Officially Here: Negative U.S. Interest Rates

Discussion in 'Business, Investing & Finance' started by FireFoley, Mar 26, 2020.

  1. FireFoley

    FireFoley Senior Member
    Lifetime Member

    Joined:
    Nov 19, 2014
    Messages:
    4,667
    Oxbucks:
    $4,594
    Ratings:
    +6,474 / -395

    Thanks @BMF for the explanation. 5% sure does sound good and glad it has worked out well, but is there any concern in this environment? USAA is certainly reputable, so in essence it is a bank meaning you loan them money (depositor) in exchange for a fixed rate of return. They in turn loan out that money at a higher rate to those they deem are viable borrowers As long as you trust their methods and decision makers it is just like giving your money to a bank, minus FDIC.
     
  2. GatorInGeorgia

    GatorInGeorgia Senior Member
    Lifetime Member

    Joined:
    Aug 25, 2014
    Messages:
    4,815
    Oxbucks:
    $3,721
    Ratings:
    +4,733 / -368
    Let me add a little more color, which I should have done the first time. I think hyper-inflation is possible, just like I feel low/negative rates (already here) are definitely possible. What I don’t see happening is the middle ground-“normalized” rates where, let’s say where the 10 year is between 4-8%. I say “normalized” in the sense that the 10 year has been in that range for a big chunk of the past 60 years.

    I think we’d go to hyperinflation rather than settling in that range.
     
  3. BMF

    BMF Bad Mother....
    Lifetime Member

    Joined:
    Sep 8, 2014
    Messages:
    17,294
    Oxbucks:
    $20,337
    Ratings:
    +27,735 / -421
    Motley Fool Ventures (a company of Motley Fool) just invested $5 million on March 18th w/ Streetshares. Streetshares has a proprietary software that they use...and are trying to sell. I actually put some money in their Angel shares (in addition to the money earning 5%) - hoping that pays off down the road. I did have some concern about 'this environment', but small businesses will very likely be in the need of loans (unless they get it from the bailout that was just passed). The software they use is specifically designed to underwrite loans.

    New StreetShares Initiative Provides Free Technology To Make Small Business Loans, Relieve Coronavirus Impact: - StreetShares Platform
     
  4. 78

    78 Dazed and Confused
    Lifetime Member

    Joined:
    Jun 9, 2014
    Messages:
    17,396
    Oxbucks:
    $15,652
    Ratings:
    +22,199 / -1,187
    The goal is to stave off deflation. Japan has been entrenched in low-to-no rates for some time. We’ll likely have no issues with runaway inflation. What we’re at risk of is a zombie economy.
     
    • Concrete Helmet

      Concrete Helmet Hook, Line, and Sinker
      Lifetime Member

      Joined:
      Jul 29, 2014
      Messages:
      14,519
      Oxbucks:
      $8,581
      Ratings:
      +13,999 / -1,011
      Ever heard of the words "Mortgage Deed" also known as a private mortgage.....8,9 and even 10% is what I see quite a bit....just get 20-25% down....if they default just write off the losses, and rinse and repeat..... Real Estate the gift that keeps on giving....

      There are also a lot of companies who will pool Ira's and other investments to lend at higher rates but that can be risky as most are in 2nd position....
       
    • Detroitgator

      Detroitgator Well-Known Member
      Lifetime Member

      Joined:
      Jul 15, 2014
      Messages:
      18,269
      Oxbucks:
      $13,026
      Ratings:
      +21,107 / -154
      Russian plane with coronavirus medical gear lands in U.S. after Trump-Putin call
       
    • Taco Gratis

      Taco Gratis Well-Known Member

      Joined:
      Jun 2, 2016
      Messages:
      4,867
      Ratings:
      +4,400 / -254
      That's one of "those" movies for me. Can watch it almost any time it's on.
       
      • Taco Gratis

        Taco Gratis Well-Known Member

        Joined:
        Jun 2, 2016
        Messages:
        4,867
        Ratings:
        +4,400 / -254
         
        • FireFoley

          FireFoley Senior Member
          Lifetime Member

          Joined:
          Nov 19, 2014
          Messages:
          4,667
          Oxbucks:
          $4,594
          Ratings:
          +6,474 / -395
          TINA (There Is No Alternative). This has been the narrative for over 10 year now @Taco Gratis. You are not wrong and starting in 2008 on, that was the Fed's entire goal; Inflate Asset Prices. But this particular situation where the world has been shut down has added a thorn that has not been there for the past 10 years. Many companies have not only suspended their dividends (with good reason), but many have been forced to cease their buybacks. Most every major company buys their own stock back in the open market every single day. There is a limit to how much they can buy in a day and a week, but they are usually the biggest purchaser of their stock. If you do any reading, buybacks are numero uno reason for most stocks price increases the past 10 years. There has been little to no organic growth. Fewer outstanding shares lead to higher EPS. These next however many quarters will be quite interesting especially if some of these companies continue not to purchase their own stock,
           
          • Detroitgator

            Detroitgator Well-Known Member
            Lifetime Member

            Joined:
            Jul 15, 2014
            Messages:
            18,269
            Oxbucks:
            $13,026
            Ratings:
            +21,107 / -154
            Mnuchin said today that it is not the fault of banks for making loans that are going bad...
             
            • Taco Gratis

              Taco Gratis Well-Known Member

              Joined:
              Jun 2, 2016
              Messages:
              4,867
              Ratings:
              +4,400 / -254
              This captures a lot of what's been happening. It also matches what I've been reading and parroting on this board and elsewhere...

              ...that the actions of the Fed, its co-conspirator Central Banks, and their political enablers have rendered the markets nothing more than a political utility. Which is why Trump spent so much time and energy pre-pandemic goading the Fed to drop interest rates even further in the midst of the longest bull market in history.

              Detroit has raised the alarm about where this ends, starting 10 years ago.

              By dropping rates to near and in some cases below zero, and stoking moral hazard, the CBs have completely gutted the markets prime function -- one of price discovery -- and created the asset bubble you mention.

              The result? An environment where corporate managers are no longer measured on corporate fundamentals and performance. They're measured on one thing. Share prices.

              So of course, their actions are no longer about taking real-world business risks like introducing new products, or expanding into new markets. Who the hell is going to take the risk of opening a new plant when it's easier -- not to mention more personally lucrative -- to simply do a buyback?

              The CBs and their political enablers have created a system of zombie companies, completely dependent on financialization and leverage and ripe for a fall

              That's how we get the record buybacks we've seen over the last 10 years.

              But it gets better. If you're a CEO, or a board member, you're not only evaluated almost solely on what your stock is doing at any given time -- fundamentals be damned.

              You also make damn sure that those buybacks directly benefit you.

              For example, management teams at the Big 4 airlines have increased debt and directed their free cash-flow towards anything they thought would prop up their stock price.

              In times past, they would have used that money to grow their core business or protect it against leaner times.

              The airlines aren't alone. They're just the current poster child.

              Instead of those real-world business risks, they take increasingly reckless financial risks.

              And why wouldn't they? If for the last 10 years, you know you'll be bailed out by the Fed every time the market hiccups, AND your compensation is almost exclusively tied to share prices, what makes the most sense?

              Buying back stock and shifting your focus from operational, long-term core business activities to financial, short-term market moves.

              Activity that is incentivized grows. In this case, it's rent-seeking by corporate managers. With the result that many of our most important businesses were so levered up they couldn't weather a garden variety downturn, much less a global pandemic.

              The boards and C-suite were incentivized to take the biggest possible rake. We shouldn't be surprised that that's exactly what they did.

              Or that they object when we suggest maybe they shouldn't be bailed out.

              With a straight face, no doubt.
               
              #31 Taco Gratis, Apr 29, 2020
              Last edited: Apr 29, 2020
              • Taco Gratis

                Taco Gratis Well-Known Member

                Joined:
                Jun 2, 2016
                Messages:
                4,867
                Ratings:
                +4,400 / -254
                 
                • Detroitgator

                  Detroitgator Well-Known Member
                  Lifetime Member

                  Joined:
                  Jul 15, 2014
                  Messages:
                  18,269
                  Oxbucks:
                  $13,026
                  Ratings:
                  +21,107 / -154
                  This also ties directly the the "US vs China" issue in terms of national security tied with economic security as a nation.
                   
                  • FireFoley

                    FireFoley Senior Member
                    Lifetime Member

                    Joined:
                    Nov 19, 2014
                    Messages:
                    4,667
                    Oxbucks:
                    $4,594
                    Ratings:
                    +6,474 / -395
                    Well the Fed Funds rate went negative today, so it can't be too far down the road that the FED actually sees what the market is saying, listens to Ken Rogoff, and takes the rate to -50 basis points if not farther. Meanwhile the Treasury is about to have its largest amount of a weekly auction (96 Billion) ever and they must be rubbing themselves silly seeing how low these rates are all going. Knowing those ASS CLOWNS they may add a few more billion to the menu.
                     
                    #34 FireFoley, May 7, 2020
                    Last edited: May 7, 2020
                    • Taco Gratis

                      Taco Gratis Well-Known Member

                      Joined:
                      Jun 2, 2016
                      Messages:
                      4,867
                      Ratings:
                      +4,400 / -254
                      Bitcoin and Gold FTW.
                       
                    • FireFoley

                      FireFoley Senior Member
                      Lifetime Member

                      Joined:
                      Nov 19, 2014
                      Messages:
                      4,667
                      Oxbucks:
                      $4,594
                      Ratings:
                      +6,474 / -395
                      Gold, Yes. Bitcoin, I will leave to the younger crowd. If I take a bar of gold somewhere, I can sell it. If I walk into the same place, I may or may not be able to sell Bitcoin, right? yes I know they both have Futures contracts, but I am talking about the ease of converting. Gold has a known value. But doesn't Bitcoin have value just b/c others think it has value? Isn't it just air? Why Bitcoin, why not Etheryum (sp) or Ripple? And I can sleep with my bar of gold vs. waking up and my cyber shyt having gone poof into thin air, right b/c it got stolen etc?
                       
                    • Detroitgator

                      Detroitgator Well-Known Member
                      Lifetime Member

                      Joined:
                      Jul 15, 2014
                      Messages:
                      18,269
                      Oxbucks:
                      $13,026
                      Ratings:
                      +21,107 / -154
                      10 yr gave back today, and oil, after being up 9%+, ended up in the negative... will be interesting to watch tomorrow.

                      FWIW, I too am a fan of physical metal (not paper metal), but did buy some more bitcoin at $3700. Be your own bank...
                       
                      • FireFoley

                        FireFoley Senior Member
                        Lifetime Member

                        Joined:
                        Nov 19, 2014
                        Messages:
                        4,667
                        Oxbucks:
                        $4,594
                        Ratings:
                        +6,474 / -395
                        With the announcement of that huge Treasury Auction, the 10 and 30 yr both backed up pretty good. I saw the 10 yr. at like 74 basis points and over 70 was the highest settlement in quite a while. I think that made a few technicians bearing on Treasurys and BOOM they get caught off guard and 15 basis points later the other way they are covering.

                        Will be curious to see how Treasurys trade after these employment numbers in an hour or so. Hate to say the numbers are meaningless but we all know they will be large, but I still contend they are not accurate. Unemployed and drawing money from the Government vs. Not Working and getting paid from your employer thru the Government loan program. What is really the difference? Both getting paid from a Government source but yet placed in two different columns?
                         
                      • Taco Gratis

                        Taco Gratis Well-Known Member

                        Joined:
                        Jun 2, 2016
                        Messages:
                        4,867
                        Ratings:
                        +4,400 / -254
                        The "GIFT" that keeps on GIVING!!!

                         
                        #39 Taco Gratis, May 12, 2020
                        Last edited: May 12, 2020
                      • FireFoley

                        FireFoley Senior Member
                        Lifetime Member

                        Joined:
                        Nov 19, 2014
                        Messages:
                        4,667
                        Oxbucks:
                        $4,594
                        Ratings:
                        +6,474 / -395
                        The largest auction of 10 year Treasury Notes took place today. $32 Billion was met with almost insatiable demand and went off at an average of right at .70 or 70 basis points. To which it is now trading at 67 basis points after the close. Needless to say the thought has been that b/c the Treasury is having to auction a substantially larger amount of debt to fund the deficits, that demand would wane and rates would rise. Au contraire Mon Fraere. It appears that dealers and non dealers can;t get enough of US Debt, perhaps b/c the chatter to take rates negative is picking up steam. In fact I have read a few people saying the FED should take the overnite rate to as low as THREE (3) %. I can;t believe this in anyway would be good in real time. Sure on the surface some of the lower cost of debt arguments seem okay, but all I know is that any sovereign nation that has tried negative rates for a period of time, has discovered that is has not benefited them and have taken measures to extricate themselves from this policy. Regardless of how milquetoast the FED heads say they are opposed to negative rates, none of them say it with any conviction. I am quickly moving into the camp that negative rates are coming not only in the markets but also from the FED on purpose.
                         

                        Share This Page

                        The Box

                        Help

                        You don't have the necessary permissions to use the chat.

                          1. There are currently no users chatting.
                            • About Us

                              Our community sprung up when the Gatorsports message board was shut down in the summer of 2014. We pride ourselves on offering Gator-biased, yet critical discussion among people of all different backgrounds. We are working every day to make sure our community is the best Gator message board you will find.
                            • Like us on Facebook

                            • Buy us a Zima!

                              The management works very hard to make sure the community is running the best software, best designs, and all the other bells and whistles. Care to buy us a non-alcoholic Zima? We'd really appreciate it! Just click the "Donate" tab at the top of the page.