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Post by Deleted on Feb 27, 2022 0:55:35 GMT
Not sure if we have a thread on this? Here is a very interesting conversation between Siegel and Bullard (St. Louis Fed). It is 50 minutes long and really interesting for those who like macroeconomic discussions: shows.acast.com/wharton-behind-the-markets/episodes/behind-the-markets-podcast-special-st-louis-fed-president-jiTakeaway for me - if consumer expectations for inflation don't fall in line, standby for a higher rate by year end than the market expects. Is the M2 impact a one time shock? Still growing double digits. Will expectations play a part to control inflationary increases? This seemed to be a key input for Bullard.
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Post by FD1000 on Feb 27, 2022 16:19:00 GMT
Good interview, Bullard is considered the biggest Fed hawk. I finished my Economics education in 1981. The last course emphasized EXPECTATIONS. They are the wild unknown card which can change everything. This was my biggest disappointment, and why it's difficult to predict anything accurately. 40 years later and it's still unknown.
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Post by Deleted on Mar 23, 2022 11:42:02 GMT
M2 grew only in the high single digits per release yesterday. That's a little encouraging. Latest commentary from Siegel currently see Fed Funds rate going to 4% eventually to control inflation and reduction of balance sheet, depending on amount, pushing long bond to 2.5 - 3 percent. All data dependet.
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Post by Chahta on Mar 23, 2022 12:16:02 GMT
M2 grew only in the high single digits per release yesterday. That's a little encouraging. Latest commentary from Siegel currently see Fed Funds rate going to 4% eventually to control inflation and reduction of balance sheet, depending on amount, pushing long bond to 2.5 - 3 percent. All data dependet. It is a little worrisome to think the Fed rate could be 4%. That will probably take close to 2 years to get there which means inflation will be longer term.
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Post by uncleharley on Mar 23, 2022 12:23:58 GMT
Fed funds at 4% with the long bond at 2.5/3% Was he talking about 2 different time frames? @slooow,
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Post by fishingrod on Mar 23, 2022 13:29:56 GMT
Scary that the FED Funds Rate is almost always above the PCE Inflation rate when the FED wants to tamp inflation.
Change the date to reflect 3/22/2022. I couldn't get it to do that and copy it.
The PCE is now 6.1%!
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Post by Fearchar on Mar 23, 2022 13:42:40 GMT
Here's a view of the last 20 years...
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Post by Deleted on Mar 23, 2022 13:44:10 GMT
Fed funds at 4% with the long bond at 2.5/3% Was he talking about 2 different time frames? @slooow , So - I am not smart on yield curves. No - he is talking about an inversion - has mentioned before this might be more common and not signal recession. That was months ago though - so his thinking might have changed - don't know. Interestingly - I heard several talking heads this am say a similar thing about the fed funds rate. I like/listen to Siegel on this topic - inflation and money supply - because he is - and has been - way out ahead on inflation rates and consequences. Then others follow.
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Post by Chahta on Mar 23, 2022 14:15:56 GMT
It was 14 years ago, during the 2008 melt down, that the Fed rate was last 4%. I don't like that one bit but inflation is what it is. No one seems to be trying much to tame it.
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Post by Fearchar on Mar 23, 2022 14:21:01 GMT
@slooow, uncleharley, fishingrod, Probably my favorite blogger is Scott Grannis: scottgrannis.blogspot.com/He just reported on the latest M2 numbers, but concludes that prospect for a recession are low. In other posts he covers yield curves and a number of other factors.
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Post by Deleted on Mar 29, 2022 11:25:02 GMT
Siegel - 3/28/22 - bloomberg. Yield curve will invert, but doesn't believe implications as ominous as in the past due to the enormous hedge demand for treasuries that has grown over the last decade. Has NEVER seen a Fed so far behind the curive. Believes substantial inflation will be with us for the rest of 2022 and 2023. Yield curve is not as reliable with inflation. Thinks the short end needs to rise to 4 - 5 percent to tame inflation - not this year, but as the end point. Now thinks 10 yr could get to 3 - 3.5 percent by year end. International - good for long term investor. Yen falling may stimulate Japan's economy.
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Post by uncleharley on Mar 29, 2022 11:59:48 GMT
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Post by Deleted on Mar 29, 2022 12:07:08 GMT
As data comes in I am certain projections will change.
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Post by uncleharley on Mar 31, 2022 18:14:39 GMT
And we have more data from Freddie Mac. The average mtg rate for the week ending 3/31/22/ Is 4.67% for a 30 yr mtg, 3.83% for a 15 yr mtg. I read somewhere recently that 30 yr rates at or above 5% would begin to push some buyers out of the market. There is also some concern about the adjustable rate mtgs coming up for a new rate will push some existing homes onto the market. It sounds like we could see a turn in the housing market this spring. That could be healthy for the economy if rate increases begin to level out.
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Post by Fearchar on Mar 31, 2022 18:37:40 GMT
Thanks uncleharley , The last time mortgages rates were higher than 4.67% was back in October-December 2018. Rates that high did not last very long. Probably took just over a month before the FED noticed the impact and began to take actions. This time it's different of course, but I think it will take over a month for this to be reflected in other economic activity. On December 30, 2021, rates were 3.1%, so it has also been an exceedingly rapid rate of rise in rates too. Previous to Dec 2018, rates were higher in the 2009-2011 time period. I believe that was a fundamentally different era though.
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Post by uncleharley on Mar 31, 2022 23:45:29 GMT
Way back in the 70's I was told that housing is the first sector to go down and the first sector to go up in an economic cycle. I think that is still true but the rapid rise is interest rates is worrisome to me. Adjustable rate mortgages had not been invented then and MBSs have come about since then also. Let me think, It was the end of W's last term that QE was invented. I wonder how many MBS's Blackrock & Pimco hold & how much QE it will take to keep them liquid. I doubt that we have to worry for a yr or so.
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Post by Deleted on Apr 1, 2022 0:43:01 GMT
When you say - housing going down - does it mean sales of houses or prices or both?
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Post by uncleharley on Apr 1, 2022 1:22:33 GMT
It means the sector becoming economically dysfunctional.
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Post by Fearchar on Apr 1, 2022 15:17:55 GMT
3.1% in December 4.67% Now
That's essentially a 50% increase in costs for a mortgage!!!
Young people thinking of buying a home are in for a shock. Real estate prices were accelerating all of last year. No so now.
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Post by uncleharley on Apr 1, 2022 21:34:20 GMT
Amazon notifies my wife of any price increases for items that we order. Our favorite Basil Tomatoe soup just went from $2.15 to $4.18 per can.
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Post by FD1000 on Apr 1, 2022 22:32:36 GMT
3.1% in December 4.67% Now That's essentially a 50% increase in costs for a mortgage!!! Young people thinking of buying a home are in for a shock. Real estate prices were accelerating all of last year. No so now. +1 for buyers who take a mortgage. I have been following RE near us closely for 2 years. Every nice house in great condition, especially with master on main, is gone in hours-days + 5-10% additional. Mature, older buyers have plenty of cash, they want to move in, do nothing and willing to pay a lot more for exactly what they want. These buyers are "crazy" On the other hand, houses in good condition, mostly cheaper with reasonable prices have started lowering their prices by 5-10% in the last 2-3 weeks.
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Post by Deleted on Apr 2, 2022 1:57:34 GMT
3.1% in December 4.67% Now That's essentially a 50% increase in costs for a mortgage!!! Young people thinking of buying a home are in for a shock. Real estate prices were accelerating all of last year. No so now. +1 for buyers who take a mortgage. I have been following RE near us closely for 2 years. Every nice house in great condition, especially with master on main, is gone in hours-days + 5-10% additional. Mature, older buyers have plenty of cash, they want to move in, do nothing and willing to pay a lot more for exactly what they want. These buyers are "crazy" On the other hand, houses in good condition, mostly cheaper with reasonable prices have started lowering their prices by 5-10% in the last 2-3 weeks. ( My wife complains twice daily why did I not buy rental property two years back) Crazy or not depends on where housing prices are in 2-3 years. Last few years housing prices across the country has gone up like 50%. Who would have thought 3 years back that covid will result in a major bull market?
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Post by Deleted on Apr 20, 2022 23:29:00 GMT
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Post by bb2 on Apr 21, 2022 19:34:33 GMT
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Post by Chahta on May 11, 2022 14:35:56 GMT
Interest is headed up and the market down today. Seems they know inflation will be up.
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Post by Mustang on May 11, 2022 17:17:00 GMT
Interest is headed up and the market down today. Seems they know inflation will be up. Pretty sure bet. I haven't seen much that would suggest it won't. Actually I have seen suggestions by several in Congress that will just make it worse.
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Post by alvinthechipmunk on May 11, 2022 21:52:48 GMT
Inflation will NOT be tamed soon. There's the War. There is stuff going on because of the War in Ukraine I would never have ever thought about--- like airlines re-routing planes AROUND Russian airspace... Can you say "fuel inflation?" I KNEW you could. Wheat. There will be no winter wheat crop out of Ukraine, and Russia will not have its customary Markets to depend upon, either: embargoes. I learned that Ukraine is about the size of TEXAS. Not ALL of it is/was under cultivation of course; but that's a lotta wheat! Anyone (like myself) who's driven or taken the train through Texas, from Orange to El Paso, knows how expansive that place is !!! Not only supply is an issue, but the lack of refining capacity--- as mentioned by some Saudi sheik on Bloomberg lately. And then, there's Fertilizer. And if there's a lack of wheat, will people turn to rice, and cause a rice shortage? ? The spiral effect is simply vicious.
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Post by bizman on May 12, 2022 16:37:39 GMT
Here's a really good survey of the horizon on inflation by Aswath Damodaran, with 4 different scenarios. Link
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Post by Deleted on May 14, 2022 12:31:09 GMT
Prof Jeremy Siegel's perspective - higher inflation is baked in for a few more years, then likely settling to 3%. Doesn't see a recession this year - earnings good, jobs plentiful. Short lived inversions with Fed hiking.
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Post by Deleted on May 14, 2022 13:05:34 GMT
From Prof Siegel this week;
We saw a strong relief rally from over sold position. EM was up with slightly better news from China. But the same problems are still here. 1. CPI - shelter costs starting to filter in, energy will be higher. May CPI will be another blowout figure. 2. PPI was closer to expectations, but still lots of inflation. 3. U of Michigan sentiment survey at a 10 year low - close to what it was as the bottom of the Great Financial Crisis - economy is good - jobs - so it's inflation causing the poor sentiment. Sees it running 5-7 percent for the next 18 months and it doesn't matter how much the Fed hikes - money is in the system and has to work its way through. Too much demand for goods still.
Did we hit a bottom - impossible to tell. Might get a bear market in S&P - kissed it last week, but earnings are good and doesn't see possibility of recession until 2023 (now if we have another black swan - surely we won't hold the Professor to that statement......)
Feels the equilibrium p/e for the market is 20 and is currently UNDERvalued (corrected my mistake) for the long term. Doesn't mean the P/E can't go to 15 or up to 25. Those with cash should start "legging" in. Rotation to value and dividend stocks will continue.
Bonds through end of year - 10 year not much higher. Real TIPS between minus 1/2 and 1/2. Nominal rate could reach 3.5% Minor inversion as Fed raises rates.
Crypto - look collateralized, caveat emptor, holds could lose to creditors if one fails.
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