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This is the result of turmoil in the House of Representatives; investors fear a government shutdown just before Thanksgiving which will ruin any chances of a soft landing and may tip the economy into serious recession.
No, this is not a result of what's happening in the House of Representatives.
The market drops and people start creating their own convenient narratives. Looking back in history we can see that market drops have often occurred in October. It's being called "The October Effect".
There are several factors going on. First, the student loan repayment pause has finally ended so money that was going into things now will have to go to loan repayment. This has been reported on by several news sites.
Second, higher interest rates feed into slower investment by companies. With the Fed only pausing, but not signalling a stop in the raises, companies are putting a pause on their plans.
Third, some of us are putting new money into CDs and not stocks. I am watching the price moves of a couple of my holdings because I want to add more shares; but the implied yield on those stock buys are competing with the 5.55% that I am getting on CDs right now.
This isn't a crash, yet. And interest rates are not too high. Compare them with what happened in the 1980s under the last true dingbat of a president and the rates today still compare very well.
A downturn is inevitable. Fed has over-reacted and rates are too high. We still need much more housing, yet projects are being cancelled and everyone from bank staff to tradespeople are getting pink slips despite months or years long wait lists for housing in my area. Next jobs report is going to be ugly, but maybe "camouflaged" by the labor shortage.
No, rates are not too high. Where were you in the 1980s when rates were in double digits?
I think that a coupon rate or interest rate of 5-6% is probably close to the sweet spot. Money should have a time value; i.e., savers should get paid for postponing the use of their money so that non-savers can party away.
The hyper-low interest rates of the past few years has led to an excess of risk-taking for which taxpayers have had to bail out many of the losers. When those risk takers hit a home run, taxpayers don't get the gain, so why should they take the losses?
Except for big tech, everything has pretty much priced in the bad news. Bonds are heavily declined, small caps have been down for a while, international is super cheap...
Assuming nothing really unwinds, which historically is the likely situation, valuations are set up across many different market avenues (except big tech) for several years of good gains.
No, rates are not too high. Where were you in the 1980s when rates were in double digits?
I think that a coupon rate or interest rate of 5-6% is probably close to the sweet spot. Money should have a time value; i.e., savers should get paid for postponing the use of their money so that non-savers can party away.
The hyper-low interest rates of the past few years has led to an excess of risk-taking for which taxpayers have had to bail out many of the losers. When those risk takers hit a home run, taxpayers don't get the gain, so why should they take the losses?
Ha, yes, people today whining about "high" interest rates; they are around normal now. As I recall, when I was young passbook savings accounts paid 5%. My first mortgage in 1975 was at 8.5%, and they even went double digits after that.
The ridiculous zero rates were obviously unsustainable. This is what happens when politics gets mixed in with currency management. Of course it could get a lot worse.
No, rates are not too high. Where were you in the 1980s when rates were in double digits?
I think that a coupon rate or interest rate of 5-6% is probably close to the sweet spot. Money should have a time value; i.e., savers should get paid for postponing the use of their money so that non-savers can party away.
The hyper-low interest rates of the past few years has led to an excess of risk-taking for which taxpayers have had to bail out many of the losers. When those risk takers hit a home run, taxpayers don't get the gain, so why should they take the losses?
Quote:
Originally Posted by RU Kidding
Ha, yes, people today whining about "high" interest rates; they are around normal now. As I recall, when I was young passbook savings accounts paid 5%. My first mortgage in 1975 was at 8.5%, and they even went double digits after that.
The ridiculous zero rates were obviously unsustainable. This is what happens when politics gets mixed in with currency management. Of course it could get a lot worse.
Yeah, but housing was much more affordable compared to average incomes back then even with the high interest rates.
And from my understanding, US debt levels were much more manageable back then as well.
Nowadays, we are running deficits into the TRILLIONS now!
Unless the Federal govt either massively cuts spending or raise taxes (or both), these higher interest rates are going to explode the US debt.
Yeah, but housing was much more affordable compared to average incomes back then even with the high interest rates.
And from my understanding, US debt levels were much more manageable back then as well.
Nowadays, we are running deficits into the TRILLIONS now!
Unless the Federal govt either massively cuts spending or raise taxes (or both), these higher interest rates are going to explode the US debt.
My first house in '75 was an old 6-bedroom farmhouse, somewhat rough but livable. It was $22,000 and I was making about $6-7/hour as a journeyman moldmaker. Someone can update those numbers.
Today, houses (and cars) are much more extravagant than they were back then. Modern houses have multiple bathrooms, central air, decks, etc. My house had a dirt floor in the basement, an old inefficient oil furnace, a well that went dry often, kitchen and bathroom were all probably WWII era, no shower only a tub.
Yes, at some point gov't will be forced to cut spending, but they got themselves into this mess. What was the low point for 30-year mortgages -- around 3-4%? And zero interest car loans? Something that cannot go on for ever won't.
The point of "high" (normalized, actually) interest rates is: Don't borrow money -- loan it. I'm retired and doing fine holding bond funds. But I realize younger people especially cannot do that.
If the Stock Market fell 5,000 points, no worries!
If the Stock Market fell 10,000 points, no worries!
If the Stock Market fell 15,000 points, no worries!
I remember losing money in the early 80's and I saw the market finally hit 1,000!
Why the market is up in the 30,000's is beyond me!!!
If the Stock Market fell 5,000 points, no worries!
If the Stock Market fell 10,000 points, no worries!
If the Stock Market fell 15,000 points, no worries!
I remember losing money in the early 80's and I saw the market finally hit 1,000!
Why the market is up in the 30,000's is beyond me!!!
Exactly. Everyone thinks they are an expert when the market just keeps going up. Now that the bears are in control for the time being, let's see what happens.
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I'm retired and doing fine holding bond funds. But I realize younger people especially cannot do that. 
