patrick.net

zzyzzx says

Reuters Fed likely to hike by 100 bps in September -Nomura

Not enough.

1% won't do shit to stop this train-wreck. Don't write 75 or 100, it's bullshit jargon to make it look like they're doing something more than they are.

If they raise rates, stocks tank, and the economy goes under. If lower rates, the train wreck gains speed, stocks implode, and the economy goes under.

Did any one remember Austin power, guy has no clue millions vs billions difference so does the Biden and rest of the clowns force people be in houses to cover up stuff including stealing public money under fake medicine while printing $T as if they were $B. Now people have to face consequences in the form of higher inflation. It cannot take too long to see inflation affect in asset prices.

100. Wednesday at 2 p.m. ET.

NuttBoxer says

1% won't do shit to stop this train-wreck. Don't write 75 or 100, it's bullshit jargon to make it look like they're doing something more than they are.

If they raise rates, stocks tank, and the economy goes under. If lower rates, the train wreck gains speed, stocks implode, and the economy goes under.

You’re right. Either way the economy gets it. I think they’re trying to tank top economy (which has proven resilient so far) as a tactic to get inflation under control. I think they’ll just create stagflation with this method. Especially if they raise rates too much.
The housing market is already in the toilet for most places. Home builders are stopping building homes, even though a housing shortage exists.
Imports from China are way down right now, indicating much less consumerism going on. People are tightening their belts and ending the purchasing party they’ve engaged in for the last few years.

I’m not sure if unemployment will become significantly worse. There are too many infilled jobs and too many people are dying suddenly. As that escalates, and the jab becomes more deadly, able bodied workers are going to be at a premium.

So my prediction is that we will have high interest rates, low consumption, a tight labor market, and stocks won’t do well. It’s hard to see a bright future when investment in new projects has dried up and everyone is in survival mode, even if the healthy ones still have jobs.
Inflation will continue until the jab deaths really begin to be noticed on a grand scale. Then it will disappear as people discover their inescapable plight.

Shaman says

Especially if they raise rates too much.

I don't think that we have to worry about that.

https://www.cnbc.com/2022/09/20/fed-should-hike-interest-rate-rates-150-basis-points-wells-fargo.html

‘Rip off the Band-Aid’: Wells Fargo makes case for 150 basis point hike at Fed meeting

Still weak!

They are loosing control.

It's 75

zzyzzx says

It's 75

Wimps.

I am saying a major downturn in tourism in the Florida panhandle.

I have not seen it this quiet before, even with gas prices lowered (due to artifical means by Biden drawing down the emergency reserves).

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Al_Sharpton_for_President says

Wimps.

I see the Fed raising the Fed Funds rate from 3.25% to 4% next November. I see them holding the rate steady between 4 and 5% in 2023.

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ad says

I have not seen it this quiet before

Are you adjusting for seasonality?

ad says

I am saying a major downturn in tourism in the Florida panhandle.

I have not seen it this quiet before, even with gas prices lowered (due to artifical means by Biden drawing down the emergency reserves).

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Same thing in San Diego. Tourism was dead this summer. Bills are coming due and low season has arrived. There's not going to be much for Christmas economy.

I am listening to Powell on Bloomberg Radio (WBBR).

Powell is saying American businesses have to feel pain so prices including wages come down.

He said wages will go down a lot less relative to inflation decreasing, so there will be a net positive effect to the working class.

We need more productivity gains such as from innovation. Hopefully businesses will feel more incentive to promote productivity gains.

The Fed raised the rate by 0.75% as expected to 3.25%. This is the highest the rate has been since 2007. The Fed indicated the rate will likely be around 4.25% by end of this year.

Notice Obama had almost 0% rate for almost all his Presidency, yet annual growth averaged only about 1.8% during his two terms :-/

NuttBoxer says

B.A.C.A.H. says

Supply chain issues only in the context of demand.

Supply chain issues in the context of raw materials

Ahem, that issue will be fixed by demand destruction from higher prices.

It's all about demand.

The 1st quarter of the year had a negative GDP print, the 2nd quarter of the year had a negative GDP print and the GDP NOW forecast from the Atlantic Fed has the 3rd quarter GDP rising .3% on an annualized basis (with more bad economic reports coming before the end of the quarter).

Employment measures are only increasing because several hundreds of thousands of Americans had to get second jobs.

Sure....go ahead hike rates when the US is already in a recession ... what could possibly go wrong ??????

Misc says

Sure....go ahead hike rates when the US is already in a recession

Are you a ®ealtor?

Just asking.

B.A.C.A.H. says

Misc says

Sure....go ahead hike rates when the US is already in a recession

Are you a ®ealtor?

Just asking.

Nope. Just sitting this one out with a bag of popcorn watching the government make one mistake after another.

Misc says

Sure....go ahead hike rates when the US is already in a recession

When I listened to Powel on WBBR, he said that 2% CPI was what was guiding the Fed's interest rate actions.

They have a long way to go but I still think the September 2022 CPI report will report between 4% and 6%.

Powell said businesses will have to expect pain and it won't be a soft landing.

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S&P 500 closed down 21.3% below its 52 week and all time high of 4818 :-/

The Shiller PE ratio is 28 and PE ratio (trailing 12 months) is 19

Put to Call ratio is down slightly to 0.95 but well above the historic media of 0.7.

CNN Fear and Greed Index or Investor Index shows a score of 31 out of 100, which is near the extreme fear region.

https://www.cnn.com/markets/fear-and-greed

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zzyzzx says

It's 75

Too little to control inflation. Raising too high can’t be possible as well as the gov can’t pay interest payment on massive debt.

Blue says

Too little to control inflation. Raising too high can’t be possible as well as the gov can’t pay interest payment on massive debt.

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Yes, that's the conundrum as future debt will be financed at a higher rate. Look at how now the 10 Year US Treasury is at its highest since 2007, since the Fed Funds rate is at its highest since 2007.

Its a delicate or sensitive optimization effort as Jerome Powell said the primary goal is 2% annual inflation or CPI.

I wonder how the Debt to GDP ratio will fare. It was about 105% just before the pandemic and was above 99% from 2012. It peaked to 135% and now is around 120%.

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ad says

I wonder how the Debt to GDP ratio will fare.

Trump suggested that doing a haircut on the debt could help with this. Seems like he was a master of this sort of thing with his serial bankruptcies.

This low-probably but blockbuster risk is the reason I never went out more than two years on the treasuries.

B.A.C.A.H. says

Trump suggested that doing a haircut on the debt could help with this

Trump is not President. Birdbrain is President.

I just wonder how much debt is growing relative to GDP in 2022. Maybe record tax receipts will help to pay down the debt even more in 2022 so that the Debt to GDP ratio at least stays constant.

I hope we can at least inflate ourselves out of a debt crisis and the Debt to GDP ratio drops to 110% from currently about 120% in the next 2 years.

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ad says

Trump is not President. Birdbrain is President.

You missed my point, I think.

Trump is not president, but he was a sitting president. A sitting president who went on record as candidate suggesting a haircut as remedy.

He is not the only one who has suggested a haircut.

Haircuts on sovereign debt have happened all over the world. He was merely suggesting that maybe it's our turn. He's not the first to suggest a haircut and I'm sure he won't be the last.

B.A.C.A.H. says

He is not the only one who has suggested a haircut.

Not sure as you mean default or not paying as much such as negotiating a better deal like Ecuador's past President Correa did and its current president is trying to do with "restructuring its debt obligations to China".

I'm not sure how that would fare out as far as debt rating and risk of borrowing money in the future, even if other countries are doing it and even if the US dollar remains the reserve currency.

Or they can just cut back on entitlements slightly relative to inflation, as they have been doing for about 2 years as part of the "haircut".

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My mom "restructured" her credit card debt. She promised to not use the credit card as she was paying it off. In return the credit card company dropped the interest rate from around 12% to 2%.

I think this adversely impacted her credit rating for about 12 months after the credit card balance went to $0.

Now how do you scale that to the USA as far as its +$25 trillion in debt and with calls for "haircuts".
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ad says

Now how do you scale that to the USA as far as its +$25 trillion in debt and with calls for "haircuts"

It will wreck pension funds.

And remember, the Social Security Trust Fund is the biggest of them.

rB.A.C.A.H. says

And remember, the Social Security Trust Fund is the biggest of them.

The fund invests in US Treasuries and so should benefit from the rise in rates.

B.A.C.A.H. says

Haircuts on sovereign debt have happened all over the world. He was merely suggesting that maybe it's our turn. He's not the first to suggest a haircut and I'm sure he won't be the last.

So, don't buy any Tbills, right?

The rate hike was less than a lot of people were expecting, and the stock market drops like 500 points. WTF?

ad says

Or they can just cut back on entitlements slightly relative to inflation, as they have been doing for about 2 years as part of the "haircut".

This is what they have been doing with Social Security for decades. Under report inflation by 50%, then base raises on the under reported number. This applies to Federal employees as well.

Al_Sharpton_for_President says

The fund invests in US Treasuries and so should benefit from the rise in rates.

For the new ones, yes. But for the huge bulk of the portfolio of older ones, haircuts will devastate the notional value.

Booger says

So, don't buy any Tbills, right?

It's the reason I don't go out more than two years.

Mentioning haircut was formerly akin to saying "Voldemort" at Hogwarts. By suggesting a haircut on the National Debt, Trump let the cat out of the bag.

So now the concept went from an Unspeakable Black Swan to a mere Black Swan. I am willing to accept the Black Swan risk to the maturities I have for less than = two years. But not beyond that.

I made a calculation that if things come to this, FDIC insurance will be more of a third rail than the treasury debt. As was mentioned on this thread, much of the treasury debt is held by foreign institutions. F*ck them.

FDIC insurance, with its 250k limit, is only for small retail depositors. However you can have just about an unlimited amount of FDIC insurance by spreading multiples of $250K around different banks. Even in banks in territories like Guam , PR, etc.

My political calculation is that the government would use printed money to back FDIC obligations. A haircut on treasury debt will threaten pension funds, (maybe) cause a run on the dollar, but will not lead to pitchforks to the extreme that bank failures would. We learned this from other countries that had debt problems during the financial crisis (Iceland, Greece, Cyprus). Their creditors got haircuts but insured deposits were made whole. That's a political guess by me. Some of you guys will shoot holes through it, whatever. It's my guess. Hopefully things won't come to that.

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A means test for Social Security would be what I would recommend, and/or increase the Social Security tax on those individuals making $200,000 or more a year.

Hold federal spending constant for 2 years during the increase in the Social Security tax.

Then assess the debt to GDP ratio, tax receipts, etc as part of feedback to the above actions.

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Blue says

zzyzzx says

It's 75

Too little to control inflation. Raising too high can’t be possible as well as the gov can’t pay interest payment on massive debt.

Is government owned debt mostly variable interest? Otherwise, rising rates would have no effect on current government debt.

HeadSet says

Is government owned debt mostly variable interest? Otherwise, rising rates would have no effect on current government debt.

Federal debt issued now is based on current rates, so any debt financed with a 10-year Treasury Note is at the current interest rate of around 3.25%.

That is the highest the 10 Year Treasury Note has been since around 2009.