problemagic area. Our GDP numbers are very misleading as they include numerous transactions of materials and goods made overseas. Those transactions are included in the GDP. So, as manufacturing has been exported those gdp numbers become less indicative of our actual "true" gdp.As @Crazed_RU pointed out I think context, specifically interest as a percentage of GDP, is important. But you are correct our interest payments as a percentage of GDP are entering in to problematic territory. As you can see below projections toward 2030 are heading towards historically high levels.
Something is breaking in financial markets — Here's what's behind the sell-off
https://www.cnbc.com/2023/10/03/som...are|com.apple.UIKit.activity.CopyToPasteboard
https://www.cnbc.com/2023/10/03/som...are|com.apple.UIKit.activity.CopyToPasteboard
Macro question I’ve been asking…Does AI help keep service inflation in check moving forward? The answer is either yes or big time particularly in “knowledge fields.”
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Historically, technology has been a huge deflationary driver due to increase productivity. I assume AI will be the same (no reason to believe otherwise).
I’m wondering about the magnitude. Coding/programming is a lot easier it seems (I’m not in that field though) if all the senior programming person has to do is edit the AI generated code. It may not be hyperbole to say AI has arrived at the absolute perfect time and it will be crucial in a transitioning world economy…all while Autonomous vehicles continue to maim people in unpredictable ways.
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As you say, the answer is surely yes, it's just a matter of degree.
The other matter would be the timeline. Is AI taking jobs in the timeline so as to help squash the current service inflation? I'd guess probably not.
I don't think and haven't believed a rate cut will happen in '23. First, the unemployment rate has remained below 4% (almost full employment) in the face of the FED raising rates. Second, preserving the ability to lower rates in the face of future economic challenges (for example the increasing default rate of commercial office buildings in the RE sector) allows the FED to "keep its powder dry" if it needs to use that tool/the ability to lower rates in the (near) future.
And speaking "historically" rates are still "low". I graduated Rutgers in '90 and my first job was at Bear Stearns working in the tax free bond and bank stock sector. Back then we had AAA NJ Turnpike Bonds that had a 7% tax free coupon. I think my first mortgage had a rate that started with a "9". Rates are not historically high.
Just my $0.02 And for context below is the Fed Funds Rate in the US since the 50's. We are not at any type of historic high.
has the Fed lost control of the yield curve? Is fiscal policy driving the long-end of the curve?
I feel that ship sailed months ago.
Now there was some thought that here in the fall would see inflation picking back up. And maybe we do see that a little, but it doesn't look to be significant, and it may be the last gasp of inflation.
16 years isn't all that long ago, and since that time we dealt with the GFC and then rates that were, arguably, kept lower then they should have been.
Core inflation continues on its glide path lower. Headline is irrelevant to the Fed.
That's perfectly fine with me, as long as they stop the stupid and replace CPI shelter/OER with something that doesn't lag 12-15 months.
not any longer as Greenspan and the 'real' Bern showed. You are right that they should be ambivalent however, the leveraged finance, M&A, asset backed mkts etc etc etc depend on Fed actions so the Fed is absolutely watching
nothing is in a vacuum any longer
I think the FED is largely responsible for monetary policy and spending (government spending anyway) is a matter of fiscal policy, which is not a mandate of the FED. Unless I’m incorrect…
Looking back in 10 years, it will be said the Fed grossly overreacted. This round of inflation has almost zero to do with monetary policy - just COVID and the fiscal/spending response to it. It went up due to this and started going straight down once COVID and rescue money ended.
Right, spending (fiscal policy) is governed primarily by Congress and the President while the FED is responsible for monetary policy. Budgets and spending on various programs do not fall under the FED.
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And, so I can’t blame the FED for excess spending. Now the FED”s monetary policy and interest rate management, that’s another story.
I get Tom's research and he was been pretty accurate on Aug/Sept. He is still holding firm on year-end predictions. Irrational fear like we have seen over the past few weeks normally corrects just as quickly.
It was stuck in that $65-$80 range for awhile. Then broke out. Is it now working in a new range.
Cramer said he thought the run to $90+ may have fueled by a short squeeze.
They kept rates at zero way too long. And they were still buying mortgage backed bonds well into a ripping housing market.
I agree fiscal was the main driver but monetary contributed.
Also have to note that some have been saying the fed has gone too far for a year now. Those guys were def wrong. Still not sure the fed is wrong for taking rates up this high. I think they have been proven right actually.
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Seems like a lot of weird stuff going on. Lots of folks are reporting that the recent spike in yields has solely been due to China and Japan (based on their own policy needs) and then jittery US investors following the trend.
Doing anything unnecessary is dumb. Taking the opportunity to get back to neutral (3%'ish) and stopping QE seemed wise. Anything additional isn't worth the consequences. Remember, the Fed is directly contributing to higher inflation. Financial services CPI is directly tied to the FFR and of course, they royally f'ed up the housing market. Why? No idea.
