WatchBetween Mr. Bubbles (AG not the soap guy), Godzilla, and Mothra who could destroy more lives?
My money is on Godzilla, hard to beat a 120 ft high pissed off prehistoric monster who breaths atomic fire. But then again Mr. Bubble's ability to spew crap packaged as sage advice is pretty formidable also.
Who wins?
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People have been really jumpy over the quarter point increases, do you think the fed will really get more aggressive and go for the half point increases?
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Those increases have had very little effect.
My limited understanding is that it takes a full year for the rate increases to really have an effect. Many have stated the fed has actually been too aggressive because they have kept raising the rates without knowing what the effect is going to be. I am not saying this is right, I am just repeating what I've heard.
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My limited understanding is that it takes a full year for the rate increases to really have an effect.
I believe you are right. Zephyr mentioned this earlier.
Many have stated the fed has actually been too aggressive because they have kept raising the rates without knowing what the effect is going to be.
All I know is that interested rate had been kept too low for too long. Tightening cycles are never popular to some.
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That was agressive (half point increments) and it certainly didn’t take a whole year to have an effect. The T-bond reacted instantly.
Thanks allah, good info.
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"I would not be suprised! RE agents will do anything to get people to go to their open houses. After all they are Real Estate whores!"
That's pretty offensive. I'm a RE agent and I'm certainly not a whore. And I wouldn't do anything to get people to come to Open Houses, they don't sell the house - they are held open mainly to appease the homeowner who has over priced their unmoving property (against my advice, based on comps in the area).
The people screwing in other people's homes are walk-ins, not the agents.
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My limited understanding is that it takes a full year for the rate increases to really have an effect. Many have stated the fed has actually been too aggressive because they have kept raising the rates without knowing what the effect is going to be. I am not saying this is right, I am just repeating what I’ve heard.
Fed rate moves are reflected very quickly in some markets, like the bond and stock markets, but are very slow to work their way out into the broader economy. One year is about the average, but it can be longer or shorter depending upon other dynamics at play. Also, the overnight rate, which is the only rate controlled by the Fed directly, has a less pronounced impact on long-debt markets, including long dated bonds. Thus the yield curve inversion. Longer term rates, which include the mortgage rates, are more reflective of future expected inflation and other things than the immediate overnight borrowing rate.
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I do hope that those "house humpers" be arrested for indecency charges. What if some kids run into them?
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The T-bond reacted instantly.
*T-bills* reacted instantly. The t-bonds and t-notes reacted either only slightly or not at all. Thus Greenspan's "conundrum". In fact, there was some hubub because the 10-year TIPS reacted more than the 10-year T-bond.
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Here's an excerpt of Fed gov'r Kohn's speech today. It's interesting in that it touches on some things discussed on this blog recently (dampening function of global economy to relatively local financial shocks).
"And the dynamics of the economy's response to policy has been affected by globalization. In one sense, an open economy may be more forgiving as shortfalls or excesses in demand are partly absorbed by other countries through adjustments of our imports and exports. To the extent that the U.S. can more readily draw upon world capacity, the inflationary effect of an increase in aggregate demand might be damped. But from another perspective, integrated economies and financial markets can also exert powerful feedback, which may be less forgiving of any perceived policy error. For example, if financial market participants thought that the Federal Reserve were not dedicated to maintaining long-run price stability, they would be less willing to hold dollar-denominated assets and the resulting decline in the exchange value of the dollar would tend to add to inflationary pressures. Overall, the ability of producers, consumers, and investors to shift purchases and resources provides rapid feedback on perceptions of policy--and not only in the monetary sphere. The need to compete for business in a globalized economy has quite likely raised the efficiency and flexibility of economic systems as well as reinforcing the requirement for noninflationary monetary policies.
Globalization is a powerful force that raises productivity and living standards. To realize its benefits fully, however, many of us are being required to adapt in various ways."
This point was rather interesting to me: If the world markets perceive that the Fed is not going to control inflation, then they will act in a manner so as to cause inflation.
Am I interpreting that wrong?
Gotta love that line about "being required to adapt", huh?
link to text:
http://tinyurl.com/8mnkl
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Does anybody know off the top of their head what the correlation is between a yield curve inversion and subsequent recession? I know it's a general predictor, but how many recent inversions have not predicted recessions? I think the last reversion was in the early 90s, but I forget exactly when (before or after the recession).
Rising inflation, an inversion, and recession would put many of the pieces of the puzzle together to make stagflation more likely than not. All we'd need then is some sustained unemployment.
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I believe something like 7 of the last 8 inverted yield curves have preceded recessions. It’s either 7 out of 8 or 7 out of 9, as I recall.
If enough people believe that yield curve inversion precedes a recession it will cause the recession.
If enough people believe that the housing bubble will burst, it will!
I believe we have the critical mass.
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Randy H,
Below is link to a neat yield curve animator; you can drag the icon through the years & watch the yield curve change to check for inversions. Last inversion was (approx.) March - November 2000 (depending on definition of "inverted.")
http://www.smartmoney.com/onebond/index.cfm?story=yieldcurve
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"the homeowner who has over priced their unmoving property (against my advice, based on comps in the area)."
I caught an episode of Buy Me tonight...someone brought that show up recently, can't remember who. Anyway, it's set in Canada...Montreal, maybe, and this particular episode gave me a whole new appreciation for the nut jobs real estate agents sometimes have to deal with. The family selling their house did almost nothing to make it look presentable, had crap and clutter everywhere, too much furniture, hideous-looking interior, horrid paint colors, crap lying all around the exterior, cracked foundation in maybe 3 places--significant cracks that needed repairing, and their house wasn't moving, and they were rabid about not reducing their too-high price. In the end, the real estate agent quit and the house didn't sell.
I'm sure it was over-dramatized for the sake of TV, but still, it was a good illustration of how people's own perceptions of their homes can differ wildly from the outside world's.
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We moved a lot when I was a kid, and you wouldn't believe the decor, or what passed for decor in some of the houses we looked at. One house we looked at had a mural the owner's son did in one of the bedrooms, hideous. Other's had all kinds of metalic wallpaper in lovely combinations of orange, gold, silver and black. Even in the 70's this had to be in bad taste. And don't even get me started on the carpet...
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Below is link to a neat yield curve animator
Thanks SJ_Jim, that is a cool link. I see that there was an inversion in 2000, and there was also a subsequent recession, but 911 makes that datapoint invalid for predictive purposes.
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"Even in the 70’s this had to be in bad taste. And don’t even get me started on the carpet…"
LOL. We move every couple of years and always rent, so I hear you. But you know, I don't run into many very badly decorated houses anymore when we're looking for places. Most people play it safe and paint everything white, with neutral carpet, which is why I was shocked to see this house with the bright red kitchen and bright kelly green room connecting to the kitchen, so it was like a Christmas nightmare. Like if Santa was on crack when he painted his house or something. I mean, I love red when used in the right way, but this...
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Thanks SJ_Jim, that is a cool link. I see that there was an inversion in 2000, and there was also a subsequent recession, but 911 makes that datapoint invalid for predictive purposes.
I thought we were in recession (perhaps not technically) before 9/11.
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Randy H your welcome!
Peter P:
"I thought we were in recession (perhaps not technically) before 9/11. "
I think so too. All my co-workers that split for the telecom/fiber optic start-ups lost their jobs in fall/00 and winter/01. Then 9/11 was a nasty punctuation. Then the 50bp rate drops kicked in. And the rest is history....
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I think so too. All my co-workers that split for the telecom/fiber optic start-ups lost their jobs in fall/00 and winter/01.
I had a telecom softare firm back then. Those were very dark days indeed. I had to let go a lot of quality folks. I hope to never experience that again. Such times test the strongest of men.
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Like if Santa was on crack when he painted his house or something.
I can just imagine the nightmare's my daughter would have. Heck, I'd have nightmare's..