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jhooper

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  • The Fed Will Not Raise Rates... Here's Why [View article]
    Here's a comment back from February 2015.

    "Global currency fluctuations are a zero-sum game, when one goes up another must come down, creating trade-offs for the economy. Importing cheaper goods will boost the purchasing power of US consumers, though at the same time hurting domestic exporters. Cheaper imports are also deflationary, as domestic producers must lower prices to compete with foreign rivals. Yesterday, Warren Buffet said it would be very difficult for the Fed to successfully normalize raise rates with a dollar this strong. He has a point. "
    Mar 19, 2015. 01:45 PM | Likes Like |Link to Comment
  • That's Not How Any Of This Works [View article]
    "raising Reg Q ceilings for just the CBs in December 1965. "

    That would seem inflationary, whereas interest on excess reserves would seem to be disinflationary. In other words, if a bank can pay interest on ddas then it can either attract or keep deposits, thus allowing it to grow its loan base, hence more inflation. Paying a bank to keep reserves rather than use those reserves to make loans would seem to suggest less inflation.

    Sorry, I'm not sure how you are equating them.
    Mar 19, 2015. 12:51 PM | Likes Like |Link to Comment
  • That's Not How Any Of This Works [View article]
    "History says rates could stay low and range bound for 10-15 years or more."

    Indeed. Its important to remember that rates don't go down because they are high, or that rates don't go up because they are low. Rates go up and down because of the economic reasons that dictate whether they go up or down. So, looking back in history to say the 1800s, the early 1900s, or even the 1950s or 1970s is only useful to understanding the economic forces that made rates what they were at those times. From that study, we can examine those same forces and their interplay in our time, and then decide based on that empirical reasoning instead of specious reasoning what the likely outcome for rates will be.

    Right now, the data point to low rates for a long time, with regards to the US that is. If these circumstances continued for the next 4 decades, then rates would stay low for the next 4 decades.
    Mar 19, 2015. 11:52 AM | 1 Like Like |Link to Comment
  • The Fed Will Not Raise Rates... Here's Why [View article]
    Oh, forgot to add that the 10 yr action suggests the market believes that DR rate hikes are on hold for a while. The 10 yr has dropped to the low 1.90s. Now, some of that might be more of the fear trade based on the Greek tragedy, but it appears to me to be the sort of front running you see when the markets think they know what the Fed is going to do. In this case, they think the Fed is going to keep the DR rate low and the balance sheet up, thus low rates. As such, everyone piles in when then 10 yr is at 2.05, thus driving down yields.

    We saw a similar thing in 2008 when QE1 was announced. The 10 yr was close to 4%. Then QE was announced, and the markets drove the 10 yr yield down to 2%. Everyone thought that QE would mean lower rates, so they piled on, thus driving down rates themselves. Then when QE started, rates went up. Ooops.
    Mar 19, 2015. 10:51 AM | Likes Like |Link to Comment
  • That's Not How Any Of This Works [View article]
    "which proved conducive for sustainable massive economic growths in the 50's and and 60's. The same happened in the 80's and 90's"

    Careful, that's specious. There were other factors in the fiscal realm that were occuring during those periods as well.

    "If history is a guide, interest rates are not going to stay depressed for long."

    Take a look at the 10yr rate since 1980, and see how history guides you.
    Mar 19, 2015. 10:42 AM | 1 Like Like |Link to Comment
  • The Fed Will Not Raise Rates... Here's Why [View article]
    Of course this is USA today, but it does represent the "Fed will raise rates" camp.

    http://usat.ly/1Lx9g92

    And then there is this from Chris Low at FTN.

    "Today’s Fed statement dropped patient.

    “Patient,” of course, meant the Fed expected to wait at least two meetings before raising rates. It’s absence suggests the Fed will discuss a hike in June. "

    Chris Low usually does pretty good work.

    Then compare Low to FIG Partners.

    "Yesterday’s FOMC forecasts were downgraded more than expected pushing out the June liftoff. The removal of ‘patient’ signals the fed will be even more data dependent while the downgraded GDP expectations and lower Employment threshold more than offset the language change. The unemployment shift low-ered from sub 5.5% to a 5.0%- 5.2% employment threshold was the real sur¬prise. Comments on inflation remained consistent that they are ‘reasonably confident’ that we will return to 2% in the medium term. The market is current¬ly pricing odds for the first rate move at: September (41%), October (50.9%), and December (66%). Click here for the latest economic projections. "

    I think Yellen wants to print, but my worry is she has stuck her foot in her mouth by implying calendar dates. Its also important to remember that the Fed is very political (the independence talk, is just that, talk), and that there is political pressure to raise rates. So, her background tells her to print, but the political pressure is telling her not to print.

    Now look at this...

    "The statement of economic projections revealed slower growth expected in all three years from 2015-2016, but also a lower unemployment rate in all three years. The long-term unemployment rate range was revised from 5.2-5.5 to 5.0 to 5.2, suggesting a new, lower NAIRU estimate. The inflation estimate, both headline and core, was revised a lot lower this year and a little lower next year."

    To me, this would suggest that Yellen would avoid raising the DR, but then low says this...

    "New dot plot medians are lower, too, consistent with a slower tightening pace:"

    Which means his view is that Yellen is going to raise the DR, but the data means she will do it slowly.

    I tend to lean towards Yellen dragging her heels past June for as long as she can get away with it. Still, its a tough call. Fed officials often cling to ideologies that make them bunglers, and what's worse, is they exist in a system that turns normal people into bunglers.

    In general, an increase in the DR is typically "risk-off". Now a 25bps hike is not the end of the world for asset prices, but it doesn't help. Remember, the typical recession starter is the Fed, so we have to watch them closely in order to protect ourselves.
    Mar 19, 2015. 10:38 AM | Likes Like |Link to Comment
  • The Fed Will Not Raise Rates... Here's Why [View article]
    Here's what happened to stocks in Zimbabwe. I just think this is interesting.

    http://bit.ly/tqxgVk
    Mar 18, 2015. 09:02 PM | 1 Like Like |Link to Comment
  • Stability Of The European Union (23) January 1, 2015. [View instapost]
    "Adopts Anti-Poverty Law Despite EU Row."

    Greece could have done nothing else that would create more poverty than pass an "Anti-Poverty" law.

    In fact, in reading through the provisions, these guys are just pikers with regards to wiping out poverty. What they really should have done is to pass a law that "bans" poverty. All they need to do to accomplish this is pass a law that guarantees a net worth of 1 million Euros for every Greek citizen. For any citizen not having that net worth, the Greek gov will simply issue a check for the difference necessary to bring the individual up to a 1 million net worth.

    If you can pass an "anti" poverty law, then there is no reason you just can't "ban" poverty. All you have to do is ignore Bastiat. Problem solved.
    Mar 18, 2015. 08:46 PM | 5 Likes Like |Link to Comment
  • The Fed Will Not Raise Rates... Here's Why [View article]
    The fear is the Fed will do something stupid (I guess that's always the fear), but the tough part here is figuring out the difference between jaw boning and what they will really do.

    IT has some interesting points suggesting that the raising rates talk is the jawboning, and the reality is that they won't raise rates because the really don't want to raise rates.

    http://bit.ly/1GYOpET

    The hints may just be a trick.
    Mar 18, 2015. 08:33 PM | Likes Like |Link to Comment
  • The Fed Will Not Raise Rates... Here's Why [View article]
    There needs to be a sarcasm font.
    Mar 18, 2015. 08:28 PM | Likes Like |Link to Comment
  • The Fed Will Not Raise Rates... Here's Why [View article]
    IT has a good take on this.

    http://bit.ly/1GYOpET
    Mar 18, 2015. 04:32 PM | Likes Like |Link to Comment
  • The Fed Will Not Raise Rates... Here's Why [View article]
    Also note the movement of the 10 yr today. Sub 2% again. This suggests the market reaction is that the Fed is going to keep rates low (this of course based on the assumption that the Fed really controls rates - which they do not). We saw the very same action before QE 1. When the Fed started to signal QE 1, the 10 yr went from just under 4%, to just over 2% by the end of 2008. Then when QE 1 started, rates didn't go lower, they went up.

    With ECB QE on tap, even though its not as powerful as the Fed, we have a similar situation. Based on this, rates should start to go up a bit. What will keep them down is the whole Greek tradgedy. Once the Greeks get their bailout, then the last fear trade factor will be gone (at least with regards to headlines), and 2100+ on the S&P and 2.30 to 2.50 on the 10 yr should be the zone.
    Mar 18, 2015. 04:24 PM | Likes Like |Link to Comment
  • The Fed Will Not Raise Rates... Here's Why [View article]
    "The statement once again stresses the data dependent nature of monetary policy and with “patience” now removed, the FOMC is free to consider rate increases on a meeting-by-meeting basis. It just may be that the data needed to confirm said rate increase may be hard to come by, at least by June."

    http://bit.ly/1GYKCY8

    They may have carved the out they needed.
    Mar 18, 2015. 04:19 PM | Likes Like |Link to Comment
  • The Fed Will Not Raise Rates... Here's Why [View article]
    Sure sounds like they are trying to drop the whole calendar thing.

    “An increase in the target range for the federal funds rate remains unlikely at the April” meeting, the Federal Open Market Committee said in a statement Wednesday in Washington. The panel said it will be appropriate to tighten “when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.”
    Mar 18, 2015. 02:08 PM | Likes Like |Link to Comment
  • The Fed Will Not Raise Rates... Here's Why [View article]
    This just in. The Fed has lost its "patience".

    http://bloom.bg/1GY2iTR
    Mar 18, 2015. 02:05 PM | Likes Like |Link to Comment
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