Hongbit Posted August 13 Share Posted August 13 1 hour ago, gehringer_2 said: This morning's July PPI release 0.1%; 2.2% year over year. "Core" PPI 0.3/3.3% Numbers that should keep the September fed cut on the table Quote Link to comment Share on other sites More sharing options...
Screwball Posted August 14 Share Posted August 14 On 8/12/2024 at 2:54 PM, Screwball said: Wall Street Engineers Invent a New Head-Spinning Options Trade At least they used derivatives and boom in the same sentence. I wonder how America will like it when we bail out the swine bankers again? at @gehringer_2 - why the funny face? Quote Link to comment Share on other sites More sharing options...
Screwball Posted August 14 Share Posted August 14 9 hours ago, Hongbit said: Numbers that should keep the September fed cut on the table Why should the Fed cut rates? Quote Link to comment Share on other sites More sharing options...
gehringer_2 Posted August 14 Share Posted August 14 15 minutes ago, Screwball said: at @gehringer_2 - why the funny face? That emoji is labeled “confused” which for me sums up an option on a derivative of an option (or whatever it actually is!) Quote Link to comment Share on other sites More sharing options...
gehringer_2 Posted August 14 Share Posted August 14 17 minutes ago, Screwball said: Why should the Fed cut rates? There is a conventional answer to your question but I have a feeling that’s not why you asked the question. 🤔 Quote Link to comment Share on other sites More sharing options...
romad1 Posted August 14 Share Posted August 14 Well 1 Quote Link to comment Share on other sites More sharing options...
Screwball Posted August 14 Share Posted August 14 14 minutes ago, gehringer_2 said: That emoji is labeled “confused” which for me sums up an option on a derivative of an option (or whatever it actually is!) got it Quote Link to comment Share on other sites More sharing options...
Screwball Posted August 14 Share Posted August 14 11 minutes ago, gehringer_2 said: There is a conventional answer to your question but I have a feeling that’s not why you asked the question. 🤔 Not really. What might be this conventional answer? Quote Link to comment Share on other sites More sharing options...
Hongbit Posted August 14 Share Posted August 14 21 minutes ago, Screwball said: Why should the Fed cut rates? To help the great men that built this country. The men that really make America great. The men that we depend on for liberty and justice for all. The Bankers We have a civic duty to help them when things get tough. It is as much of a patriotic gesture to aid one of the pillars of our society as it is an economic tool to help grow their business. Free market shouldn’t apply to them. They should be above the law for all of own financial safety. God Bless Jamie Dimon God Bless Brian Moynihan God Bless The United States of America. Quote Link to comment Share on other sites More sharing options...
gehringer_2 Posted August 14 Share Posted August 14 (edited) 38 minutes ago, Screwball said: Not really. What might be this conventional answer? LOL - OK - here goes. My understanding of what a typical central banker believes is that if inflation is falling below target, you have to decrease interest rates in order to increase borrowing across the economy which in turn increases the money supply (and/or velocity) and so reinflates the economy to the target inflation level. By the theory - you have to do this because if inflation is allowed to fall too close to zero, you open the economy to the possibility that normal economic variation tips the economy into deflation, and in conventional monetary policy, deflation is believed to not only be strongly contractive, but potentially self accelerating as well and thus very very difficult to get out of once you fall into it. Stagnation in Japan in some recent decades would be pointed to as the example. The inflation target of 2% inflation is the number the Fed has settled on as a compromise that is high enough to give the Fed some margin of error to prevent falling into deflation while being low enough not to set off inflationary expectations high enough to tip it unstable the other way. I've seen liberal economists argue 2% is unnecessarily low and that you could target 2.5-3% and get lower unemployment, more conservative economists disagree and they hold sway at the current Fed with the 2% target. If the PPI/CPI/PCE are at 2.2% and still falling, those are signs the economy has reached/is reaching the Fed's target. Ergo the rate cut is in the near future. Those would be my notes if I were cribbing them from a guy like maybe Bernanke giving the lecture (and in fact I think I have probably heard Bernanke give close to this layout in a speech.......) In the current case, the other piece is quantitative tightening. The Fed is working down its $7 Trillion (it was $9T!) balance sheet (taken on after the great crash) by selling ~$100B of their bond holdings per month. That is also deflationary so they have some room to maneuver just by changing their QT schedule even without lowering the discount rate... Edited August 14 by gehringer_2 Quote Link to comment Share on other sites More sharing options...
Tiger337 Posted August 14 Share Posted August 14 I kind of like the high rates now that I am getting older and starting to shift more money into CDs. Quote Link to comment Share on other sites More sharing options...
Hongbit Posted August 14 Share Posted August 14 4 minutes ago, Tiger337 said: I kind of like the high rates now that I am getting older and starting to shift more money into CDs. High rates are terrible for housing and real estate, automotive, credit card and consumer debt. Housing is always a key factor in economic growth and it’s stalled out with these rates coming on the heels of the record lows from Covid. Quote Link to comment Share on other sites More sharing options...
Tiger337 Posted August 14 Share Posted August 14 3 minutes ago, Hongbit said: High rates are terrible for housing and real estate, automotive, credit card and consumer debt. Housing is always a key factor in economic growth and it’s stalled out with these rates coming on the heels of the record lows from Covid. Right, high rates can be a problem in general. I was just selfishly commenting on my own situation! Quote Link to comment Share on other sites More sharing options...
chasfh Posted August 14 Share Posted August 14 10 hours ago, Hongbit said: To help the great men that built this country. The men that really make America great. The men that we depend on for liberty and justice for all. The Bankers We have a civic duty to help them when things get tough. It is as much of a patriotic gesture to aid one of the pillars of our society as it is an economic tool to help grow their business. Free market shouldn’t apply to them. They should be above the law for all of own financial safety. God Bless Jamie Dimon God Bless Brian Moynihan God Bless The United States of America. Rhetorically incendiary though this may be, this is correct as practiced. Quote Link to comment Share on other sites More sharing options...
1984Echoes Posted August 14 Share Posted August 14 10 hours ago, gehringer_2 said: ... By the theory - you have to do this because if inflation is allowed to fall too close to zero, you open the economy to the possibility that normal economic variation tips the economy into deflation, and in conventional monetary policy, deflation is believed to not only be strongly contractive, but potentially self accelerating as well and thus very very difficult to get out of once you fall into it. Stagnation ... Additionally: The Fed's 1st priority is keeping inflation in check. But their 2nd priority is keeping employment as high as possible. 1st priority obviously takes precedence (it is #1 after all); but with rates at this level, as Hongbit pointed out: 10 hours ago, Hongbit said: High rates are terrible for housing and real estate, automotive, credit card and consumer debt. Housing is always a key factor in economic growth and it’s stalled out with these rates ... Right now, everyone is focusing on the 2ND PRIORITY because if holding rates ta this level tips the economy into a recession... they just screwed up their 2nd priority and it's no longer a "soft landing" but a hard landing with unemployment jumping (already jumped from 3.7-ish % up to 4.3% in the latest report...). Personally, I think the economy is too strong for us to be anywhere near a recession. Zero chance IMO. But that's what ALL the Finance conversation is revolving around today... Recession? Rate cuts? How much? When? I even heard a proposal for an "emergency session" to drop the Fed Rate by 50 basis, like, right now. I think that's a bit ridiculous, just wait till Sept. September meeting will be to drop by 25 or 50 basis points... I think a rate cut is pretty much baked in... could go either way on the 25 or 50... too early to tell at this point... Quote Link to comment Share on other sites More sharing options...
oblong Posted August 14 Share Posted August 14 Nobody knows anything. It's just a circle jerk echo chamber of talk. They can twist anything into good or bad and the "talk" is just like Twitter's "Trending" feature where it's just people talking about the talking but nowhere is the actual words. Quote Link to comment Share on other sites More sharing options...
Screwball Posted August 21 Share Posted August 21 Quote Nonfarm payroll growth revised down by 818,000, Labor Department says - CNBC Points As part of its preliminary annual benchmark revisions to the nonfarm payroll numbers, the Bureau of Labor Statistics said the actual job growth was nearly 30% less than the initially reported The revision to the total payrolls level of -0.5% is the largest since 2009. At the sector level, the biggest downward revision came in professional and business services, where job growth was 358,000 less than initially reported. Imagine that! I guess it's easy to not know anything when they people who provide the numbers don't either (some financial people think these numbers are too low). For those wanting a rate cut, this will probably help. 2 Quote Link to comment Share on other sites More sharing options...
Tigeraholic1 Posted August 21 Share Posted August 21 43 minutes ago, Screwball said: Imagine that! I guess it's easy to not know anything when they people who provide the numbers don't either (some financial people think these numbers are too low). For those wanting a rate cut, this will probably help. Cooking the books you say? Nothing to see here. Quote Link to comment Share on other sites More sharing options...
Hongbit Posted August 22 Share Posted August 22 21 hours ago, Screwball said: Imagine that! I guess it's easy to not know anything when they people who provide the numbers don't either (some financial people think these numbers are too low). For those wanting a rate cut, this will probably help. Yearly revisions are normal and expected with such an antiquated survey system. This is a huge, huge miss. Average of 70k overstatement each month is crazy. We’ve operated for many months with the facade that the crucial jobs component of our economy was much better than it really was. That’s just not right but I’ve got to keep reminding myself this is all a rigged game. Powell is speaking shortly from Jackson Hole and is expected to confirm the Fed will be cutting at their next meeting. Quote Link to comment Share on other sites More sharing options...
1984Echoes Posted August 22 Share Posted August 22 13 minutes ago, Hongbit said: Yearly revisions are normal and expected with such an antiquated survey system. This is a huge, huge miss. Average of 70k overstatement each month is crazy. We’ve operated for many months with the facade that the crucial jobs component of our economy was much better than it really was. That’s just not right but I’ve got to keep reminding myself this is all a rigged game. Powell is speaking shortly from Jackson Hole and is expected to confirm the Fed will be cutting at their next meeting. I would be looking to see if he states explicitly that the Fed is looking at both 25 or 50 basis point reductions. I think the market right now is waffling between those two expectations... But one of them is definitely expected as the September meeting. Quote Link to comment Share on other sites More sharing options...
Hongbit Posted August 22 Share Posted August 22 19 minutes ago, 1984Echoes said: I would be looking to see if he states explicitly that the Fed is looking at both 25 or 50 basis point reductions. I think the market right now is waffling between those two expectations... But one of them is definitely expected as the September meeting. They will have access to some of August numbers before they meet in the middle of September. I’d guess they are thinking 25bps now and will move it to 50bps if those numbers come in soft. Quote Link to comment Share on other sites More sharing options...
1984Echoes Posted August 22 Share Posted August 22 22 minutes ago, Hongbit said: They will have access to some of August numbers before they meet in the middle of September. I’d guess they are thinking 25bps now and will move it to 50bps if those numbers come in soft. Yes... They have time (and will have additional info) to decide... Quote Link to comment Share on other sites More sharing options...
mtutiger Posted August 23 Share Posted August 23 September it is Quote Link to comment Share on other sites More sharing options...
1984Echoes Posted August 23 Share Posted August 23 Everything is hitting expectations so far... Quote Link to comment Share on other sites More sharing options...
Hongbit Posted August 23 Share Posted August 23 I read somewhere that traditionally the Fed has started with a half point cut in similar situations after a long stretch of inactivity. On top of September, there’s also been talk of an additional cut in December as well. Quote Link to comment Share on other sites More sharing options...
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