In 2022, Zillow Predicts That Phoenix housing market will climb ANOTHER 20%?! (Scottsdale: subsidized, price)
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Every economic slump has ties to the stupidity of the federal government, and this is no exception. Two years ago, the feds racked up trillions more in debt with the so called "COVID relief packages", which amounted largely to frivolous spending, and free money (stimulus) given to people who didn't really deserve it. On top of that, interest rates were too low. Now, the feds think they can offset inflation by continuously pushing up the rates. The rate increases earlier this year were needed, but now it's time to apply the brakes.
If anything, these incessant rate hikes will push us into a recession (if we're not in one already). The DJIA is in bear market territory, largely due to the feds, and inflation still is rampant. The only DEflation appears to be the value of the housing market & personal investment accounts ... exception being money market funds which are earning greater interest as a result of the rate hikes. The feds need to quit while they're ahead. Interest rates were jacked up during the 1970s, and it did nothing positive for the economy. The last thing we need is another recession, especially a major one like 2008, or a prolonged one like in the '70s/early '80s.
Every economic slump has ties to the stupidity of the federal government, and this is no exception. Two years ago, the feds racked up trillions more in debt with the so called "COVID relief packages", which amounted largely to frivolous spending, and free money (stimulus) given to people who didn't really deserve it. On top of that, interest rates were too low. Now, the feds think they can offset inflation by continuously pushing up the rates. The rate increases earlier this year were needed, but now it's time to apply the brakes.
If anything, these incessant rate hikes will push us into a recession (if we're not in one already). The DJIA is in bear market territory, largely due to the feds, and inflation still is rampant. The only DEflation appears to be the value of the housing market & personal investment accounts ... exception being money market funds which are earning greater interest as a result of the rate hikes. The feds need to quit while they're ahead. Interest rates were jacked up during the 1970s, and it did nothing positive for the economy. The last thing we need is another recession, especially a major one like 2008, or a prolonged one like in the '70s.
Go and study every high inflation period......there won't be any relief from high inflation until the economy is destroyed and the reckless spending stops........we haven't seen the worst yet...just wait until 2023.
Most of the covid dollars were wasted.......these morons dream up a crisis only so they can spend money.
If we hadn't moved our money out of stocks we would be looking at a 50% drop......thank god I didn't listen to the Merrill experts...lol
Go and study every high inflation period......there won't be any relief from high inflation until the economy is destroyed and the reckless spending stops........we haven't seen the worst yet...just wait until 2023.
Most of the covid dollars were wasted.......these morons dream up a crisis only so they can spend money.
Yep. The government inflates practically everything into a huge crisis, and then they use the so called "crisis" to chip away at our personal freedom & spend frivolously. Speaking of which, there was an internet link after the first round of stimulus payments which reported on how a lot of that "free money" was being spent. I'll have to see if I can find that link. It's pathetic what people were blowing that money on.
Yep. The government inflates practically everything into a huge crisis, and then they use the so called "crisis" to chip away at our personal freedom & spend frivolously. Speaking of which, there was an internet link after the first round of stimulus payments which reported on how a lot of that "free money" was being spent. I'll have to see if I can find that link. It's pathetic what people were blowing that money on.
In Chicago people in jail were getting PPP loans to bail themselves out of jail.....just the tip of the iceberg.
Thanks to all the trillions in wasteful spending we now get to pay higher mortgage rates, higher food costs, higher everything......inflation is a tax that hits everyone but mostly the poor and older people the hardest.
It is impossible for these guys to take the politics out of their decisions......that explains why he didn't start raising rates sooner or being more aggressive....the longer he takes and the weaker he acts the worse it is all going to be and last longer.
It seem like there would be an objective set of criteria to base a spot-market index out of. Something that sets the current interest rate based upon prevailing conditions. I couldn't do it. But, with what these guys can do, you'd think they could find something that would have outperformed the past 50 years. More natural than unelected people doing the bidding of who knows whom. IMO, Greenspan held rates too low for too long. Berkanke raised them too high too fast. Anything they do is subject to "too much, not enough; too soon, too late." It's the nature of reading tea leaves the way they do (with their own bias, as you noted). It seems like a variety of factors could set interest rates without human engineering. Labor, CPI, GDP, leading & coincident indicators. There should be something they could put together and model against the last 50 years, and say "this would have worked great."
It strikes me as strange that we pride ourselves on being a free market, and then have *obvious* manipulation of a kind that smacks of central planning of the worst kind. Greenspan was a lifelong devotee of Ayn Rand, and then held the most central-planning role for decades. (Maybe his holding rates low was good, and it was other factors like unregulated/over-leveraged derivatives that caused the bubble that made his low rates look bad. Other factors too. But, if rates are going to be seemingly arbitrarily set, why can't they track more transparent indicators? Remove the predilections. I can't believe there aren't objective metrics that (when weighed together) wouldn't do a better job at pegging interest rates every day. (That would lead to speculators arbitraging the next day's rate movement based upon what they perceive the metrics are doing that day. People offering futures contracts. All this happens now anyway. But, it's based upon human behavior (the board members who make up a "dot plot" which itself shows no one person has any idea what to do. It's usually all over the place. There has to be some set of metrics that together would form an index to set each day's interest rates. Leading and lagging indicators. Less coin flipping, more transparency in a way that anyone can watch what tomorrow will be. Not a smoke-filled room of elite who are beholden to people we're not even aware of.).
Go and study every high inflation period......there won't be any relief from high inflation until the economy is destroyed and the reckless spending stops........we haven't seen the worst yet...just wait until 2023.
The elephant in the room is the Fed Reserve's balance sheet. They should have at least stopped propping up the market from 2014-19. They tried to unwind a little in 2019(?) and the markets reacted badly (times were relatively good then, too). Then covid led to the balance sheet doubling again. Now, the fed is reducing the balance sheet while raising interest rates (double the pain that they were unwilling to do during good times). At the rate they going, they expect to reduce it by 2.5 trillion over the next 2.5 years (from 9 trillion, when it was less than 1 trillion in 2007).
That's a lot of pain over a long period of time, when they couldn't even manage to do it for over a couple months back when things were relatively good four years ago. Even if they can keep it up that long, it will still be 6 times higher than it was before the 2008 financial meltdown (when the fed became the "buyer of last resort" to avoid a complete meltdown). They've been deferring pain for a long time, much of which would have been a good time to unload some of it. Now they're using two painful tools (rate increases & delivering past pain to the present market).
The influencer media focuses on rate hikes. The balance sheet is a "force multiplier." 2023 will be even worse than rate hikes would cause, or the fed will stop and go back into sugar-daddy mode (they can't just stop. They either keep buying even when it's not necessary, or go into sell mode and cause a problem which forces them back into sugar-daddy mode).
Another interesting factor the pop media won't talk about: how much of revenue to the treasury goes to servicing the national debt? There is a point where interest rates will cause the debt to cost more to service than the treasury receives through revenue. Big spending looked good when the national debt could be rolled over into 1% treasuries. All the past spending will have to be rolled over into 4%. Not just current spending financed at higher rates, but the existing debt from past spending too. That adds up really quick. Like a maxed out credit card that the individual's accustomed to making the minimum payment, and then it goes into "default rate" (much higher rate applied to the existing balance). The monthly minimum payment rises dramatically, and the balance grows in a way that what would have taken 20 years to pay off at the minimum payment now takes 100.
There's going to be some more pain than just businesses paying more to borrow money, expand, etc. That's the usual scenario for how rate increases bring about recession. The enormous balance sheet (rung up during times that haven't been that bad compared to the 1930s and WWII), and the national debt (the interest on just servicing debt from decades ago) is creating a much worse situation.
Quote:
Originally Posted by jdahunt
If we hadn't moved our money out of stocks we would be looking at a 50% drop......thank god I didn't listen to the Merrill experts...lol
Most people (not nearing retirement, in retirement) usually lose money trying to time the market. If you're in that category, the trick will be to know when to get back in. You could be lucky. But, on average, people get out and back in at the wrong times and lose money. If anyone could time the market, they'd make a fortune selling their trading skills via a mutual fund. Every time someone thinks they've got a system, it usually falls apart as soon as everyone starts buying into that fund. Overall, low-cost index funds do better than managed funds that claim to beat the indexes.
But, things could be different this time too. The fed balance sheet & servicing the national debt could be the perfect storm for a huge reset. (People have always said that it's coming. The debt-to-gdp ratio is higher than it ever has been. The fed balance sheet is as high as it ever has been, and largely for no reason because the fed excessively played sugar-daddy the past decade.). So, you could be the smart one here getting out of stocks. But, historically speaking, that's a costly thing to do because nobody gets it right (other than luck).
It is impossible for these guys to take the politics out of their decisions......that explains why he didn't start
raising rates sooner or being more aggressive....the longer he takes and the weaker he acts the worse it
is all going to be and last longer.
The Russian economy continues to out perform experts expectations....the below might be one of the reasons.
The FED knows exactly what is happening. read https://www.eidebailly.com/insights/...22/5/cbo052522 .Individual tax receipts are up 28% in 2022. Of course, that will be burning a hole in people's pockets causing more inflation. Businesses have record profits as well. Both in 2021 and even higher in 2022. In 2021, and even with a pandemic, our government is collecting RECORD revenues. In 2021, they collected 18% more revenue.
It should be obvious that the fed is allowing inflation to jump in order to pay for the massive spending. NO ONE can deny the obvious. No way, no how, did they actually think it was "transitory". It's politics.
Sticking to the topic and I have mentioned before, housing especially in PHX metro was skyrocketing in value. And the GD FEDs were still busy buying mortgage-backed securities (which resulted in ultra-low mortgage rates while the housing market was overheated). In fact, they finally stopped buying mortgage backed securities just last week. Read https://wolfstreet.com/2022/09/16/th...ing-mbs-today/ All along, the purpose of MBS purchases was to repress mortgage rates and inflate home prices.
IMO, the FED's are attempting to inflate their way out of our spending frenzy. They are "taxing" most people's wealth by getting at our wallets another way. They are collecting more revenue and with inflation, our buying power is collapsing (and the national debt has become easier to swallow). And we are all sitting back assuming that they simply miscalculated "transitory inflation". The fact is, they are pretending they miscalculated. I call B.S. They are perfectly happy to make the $30T in debt feel like 30% less.
Rest assured, the "basket of goods" used to calculate inflation is waaaaaaaaay off! Inflation is much (much) higher than 9%. Go look at food, labor, cars, etc. You know, the total bill/budget. I bet it went up close 20% in the past year.
Most people (not nearing retirement, in retirement) usually lose money trying to time the market. If you're in that category, the trick will be to know when to get back in. You could be lucky. But, on average, people get out and back in at the wrong times and lose money. If anyone could time the market, they'd make a fortune selling their trading skills via a mutual fund. Every time someone thinks they've got a system, it usually falls apart as soon as everyone starts buying into that fund. Overall, low-cost index funds do better than managed funds that claim to beat the indexes.
Its not really called timing the market when the market has suffered a massive drop.....even a blind person could see what was coming with high inflation and the government wanting to spend trillions more.
We didn't get out on the peak, but close enough and we won't get back at the bottom but it will be close enough and should realize at least a 4x-5x multiplier vs riding it out.
I expect to be able to buy back stocks I once held at $70-100/share but have dropped 40-50% and going lower to pick them up around $10-$20/share once the economy tanks and will ride them back up....won't be as fast as what we realized from the Covid drop and the V shaped recovery but even selling at $40-$50/share brings a nice profit......
The elephant in the room is the Fed Reserve's balance sheet. They should have at least stopped propping up the market from 2014-19. They tried to unwind a little in 2019(?) and the markets reacted badly (times were relatively good then, too). Then covid led to the balance sheet doubling again. Now, the fed is reducing the balance sheet while raising interest rates (double the pain that they were unwilling to do during good times). At the rate they going, they expect to reduce it by 2.5 trillion over the next 2.5 years (from 9 trillion, when it was less than 1 trillion in 2007).
That's a lot of pain over a long period of time, when they couldn't even manage to do it for over a couple months back when things were relatively good four years ago. Even if they can keep it up that long, it will still be 6 times higher than it was before the 2008 financial meltdown (when the fed became the "buyer of last resort" to avoid a complete meltdown). They've been deferring pain for a long time, much of which would have been a good time to unload some of it. Now they're using two painful tools (rate increases & delivering past pain to the present market).
The influencer media focuses on rate hikes. The balance sheet is a "force multiplier." 2023 will be even worse than rate hikes would cause, or the fed will stop and go back into sugar-daddy mode (they can't just stop. They either keep buying even when it's not necessary, or go into sell mode and cause a problem which forces them back into sugar-daddy mode).
Another interesting factor the pop media won't talk about: how much of revenue to the treasury goes to servicing the national debt? There is a point where interest rates will cause the debt to cost more to service than the treasury receives through revenue. Big spending looked good when the national debt could be rolled over into 1% treasuries. All the past spending will have to be rolled over into 4%. Not just current spending financed at higher rates, but the existing debt from past spending too. That adds up really quick. Like a maxed out credit card that the individual's accustomed to making the minimum payment, and then it goes into "default rate" (much higher rate applied to the existing balance). The monthly minimum payment rises dramatically, and the balance grows in a way that what would have taken 20 years to pay off at the minimum payment now takes 100.
There's going to be some more pain than just businesses paying more to borrow money, expand, etc. That's the usual scenario for how rate increases bring about recession. The enormous balance sheet (rung up during times that haven't been that bad compared to the 1930s and WWII), and the national debt (the interest on just servicing debt from decades ago) is creating a much worse situation.
Most people (not nearing retirement, in retirement) usually lose money trying to time the market. If you're in that category, the trick will be to know when to get back in. You could be lucky. But, on average, people get out and back in at the wrong times and lose money. If anyone could time the market, they'd make a fortune selling their trading skills via a mutual fund. Every time someone thinks they've got a system, it usually falls apart as soon as everyone starts buying into that fund. Overall, low-cost index funds do better than managed funds that claim to beat the indexes.
But, things could be different this time too. The fed balance sheet & servicing the national debt could be the perfect storm for a huge reset. (People have always said that it's coming. The debt-to-gdp ratio is higher than it ever has been. The fed balance sheet is as high as it ever has been, and largely for no reason because the fed excessively played sugar-daddy the past decade.). So, you could be the smart one here getting out of stocks. But, historically speaking, that's a costly thing to do because nobody gets it right (other than luck).
Your points about the Fed balance sheet and Fed funds rate are excellent.
I think they painted themselves into a corner. Not the Fed, but the entire US private and public financial system.
We have long said the Fed is out of bullets. I don't know if the US economy can withstand emptying half the balance sheet let alone all of it. As you said, the Debt service soars with the Fed funds rate. We are basically trapped in a bad place where the Fed can't stabilize the economy. I think we are going to see only boom and bust cycles whiplashing the economy going forward.
Financial collapse is the eventual end came. It may come 50 years from now or 5, but I don't see a future of stable economic propserity on the horizon due to the Fed being out of bullets combined with the soaring national debt. It sounds impossibly dramatic to say "financial collapse" but I just don't think the Fed can possibly rebalance the competing financial conditions that restore stability.
Boom. Bust. Repeat. Collapse. I just don't now when.
But what do I know? I am just speculating.
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