Way OT - Fed cuts target interest rate for first time in over a decade
For the finance people on the board - what say you? Would you have been a dissenter? Personally, not too crazy about it (or about the idea that the market is pricing in another one for September) given where unemployment is and GDP continuing to modestly grow. Might offer an opportunity to refi if you haven't already!
A long-standing political move going into an election year: juice the economy!
I honestly thought we'd get a 0.50 rate cut. There are probably some politics involved in this cut (just the nature of the beast), but it certainly could have been more blatant.
Yeah, I was surprised it was only a quarter point. It's almost like the Fed really didn't want to do it.
“the manufacturing and business investment part of the economy is not growing very much” —Fed chairman Powell
I expect this thread will eventually get nuked, but until then:
Barry Ritholtz ain't having any of it:
https://ritholtz.com/2019/07/todays-reckless-irresponsible-politically-motivated-fomc-rate-cut/
No chance for a 50 today. There's no need. Powell's doing the right thing regardless of incessant critical tweets.
I expect this rate cut to help increase Michigan's TD production by at least 23% this year.
The fed is private and it doesn't have reserves. It's actually illegal and has reduced purchasing power through inflation by 99% since it was created.
This is oddly interesting for someone who knows so little about finance. I would be interested in refinancing if rates continue to drop though.
Curious though, where else does a Finance nerd such as yourself go to talk about Finance on the Internet?
I mainly read FT and WSJ. Don't really partake much in on-line finance forums (or any other forums for that matter - outside of mgoblog obviously...).
As someone who knows next to nothing about finance and economics:
What factors do you look at to classify the economy as "strong"? I always see people refer to stocks (DOW and S&P), and unemployment rate. But those seem non-representative to this average joe because:
1: The average Joe can barely put away for a 401k, let alone anything into actual stocks; and
2. Unemployment may be low, but isn't it likely low because so many middle to lower class people are working 3 - 6 part time jobs (and because of this they aren't getting employee benefits like retirement, healthcare, vacation, etc).
the number of people working more than one job is lower than it has been in years. (bureau of labor)
if you have investment in your 401k, you no doubt own stocks (via mutual funds)
No, it’s not, at least in my area. I can’t find qualified individuals for full time positions. Only HS degree or equivalent required. People who want to be employed are. People who are fragile and want to complain are not. Again, other parts of the country may be different but I’m 56 people short of my hiring target this year alone.
I think Steves is trolling us. My job is to hire the unemployed. Over the last year or so it has been much more difficult to find candidates as well as retain them for a significant period of time before the leave for something better.
I don't doubt that makes your job difficult, but its great for the economy. when unemployment is low and demand for labor is steady or increasing, wages rise. the capitalist system at work.
Fact-based accurate comment gets down voted. Lots of rational folks up in here.
Same here in NE Indiana. The economy is humming around here, but ok the Fed?
Up your wages and benefits cheapskate.
That is what has been so strange about this period of growth ... where are the increased wages for the full workforce ? If the economy was really at full employment, the opportunity to jump to a new job and get a 20% increase in one's paycheck is the norm at full employment points. I think the issue is that the incentive to jump is muted by how risky that is at the peak of a cycle. Too many recently hired are scared to change jobs with all this talk of recession ... last in, first out is often the way layoffs occur.
That is the lasting impact of the Great Recession that folks endured - no savings cushion to risk a new job with higher wages. But it will turn at some point into higher wages. The Fed is testing that point with this rate cut as it would like to see some wage growth in it's inflation numbers to get closer to equilibrium. The Fed is not political - it has a charter and a board to enforce the charter.
All that increased wage for the common guy is, instead, going to CEO's and other C-suite people. Companies, and their leadership, have been hording money like nobodies business. Why does Apple need ~$245 billion dollars in cash just sitting around (most of it outside the country). Find a way to put it back into the economy. Why does Jeff Bezos keep ~$120B in his personal account? How much does one need? He earned, it. Great. Put it back into the economy - where it can help people.
The amount of greed at the top end is out of control...
Wages for the laborers have increased significantly at my company(small business) in the last 3-4 years.
Back in 2015ish our general labor guys were making $12/hr(and they ended up leaving because someone offered them like $16/hr). Nowadays, the guys doing that same job are making $25/hr. Now these new guys are a little more efficient and have a bit wider skillset, but 90% of the job is the same as it was in 2015. And pay has more than doubled.
$25/hr is $50k per year. For guys who are mostly doing handyman-type work. It is an absolute lie to say this current economy isn't treating blue collar guys well.
Wages for the laborers have increased significantly at my company(small business) in the last 3-4 years.
Back in 2015ish our general labor guys were making $12/hr(and they ended up leaving because someone offered them like $16/hr). Nowadays, the guys doing that same job are making $25/hr. Now these new guys are a little more efficient and have a bit wider skillset, but 90% of the job is the same as it was in 2015. And pay has more than doubled.
$25/hr is $50k per year. For guys who are mostly doing handyman-type work. It is an absolute lie to say this current economy isn't treating blue collar guys well.
August 1st, 2019 at 11:36 AM ^
you are correct, twice
Well, at least with respect to the Fed Reserve, their mandate is to stabilize inflation and unemployment. Both are stable so I’m not crazy about this cut. A very important thing to remember though is that most central banks are still handing out free money (mostly looking at you, Europe) so there’s a bit of logic in getting our rates in line.
August 1st, 2019 at 11:22 AM ^
Yep, this is very much about dealing with external forces. China's economy has struggled recently and they are introducing stimulus from their government. Not a fan of lowering much in case we have a recession, leaving us without a major tool to ease stress within the economy.
1. Average Joe's own few if any stocks. 84% of the entire stock market is owned by the wealthiest 10%.
2. Its hard to make sense of unemployment data when there are so many structural changes happening in the labor market, including a secular trend towards lower labor force participation as retiring baby boomers exit the labor pool, and more workers taking on "gig economy" type jobs.
For these reasons, unemployement stats are probably not as good a measure of the overall health of the economy, as opposed to say, median wage growth.
I go to pornhub for the financial discussions.
Back in the day, I bought Playboy for the great articles.
Funny, I go to pornhub for the porn.
Perv! Upvote for being honest though.
Gotta love a healthy economy, won't talk about the politics of the matter per guidelines....lol
In before lock.
o/u on when this thread gets locked for political "discussion" (re: arguing like idiots)
The line has been set at: 3:31pm
3:32pm and not locked.
I'll take the over.
5:01 pm and all is clear.
August 1st, 2019 at 11:05 AM ^
Still not locked. I have to say - I am super pleased with discussion overall. We CAN be adults here after all!
...why the Fed is stimulating growth at a time when the economy 'looks' solid, if not strong?
Because the cycle is overdue for a reset and recession.
That doesn't really make sense as motivation, because now the Fed will have less tools at its disposal if things do turn towards recession.
This is also my belief too. It is the same with the 2017 tax cuts. There is a time and a place for tax and rate cuts, and that time is when the economy is floundering. Doing these things now is like using all the wood you have put away for winter before you are through October in order to keep your house at 90 degrees.
Fewer
my understanding is the reduction was a reaction to other central banks having lowering rates, which has artificial enhanced the dollars value compared to other currencies and inflation has been very low(less than 2%).
Money is cheap but returns suck.
The drop will turn into a negative when it turns out to be the only decline. With the economy on the healthy side, I think the Fed will wait until economy truly slows before they drop rates further. If they don't wait, there won't be any opportunity to bring rates down when a real slowdown/recession happens.
So I don't think they should have signaled a rate decrease or acted on it yet. But once you signal it, it's tough to not act.
J Powell is a proud man. He doesn't want a recession during his tenure.
Conventional thinking is, this rate cut isn't necessary because GDP growth has been solid, unemployment is low (we are basically at full employment) and inflation has been very muted. Typically those factors would indicate a cut isn't needed. That being said, there are several global economic factors that give the Fed good reason to take preventative measures with interest rates.
Time will tell, but I don't think it was politically motivated, influenced or a bad idea.
I would have actually liked to see the Fed raise rates a little faster two years ago, when the markets were on absolute fire and would have tolerated rate increases. In my opinion, Yellen was to dovish when economic growth was rapid after a long period of restraint.
Recessions aren't the boogie-man either. They are a normal part of the economic cycle and often are healthy for the market.
For what that's worth.
Yeah, you can definitely see this as a political aftershock, but that's not the same as motivation. The common indicators are sending mixed signals (low unemployment, strongish stock market,but a slowing housing market, trade uncertainty, retail markets falling everywhere and manufacturing problems to some degree in a lot of areas -Especially in Germany--falling payroll numbers) and they point to a slowdown on the horizon-- though probably not an outright crash.
However, if these trade disputes escalate, it could lead to some bleak numbers.
I completely agree with your last statement. Every recession is not like 2007-2010. It's ok to have some pullback in growth, a bear stock market, normalization in credit losses for banks. Tends to weed out the under performers and allow for more efficient use of resources/capital. Thanks for your commentary throughout the thread.
Thanks. I can go on for hours about this stuff although I try not to, for the benefit of those reading.
Yeah - I think most could tolerate a slowdown but a GDP decline wouldn't be something I'd label as healthy.
The last time the fed did this was to combat a financial crisis and ward off a recession, correct? Considering we're in an extended recovery, this seems pretty unnecessary and borderline irresponsible.
Word around the camp fire is that the economy is about to take a dip, due to our battles over trade issues.
That’s why Trump called for it!