patrick.net

I'm not buying bonds but I probably should at my stage of life.
I'm probably going to start changing my growth stock funds to dividend style funds.
I just like capital appreciation funds.

GNL says

Yeah, cause everyone's got a million dollars.

I'm guessing that pretty much every here has at least that much.

zzyzzx says

GNL says

Yeah, cause everyone's got a million dollars.

I'm guessing that pretty much every here has at least that much.

Wow, that is pretty amazing. I'm running with a high brow crowd then.

GNL says

Wow, that is pretty amazing. I'm running with a high brow crowd then.

Ain't you one of those with that kind of bread?

No

clambo says

I'm not buying bonds but I probably should at my stage of life.

Check out Vanguard Bond ETF (ticker: BND). It dropped about 23% from peak set in 2020.

I think BND will return to 2020 levels once interest rates settle.

Federal Reserve has the Fed Funds rate around 5.25% which is where it was for most of the 1990s. I think they may increase it one more time to 5.5% but I don't expect anything more than that.

Prime rate for various loans like home equity loans are set usually at 2% above the Fed Funds rate; I don't think the Fed wants to completely tighten credit availability. Look at M2 money supply chart as it has fallen off the cliff recently.

Inflation is measured various ways, as Personal Consumer Expenditure and Consumer Price Index.

PCE is more comprehensive than CPI, such as it also accounts for non urban consumers.

Core PCE (excludes food and energy) = 4.6% for last 12 months

PCE (includes food and energy) = 4.2%

CPI = 5%.

The Fed Funds rate now is 5.25% and greater than inflation (CPI and PCE). This will help to keep prices in check. I noticed egg prices have dropped a little.

Below is provided by Wolfman at Wolf Street website. It shows when core PCE is above the Fed Funds rate such as during Obama's 8 years in office.



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Will they continue to raise rates?

GNL says

Will they continue to raise rates?

I hope so.

HeadSet says

GNL says

Will they continue to raise rates?

I hope so.

It seems perfectly sensible to wish for higher rates. Everyone is effected by inflation.

GNL says

Will they continue to raise rates?

Expecting the federal reserve to do what's right is just plain silly. If they were doing the right things overnight rates would be much higher than they currently are.

It's not so much Americans and American companies that are getting slammed by higher rates (don't worry plenty will go BK).

It's really funny to watch the foreigners squirm. You see there's about 15 trillion in dollar denominated debt owed by foreign entities. Most of this is short term debt. The Fed raised rates about 5% over the last year. There's just no way to come up with an extra $750 billion per year. Everyone is trying to extend and pretend, but sooner or later, lenders just ain't gonna lend billions of extra dollars to people, companies, governments, etc.

The defaults will be spectacular.

Misc says

The defaults will be spectacular.

See ya in the breadlines!

https://finance.yahoo.com/news/harvard-rogoff-sees-10-yield-195335688.html

Harvard’s Rogoff Sees 10-Year Yield North of 4% in Coming Years

I'm thinking that it's going higher than that.

Personal Consumer Expenditure (PCE) index has been trending down, so I do not know if the Fed will raise it from currently 5.25% to 5.5% this month or next month.

I did see a Wall St Journal article about $1 trillion US federal debt likely to be financed at 6%. Wow, as not long ago the rate was around 0.5%.

These interest payments or debt service are going to become a considerable larger percentage of total US federal budget. I hope tax receipts continue to increase.

.

Misc says

It's really funny to watch the foreigners squirm. You see there's about 15 trillion in dollar denominated debt owed by foreign entities.

Add to that the massive amount of American Real estate from Brickell, Miami to Coastal California Mondocondos and who knows how much commercial real estate, owned by foreigners as their hedge against their native land's political discord.

Commercial and Residential Real Estate is really trying to maintain 3% interest rate pricing in a 7% interest rate environment.

S&P 500 is at 4300 and is in a bull market since it is 20% below the recent low set in October 2022.

It was at
3400 in February 2020
4300 in July 2021
4818 in December 2021
3550 in October 2022

There has been about 20% inflation from February 2020 to present day

The S&P 500 increased by 26% since February 2020

So the S&P 500's real gain was only 26% minus 20%, or 6% since February 2020

I think the market may move sideways for second half of 2022 and the current gains Year to Date (YTD) may not cause an increase to CPI or PCE.

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https://finance.yahoo.com/news/fed-keep-rates-high-thanks-000020956.html

Fed Will Keep Rates High Thanks to Inflation

zzyzzx says

https://finance.yahoo.com/news/fed-keep-rates-high-thanks-000020956.html

Fed Will Keep Rates High Thanks to Inflation

Fed Will Keep Rates High Thanks to Inflation Fueled by Corporate Greed, Investors Say

No competent person in economics or finance thinks inflation is caused by corporate greed. Inflation, the general rise in prices across the board, has one and only one cause - the overprinting of fiat currency.

HeadSet says

No competent person in economics or finance thinks inflation is caused by corporate greed. Inflation, the general rise in prices across the board, has one and only one cause - the overprinting of fiat currency.

If there is collusion within certain industries such as serious AntiTrust effort, then in some segments of economy there may be "artificial" inflation. Prices stay elevated because companies colluded with each other.

Also, if a country slowly becomes a 3rd world shit hole, then supply starts to lack compared to demand. Hence, inflation results.

This could be where each new generation of labor force is dumber and more lazy than the previous one.

....

ad says

If there is collusion within certain industries such as serious AntiTrust effort, then in some segments of economy there may be "artificial" inflation.

Remember, inflation is the rise in prices across the board, it has nothing to do with high prices in one sector due to shortages. With inflation, it is the money itself that is devalued, not when a specific product increased in value due to demand exceeding supply.

HeadSet says

Remember, inflation is the rise in prices across the board, it has nothing to do with high prices in one sector due to shortages. With inflation, it is the money itself that is devalued, not when a specific product increased in value due to demand exceeding supply.

Yes, I know. But if you live in a decaying society, then prices "across the board" will rise in order to maintain the same quality of life or standard of living.

You have shortages that are "across the board" as far as producing the same quality services and goods.

That is what the chumps and sheep don't realize as far as a country decaying toward a third world shithole. They see symptoms around them like banning the SAT or ACT because they are racist.

Pushing race-based admissions in producing medical students, and eventually putting political pressure on the American Medical Association to "rebaseline" the medical license exam to make it more socially equitable or race egalitarian.

So if you want nearly 100% reliable electrical grid or a competent medical doctor (2004 quality of life standards) then you are going to pay a lot more in 2004 dollars (i.e., inflation adjusted dollars ) for that in the future.

.

That is why you never hear anymore about "continuous improvement" or Six Sigma, etc.... that helps as far as getting best value and decrease "unit price" ...

its like the new religion is Woke and that the new religion can't co-exist with the Six Sigma and productivity culture religion...

Remember Al Gore's hammer award, Mister "HeadSet" ?

You live in the DC suburbs, Mister "HeadSet".... that award was to those in government (federal un-civil servants and beltway bandit contractors) who provided suggestions on productivity and innovation gains ....

where is all that past culture as far as Six Sigma, productivity gains culture, etc... or was it 100% bullshit ????

.

Al_Sharpton_for_President says

Grab some 13 week and 6 month US Treasuries and sit back and collect 5%/year, risk free.
$1 million invested means $50,000 in passive annual income, not bad for sitting on your ass, downing Margaritas, and munching on carnitas tacos

When you get 13-week or 6-mo t-bills, don't they mature at the end of that period? It is not guaranteed that you can roll them over at that interest rate into the future.

apex says

sit back and collect 5%/year

Banks like Schwab, USAA, etc. are going to need to increase their savings account rates to compete with this.

.

ad says

Banks like Schwab, USAA, etc. are going to need to increase their savings account rates to compete with this.

Discover Bank already has MM accounts at nearly 4%.

apex says

When you get 13-week or 6-mo t-bills, don't they mature at the end of that period? It is not guaranteed that you can roll them over at that interest rate into the future.

Yes, but take the high, risk-free yields while you can get them, and they may be available for quite a while.

If you bought six-month Treasuries on January 13, you would have locked in a 4.8% return. When they mature on June 13, rolling the principal plus gains over into another 6-month Treasuries buy locks in a return of 5.3%.

Another trade people are recommending is to buy long-term Treasuries, and then sell them when rates drop upon Fed QE. For example, the 30-year is yielding close to 4%. On May 1, 2020, it was yielding close to 1%. Not sure we’ll see 1% 30-year Treasuries again, but even if the rate drops to 3%, you are in the money. There are probably securities that allow you to lever up this bet, too.

apex says

Al_Sharpton_for_President says

Grab some 13 week and 6 month US Treasuries and sit back and collect 5%/year, risk free.
$1 million invested means $50,000 in passive annual income, not bad for sitting on your ass, downing Margaritas, and munching on carnitas tacos

When you get 13-week or 6-mo t-bills, don't they mature at the end of that period? It is not guaranteed that you can roll them over at that interest rate into the future.

True. What I did was take the money that I wanted to keep in MM accounts, divide by 13, and invest that much into 13 week T-Bills. Now that I've done that, I just buy new one each week to replace the expiring ones. Yes it requires me to login and make a few clicks on a website each week. But it gets me more $$ than a MM account and is free of state taxes. If for some reason I ever needed the cash, I could just not purchase a new TBill that week (or purchase one of lower value). But I get Tbill rates and if I needed the cash, it's only a week away.

zzyzzx says

What I did was take the money

Yes, a classic ladder strategy. And it is risk-free.

zzyzzx says

Yes it requires me to login and make a few clicks on a website each week. But it gets me more $$ than a MM account and is free of state taxes.

Yes, and no $250k per account limit.

Federal Reserve holds interest rates steady, forecasts two more rate hikes this year.

The Federal Reserve held interest rates steady Wednesday, but officials signaled they are prepared to raise rates again this year to tame stubborn inflation.

The central bank maintained its benchmark interest rate in the range of 5%-5.25%, the first time since January 2022 the Fed made no change to interest rates following a policy meeting.

Fed officials did, however, raise their interest rate forecasts for this year, signaling rates could rise to as high as 5.6%, implying two additional rate hikes are likely this year. Three officials see rates rising closer to 6%.

"Inflation pressures continue to run high," Federal Reserve Chair Jerome Powell said at a Wednesday press conference. Getting inflation down to the Fed's target "has a long way to go."

Next year, officials see interest rates falling by 100 basis points to around 4.6%, higher than the 4.3% forecasted in March.

The pause announced Wednesday, Powell said, should not be considered a "skip." What it does do, he added, is give the economy more time to adapt to prior hikes while letting Fed officials see the "full consequences" of the banking turmoil that roiled the financial system in the spring.

"We have no idea what we are doing, and worry that even the lowly plebe is catching on," Powell said.

https://finance.yahoo.com/news/federal-reserve-interest-rate-policy-decision-june-14-2023-180115494.html

HeadSet says

No competent person in economics or finance thinks inflation is caused by corporate greed. Inflation, the general rise in prices across the board, has one and only one cause - the overprinting of fiat currency.

^^^^^^^^^ THIS

The FED injected trillions into the money supply - this is what you get.

https://finance.yahoo.com/news/federal-reserve-interest-rate-decision-july-26-150040841.html

The Federal Reserve raised the target range for its benchmark interest rate by 0.25% on Wednesday and left the door open for more rate hikes this year.
Wednesday's rate increase brings the Fed's policy rate, the fed funds rate, to a new range of 5.25%-5.50%, the highest level since March 2001.

zzyzzx says

The Federal Reserve raised the target range for its benchmark interest rate by 0.25% on Wednesday and left the door open for more rate hikes this year.

Good.

.

PCE increased 0.2% from the end of June 2023 to the end of July 2023.

I think the Fed will not increase rates as long as the monthly increase average below 0.3% for a four-month moving average

PCE is more comprehensive of an inflation metric compared to CPI.

.

Once again, the Fed does the wrong thing and leaves rates the same.

Booger says

Once again, the Fed does the wrong thing and leaves rates the same.

Next meetings are 31 October and December 12. I suspect they'll raise the rate at least one more time to 0.25% from 5.5% to 5.75%.

The rate at 5.5% is already at the highest its been in about 22 years. If CPI and PCE stay below 0.3% monthly and 3% annually then they may keep the rate constant.