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Old 01-16-2015, 01:57 AM
 
4,174 posts, read 2,788,828 times
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Quote:
Originally Posted by jimhcom View Post
The Fed did not bail out the middle class because the Fed does not work in the best interest of the citizen's.

It's constituency are the banks and Wall St. If you think the Fed is going to bail out a bunch of wildcat drillers you are sadly mistaken, they could not care less.

It never ceases to amaze me how people still naively believe that the powers that be are working in their best interests. The wealthy get wealthy by taking what you work to accumulate. That is how the top 10% of the population ends up with 75% of all the wealth.

Like I said before, if you believe the future is rosy, then put your money where your mouth is and stay fully invested. Just don't complain when you get your backside handed to you because you were warned.
The FED has no mandate to "bail out" the middle class directly. And you should know that. However, the rescue of the US banking system was to the benefit of everyone. Your dire predictions of the future aside, the numbers speak for themselves. Your third paragraph is relatively lucid though.
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Old 01-16-2015, 04:51 AM
 
64,833 posts, read 66,327,513 times
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am in your camp shaker, the banking system almost imploded on itself and anyone who understands how banks create liquidity to lend understands why they needed that money and zero rates to reinflate themselves..
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Old 01-16-2015, 07:12 AM
 
3,764 posts, read 1,680,314 times
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Say the interest rate on 10 year treasuries goes to 3% in 2017. Is there even one retiree who wouldn't sell every stock he owns and buys treasuries hand over fist?

The dollar is already at multi-year highs. How can US manufacturers export or even compete with imports to the US if the higher interest rates push the $ even higher? Europe isn't raising rates, Japan isn't.

Low oil prices are good for consumers in the US. Less so in Europe because they need dollars to buy oil, and even though oil is cheaper, the dollar is dearer. They use less oil anyway so they benefit less.

Low oil prices are bad for US and Canadian producers. Already Saskatchewan house prices are weakening. I heard the same for Texas. Schlumberger said it's laying off 9000. BP is shutting North Sea platforms. What if Canadian and regional US banks, Scottish banks get too weak? 1989 or 2008 all over?

The labor market is tight right now. Companies can't find qualified people. This means wages should go up. But what has happened, instead of wages going up, money that would go to wages is being spent on increased medical care costs. Maybe this is good for hospital workers, but not many more.

Oil prices could be the black swan people always talk about. Retail sales missed bad in December, mid-Atlantic manufacturing missed and jobless claims were way higher than expected lately. The problem is, this was preceded by good numbers that raised peoples hopes. Now that numbers are coming in worse, and people also have to worry about Grexit again, oil, terror, it wouldn't surprise me if stocks take a beating. At least for this year.

The 2007 - 2009 bear market lasted about 5 quarters. Given the run-up since then, maybe we're due.
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Old 01-16-2015, 07:24 AM
 
Location: Wartrace,TN
5,287 posts, read 8,245,858 times
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I don't know where the earnings growth will come from.
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Old 01-16-2015, 07:25 AM
 
64,833 posts, read 66,327,513 times
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you are kidding yourself if you think retirees are selling all their stocks for 3% interest. in fact if rates go that high being most retirees are already big bond holders a fear of a bond sell off is a reality as retirees dump bond funds and income funds as they get hit with statement losses and freak out.

first off you couldn't draw more than 2% inflation adjusted from 3% returns vs 4% from a diversified portfolio and have a decent success rate. that is a 50% pay cut .

in a world of rising interest rates that are joined at the hip to inflation that would be nuts.

retirees still need a diversified mix , always did unless the draw is 2% or less inflation adjusted and historical averages for bond rates are 6-7%.
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Old 01-16-2015, 07:25 AM
 
17,645 posts, read 12,253,083 times
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If I was a retired I wouldn't sell everything I own and buy treasuries if rates went up to 3%, why would I?
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Old 01-16-2015, 07:31 AM
 
3,764 posts, read 1,680,314 times
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Quote:
Originally Posted by Lowexpectations View Post
If I was a retired I wouldn't sell everything I own and buy treasuries if rates went up to 3%, why would I?
The S&P yield is 2%. It would have to grow 50% to equal the yield on a 3% to year treasury. And, if you don't sell before maturity, there is no risk of principal loss with a treasury.

I know the argument for earnings growth. But I don't believe there much gas left in the tank at this point.
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Old 01-16-2015, 07:32 AM
 
64,833 posts, read 66,327,513 times
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that is nonsense , it is ridiculous thinking to own 3% bonds and sell stock..

once again do not confuse dividends with interest , they are not the same thing , they do not work the same way or mean the same thing. one is what you get paid for loaning out money and is added to principal . the other is a return of a piece of an already existing share price and is a subtraction of dollars off the value of your investment share that is left to compound. .
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Old 01-16-2015, 07:42 AM
 
17,645 posts, read 12,253,083 times
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Quote:
Originally Posted by Troyfan View Post
The S&P yield is 2%. It would have to grow 50% to equal the yield on a 3% to year treasury. And, if you don't sell before maturity, there is no risk of principal loss with a treasury.

I know the argument for earnings growth. But I don't believe there much gas left in the tank at this point.


Do not give anyone financial advice because they will end up broke
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Old 01-16-2015, 07:46 AM
 
64,833 posts, read 66,327,513 times
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especially retirees tring to pull anything more than 2%. according to the updated trinity study a minmum of 35% equities is needed to mainatin 4% inflation adjusted with a high success rate without spoending cuts likely in the worst of times to date.

Last edited by mathjak107; 01-16-2015 at 08:00 AM..
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