Posted on 05/04/2022 11:27:03 AM PDT by Browns Ultra Fan
Well, the Fed’s talking heads have been saying a 50 basis point hike was coming in May … and it appeared!
And it looks like 9 rate hikes are a comin’ by February 2023.
The Fed’s Dot Plots shows a cooling of Fed rate hikes by 2024 and beyond.
The US Treasury actives curve is up by 14 bps at the 10-year tenor and up 17 bps at the 2-year tenor.
I could read the Fed’s speech on their decision, but since The Fed has been so highly politicized, I don’t really care what they say. Only what they do.
(Excerpt) Read more at confoundedinterest.net ...
I think one time in the late 70s or early 80s Paul Voelker raids the Fed’s Target rate by 500 basis points, 10 times what the current Fed did today.
If current Fed was serious about fighting inflation they would get rates to 10-12% within the next 6-9 months if not sooner.
Interest rates need to be up near 18% to stop the madness
I can't imagine what such a scenario would do to property and stock prices. And neither can the Fed.
Always with the fud
Then we will continue to have high inflation, IMO, there is no easy way to turn the economy around, to curb inflation you need much higher interest rates, if you do that the economy will tank, otherwise we will slowly move along in a lousy economy with no prospects of it turning around anytime some, the only this goes on, the longer it will take to turn it around, assuming the liberal globalist really want to turn it around.
Brilliant! Country is being killed with high cost of living and these bastards just add fuel to the fire!
If they keep raising rates to quell inflation, that means they plan on a structured default.
Get them out the fantasy valuation they've had for a long time.
Sara Palin had the answer, and it worked for Trump “Drill, baby, drill”
Interest rates are only one slice of the big picture. The real problem is runaway government spending. Trillions upon trillions tossed about like confetti with nothing positive to show for it.
To throw another monkey wrench into this whole thing … the people at The Fed almost certainly know that the bigger long-term challenge for the U.S. is our underlying economic factors that point to a long-term DEFLATIONARY trend.
I can imagine what it'd do to stock prices.
Summary: This fat bubble is being popped.
Methods of my madness: The S&P 500 closed at 98.18 on Aug 15, 1977 -- the day before the Fed started hiking rates from 4.75% (already high by today's standards) to 6.0% that first day. They kept hiking for years to even 20% on March 18, 1980 (S&P 500 closing at 107.67 on March 19, the next day the NYSE was open). So for 2 and a half years the stock market rose by 9.7% (compounded ROI was a measly 3.5% per year).
One difference between then and now IMHO is that the S&P 500 had already dropped from 103.36 in April 1976 (meaning the S&P 500 was already down by 5% before the Fed hiked rates). This time the S&P 500 was down about 13% form the ATH before today's announced rate hike So an argument could be made that the rate hike was already priced in. That's not how I see it.
The main difference IMHO is that the S&P 500 has traded way high lately. Even with the recent 13% decline the Shiller PE Ratio is 30% higher than the 20 year average. It's currently at 33.7. Back in 1977 it was close to 10 (hard to tell reading the chart exactly what it was on Aug 15, 1977). Thus, the stock market prices by that measurement is 3 times higher relative to corporate earnings than it was in summer 1977. Thus, we have a bubble that's 3 times bigger, perhaps 2/3rds of it is artificially inflated price. I'm expecting a drop of at least 30% if it's rapid (like the Jan-Mar 2020 drop or the fall of 1987 drop). But if takes a year or so to drop 30% I'll hold off until at least 40% (like the 49% slow drop from Mar 2000 to fall of 2002, or the 56% drop from fall 2007 to Mar 2009). Only when one of those triggers hit will I jump back into equities.
So, are higher interest rates going to bring down diesel prices? Because that is what is fueling inflation.
I agree with most of your ideas, but the question is, do we take the hit now and rapidly or go into a long slow decline and end up at the same place.
IMO, I’m of the mindset of taking the hit now and then start building back, assuming that’s even possible with Biden as POTUS.
Build Back Bidenless
Yep the years of not addressing the federal budget deficit has boxed in the Federal Reserve. Any real attempt to fight inflation will absolutely destroy the federal budget as all tax revenues will now be used to service the national debt.
I think default or just trying to tread water is the plan and with the structural rot in the US economy that should make things interesting to say the least.
But let's say it was a given that I'll never win that argument, then yes, I agree it's best to pop the fake bubble and bring back realistic economic prices: in the stock market, in housing, in food, in gas prices, even Hunter's hooker and crack expenses. LOL
When Federal Gov’t spending exceeds 40% of GDP, and the Gov’t doesn’t care AT ALL about the cost of things, the Fed’s power is limited to crushing the private sector to make up for the sins of Congress.
Every Fed statement should include remarks like “As long as the Congress shirks its duty to manage the fiscal side of things, monetary policy MUST be overly severe, and the people must bear the brunt of the damage.”
Of course, the Fed will push the economy into recession in the name of fighting inflation, at which time Congress and the Administration will rush in with “stimulus”. Its really all about transferring wealth, and using it to buy the votes of people who were “helped”.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.