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!
Need to able to afford taking on more national debt, duh
Wow. Just checked to see how wall street is taking the news and not good bob would be understatement. NYSE was up 15 and Nasdaq up 60 pre announcement. NYSE is now down 450 points and Nasdaq is down 150.
Yikes.
Market wanted a cut of 50 bps
The stock market is not the economy. People seem to forget this.
(not saying you in particular, just a reminder)
That's only half true. It's the economy when it makes a President you like look good, or a president you don't like look bad. That's pretty much econ 101.
markets don't act, they over re-act. short term buying opportunity
Some in the market were expecting a 50 bps cut. We shall see... Could be politicking to push off a recession to the next President however, some argue that the economy is not as good as it seems and needs a slight rate cut.
Who knows!
With the disclaimer that I'm nobody, it's my opinion that emotion, particularly greed and fear, play a significant role in market ups and downs and that steely-eyed analysis doesn't necessarily reign supreme. I wonder if the rate cut makes people think that the economy isn't as fundamentally strong and they panic in the moment.
From my amateur's perch, I wonder about inverted treasury bonds and if it is the canary in the mine that I've read so much about the last few months. Stocks are less predictive in my opinion.
My thoughts exactly...
An inverted curve is a definite warning. The Fed can make some moves but the bond market is like an oil tanker. It needs a wide berth to move!
Fortunately, the market is starting to "sober up" about this move and it's back to only 238 down as of the time I'm posting this. As someone just said above, the market overreacts to many things and as an investor you need to just stomach it and ride it out.
the stock market is an auction.... it's not a 737 Max
Fed hinted and no future cuts? Could lead to a big sell off.
Rate cut(s) and trade deal are already baked in to the stock market. Wall Street is getting crazier and companies are taking on debt to buy back stocks at all time high prices. People should generally be worried about what is going to happen in the next couple of years.
There is never, ever a time when there isn't someone telling people to be really worried about what is going to happen in the next couple of years.
Don’t worry, about a thing. B’cause every little thing is going to be alright.
(You’re welcome :) )
I’m not sure what effect this rate drop will have.
Business capital spending dropped last quarter vs. 2018 and money has been cheap for a long time.
70% of the economy is driven by consumers and there are still a lot of young people paying off student loans instead of paying on a mortgage. Housing starts have been down, so maybe some people will decide to jump into the housing market. Affordable housing is problem in many cities. That doesn’t get fixed with interest rate changes. Consumers have been adding debt to their credit balances and this rate drop will do little to reduce their APR.
So, a recession is surely going to come. The leading indicator of a recession has already occurred in the bond market. Looks like early 2020 could be the starting point. Stocks can’t stay at this price level forever.
This move is going to delay the onset of the recession?
Pulte has literally broken ground on at least two new subdivisions near my house in the Ann Arbor area.
This has already built into Banks/mortgage companies pricing for a month as it was expected. The mortgage rates will now play with the market until the next meeting. If the fed backtracks on this policy at all rates will shoot back up, but I don't see that occurring til next spring.
This is bad, but I'm really not into Keynesian Economics at the federal level in general.
So this rate drop is a little different. The lending rate has been dropping. As it gets closer to the lending rate of the Fed, the banks take the Fed rate since there is zero risk. This causes even well qualified candidates to be declined for loans/mortgages.
I see this as a market test for inflation management. The Fed wants to see if they can move inflation expectations up to its 2% target. The equity markets reaction this afternoon seems to reflect an expectation of a 50bps cut, but the Fed went with 25bps and a pause of Fed buybacks.
25bps cut is by no means a recession motivated easing ... there is no recession on the near term horizon. If there was, the cut would have been much stronger.
The Fed revised its statement to include that it was cutting rates because of “the implications of global developments for the economic outlook as well as muted inflation pressures” ... we will see if this strengthens the economy enough to move inflation expectations up to 2%. The equity markets being down so much on the announcement indicates skepticism.
Has the Fed ever prevented a recession?
Central Banks, by design, create the Boom & Bust Cycle. They'll send dozens of "economists" out claiming to have been blindsided and how next time they'll be more prepared. It's horseshit, every word of it and either the person saying it is a dupe, or an accomplice.
Carl Marx is that you? The manifesto is dead. Let it go.
Mongo, I’m an staunchly anti-central bank, while a pillar of Marxism is a Central Bank issuing debt-based currency.
surprised you’d conflate the two.
There is no central bank in a planned economy. Marxism eliminated all monetary influence as we know it. You need to read the Communist Manifesto again.
Sten - the Communist Manifesto doesn’t call for a "central bank", but a public "bank" with an exclusive monopoly of credit. That tenant is not what our Fed is based upon. It has a public charter and is by no way a monopoly of credit ! Our banking system is a regulated yet free market enterprise. Until death do us part - free markets !
Tough to say if the Fed has ever prevented a recession, but they certainly have softened the blow of numerous recessions.
For example, the Dot Com bust of 2000 could have been a fairly significant recession, but instead many people didn't even notice anything bad happening. Unemployment only ended up rising 2%, and the Fed dropped rates from 6.5% to 1.75%. This is something that could have easily turned into 10%+ unemployment nationwide if the Fed chose to do nothing.
No...the Fed often takes part in causing recessions...not preventing them.
Just closed on our house in May, so I'm paying thousands more than I needed to.
Thanks, Trump.
He's been an obvious advocate for a rate cut and it was going to come eventually. While future rate cuts might be fewer and farther between, be ready to move if rates go lower. If the yield on the 10yr treasury goes below 2%, call your mortgage guy!
Hello, Rocket Mortgage?
#SpeedInSpace
Mortgage rates have already moved. The bond market has already priced in the next cut. Chairman Powell's statement says it all. Lack of inflation meeting target and world economic risk are the reasons for the minor cut. Risk of tariffs, trade wars, petroleum supply disruption, Brexit, etc. Currency competition is another. World funds flow into the US is another. When much of the world has negative interest rates, people want to invest where they can get a return on their money ( the US). Lower interest rates = cheaper dollar = improved import competition.
Anyone else notice that properties in SE Michigan are sitting that would've been snapped up a year ago? Could very well be just a typical summer lull, but sure seems like things are starting to stagnate around here. I get the sense that home prices may flatten since they can't outpace wage growth by too much.
I'll be curious to see the numbers for July and August. I definitely won't be buying anything in the coming months unless there's a great deal to be had.
There seem to be more homes sitting than there would have been maybe 2-3 years ago, but I think this is mostly related to being 10 years into an economic cycle. The home ownership rate for Millennials is quite a bit lower than older generations(often by lifestyle choice), so when you see these homes coming onto market with prices that are 10 years removed from the bottom, people make the rational decision to keep renting in a good location rather than buying somewhere that decreases their quality of life and roughly costs the same as an apartment downtown.
This ^^^ !!!
We’re being told we’re in a protracted recovery, the S&P just hit a new all time high, yet time after time the Fed makes “crisis” mode actions.
This an international war being waged over USDollar hegemony and continued entrapment of consumers and nations into the fiat debt web of the Central Banking Cartel. The Fed’s “inflation mandate” is complete bullshit and meant to dupe both Americans and foreign nations as we export our inflation around the world. Nothing going on has anything to do with supporting or bolstering the US economy, only maintaining the USD as the world’s reserve currency.
Countries like Russia and China are getting tired of the whole song and dance and but they’re too powerful to just bomb, unlike Libya, Syria, Iran, etc.
If the dollar isn't the world's currency, were all fucked.
There is no way to simultaneously claim the economy is great and we also need rate cuts, but I’m sure at least one moron will do so
Rick - the Fed is probing. It is implementing policy change to explore economic reaction. It is like a good DC like Don Brown ... test and varify reaction to the constraints. Then adjust.
The Fed is trying to keep the economy within a certain channel. The economy is currently great, and they are trying to prolong this period. Prolonging this period will be good for a variety of things, mostly economic development in urban areas where a recession usually hits before they receive the benefit of a boom period.
There are a LOT of moving parts with this. Do we have a rate cut if Trump isn't haranguing Powell on Twitter every other day? I don't know, but it's a fair question to ask.
That being said, while the US economy is growing the world economy ex-US is most definitely not growing. Europe is a mess. Japan hasn't grown in a generation. China hasn't had this slow of a growth rate since the early 90s. And the US economy isn't insulated from the world economy anymore. What happens overseas has an effect here. In that sense the cut makes sense. For those wondering why the market went down this afternoon, the market, bonds in particular, has priced in 3 or even 4 cuts over the next year. Powell threw some cold water on that in his press conference.
There has been a tendency for the Fed in the past to assume full employment is much higher than it actually seems to be. In other words, one of the reasons real wage growth has been so slow over the past 30 years is that right when the economy starts to REALLY hum, the Fed starts to raise rates and slow it down. The American worker has frankly gotten the short end of the stick over the huge economic gains over the last 30 years because they are last in line to get the benefit of a great economy. The cut now (and possibly future cuts), while not necessary for the health of the American economy as a whole, should continue to keep the labor market running pretty hot which I believe is long overdue.
I encourage you all to read Fed Up by Danielle Dimartino Booth (a former insider at the Fed). It really exposes what a ridiculous piece of non-governmental power the place has over our economy. It’s incredible and borderline (?) illegal.
I have been in disagreement with federal monetary policy for the last decade plus. Stimulus packages to artificially prop up the market and making federal monetary policy decisions based on the stock market are bad ideas IMO.
As you, and everyone else (except for the "Primary Dealers") in every nation in the world, should. As an active trader I watched as the QE dumped BILLIONS into the markets daily -- billions in debt written in the name of the People, given to criminals who exploded a bomb inside our financial system -- to keep the whole farce afloat. Markets extend beyond anything ever even conceived upon nothing money conjured into existence with a few key strokes. Always reaching higher and higher, often times institutions essentially selling shares/futures contract back and forth to themselves always being able to "front run" any transaction. The sooner one realizes that the Fed, and any bank for that matter, is ALWAYS making policy based 100% upon it's own profits, the better one understands the position they're in when dealing with them.
Do not follow this advice as it is not qualified to be legit. Seek the advice of a qualified financial planner. Thanks
August 1st, 2019 at 12:01 AM ^
Lol! GFYCS!
Qualified like you, Mongo? You’re clearly brainwashed and take exception to anyone who expresses opinion of the Fed differs from yours. Why is that, Mongo? Do you have a vested interest in people believing that the Fed is an innocent, innocuous, and even benevolent institution? It’s always interesting when the prisoners police their own prison.
Markets were hoping the Fed notes would say another half percent of cuts through 2020 but they said probably no cuts or at most another 0.25. Markets crashed on this news and we may see the pull back continue. It may be a good time to get in the market one last time before an expected bear market in the next year or two.
we may see the pull back continue. It may be a good time to get in the market one last time before an expected bear market in the next year or two.
If one is expecting a pull back and subsequent bear market, why is that a good time to "get in the market"? Markets made new al-time-high's just the other day. That is a time to sell the shares/contracts you were holding during the most rally. If you missed that rally, the resulting pull back (if it comes) is the WORST time to buy. Once a true "market correction" takes play -- something we've not seen last decade -- is the best time to get (back) in the market. When this correction there are going to be a ton of people holding who are going to be looking desperately for a "greater fool" to whom they can sell. Don't be that fool. There are also going to be a ton of advisors out there telling the clients to hold tight, that they shouldn't be going to cash -- near an all-time-high during the more unprecedented run up in market history -- and they should just ride it out because it will come back.
Bon Chance!
Stop spewing trading strategies. Markets are efficient. They are all knowing. Folks, take Warren Buffets advice and buy low-expense equity index funds and dollar average into your investments. Don't be a "trader" like this guy. Be an investor. Have a long term view and trust in America and the global economy. The Fed isn't some evil organization trying to rob you. This type of spewing bullshit Sten spits needs to be called out as what it is.