Investing

[Deleterious]

Markets hate uncertainty more than anything.  

There was some concern of a 75 bp rate hike today.  So when they announced the 50 bp jump people were happy.  JPow also said they are not even considering 75 bp rate hikes as of now.  So that helps with future guidance as well.  

[Screwball]

1 hour ago, Tiger337 said:

S&P 500 up almost 3%.  That is surprising. It usually goes down when the Fed speaks.  

First, I have to correct myself.  Above I posted "Once COVID hit they had to raise rates."  Should read "lower."  My bad.

****

To address this, it was fun to watch.  No chart porn here, so I have some.  Today's S&P by the minute. The two cyan lines are the Fed release at 2pm, and the start of their presser at 2:30pm.  I watched part of it.

 

Adding to Del's point;

A link to their unwinding plan;

Plans for Reducing the Size of the Federal Reserve's Balance Sheet

Powell spoke until almost 4 if I remember right.  What the market was looking for is the QT numbers.  Everybody expected 50bp, some wanting/guessing 75.  I don't know what the Street was expecting for the reductions in monthly buying, but the way the market acted, the may have been on the dovish side.

[Tiger337]

I understand why they dropped when Covid hit, but I wondered why they started dropping in Summer, 2019.  

[Screwball]

17 minutes ago, Tiger337 said:

I understand why they dropped when Covid hit, but I wondered why they started dropping in Summer, 2019.  

From that bank rate article.  The text is kind out of sequence, but the point valid.
 

Quote

 

The Fed couldn’t escape zero rates in the 2010s just as much as it couldn’t escape devastating recessions.

Officials would ultimately end up leaving interest rates at rock-bottom until 2015, after which they only hiked interest rates by 25 basis points once per year. That is, until 2017, when the Fed hiked three times, and 2018, when they hiked four more times. The fed funds rate peaked at 2.25-2.5 percent.

Facing tepid inflation and moderating growth, the Fed also decided in 2019 to cut interest rates three times to give the economy a fresh boost — similar to Greenspan’s “insurance” cuts of the 1990s.

The fed funds rate looked like it was about to settle there until the coronavirus pandemic came along, ushering back in another era of near-zero rates. The Fed slashed rates to zero across two emergency meetings within 13 days of each other as the gears of the economy came to a halt.

Chair Janet Yellen took the helm of the Fed from Bernanke in February 2014 and steered the economy through its Great Recession recovery until February 2018, when Chair Jerome Powell was installed.

 

Speaking of the Fed, can anyone explain why they are buying MBS to begin with?

[Tiger337]

1 hour ago, Screwball said:

From that bank rate article.  The text is kind out of sequence, but the point valid.
 

Speaking of the Fed, can anyone explain why they are buying MBS to begin with?

Thanks!

[gehringer_2]

2 hours ago, Screwball said:

From that bank rate article.  The text is kind out of sequence, but the point valid.
 

Speaking of the Fed, can anyone explain why they are buying MBS to begin with?

just another pump handle. Another mismatch in the end. For years they've been doing this that and the other to keep mortgage rates down, but nobody's bothered to make sure anyone is building houses recently. So no stock available to put a mortgage on.

Edited May 5, 2022 by gehringer_2

[Screwball]

Purchasing MBS started in 2009 when the bankers blew up the world, ended in 2010.  Re-started in 2020 due to COVID, still going, and I don't think the dual mandate of the Fed includes being a home building cop.

[Screwball]

I haven't watched any of the Fed pressers in a long time other than a little today.  But I got curious today and did a little poking around.  The Fed announced an open ended buying of MBS  March 15, 2020.  If you look at the chart below, it is the exact day where you see a bubble that says 2191.86.  Then look up and to the right and you will see a bubble that says 4818.62.  That is Jan 4, 2022.

That is a 3 year chart.  As you can see, once you get to the top bubble, the market turns over.  So what happened on the day of the second bubble?  The date is Jan 4th.  Did anything happen that day?  Yep.

Dow drops nearly 400 points in first loss of 2022, as traders brace for a more aggressive Fed

The money line;

Quote

Rates also jumped, putting pressure on equities, after the minutes from the Federal Reserve’s most recent meeting showed the central bank has discussed reducing its balance sheet shortly after it raises rates later this year. 

Discussed reducing it's balance sheet... All 9 trillion of it.  For context, a 5 year chart.

Their balance sheet has expanded from 4 to 9 trillion (rounding) in the last 2 years.  I wonder how much the total MBS purchases (over a trillion) actually add up to, and what we accomplished for creating all this money (I guess, since this isn't bonds, the debt isn't monetized, so where did it come from?).

One thing we did was send the S&P some 2600 points higher, or quick, someone do the math - 120% if you hit bottom to top.  And this is only a 2 year run.  Ain't that friken sweet?

Sure, but for who?  How many people doubled their money in the last two years? Guessing it ain't most of us.  And now they are talking about more rate hikes, limiting MBS purchases - in other words - taking away the punch bowl. Usual policy says when inflation is running hot you raise rates.

The market expected 50bp, got it, then ripped to the upside, along with the rip went commodities, with crude closing around 108.  Not helpful.

We'll see where this goes, but the Fed has a market that turned over while we have a 8.5 inflation rate and a last quarter -1.4 GDP.  Who you gonna save?

Sure as fuck won't be us chumps.

[Screwball]

And then some.

[gehringer_2]

43 minutes ago, Screwball said:

And then some.

Yesterday's rally was silly anyway - but let's see where this stops. 🤷‍♀️

[Deleterious]

I always wonder about the few green ones on days like today.

[1776]

One of the green ones is Kelloggs. The stock was up over $2 today. They pay a decent dividend, .58 a share.
I held it a while back and sold it for a small profit. I sold it when the workers went on strike. It’s a good defensive stock.

[Screwball]

3 hours ago, Deleterious said:

I always wonder about the few green ones on days like today.

Some call this a stock pickers market.

[Screwball]

This caught my eye today.  I don't know how this picture will look so we'll see. The market gapped down and went south until around noon, then fiddled around and made the days low at 3:21.

I don't remember how much the market was down at that time, but it was a bunch.  FTR, I use the S&P.  At 3:50 pm it printed a 32.17 increase in one minute.  I would have to do the math, but what kind of money would it take to do that?

Probably above my pay grade, but that is wild.

[Deleterious]

Could that be a big find buying back in. Something like Vanguard.

[Deleterious]

Shares of Rivian can be sold tomorrow if you bought them in their IPO. Ford announced they will be selling about 8% of their shares.

The stock has been taking a beating so I imagine quite a few will want to sell.

[Deleterious]

Futures are ugly this morning.

[Deleterious]

On November 11, 2021 Bitcoin reached its ATH of $69,045.  Right now it is trading at $31,718.  A drop of over 50% in 6 months.

[Hongbit]

38 minutes ago, Deleterious said:

On November 11, 2021 Bitcoin reached its ATH of $69,045.  Right now it is trading at $31,718.  A drop of over 50% in 6 months.

I’d love to see the total marketing dollars spent by the top crypto exchanges in this same time period.   Billions spent on branding trying to normalize crypto as a safe place for regular schmoes to put their money. 

Edited May 9, 2022 by Hongbit

[Motown Bombers]

I still don't get crypto. I also don't understand what mining crypto is. I'm 99% there isn't someone somewhere wearing a hardhat and flashlight with a pickaxe in a mine somewhere mining crypto. 

[gehringer_2]

1 hour ago, Motown Bombers said:

I still don't get crypto. I also don't understand what mining crypto is. I'm 99% there isn't someone somewhere wearing a hardhat and flashlight with a pickaxe in a mine somewhere mining crypto. 

its the ultimate irony. For millennia we used things like gold that were hard to get and yet quite easy to keep (very physically stable and reworkable) to stand for the value of other stuff we wanted to trade so we didn't have to carry bushels of wheat around. But it never worked all that well because the price of the gold or silver or whatever, kept changing its intrinsic value (e.g. every time a gold find flooded the market with cheaper gold) and when that happened it screwed up everybody's economy. And there was no way for money supply growth to match economic growth so growth was often inhibited.  But that's the way it stayed, right up until the 20th century. Then finally some clever people figured out that you can just print dollars, and as long as you control the supply, it's value won't bounce around everyplace. The economy saw that it was good, and that was the creation of 'fiat' money. Now, sometimes the people trying to control the supply didn't do the best job and the economy ping ponged from inflation to recession, but decade by decade they tried to learn to get better. How much better is an open question but the point being there is group of people out there trying to keep the dollar as stable as they know how. (and getting a lot of flak for being too slow to have caught the current inflation before it got off the ground.)

But all was not joyous in paradise. Some people thought that the government was controlling the value of money to evil purposes and pined to go back to some material standard like gold, despite all the problems inherent in that. And some people just couldn't accept the idea of money with no backing. But they never got much traction.

Then came 2009 and the crash. And a bunch of programmers decided that the crash was caused by the fact that the banks 'controlled money.' Now this was a misdiagnosis because the problem in the crash was not instability in the value or origin of money, but in its use (reckless credit and derivativization) but be that as it may they decided that what the world needed was money created by computers under some kind computational distributed model were no-one had control. They would free 'fiat' currency from it's oppression by government and bankers and somehow market magic would take care of everything.

But it turns out that fiat currency only works exactly when there is someone, like the Federal Reserve or Euro Bank, actively trying to manage the value of a currency. In it's absence it's value becomes a pure speculation and just goes anywhere, and that is what crypto now is. On top of that, the programmers' dreams of block chain tech have also crashed because the 'ledger' (the bitcoin or other cypto database) quickly became too big for transactions to be executed at reasonable cost (which has to be damn near zero in the everyday economy). The cost to clear a single bitcoin transaction today is in the 10s to 100s of dollars depending on too many variables for anyone to contemplate when they are in the line at Krogers. So it has failed both functionally as a medium of exchange and theoretically as a stable store of value.  And Bitcoin even fails as an environmental scourge because mining bitcoin is pointlessly generating untold tons of CO2 the world doesn't need as computers churn recalculating the encryption of the ledger.

However, the market loves a good speculation - especially with a high tech gloss and a story so complicated it can keep people confused and worried about FOLO, so onward it goes. And Etherium thinks it can transition to a new gig by adding NFTs to its blockchain to keep it going for them. 

All the while the power to control these 'currencies' is concentrated into smaller and smaller circles as the cost and resource requirements of mining goes up, failing even their initial theology of a system too distributed to be manipulated. The system insures each crypto quickly and effectively generates its own oligarchy.

Moral of the story, the nerds are no better at saving the world than anyone else, but clever people can always find another way to get rich.

Edited May 9, 2022 by gehringer_2

[Deleterious]

I think there are legit reasons a busy CEO needs to fly private.  Security is not one of them.  Nobody could pick this guy out if they were in a room alone with him.

DraftKings Stock Continues To Slide Despite Q1 Earnings Beat

Quote

In March, DraftKings also agreed to a one-year, $600,000 lease of the aircraft from an entity controlled by Robins. The company will cover all operating, maintenance and other expenses associated with the aircraft. 

Per the DraftKings 10-Q, Robins and his family need to fly private for security reasons. The DraftKings remunerations committee assessed it was “more efficient and flexible and better ensures safety, confidentiality and privacy.”

 

[Tiger337]

5 hours ago, Motown Bombers said:

I still don't get crypto. I also don't understand what mining crypto is. I'm 99% there isn't someone somewhere wearing a hardhat and flashlight with a pickaxe in a mine somewhere mining crypto. 

I expect to get through life not really understanding crypto.    

Edited May 9, 2022 by Tiger337

[gehringer_2]

24 minutes ago, Tiger337 said:

I expect to get through life not really understanding crypto.    

hopefully it will just go away as it really serves very nearly no purpose, but I doubt it. From an investment standpoint it's basically now in the same category as art. It's going to be worth whatever the next guy will pay for it, except you can't hang it on your wall and look at it in the meantime. I guess if you buy a digital art NFT, which is essentially also buying crypto, you can leave it up as the screensaver on your TV! 

Edited May 9, 2022 by gehringer_2

[Screwball]

There is an entertainment value to the now popular crypto vs. tulip parallel.