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Old 12-17-2015, 08:24 AM
 
17,384 posts, read 9,207,763 times
Reputation: 11856

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Quote:
Originally Posted by Finn_Jarber View Post
So, the markets go up every time the Fed announces they will NOT raise the rates, it went up every time they lowered the rates, and it goes up when they raise the rates.

Is it because they do the right thing at the right times, or maybe something else?

Liftoff! Global markets rise after historic Fed decision - Dec. 16, 2015

We have liftoff! Global markets surged Thursday after the U.S. Federal Reserve added one to the history books, announcing it would raise interest rates for the first time in nearly a decade.

All of the key European markets jumped at the open, with some increasing by as much as 2.5% in early trading.

Investors cheered the widely-expected move, which was seen as a vote of confidence in how much the economy has healed since the 2009 financial crisis. Stocks in the U.S. rallied, with the S&P 500 and Nasdaq both rising 1.5%, while the Dow gained 224 points.
At this point ....... it was widely expected for the rate to rise from ZERO to a quarter of a percent. Supposedly - we have a "recovered economy" and low unemployment. IF they had not raised the rate as expected, the Market would have suspected things were really awful and they were hiding it.

I was told 6 months ago that the rate would rise in December, I'm sure others were told the same thing.
A ZERO interest rate is not a good thing - when things crumble again, how far down can you go from ZERO?

 
Old 12-17-2015, 08:26 AM
 
Location: Great State of Texas
86,052 posts, read 84,321,515 times
Reputation: 27718
Quote:
Originally Posted by Kibby View Post
At this point ....... it was widely expected for the rate to rise from ZERO to a quarter of a percent. Supposedly - we have a "recovered economy" and low unemployment. IF they had not raised the rate as expected, the Market would have suspected things were really awful and they were hiding it.

I was told 6 months ago that the rate would rise in December, I'm sure others were told the same thing.
A ZERO interest rate is not a good thing - when things crumble again, how far down can you go from ZERO?
Negative and then start charging people to keep their money in the bank.

Negative interest rates would start a money flight.
 
Old 12-17-2015, 08:37 AM
 
20,627 posts, read 19,289,703 times
Reputation: 8229
Quote:
Originally Posted by Finn_Jarber View Post
Only if people did not learn their lessons last time when ARMs blew up in their faces. I'll be happy to pick up their properties for pennies if they did not learn.

That is not how it works. And nothing is how it used to work. Since you are the second person I see post this....

If that rate controlled long rates , why in the hell would they have QE?

High short rates actually have a bias against high long rates because it means less credit will be flowing around to drive up prices,aka not as much inflation in the future. That is of course ignoring all the other assumptions like any changes in loans vis-a-vis credit quality. Of course the bias you are fixating on is when people decide to move to short term investment vehicles from long term ones, which in some cases might dry up the money available for long rates. However why do we end up with inverted yield curves from time to time? Its because the high short rate implies low inflation in the future to the market, and the assumption they will bring the rate down

But then again, QE utterly annihilates the real market for that anyway. So depending on the whims of our central planners....
 
Old 12-17-2015, 08:49 AM
 
20,627 posts, read 19,289,703 times
Reputation: 8229
Quote:
Originally Posted by Kibby View Post
At this point ....... it was widely expected for the rate to rise from ZERO to a quarter of a percent. Supposedly - we have a "recovered economy" and low unemployment. IF they had not raised the rate as expected, the Market would have suspected things were really awful and they were hiding it.

I was told 6 months ago that the rate would rise in December, I'm sure others were told the same thing.
A ZERO interest rate is not a good thing - when things crumble again, how far down can you go from ZERO?
I really don't think it matters much in the aggregate. It beats up savings and retirement . Older boomer probably do not feel so goo about retiring in a bond market like this. Some real simple logic applies.

*Bonds are good for retirement
* bonds are a crappy investment.
= No jobs for gen-Y.

It didn't spur investment. The stock market boom was simply corporate America buying back its own stocks. That's the opposite of expansion.

When interest rates are higher , da guberment is paying out incomes distributed across millions of bond holders. Its what one might call a stimulus.

So lowering the interest rate isn't really isn't a policy to help anything in the kind of liquidity trap we have been under.
 
Old 12-17-2015, 09:00 AM
 
Location: Florida
77,012 posts, read 47,481,489 times
Reputation: 14806
Quote:
Originally Posted by gwynedd1 View Post
That is not how it works. And nothing is how it used to work. Since you are the second person I see post this........
It is how it works for people who have ARMs.
 
Old 12-17-2015, 09:43 AM
 
Location: Philadelphia
11,998 posts, read 12,893,138 times
Reputation: 8365
This was expected and long overdue. With so much time, concern and warning given just to raise 0.25%, I wonder if this will be it.

"Yellen also soothed concerns about higher rates by repeatedly telling investors that the Fed will be "gradual" about future rate increases so as not to kill the economic recovery. "
 
Old 12-17-2015, 09:48 AM
 
20,627 posts, read 19,289,703 times
Reputation: 8229
Quote:
Originally Posted by Finn_Jarber View Post
It is how it works for people who have ARMs.

Less those that simply refinance. It still competes and is affected by long rates.
 
Old 12-17-2015, 09:51 AM
 
31,745 posts, read 26,706,619 times
Reputation: 24626
Quote:
Originally Posted by HappyTexan View Post
The Fed rate raise was already priced into the market.

The Fed put it off until the very end so everyone knew it was coming months ago.

Thank you!


Federal Reserve for years now under various leaders has been very careful to avoid shocking the markets by giving ample notice of intentions. You'd have to be living under a rock the past few months not to have known this increase was going to happen. If recent US economic indicators had suddenly turned very negative then perhaps the increase would have been called off, but otherwise...
 
Old 12-17-2015, 09:56 AM
 
79,908 posts, read 44,064,775 times
Reputation: 17204
Quote:
Originally Posted by BugsyPal View Post
Thank you!


Federal Reserve for years now under various leaders has been very careful to avoid shocking the markets by giving ample notice of intentions.
They sure failed in 2008.
 
Old 12-17-2015, 09:58 AM
 
Location: Florida
77,012 posts, read 47,481,489 times
Reputation: 14806
Quote:
Originally Posted by gwynedd1 View Post
Less those that simply refinance. It still competes and is affected by long rates.
One thing leads to another. Fed raises their rates, and mortgage rates usually follow, and those people who took out minimal rate ARMs will see their monthly payments go up. Refinance would be a good option for the ARM crowd. Since fixed 30 & 15 yr rates were also so low, I would think that most people took those as opposes to ARMs where the rate would have been a little less than fixed, but not much.
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