Investing

[gehringer_2]

4 hours ago, Hongbit said:

25bps cut was expected in September.

I think 50bps is now on the table with possibly more to follow in December

It should have been yesterday - they are behind the curve, know it, and are aggressively proud of it.

[Tiger337]

The Feds were slow to raise the rates.  Now, they are being slow to lower them.  Is Scott Harris in charge?  

[1984Echoes]

3 hours ago, Tiger337 said:

The Feds were slow to raise the rates.  Now, they are being slow to lower them.  Is Scott Harris in charge?  

No that would be Al Avila: too slow and too late.

Their competence is at a much higher rate though: akin to Harris.

Now...

if they could only match up well with Brad Holmes and Dan Campbell, etal...

We'd (the economy) would be cookin'...!

[Screwball]

So we need to lower rates? What, exactly, are we fixing?

Low rates for too long got us to where we are now.

Been trending down since early 80s, flat lined (ZIRP) in 2010 when the banks blew up the world until 2016ish, a little blip, and flat again(probably due to COVID). And here we are. If cheap money was the solution we wouldn't be where we are.

Wherever we are, I'm not real sure.

[gehringer_2]

33 minutes ago, Screwball said:

So we need to lower rates? What, exactly, are we fixing?

IMO, between maybe 3 and 5 percent, which is sort the all time historical long term average, it's not going to change much of anything real from an economic standpoint, I think there are people out there that think that eventually the Fed will take things back to ZIRP where we know there are a whole bunch of folks whose happiness I don't care about would be happy as clams. But I think it's a lot more likely that rate reductions will not go below 3-3.5% so in reality the difference to economic activity will small. But not to psychology.  And the psychology impacts the politics and the politics feed back into the determination of future economic policies that will matter.

Edited August 3 by gehringer_2

[Tiger337]

1 hour ago, Screwball said:

So we need to lower rates? What, exactly, are we fixing?

Low rates for too long got us to where we are now.

Been trending down since early 80s, flat lined (ZIRP) in 2010 when the banks blew up the world until 2016ish, a little blip, and flat again(probably due to COVID). And here we are. If cheap money was the solution we wouldn't be where we are.

Wherever we are, I'm not real sure.

I don't know where the rates should be.  For regular middle class people (not big investors), high rates are good and bad - good because you can grow your savings in CDs or treasuries and not risk all your money in stocks.  They are bad because it makes it hard to make big purchases like cars and houses.  Those are things that most people care about, so for them it's a balance between the good and bad. Right now, I hear a lot of people complaining about the high rates.  

For the overall economy, I am not smart enough to know what the ideal level should be.  They left it near zero for so long (to please people who don't need help) and then shot it way up to 5+ due to inflation.  I don't know if the current rate is inherently bad but it seems going from 0 to 5+ is a big jump in a short time and now that all the Covid era stuff has calmed down it makes sense to moderate that jump a little bit.  That is just my very amateur opinion.  

 

[gehringer_2]

Just now, Tiger337 said:

I don't know where the rates should be.  For regular middle class people (not big investors), high rates are good and bad - good because you can grow your savings in CDs or treasuries and not risk all your money in stocks.  They are bad because it makes it hard to make big purchases like cars and houses.  Those are things that most people care about, so for them it's a balance between the good and bad. Right now, I hear a lot of people complaining about the high rates.  

For the overall economy, I am not smart enough to know what the ideal level should be.  They left it near zero for so long (to please people who don't need help) and then shot it way up to 5+ due to inflation.  I don't know if the current rate is inherently bad but it seems going from 0 to 5+ is a big jump in a short time and now that all the Covid era stuff has calmed down it makes sense to moderate that jump a little bit.  That is just my very amateur opinion.  

 

The equilibrium for 'prime' interest rate loans should normally sit a couple of percent above the inflation rate expectation. Having use of money has a value, and if you have money and you loan it, it must make some profit over the inflation rate or you are not going to loan it. So that sets the real economic limit. Also the longer you loan it for, the higher margin over current inflation you want because you are taking a bigger risk in offering the loan. The Fed can play around and push things one way or the other for a certain amount of time - esp in the short term, but the market always wants to force long term rates to what the inflation expectation plus a reasonable profit, determines. If the economy goes into the doldrums, no-one wants to borrow and invest and inflation falls to less than the Fed target, then I could see rates under 3% (like the aftermath of the crash and the pandemic). But if the Fed manages inflation at 2%, long term rates are not likely to end up below 3.5% - 4%. The other big drag on consumer spending that was keeping things slow and rates artificially low in the post 2008 crash era was the boomers transitioning into a lower spending part of their life cycle, but the demographics are over the hump on that now.

[Tigeraholic1]

Like nobody saw this coming. I locked my rate as many others did into a 30y mortgage at 2.5. NOBODY is going to go to market with 6+ prevailing rates. 

[Tiger337]

48 minutes ago, gehringer_2 said:

The equilibrium for 'prime' interest rate loans should normally sit a couple of percent above the inflation rate expectation. Having use of money has a value, and if you have money and you loan it, it must make some profit over the inflation rate or you are not going to loan it. So that sets the real economic limit. Also the longer you loan it for, the higher margin over current inflation you want because you are taking a bigger risk in offering the loan. The Fed can play around and push things one way or the other for a certain amount of time - esp in the short term, but the market always wants to force long term rates to what the inflation expectation plus a reasonable profit, determines. If the economy goes into the doldrums, no-one wants to borrow and invest and inflation falls to less than the Fed target, then I could see rates under 3% (like the aftermath of the crash and the pandemic). But if the Fed manages inflation at 2%, long term rates are not likely to end up below 3.5% - 4%. The other big drag on consumer spending that was keeping things slow and rates artificially low in the post 2008 crash era was the boomers transitioning into a lower spending part of their life cycle, but the demographics are over the hump on that now.

That is what I had thought.  However, they left it near zero for so long, I wasn't really sure whether that rule of thumb still held true.  

 

Edited August 3 by Tiger337

[Tiger337]

12 minutes ago, Tigeraholic1 said:

Like nobody saw this coming. I locked my rate as many others did into a 30y mortgage at 2.5. NOBODY is going to go to market with 6+ prevailing rates. 

Personally, I have liked the higher rates because I was able to lock in some money in CDs for 3-5 years.  This is money that I did not need right away but might need before retirement and I didn't want to put in stocks..  However, I see a lot of younger people not able to buy homes because of the high rates.  That's not good for them or the economy.     

[Tigeraholic1]

Thankfully this came on a Friday. It would be a wise to sure up your high risk investments this weekend.

 

 

 

[CMRivdogs]

10 hours ago, Tigeraholic1 said:

Like nobody saw this coming. I locked my rate as many others did into a 30y mortgage at 2.5. NOBODY is going to go to market with 6+ prevailing rates. 

Bought our current abode in Summer of 2020, locked in the rates early in the pandemic ( if I remember correctly). We signed the contract to build the previous September.

I laugh every time I get mail or a call from the mortgage company to refinance. I ask them if they can beat our current rate. I really don't care about accrued equity, yet.

[gehringer_2]

9 hours ago, Tigeraholic1 said:

Thankfully this came on a Friday. It would be a wise to sure up your high risk investments this weekend.

 

 

 

Tech has been oversold and corrections there are dragging the indexes.

[gehringer_2]

Not so much investment, but economics related - if you wonder why gasoline prices in MI have risen, the storms on the 15th took down Exxon's 250,000 bbl/day refinery in Joliet Il. It's takes more than a week just to completely restart a refinery, and that's after you've fixed whatever the shutdown may have broken.

[Hongbit]

Dow futures down 300 right now and still falling. Black Monday is trending on Twitter.

Buckle up for severe turbulence. 

Edited August 5 by Hongbit

[Tigeraholic1]

4 hours ago, Hongbit said:

Dow futures down 300 right now and still falling. Black Monday is trending on Twitter.

Buckle up for severe turbulence. 

 

[Tigeraholic1]

lol 

 

[chasfh]

Can't even log into my brokerage. Is this how they getcha? Because it's not really your money until it's safely in your pocket, is it? Until you can pry it out of their clutches, it's theirs.

[Screwball]

[Tigeraholic1]

This is baaaaaad. I wonder how Biden/Harris will pin this on Trump admin? 

[pfife]

I would like to be the first to congratulate MagaHolic, this must be a wonderful day for you 

[1776]

My only wish is that younger investors don’t panic and do something irrational, like selling. In fact, increasing retirement contributions through work plans, or whatever, would be wise in the very near future. Selling now, probably not so wise. Easier said than done I know. 

 

[gehringer_2]

I don't want to sound cruel, but if you bought NVDA etc., at the top of run you set yourself up to be the kind of sap that the pros make their money from. If you bought it when it was reasonable, you are still well into the black.

One thing you have to learn as a single investor is that if you are late to the party, just accept that you need to go somewhere else. Hopping on trains that have already pulled out far from the station is seldom a winner.

Edited August 5 by gehringer_2

[1776]

Berkshire Hathaway is holding a record number in cash now. Warren’s probably checking his buy list twice.

[gehringer_2]

13 minutes ago, 1776 said:

Berkshire Hathaway is holding a record number in cash now. Warren’s probably checking his buy list twice.

Yup. Warren getting out is probably one of things that started the move to the exits.

Edited August 5 by gehringer_2