- Jun 12, 2014
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Founding Member
Timing is not a fundamental flaw.
Yes, and it seems like you still don't get it. In this exchange you were fundamentally wrong:
2022 investing thread
- Thread starter BMF
- Start date
- Jun 9, 2014
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Founding Member
I was referring to the entire process leading to now. Go back a week. I referred to it then, too. It’s the taper. We’ve been in it since a December. Every QT is preceded by a taper. This isn’t rocket science. You’re either buying bonds, not buying bonds or selling bonds. Or, in the case of the bold, indirectly reducing by not replacing. But you ain’t selling yet.
The financial community recognizes QT as the moment the Fed starts selling.
Seriously, you must be a librarian or some nerd who works in a cubicle. No one else would go to this extent to push something so trivial. Do you realize how asinine this discussion has become?
- Jun 12, 2014
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Founding Member
- Jun 12, 2014
- 5,405
- 9,423
Founding Member
- Jun 12, 2014
- 5,405
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Founding Member
Maybe you'll believe it if you see it from the blurb you posted yourself.
The second sentence after the one you highlighted. Notice it says the same thing the wikipedia definition says.
You can figure this out, I believe in you.
The second sentence after the one you highlighted. Notice it says the same thing the wikipedia definition says.
You can figure this out, I believe in you.
- Jul 29, 2014
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- Jul 29, 2014
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I'm wondering what "not re investing" in maturing treasuries does to the yield curve? Does it give them more room for increasing short term rates like the 2&10 year by raising the long term rates or the other way around?Maybe you'll believe it if you see it from the blurb you posted yourself.
The second sentence after the one you highlighted. Notice it says the same thing the wikipedia definition says.
You can figure this out, I believe in you.
- Jun 12, 2014
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Founding Member
Well, "not reinvesting" would essentially mean that the Fed wouldn't be buying or selling anything beyond the transactions they make to achieve the funds target rate. The market demand would then determine the yield curve based on the supply of existing treasuries and new ones created by deficit spending.
The key note here though is where it says they won't reinvest proceeds up to $30 billion in treasuries and $17.5 billion in MBS. If you look at the balance sheet they have around $430 billion in treasuries maturing in the next 90 days plus whatever proceeds they get from coupons. So with some rough math it looks like they will still be buying over $100 billion a month in securities. That will continue to artificially lower interest rates across the yield curve depending on what they are buying. I think the tendency is to spend money on shorter term and I remember reading somewhere that the current average duration on all of their treasuries is around 2 years. That's kind of why the QT goes hand in hand with setting the funds rate as buying down short term interest rates conflicts somewhat with raising the funds rate.
Edit: one more note is that the current plan is to grow the "up to" amounts to $60B and $35B by September.
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- Jul 29, 2014
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Sharp drop in the DXY today....Maybe time to buy back into commodities? When I sold off over a month back I left a small position in gold shares(paper stock)and despite gold dropping from $2080 when the war broke out down to near $1800 it has held up better than pretty much anything else. Perhaps this drop in the dollar will give it another shot in the arm back up around $2k?
Just looked at a few others that I sold including BHP, Vale, and Freeport McMoran and they seem to be getting a decent bounce since the dollar topped late last week....Hmmmm....still scared.
Maybe @Bernardo de la Paz or @78 would like to weigh in on the DXY's movements and if this means perhaps a topping pattern in inflation?
Just looked at a few others that I sold including BHP, Vale, and Freeport McMoran and they seem to be getting a decent bounce since the dollar topped late last week....Hmmmm....still scared.
Maybe @Bernardo de la Paz or @78 would like to weigh in on the DXY's movements and if this means perhaps a topping pattern in inflation?
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- Jun 12, 2014
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I think it has more to do with what's being reported... The ECB has signaled that they are going to start raising rates as well.
- Jul 29, 2014
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Yeah I hear them flapping their lips on Bloomberg over at that commie euro meeting....That grey haired old bat LaGrande(?)irritates me.
I was thinking the big rumor that China is gonna quit playing possum maybe had something to do with it.
- Jun 12, 2014
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Founding Member
I think there is a lot of uncertainty in the coming months with regard to the eurozone. If they walk the talk on cutting Russian energy I think there will be significant economic pain for them and likely recession along with a weaker euro. Could happen regardless if there is a food crisis. If push comes to shove and they say, "hey we were just kidding lol" or if Russia dumps Putin and retreats, I think the market would react positively to the euro.
- Nov 19, 2014
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- Sep 8, 2014
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I'm seeing that around here in Pinellas. Some of these prices are ridiculous. We bought 11 months ago (July 1st) and paid $261sf. Most homes in Gulfport are selling for over $400sf - and I'm talking about 2/1 800sf homes going for over $400k. The house next door to us is a rental, the people moved out after 4 years living there. We figured it would sell (why not? it's the hottest housing market in US history), they cleaned it up, painted it, yard work, etc. Then rented it for $1000 more than the last people were paying (it's a 2/1 about 800sf for $2200/mo).
The biggest issue w/ selling your primary home is - where do you go? For most people, the profit off of their current house becomes the down payment on the new house. Otherwise, they can't afford the new house. When I have friends tell me, "I can get $600k for my house right now!" I say, "That's great...but where are you going to move?"
- Nov 19, 2014
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I get your point and I was the first to say this was not going to be 2005,2006, 2007. All I did was post an article which means it has been happening. Prices are not going to crash, but we live a sheep society. Just like people had to buy and never think they are going to be the last ones in, well yes they are. And when they choose to sell they always think their home is the bomb. I posted for info only. I expect, as I said many many times, 15-20 years of a slow bleed. Those 600K 800sq ft. homes where you are now will be 450K 800sq ft homes in 15 years or whatever the prices are. People can do the math relevant to their area.
What is happening around me is that homes are still being listed at ridiculous prices. The difference is when they don;t sell in 3 days the price drops are already coming and the initial drops are 10-20%. That shows me that someone has gotten to the seller and said this is the story. Even after those drops the prices are still obscene.
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- Jul 29, 2014
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Plus with the current mortgage rate compared to last August your monthly payment is worth 35% less house if that makes sense. Or another way to look at it is if you qualified for a 500k mortgage(max)last August now you only qualify for a 350k mortgage...
Truth is though prices are starting to roll over and there is now a widening number of listings nationally over the last 2 months. There has also been 2 consecutive months of additional price reductions on current listings. Again this is nationally but it will catch up to Florida sooner or later.
- Jul 29, 2014
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There is an old saying that says the cure for high prices is.....well high prices. The housing market moving forward faces headwinds from higher rates and higher prices that were propped up by cheap leverage. Once that cheap leverage is removed prices will have to fall as demand will falter due to lack of qualified buyers....The real question is how long and how far the market will rollover before the fiscal cocaine spills out again.
Powell is removing 95 billion a month from the balance sheet and he hasn't even begun yet....35billion a month of that will be MBS....What are your thoughts about how long he can keep doing this before something breaks. I'm seeing layoffs growing by the day, banks, mortgage companies, retail, Facebook, Snapchat and even tech like MS have announced they will be eliminating positions as well as hiring freezes being put into place by Amazon and Walmart....pay close attention the Homebuilders earnings reports coming out soon. If they start laying off we ARE already in a recession(I think we are already).
Also give me your take on the possibility that Powell, a Republican, is willing to give the economy and markets a major haircut to try and get a conservative congress back in majority after the mid terms. I think there is something to this after hearing why he waited so long to take on inflation from a former Fed chair.....he was waiting to get re confirmed...
- Nov 19, 2014
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@Concrete Helmet my thoughts are the FED reducing its balance sheet have not changed. Just like I said the FED will get no where near 3% on the overnight rate (have you noticed the futures market has now marked down the overnight rate to 2.75ish by the end of next year from 3.5). I expect if the FED gets the overnight rate to 2% they will be lucky. The balance sheet, in my opinion, will go from trying to sell the holdings in the secondary market to just holding them until maturity and then returning the proceeds to the Treasury.
As for Powell I don;t think he gives two shyts about politics and who is in control. Sure he takes small jabs at the fiscal spending but not to the point of jeopardizing his job. He is not like Yellen who would say spending was overdone when she was at the FED now as a politician she sux the penus asking for more wasted spending. Powell is not going for a political post. Greenspan was a PUB and did not give 2 shyts about poilitics and carried himself as the smartest guy in the room. Arrogant and smart, but PHD smart and made big mistakes. Powell also carries himself as the smartest guy in the room but not to the extent Greenspan did. Powell did just enough to keep his job but won;t crash the economy or market just to keep his job. He will cower b/e he is a wuss and will cease when it looks bleak, just like in 2018 in about 6 seconds.
As for Powell I don;t think he gives two shyts about politics and who is in control. Sure he takes small jabs at the fiscal spending but not to the point of jeopardizing his job. He is not like Yellen who would say spending was overdone when she was at the FED now as a politician she sux the penus asking for more wasted spending. Powell is not going for a political post. Greenspan was a PUB and did not give 2 shyts about poilitics and carried himself as the smartest guy in the room. Arrogant and smart, but PHD smart and made big mistakes. Powell also carries himself as the smartest guy in the room but not to the extent Greenspan did. Powell did just enough to keep his job but won;t crash the economy or market just to keep his job. He will cower b/e he is a wuss and will cease when it looks bleak, just like in 2018 in about 6 seconds.
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- Jul 29, 2014
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Agreed but in 2018 he had a favorable energy policy which kept inflation at 2% not 8%. I don't think he can get back to 2% inflation by QT alone. He will need help with supply chain and energy policy issues which he could get with a majority in both houses of congress.
- Nov 19, 2014
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Raising the overnight rate will do very very little to what is causing the majority of the inflation. Yes we need to quell demand in certain areas, but this should have been done well over a year ago. The dollar has been getting stronger for years now and has had no effect on commodity prices. This is not a FED issue. A lot of it is a fiscal issue. But had he done it when he should have done it would have made him look like an azzhole to most. Instead of taking our lumps during the KUNG FLU, the GOV'T decided to send out free money. And once those BALLZ start rolling, you can't wean the addicts.
