I feel exhausted and manipulated by the 1%.
1
how can it put rates up when the country is about to nosedive into severe recession? surely THAT is a warning for those who have not yet got a grip?
This piece is written like everything is sunshine and roses. The stock market is still off it's highs from Jan 2018. That's not to mention the slowing global economy that you completely forgot to mention. Then there is the new headwinds facing the china trade deal, Brexit, steel tariffs, aluminum tariffs, pending foreign auto tariffs, inverted yield curve, corporate debt at it's highest levels ever, declining real estate market, bad February jobs report, I could go on and on and on. The DOW finished down today, not up, but this author thinks real investors are going to get back into the market....
2
I'm predicting stagflation....
2
The Fed STILL has no outlined policy on how to wind down its position without doing harm.
Money printing to generate an asset bubble is easy
Deflating the bubble perilous :-(
1
Fed printing money and giving it to Wall Street at low, low, interest.
Can I get the interest rate on my federally-backed student loans reduced back to the 3.5% that I was expected to pay when I took them out?
Because when it suddenly became 6.5% I was blindsided.
4
It's a shame you no longer can put your money in an interest-bearing savings account and get any decent return -- been this way for years on end. The Fed is forcing our hands once again to place our bets -- and bets they are -- with the stock market if we're to have any hope of retiring with anything resembling a nest egg. It also seems to be permitting riskier and riskier investment packages that could well presage yet another stock market collapse like that of 2008-9. When will we learn....when will they learn...or are we just destined and doomed to keep repeating the same mistakes, with the 'little guy and gal' the ones who are most victimized by this?
5
@Christopher P Some one wants the stock market to be the savings bank. What a great insurance policy for corporations; if they lose you lose.
The Fed should not be making decisions that benefit wall street and wealthy investors over main street/small savers. Is Fed Chair Jerome Powell becoming intimidated by Donald Trump?
8
If "Wall Street could not be happier" with the Fed announcement, why are the Dow, NASDAQ and the S&P 500 all down for the day?
1
@Wally
It looks like automatic shorting at around 26,000.
Shameful behavior. Encouraging people to speculate... what a wonderful idea. The Fed should allow the little guy the ability to have his nest egg protected. Interest rates are way too low … and PE ratios undoubtedly too high.
When will they ever learn?
2
With this great news and ensuing happiness, why did the DOW drop 142 points today.
Trump disagrees with the Fed’s 2.2% projection for GDP in 2019. Rather than fantasizing about 3% growth, Trump needs to stop with his trade wars and tariffs.
1
Some people here say that it is all about the stock market.
They are right, it all really is about the stock market. Like or not, most of us (rich and poor) do need the stock market to be sort of steady, moderately going up, and certainly not collapsing like 10y ago.
Even if this means living in some sort of bubble. A long-term bubble is not a bubble at all.
1
And for us old timers who don’t put money in the stock market
since we don’t have time to recover if the market tanks, we’re
stuck with like 2.5% CD rate of return and a 2% inflation rate.
In the old days the banks would trip over eachother to get our deposits and give us 5% interest.
Now the banks only want to take money from us in fees.
The banks don’t really need depositors like me anymore.
They go to the Fed., stick out their hand, and the Fed. prints some more money for them.
It’s all a confidence game, the Fed can print money as long as the globe has confidence in the dollar, and our promise to settle our obligations.
I think our military backs up our dollar. Am I on to something?
8
@New World. There is such a thing as cautious investment. You don’t have to be rash to be getting an 8% return.
Invest in stocks that provide dividends.
At first glance, it seems like a good thing that the Fed plans no more rate increases this year... but then I stopped to think about the 'why'. The Fed sees enough weakness (what? what is it they are seeing...?) that they will hold off on restoring interest rates back to a range more closely associated with a normal, healthy economy. Hmm... that's like the doctor telling you they are going to stop treating your hangnails because there might be some spots on your latest x-ray... Wall Street will react with glee, because Wall Street only ever focuses on the next day's profits, and is insulated from the 'real America' effects of "a slowing economy..." That phrase means people getting layoff notices, it means people struggling to find money for the next rent increase. It means unmeasured, un-noticed hardships for thousands or tens of thousands of 'ordinary' Americans, while Wall Street celebrates. The Fed seeing enough weakness in the US economy to halt rate increases restoring rates to 'normal' levels is -not- all good thing.
"On Wednesday, the S&P 500 had been down slightly before the Fed’s announcement lifted the spirits of investors and pushed the benchmark stock market index into positive territory."
Guess you should be careful if you're gonna post an article while the market is still open. It pushed into positive territory alright...and then the S&P 500 fell right back down into negative territory to end the day. Sure is too bad us plain folks can't make a killing when the bump lasts twenty minutes or so.
2
@Gypsy Boy. Since your trade doesn’t clear till end of day, that 20 minutes is irrelevant.
Every week I am behind a long line of Lotto, Pick 5 and scratch off
buyers in the local QuikChek. I've spoken to several over the years, and some are regularly playing $20-$50.00 a week.
If they chose to invest in stocks with that money, or a mutual fund, or even a CD at 2%, I imagine they'd have a better chance at having more money saved for future purchases or retirement.
It costs nothing to read beginner's books, articles or magazines at the library or online about dipping a toe into stocks or money markets. It costs $4.95 to make 1 trade at Fidelity Investments.
If our schools taught money management as a high school class, I could see a generation of people with a better understanding of where to stash $20.00 a week.
I am in no way blaming people for their choices, but there are always other ways to make money for the future.
2
@mainesummers
I spend 35 dollars on dry cleaning each week. If you said 200-500 a week, I'd agree with you. 20 dollars is a tip on dinner for two in NYC.
Looks like the Fed did it's job. Trump's economy had inflation potential especially with wages going up (something that didn't happen under Obama).
News often points out how corporations benefit from the stock and regular folks don't.
I'm middle class. Like a lot of Americans I have a 401K. It's grown tremendously over time and it's my retirement. It is meaningful when the stock market does well for most of us Americans.
11
@Ari
"It is meaningful when the stock market does well for most of us Americans."...
The reason why it's meaningful is because there is no other way to invest ones retirement savings that will bring a return approaching the rate of inflation. The old savings and loan banking era is gone.
28
@Ari Wages are still barely moving and the market more than doubled under Obama who, you choose to forget, was handed an economic disaster.
35
@Jim Dennis. And we all remember Obafabulous stimulus that did nothing. And by the way, wages of blue collar workers are rising faster than white collar. I suppose you didn’t want to mention the unemployment rate.
I am a millennial. A booming stock market and low interest rates do not lower the burden of my student loans. It certainly does not help me afford childcare/preschool for my toddler.
I am forced to save for retirement on the stock market because it’s the only option my employer gives. So my hard earned dollars are mixed with speculative investments for the wealthy looking to further increase their wealth.
The deck is stacked against working people.
148
Low interest rates should help you afford a home. Which might not matter that much because you chose to live in the Bay Area.
You knew the interest rate on the student loan when you signed the contract. It’s hard to complain about the interest burden after you agreed on the terms. On the bright side, lower interest rates mean you have good opportunities for refinancing.
Child care is incredibly labor intensive. Pressure for higher wages economy wide should make the cost of daycare higher, not lower. Interest rates are a measure of the price of capital, not labor. Not sure what is the connection you’re trying to make here.
11
@SB I'd say if you're "forced" to save for retirement, that's a good thing. Why are your investments speculative? Most employers offer index funds, which should be less "speculative" than investing in Pets.com for instance. I'm "working people," and investing in the stock market (I "force" myself to save for retirement) has done well for me so far. Read up on what your employer offers, understand what they're doing with your investments.
14
@SB
I was once in your position. I graduated from college in 1986. I put my money into the stock market. I've done well. You, also, will do well--don't whine about what your employer requires, and if you don't like what your employer requires, find another investment tool. It is, after all, your money: No employer can stop an employee from putting their own money into an IRA, where you can invest in stocks, bonds, commodities or money markets. In the event you are in a 401(k) and your employer matches contributions, give thanks. That's free money, it's yours and as you change jobs--and you will--you'll have that money to invest however you see fit. If you're smart, you'll keep it in the stock market. If I had invested $1,000 in an S and P index fund in 1986, the year I graduated from college, I would have more than $21,000 today, assuming dividends were reinvested, even if I didn't put another penny in.
And you're complaining about the stock market? Heavens, why?
19
Wall Street is probably correct about more rate hikes. The economy is not at risk of producing inflation because the domestic economy is not expanding fast enough to stimulate over spending on productive capacity nor excessive borrowing to buy more extras beyond necessities.
Trump’s policies, while making conservatives who have faith in supply side hypotheses and that only rich investors create economic growth very happy, have spiked the rate of growth for the foreseeable future. Government deficit spending has begun to skyrocket while businesses hoard their savings rather than investing in growth and innovations. His administration seeks to reduce mass market wealth by slashing labor costs and to increase the costs of civil society by ending regulations that prevent businesses from shedding costs which society will have to pay.
The Fed will likely not raise rates much if at all for a while. But they will and when they do the Government borrowing to cover deficits may stagnate the credit market.
4
@Casual Observer really an excellent point that political/economic policies will "increase the costs of civil society by ending regulations that prevent businesses from shedding costs which society will have to pay."
1
Really, the bottom line for people of middle to lower incomes is just being able to pay their bills. There is no play money left over to speculate on stocks.
Wall Street lobbyists created the 401k system because it was extremely profitable for them to do so. Pensions are long gone. Workers make crumbs on 401ks, but Wall Street takes the cake.
In the old days, public corporations used investments in their stock to expand and grow their business. Now, their profits mostly go to stock buybacks, dividends, and astronomical executive compensation, rather than reinvestment in their business or their worker's salaries. Rank and file raises are to be avoided.
Lastly, the very rich and powerful individuals who control the market have socialized their losses when they occur: they're just added onto the national debt when the government bails them out. Look at 2008 and you know that to be true.
31
@dave. Workers don’t make crumbs. Quit quoting Pelosi.
Stockbrokers have been wanting Social Security and pension funds to be replaced with retirement accounts since the they were created. It’s great for their business but anytime the markets plunge as in the Great Recession or the Great Depression retirement account dwindle in value to less than the money deposited into them. The point of pensions and Social Security is to assure that old people without jobs will not become impoverished.
4
Funny how different "experts" see wildly divergent futures in their crystal balls. This hedge fund today touted doom down the Dow road.
https://www.ccn.com/short-the-dow-for-2019s-coming-recession-says-top-hedge-fund
Considering that computers and their algorithms are responsible for the vast majority of trades, it's humorous when the human is given credit for the movement of the markets. The incessant speculation by "experts" on why it moves in any direction continues to be entertaining. The fact that we have a very unstable, crazy man as a leader should have a huge negative impact on the market, but it does not. Go figure!
1
A rising tide raises all boats- We assume in the States that everyone is in a boat AND that they OWN that boat, be in ever so humble. Of course that has never been true.
Many Americans are treading water and others are standing on their tippy-toes holding their children up. That is a better picture of a large swath of the American population.
But I think this Fed is petrified of Trump. The bankers that I have known tended to live anonymous lives; they liked the shadows not the lime light. Trump and his increasing twitter-assaults can put individuals into the spotlight.
The Fed members probably feel the pressure. After all Trump knows more than his generals and based on his experience with Deutsche Bank, he probably feels that he knows better than America's bankers as well...
Tides go in and out, even wealthy yachts wind up stuck on the mud flats. We can only hope.
4
Stock buybacks, if they had any impact on price (they really do not), would raise the average PE, not lower. The P and the E get divided by same number, shares of stock. You mixed up your numerator and denominator.
My workplace retirement plan allowed me to save taxes equal to about 2.5% of my income and my employer made a tax free contribution equal to about 1% of my income. This benefit equal to 3.5% of my annual income year after year insured my portfolio against loss. When I retired the "insurance" disappeared as did dollar cost averaging with twice monthly deductions from my paycheck. The long time horizon disappeared as well. I decided that I was no longer in a position to be an investor and would become a speculator if I continued to hold risk bearing assets. I stopped investing and allocated my principal to CDs and treasuries.
2
What's (one of the 200) worst thing(s) that President Obama did during his administration? (According to Republicans, it was that) He kept interest rates low in order to inflate stock prices. (President) Trump is now keeping interest rates low, (literally in order) to inflate stock prices. That (according to Republicans) is one of the best things he's done. Know what? They're right, and it really is no better now than when President Obama did it. Only the background noise has changed.
1
The hilarious thing about this is Wall Street has proven to be a poor indicator of the health the nation. The ups and downs of the trend has no bearing on whether or not the country is doing well.
Corporations are so diversified with overseas profits, the fact that our farming industry is tanking will not have any bearing on Apple or Google grossing billions this year. GM and Carrier closing plants only drives the profits through layoffs numbers and benefits people like Wilbur Ross.
We could be launching missiles at North Korea and Wall Street will still report high earnings.
6
S&P PE ratio is currently 21.06. That means, relative to profits, the market is about 5% over priced from an historical perspective. Year over year new home sales in January fell 4%. Could the Feds decision on rate reflect concern about a slowing economy? I'm not saying sell. I'm just suggesting we should all be a little cautious when buying.
4
Anything that makes Wall Street happy seems to always be a disaster for the rest of the country. Making money from money adds zero value to society.
14
Why wouldn't Wall Street be optimistic?
As long as Benjamin Netanyahu, Kim Jong Un, Vladimir Putin, Mohammed bin Salman, Abdul el- Sisi, Rodrigo Duterte and Recep Erdogan are still smiling and smirking why worry?
Donald Trump made a solemn sworn oath to preserve, protect and defend whatever profitable Trump Organization profitable advantage that he is hiding from the American people in his personal, family and business income tax and other records.
11
Well, if you made money, and are still afloat, everything is justifiable. But then if you didn't, the system is broken.
My own experience has nothing to do with investments, just the experience of discovering that honesty is a perk granted to insiders, that unless you're able to protect an asset you won't have it for long.
1
We have a bumbling president who says 'I'm a tariff man' & he's negotiating trade deals & quitting trade deals though terribly afflicted by the Dunning-Kruger effect. Anyone who's stepping back to gauge the market is making a wrong bet when they disregard these factors.
7
"But sectors sensitive to interest rates [housing, autos]...have posted some of the bigger gains in this rally."
"Those increases have come even as forecasts for economic growth have shown concern about a slowdown."
"Investors who have so far sat out the 2019 rally...may be coming around to the idea that it is a mistake to do so when the Fed is so clearly the primary driver of gains."
"“It could be that the chase is on,” said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch."
This, more than ever, points out how the FED assists stock market investors even by inadvertent means. Such investors -- the vast majority of whom are extremely wealthy if we can agree 1 or 2 out of 100 persons are an extreme minority -- are less concerned about the goods and services than they are of the monetary policy that inspires exuberance.
The FED sees darkening clouds and decides to take the foot off the brakes to speed up and outrun a possible brewing storm, and investors think this is good news because of the increased speed. Their extreme minority joy is therefore derived our pain, and I suppose that makes sense: every time somebody makes money somebody loses it, except for the ongoing marginal increase in overall national wealth by however much the GDP grows, which is NEVER as fast as their stock market growth.
Investors are ebullient because they know that when GDP slows, they can pull ahead relatively. All they ever want is to stay relatively ahead.
3
2018 Trump warns about the Fed moving too fast on interest rate increases.
It is amazing how many times Trump is always on the money.
Trump is a visionary with unbelievable foresight.
He has raised issues and topics that no one was even thinking about.
@True Observer It's even more amazing that you can think that!
6
President Trump has created through deregulation and tax cuts an economy that is booming. Anyone who wants to work can find a job. The fall sell off of stocked occurred after the Democrats won the house—fortunately it was a temporary slump. Keep America Great--Vote Republican. The socialist Democrats will lose in 2020.
@Jonathan - Ah. those pesky socialists. So, I suppose you are opposed to bailing out all of the farmers (literally) who are underwater right now in places like Nebraska? Let the markets decide, right?
1
Do you mean the 0.01% who own control all the stock in the world are "optomistic" that they will be allowed to continue to rob 99.9% of us blind?
Why" Because their boys O'Rourke and Sanders are getting media attention with all the money they're throwing for them?
Because Senator Harris is also in the "money running"?
The 0.01% have no business being "optomistic". WE THE PEOPLE are going to hire/elect Socially Conscious Women and men who sill tax and regulate "markets". They are nothing but the world's biggest craps tables and add nothing to society - the owners/controllers just take as much as they can.
It must end NOW.
2
This is good news for the poor and the rich.
This is good news for the entire world.
Very shameful that many Democrats would rather see a recession to hurt Trump.
This is sad and sickening.
1
It’s all about betting or a bet, not policies that stimulate economic growth through manufacturing, creation and innovation. Shareholder activists’ ears seemed all perked up.
2
Wall street has seen significant volatility from its peak period in January 2018. After over a year there is some optimism and decent returns for those who did not do any panic selling for any of the many reasons. Those who played the markers through quick short term gains made off with millions but those who struggled and had faith that the markets will return back to the Jan. 2018 peak performance have every reason to be optimistic and betting on future stability and the lack of recession in near future. Also reliable stocks are currently a bargain and could start rising if opportunities are not used. especially for those who panicked and left last year.
The Feds were warned and rightly so not to predict the markets too much in advance not being able to assess the long term ground realities and spook the economy. Henceforth they are expected to be more cautious.
1
I looked, but I couldn't find the words "debt" or "deficit" in this article. Do these realities not matter any more?
13
@Frank
No. And they didn't matter during the Obama administration either when Republicans in congress were carrying on about it then.
Macro economics does not work like household, or even business economics. Households and businesses cannot control monetary forces, only fiscal ones. This changes everything for governments, especially when we still control the world's reserve currency (at least for now...)
The Federal Reserve's inaction on the rate front is less on the economic logic and more under the political cpmpilsions to be traced to Trump's policy flip-flops and the trade wars that pose a real threat to the economy. However the Wall Street sharks have always thrived on crisis as they did during the last great recession when the common man was the worst sufferer.
5
Agreed, the Fed needs to continue to raise rates back to normal so that it has the tools to deal with the next economic crisis that surely will come.
7
Sorry, but I don't subscribe to the Cherry picking notion of buying and selling of stocks and bonds.
I adhere to the Bogle notion of buying lowest cost index funds and ETFs. Buy and hold is my mantra.
You want a financial education. Try diehards.org.
It is free and no "financial planner" will call to pester you with their so-called "expertise" as you are your own financial planner.
Enacted for 2018, the cut in corporate tax rates from 35% to 21%, simply means that the after-tax cost of borrowing has increased, or an inherent interest rate rise has been enacted. For a +0.25% rise in rates, or a +25 basis points increase, the after tax cost of interest on debt is now, since: (100% - 21%) = 79%. And, the after-tax cost of debt for a 0.25% rate increase is now (0.79 x 0.25%) = 0.1975%; compared to 0.1625% before the corporate tax reduction. So, the lower corporate income tax rates act to increase the after-tax cost of borrowing, or interest rates, by (79%/65%) = 1.2154 times, or +21.54%. And, 1.2154(0.1625%)= 0.1975%.
This lower corporate tax rate and the resulting increased after tax-cost of debt would apply uniformly to all tax deductible corporate interest expense incurred in 2019, for example.
[JJL 3/20/2019 W 11:01am Greenville NC]
1
The Fed Reserve only controls the overnight term rate. Anything held longer is strictly the result of lenders selling temporary use of their money at a price borrowers are willing to pay. The Fed is not holding down interest rates. It does control the money supply, mainly in response to inflation projections. With inflation low, it does not need to restrict the supply of money. Wall Street cares more about the money supply and reacts quickly.
Inflation simply did not grow as expected. Consequently the Fed paused and the market sees the money supply will not decrease. It is not more complex than that reasoning.
1
Hmph.
A recession is still very possible; the stock market is one indicator of the health of a slice of the American economy, and it's not even that good of an indicator.
I'm convinced that the economy could come crashing down around our ears and Wall Street would be posting gains.
10
According to Jeff Gundlach's 2018 math:
The economy grew at 3% of GDP
The debt grew at 7% of GDP
Strip out the the government spending and that's negative 4%!
3 - 7 = -4 = false growth
If you are any good at arithmetic...
Piling on over a trillion $ a year in debt is hardly a healthy economic policy - unless you subscribe to Modern Monetary Theory...a fantasy as sound as Trickle Down.
13
Like a lot of smart people, I have lost out on the rallies of the past ten years....
The reason, there is absolutely no justification for these rallies. P/E ratios are sky high requiring future earnings that are impossible.
Buying 'the dips' is ridiculous when you look at historic pricing.
And generally, we have a market of speculators not investors.
But what do I know. I'm not the one making any money. You can be right, and it doesn't matter...
until of course it does.
4
The current average market PE is about 15, the long term average. Stop worrying about Netflix, Amazon and other high flyers. Invest in broad market ETFs at low cost, stay diversified with some high quality bonds to get you through down parts of cycle (yes it is a cycle) and you will do fine. Never has it been so easy for a small investor to control her risk and get reasonable returns while avoiding anything that smacks of overextended firms. Still, you have to be in the game to win. You do not have to win big, just the average.
1
There are a few ways to interpret this story. The most unsexy boring manner is: The American economy has been incapable of sustaining interest rate increases since...well, I don't know. But it has been a long time. And, when this economy appears to be healthy, like in 2018, it still isn't strong enough to sustain regular rate increases.
The text book concept that sustained low interest rates should be followed by a period rising rates is great...in a text book. But, those of us who actually participate in the economy realize America has not yet completely recovered from the 2008 debacle.
15
@michael
Supply Side Economics has cut average GDP growth by 40% since the 1970's. We had higher growth under stagnation and oil shocks than we have under Supply Side Economics. You can children my assertions by googling GDP growth by year and averaging the decades.
Tax cuts for the rich cuts economic growth. That is what the data says.
The only reason media doesn't point out this obvious fact is that they are corporations threat like their tax cuts.
1
This seems to be the market's expectation that the next recession will happen organically, as a result of shrinking demand and overcapacity, rather than as a result of Fed interest rate increases.
I have to wonder whether the stock market really reflects the state of our economy, or whether it has become safe haven for the world's investors. Especially in advance of the possible economic chaos of Brexit.
6
Wall Street is wrong. The weather will interfere with the economy and it started with the farming community already.
5
@Joe Barnett
The would be a 'real world event' which so far has eluded being an effect on the AI stock market boards.
1
The bet is, the economy is on a sustainable growth path so no more rate hikes will be needed. The headline seems to indicate that the Fed arbitrarily speeds up or slows down the economy for whatever capricious reason. Journalism is a lot easier counting dots and reading between the lines of speeches than talking to real people about what they are seeing.
You know, somebody (whose name I can’t bring myself to mention) was tweeting constantly about the Fed being too tight back at the end of the year. Does it count as political pressure if he’s right?
1
In my personal experience, inflation seems to be running around 7 percent, not 2 or 3 percent. From snippets here and there, I gather that others across the nation are perceiving similar real inflation.
I'd love to see some reporting whether this perception is true, and, if so, what it means in face of the Fed sitting on, or reducing, extraordinarily low interest rates.
7
@William Lazarus ... maybe, but my wage income certainly hasn't increased by six or seven percent.
5
@William Lazarus well remember, the CPI (inflation index) is dealing with the average consumers basket of goods over the country. You could indeed be experiencing 7% inflation, in fact, all of Oakland could, but that could be being washed out by the rest of the country. However, it seems like Oakland is around the 3-4% range (https://www.bls.gov/regions/west/news-release/consumerpriceindex_sanfrancisco.htm).
1
@BD Wage increases have not kept up with the pace of inflation for a while now. You can find lots of articles online about this.
3
Things that need to be remembered is that the stock market nowadays is not about investments, it is about generating money by moving it around, often by buying and selling the same item over and over. 70% of the activity within trading is being done by algorithms without any human interactions and these algorithms, with the help of the machines that run them, react within milliseconds to the activities of other machines.
Human knowledge and instincts and a company's real value have very little to do with the stock value nowadays. Hardly anyone actually invests in a company, they invest faceless in abbreviations that are just shuttle buses for quick transactions.
Capitalism was never designed for this and it fails to deal with it.
19
@Truthseeker
Actually I think capitalism is the ideal breeding ground to allow artificial manipulation of stocks while preserving the fabled 'plausible deniability.'
1
@Truthseeker: Broadly speaking, there are two ways to make money in a stock market: by trading and by investing. Trading is short term and generally happens in response to relatively small price movements, many of which happen in response to other trading activity. You may be right about the percentage of trading that happens automatically, but there are plenty of human traders who hope to profit from the same activity, and automated trading is just an extension of something humans have been doing for centuries.
Investing involves buying and selling shares only occasionally and holding shares for a long time to allow the business value of the investments to develop. Over longer intervals that happens most of the time and a lot of people have made money this way. (Warren Buffett is one or them.) The longer term trends in markets and with individual companies are seldom affected by short-term trading.
I agree that the effect of automated trading systems on the markets is a serious concern, but when you count just the short-term trading activity you're ignoring the large numbers of investors (individuals and funds) who don't trade frequently. This is an observational bias. You need to consider all of the trades that aren't happening, too.
@katesisco
yes, but capitalism was based on the basic idea that "supply and demand" would keep things balanced and in the "civilized" world, where the justice system managed to keep people from doctoring the system with guns and fists, it worked reasonably well.
Problem now is that so much business is done basically in the imagination. There are no physical products being bought or sold, just numbers being moved between columns. Basically, it is a situation of endless supply and zero demand, because nobody actually needs the "products" they buying. They are only useful in that the sense that they can be sold.
1
The last interest rate itself should not have taken place. It can be assured there will be no interest rate hikes before 2020 presidential elections, if anything it will cut the rates. The chairman of the Fed should expect heat from Trump if the economy slows down before 2020 elections.
3
Sorry, not buying. For one thing, this looks EXACTLY like yet another case of Trump looking for an alibi, for a scapegoat, some way to leave aomebody else holding the bag for his own incompetence, the economic chaos he’s caused, the failure of that $2 trillion giveaway to the wealthiest to jazz the economy for more than six months, the abject lack of anything on infrastructure, and so on.
Typical for him. Also typical: selling off the future. Part of the purpose of the Fed is to have ways to respond to recessions, like cutting interest rates. Now, there’s no room. Nor is the kind of “growth,” we’re getting anything good for the long term. It’s more like cancer.
And you’re doing the same.
2
The wizards, pundits and other wise economists have firm conviction about trends in the economy and what the Federal Reserve will do in the next year. Until it changes frequently. So the sheep think (I am embarrassed to call it think) wanders this way and that with little success at predicting short term economic trends. These are the people who are involved with computer algorithms that move billions in nano seconds to reap pennies.
Why we look to these idiots instead of chicken entrails is a mystery to me.
5
@Paul
And then the journalists quote the wizards and pundits for you in articles like this.
There are two explanations:
1) the people doing the predictions are idiots. I think this is your contention.
2) predicting the future is really hard. That doesn’t mean it’s not worth trying, but the world is a fundamentally unpredictable place and so there is a limit to what we can know.
I lean towards the second explanation. We should recognize then that the predictions we get may be “the best possible” but they should be regarded as necessarily imprecise all the same.
If you dig into the bonds that pack so many retirement accounts, you'll find much of it is near junk. Much of the financing for the past 10 years has been from so called "shadow banks", and most of this debt has been converted to bonds, and the biggest buyer of these bonds are essentially insurance and pension funds. Pension funds have not been able to balance inflows and outflows with secure US Treasury debt for over a decade because Treasury yields are so low. You can start a real hot argument among finance people about the quality of pension funds. Personally, I detect a massive bailout on the horizon.
13
@Epicurus
I fear you may be correct. Probably the reason the Genworth deal can’t seem to move forward.
1
Since only 14% of private employees have defined benefit plans and only 4% have defined benefit as the only employer plan, you must be discussing public sector plans. Incompetent state and municipal bureaucrats have mismanaged those plans for decades. Those workers are going to be taking haircuts, big time, because Joe and Josephine Taxpayer will not be funding any bailouts for state and municipal workers.
The Genworth acquisition by the Chinese firm has to go through 4 or 5 states’ regulators and Canada. I believe Canada is last step left. The delay is more about government bureaucrats taking their sweet time.
Does this pause in raising interest rates mean that the economy is still being artificially stimulated - such as it was to bring the nation out of the GFC? It's like creating new debt to pay down old debt - something The Trump Organization and Kushner Inc. know from mutual experience. Trump is known for walking away from his financial responsibilities and obligations, and so his source of debt refinancing is of little concern for him...just ask Deutsch Bank. Kushner Inc. however have a track record of getting it wrong - with the patriarch ending up behind bars. It's hard to accept the Fed's statement that their independence has not been compromised by this administration, whose objective is more likely political than not, and to eliminate any threat to the perception that we are living in a golden, rosy, Trumpian utopia.
25
My business causes me to travel the world extensively. I interact with CEOs and staff on three continents.
As Trump policies continue to wend their way thru the global economy, weakening is becoming more pervasive. The single worst Trump policy mistake was the tariff war he purported was "easy to win". As a result, US soybean sales are down 95%. China has proven to be a resilient adversary and shifted its soy purchases to Brazil.
Auto sales are down and last week GM told Trump that the corporation will decide where it will build cars, not Trump.
But the loss of confidence in US management of domestic affairs has become a global embarrassment. For years US politicians have vilified gov agencies as wasteful and gutted their budgets. That short sighted, vote gathering strategy gave us the Boeing debacle.
But the single greatest cause for loss of confidence in the US is our inability to replace our president despite all of the legal issues, failures and investigations. Trump has single handedly poisoned America's well of good wishes. Trump personifies what the rest of the world despises about America: casual racism, crass materialism, relentless self-aggrandizement, and vulgarity on an epic scale.
131
@Barnett K Trump is as much a symptom of what was already there as he is the cause for further aggravation.
14
@heinrich zwahlen
I disagree.
Many negative elements have ACCELERATED as a consequence of the actions of Delusional Donnie.
Soaring fiscal deficits
Loss of international support by our traditional allies
Willy nilly abrogation of treaties
International trade problems
Disrespect for the law (Donnie's hangers-on and other fat cats are thumbing their noses at the law)
Foreign influence in domestic politics
Racism/White Supremacy/Bigotry
Shall I go on?
10
Mission accomplished. Trump let his hand-picked Fed Chair know that rates had to stay low to keep the economy, which is based on massive debt and cheap money, from slowing or collapsing. In the meantime, the price of gasoline has gone up by sixty-cents a gallon but Mr. Trump can't get his Saudi buddies to do anything about that. You would think that covering up a murder would at least by us a little relief at the pump.
15
Fed has created all these bubbles by trying to please Wall Street by prematurely cutting interest rates and keeping interest rates low. The Dotcom bubble took off when the Fed cut interest rates 3 times in response to the LTCM hedge fund collapse. The Housing Bubble took off on the back of 1 % interest rates that were gifted to Wall Street to protect the brokers from the Dotcom collapse. 0 % interest rates and QE 1, 2 & 3 followed the Housing Bubble collapse. Now the Fed has inflated the mother of all bubbles and wall street broker's shirts are on the line if Fed does not throw them a bone. The crux of the matter is that the Fed is overly focused on goods inflation which has all but disappeared in this era of globalization. The Fed considers the inflation in the price of assets (Stocks, Bonds & Property) as benign and a sign that people are becoming richer and the economy starts humming with asset rich people spending more. After so many bubbles, there should be a realization that unexplained asset price inflation is not benign and a collapse is just a few quarters or a couple of interest rate hikes away. The broker-dealer community, real estate complex and the media are all in cahoots because of the commissions and only want to talk the markets up. If Fed continues on this path, the general public will lose all faith in markets and completely withdraw from investments as happened after the great depression when the survivors decided that the mattress was the only safe place.
19
@Rahul
Yes. Asset bubbles are created by tax cuts for the rich, which don't go into actual investment, but into bets on financial instruments.
Creating and popping bubbles is a great way for the rich to get richer, but it disrupts the actual economy.
9
@McGloin
The tax cut is only a year old, Fed has been inflating bubbles for more than 25 years. Remember Maestro Greenspan with his Greenspan Put that used to send Wall Street into giddy euphoria, how did that work out? The Fed can create more phony wealth with a few cuts in interest rates than the Congress can ever do! Wall Street has a short memory because they work on commission and only care about the next quarter. To them it means nothing that people have their savings and futures at stake.
nice to know the Fed works for Wall Street...I'd like to see CD rates back to 5+%, please...
20
@Jim So would I. However if the corollary of a 5% CD rate is an 7% mortgage rate, I don't think our economy would survive that.
The current U.S. economy seems predicated on having a lot of cheap money sloshing around to allow corporations to run up debts, often for dubious reasons.
I think we'd all do better if Washington focused on spending (investing) in public infrastructure projects that position us well for the next 50 years: bridge repairs, dam repairs, public transit improvements, high-speed rail between major American cities, more renewable energy as we phase out coal.
Such projects would benefit the U.S. public for generations to come. In contrast, keeping corporate borrowing costs low as this country's overriding economic tools benefits mainly the one-percenters ... and, I'd guess, for maybe only one more generation before the whole unsustainable system collapses.
The fed funds rate is currently 2.5%. Inflation is 2%. So the real return on bonds is a measly 0.5%. Is that what we are calling high interest rates now? If the fed needs to hold rates this low so as not to discourage business investment we are basically conceding that the return on real business investment is barely above zero. That’s not normal. It suggest there is something fundamentally wrong with the US economy. Those massive corporate tax cuts haven’t helped with this either. Notice also trash the fed has almost no room to move. Job growth has been fairly strong for many years now, if that changes the fed can only lower rates 2.5% at the absolute most.
12
@Baldwin
Yes, and global banks have so much cash ($3 trillion in free cash from the Fed since the recession) that in order for the Fed to raise rates, they have to pay bankers to not lend!
All of this socialism for the rich is destroying the system from the inside out.
9
@Baldwin
May I suggest 'job growth' is an artificial figure similar to the economy as a whole. The massive numbers of able bodied men incarcerated and not counted as 'unemployed' are significant.
Sure. The banks pass up on $billions in loans with 300 basis points margins to get 60 basis points from the Fed on their reserves. Do you know anything about banking? The Fed paying peanuts on reserves is not holding down lending activity.
The days of the "Independent Fed" appear over. Jimmie Carter was not able to overcome the 19% interest rate set by the Fed in the late 1970's. Reagan benefited from it and got elected president in 1980. What resulted was lower taxes and increased budget deficits. Deficit spending works in the short term and then republicans lose an upcoming election because of looming debt. Then a democratic president improves the debt situation and then loses an upcoming election. Republicans then call for cutting entitlements as a remedy for the national debt which they created in the first place. Here we go again.
57
@mikeyh
Not only that but with all this wealth created for the rich 1% and corporate America - how many of those rich and corporate CEOs gave out hourly or salary increases to their bottom tier employees commensurate with their wealth? or improved their health care benefit programs for their bottom tier employee. No one I know got a raise as a result of all this redistribution of wealth.
14
@mikeyh Obama got he debt to $21 trillion, so let's not say he improved the situation.
1
@Jackson
I didn't say that Obama improved the debt situation. It was Clinton who did. We ran a budget surplus in his last full year.
8
The Feds raise interest rates to cool down an overheated economy.
When they halt announced plans, it is a sign the economy is slowing.
12
@Rita
Not necessarily. Rates dont have to be rising and falling all the time. They could remain the same for a period.
the Fed rose rates pretty aggressively. The economy needs to digest this.
Still a lot better then the Obama years, when the economy was so weak, the Fed couldnt raise rates a lousy quarter point.
1
@Sports Medicine
Stop trying to say that Obama was bad for the economy.
Republicans had had control of the House and Senate for almost all of 12 years and control of the presidency for eight years, when the Great Recession was throwing thousands of people out of work, compounded by Republican states firing.a million police and teachers. There is no way to deflect the giant hall Republicans put into the economy on to Obama. Obama had positive growth for goes entire presidency. Obama took control, passed a stimulus, and turned the economy from panic to confidence.
I'm not a fan of Obama, by compared to Bush's disasters he was steady as a rock.
13
@Sports Medicine
Ever hear of the Great Recession?
Remember who was the President at the time? Who was President during the recovery?
How long does it take to recover from such an event?
5
For millions of people, they are still waiting for the Great Recession to end. The Fed was only helpful for "too big to fail" banks. The so called "stimulus" never made it to millions of people. Many people lost their homes, and never recovered. Many people are working multiple, low paying jobs. The unemployment rate, like the CPI, and GNP, are effectively meaningless numbers. Why? Because the government is painting a much rosier picture, than what is actual.
The rest of the world economy is slowing down, never recovered, or doing what the US does, make it look like it is the best of times.
There is reality out there. Australia's red hot real estate market has started its "bubble burst". Mainly, because Chinese investors started pulling out. They started doing that here. Also, thank to Trump's so called "tax cuts", real estate is starting to fall here.
Meanwhile, our millionaires in Congress (including both parties), continue to kowtow to their supporters; the 1%. People like Pelosi and Schumer are part of this wealthy elite.
And by the way, where is the investigation into the 10% market drop, in December? Some small mall investors (most with IRAs and 401ks) went to safer harbors. Now, the market has gained back 15%. All this did was concentrate more wealth into the hands of the few.
The two class society is not finally entrenched. The "haves" want even more form the "have nots"; their homes, savings and Social Security benefits.
41
@Nick Metrowsky So who are these "millions" that are waiting for the recession to end?
1
@Nick Metrowsky
Do you think this administration knows how to manipulate the market through the media?
2
@Nick Metrowsky
It is not that the government is not giving us good data. It is that the media only concentrates on aggregate data, the big picture numbers. The big police numbers look good because the rich are doing great. In order to see how badly most people are doing media would have to look at details.
For example the unemployment rate can go down, but if large numbers of people are losing high paying jobs with benefits to drive for Uber, they are employed but far worse off. Meanwhile the companies that are firing workers have higher profits going to the rich.
9
We are not talking about rocket science here.
If the economy is in a recession, the Fed lowers rates, if it starts to overheat at all they raise them.
So far the eight boring yrs. of Obama getting us out of the greatest recession in history with low, but study growth, low unemployment etc. has drifted into two yrs. of Trump.
With an insane trade war, trillions in deficit spending with corporate welfare, Wall Street running wild again, infrastructure crumbling, it is just a matter of time before the economy implodes.
In fact the Fed is helping Trump by keeping the economy from overheating and crashing sooner than later.
150
@Paul
Wrong on so many accounts.
What on earth did Obama do to get us out of the recession??
Which pro growth policy did he pass, or support?
Obama's growth was sub 2%, not even enough to keep up with population growth.
Obama's job creation was burger flipping jobs. Real jobs were scarce, and almost impossible to get.
Obama added 9 Trillion to our debt, with never any interest to address spending. He cried economic calamity when the sequester was passed, and then took credit for the lowered deficits that came about as a direct result of the sequester.
Finally, the S&P rose 1.4% during Obama's last 2 years. His last year saw GDP growth of 1%.
So your saying it was Obama's policies that lead to a parabolic 30% rise in the stock market beginning the day after Trump won the election?
And of course the US cracking 3% growth??
I dont think so.
9
@Sports Medicine says "Obama added 9 Trillion to our debt, with never any interest to address spending."
Trump has been skyrocketing Federal debt at levels completely unseen in Obama's time. Honestly not sure what you are talking about there.
106
@Sports Medicine. All I know is that 75% of my 401k's gains were from 2009-2016 and the rest came in the last two years. Most of what I now have as I get close to retirement came during the Obama years.
86
....it's all about the stock market.
Income inequality at work.
Barely 1/3 of families in the bottom 50% of earners own stocks. On the other hand, nearly 94% of the top income group owned stocks in 2018.
1/3 of all workers don't have access to 401k or other retirement accounts.
Less than a third of Americans ages 18 to 29 own stocks.
The richest 10% of Americans own 84% of the stocks.
Low interest rates have stolen trillions from the elderly and seniors who depended on interest income to live.
Low rates have caused retirement funds to become severely underfunded - at crisis levels.
Low rates have caused high risk corporate borrowing - corporate debt, which stood at $4.9 trillion in 2007, is now at $9.2 trillion - wait for the defaults to begin in a few years.
Low rates have resulted in our federal government to borrow our future into oblivion - US debt has swelled from from $11 trillion in 2008, to $21 trillion today.
The interest to service US debt has ballooned to $350 billion a year - half the Defense Dept. budget.
Low rates have caused every state and city to borrow recklessly - fiscal discipline has been forgotten.
New York City and New York state have record debt - record unfunded pensions and a crumbling infrastructure; and there is no money to replace it.
The pundits and the media continue to boast of Wall Street's bull run - however, it's going to come to a grinding halt one day - it's called the day of reckoning.
Income inequality.
194
@JMS tying income to money in the stock market is a false equivalency. Anyone can buy stocks, they don't check your income when you place a trade, and anyone can make small trades. It's more of an education issue--most people, especially I assume lower-income, don't understand stocks, why or how to invest.
8
JMS, you say that "1/3 of all workers don't have access to 401k or other retirement accounts." Wrong. Anyone (with income limitations) can put money into an IRA (Roth or Traditional).
6
@DannyR One actually needs . . . you guessed it, **money** to buy stock or mutual funds. If you cannot afford food then why would think of buying stocks?
34
FED should do nothing on the interest rate. With budget and national debt increases annually, any interest rate increase will bear sever consequence to the economy, not to mention the stock market performance. Regardless of GDP, the main thing is to increase the personal saving rate and decrease the government spending especially the unnecessary defense budget. Consumer spending may be important to the GDP, but fundamentally we need to improve our education, infrastructure, and research and development to improve our future economy. And China is doing that exactly.
2
We have become junkies since 2009. When I say, "we" it really is the entire world.
If even for a slightest moment we feel the high is coming off, we cry and plead, and our central bank masters agree and open up the printing presses. What's another trillion or two? How do you think Netflix is at $350?
Now, we all know what happens to junkies, eventually.
22
As the stock became the ”running of the bulls”, the Fed appropriately stepped in and finally began to raise interest rates to slow down the debt stampede. Let’s face it, Corporations were given access to billions of dollars at virtually no interest rate (just look to the oil and gas fracking companies as a perfect example), and the Corporations gorged while those of us who are not in the stock market were receiving about one tenth of one percent interest on savings. President Trump whined and blamed the Fed for the market downturn. The Fed stopped raising interest rates in response to POTUS and now this article bets that the Fed will actually reverse itself and lower rates even though the market is doing just fine. With actions like this, the Fed has shown that it is an arm of Donald Trump, just as every Cabinet member is. This is a disaster in the making. All short terem gains so that Trump can enter the 2020 election with a hot stock market. But what about the health of savings accounts, and who knows what will happen even with these inflating actions by the Fed?
31
@James Barth interest rates were virtually at ZERO during Obama's entire tenure.
2
@Ari
It doesn't sound like Barth thought that was good either.
You team players may not understand this, but large numbers of people are not on either team.
We don't spend our days trying to figure out how to make one party look good and the other look bad. We look at individual actions and criticize the actions.
Most of the worst things done by Congress have been bipartisan. Usually the Republicans demand some bad policy and the centrist Democrats demand that we compromise with it, then supply enough votes to pass it.
NAFTA was a Republican idea. Unions were against it. Bill Clinton had to twist arms to get Democrats to vote for it. Now Republicans pretend it was the Democrat's idea, and centrist Democrats are still defending it while the left is still attacking it for 25 years.
Obama Care was written by the Republican Heritage Foundation. Obama thought he was compromising with Republicans by passing a Republican plan.
People that pick a team, then aim all of their rhetoric at winning the game, are missing the entire point.
We are supposed to be intelligently and objectively evaluating policies and holding all politicians accountable. The team players just keep trying to twist everything to their political advantage without thinking about how it actually affects your actual life.
Clinton fans make excuses instead of learning.
Now Republicans have taken this so far that they like that Trump lies and cheats and insults people, just to make liberals heads explode.
1
The "good" news here is that at least the Fed Babk has raised the rates from the effectively zero rates of 2008 to 2015.
Fed Bank interest rates are still at an all time extended historical low for which there is no precedent. Big Banks and larger corporations WANT low lending rates for about a dozen reasons and the Fed Bank is happy to comply. This article is a bit disingenuous by talking about the forecast but not saying what has already happened with the rate.
2
As much as liberals would like to see the market crash, this is what happens when you instill pro growth, low regulation, low tax policies. Trump is telling the country, I'm giving you the friendliest environment for business you will ever experience in your lifetime. He is igniting the "animal spirits" of business. This is the greatest opportunity you'll have to be successful, so go to work.
He cant hold your hand. Nobody is going to give you a job, but the environment is there to make it. The smart business people know this, and are taking full advantage.
You can do it, or you can whine about how Trump is a bad person, while the rest of us make tons of money.
@Sports Medicine.
You do know it what Obama's administration who kept the rates at virtually zero for years and it is Trump's era that is raising the rates? I am not a giant fan of Obama but you dont seem to have a handle on facts.
3
@K Henderson
That is 100% correct.
Well, it wasnt Obama, it was the Fed, but ask yourself why did they keep rates at zero?
The answer was to stimulate the economy. Rates rise when the economy is doing well. They had to keep them at zero because the economy was too fragile to raise them even a lousy quarter point.
Rates rose during the Trump era because the economy is strong.
Something tells me you arent that well versed on the relationship between the economy and interest rates.
1
Glad I just got something decent on a 12 month CD.. should've made it 3 years instead! Sad no one is interested in encouraging simple savings.
13
@Tom
When banks are paying Basis Points, a cute little euphemism for 1/100 of a point, the savings rates offered by banks seems not to be very attractive.
3
@Tom T-bills are a good option for saving right now, as are Treasury notes. It can all be done online. It's very easy.
@MIKEinNYC
Fortunate then it was that the returns were presented not as basis points but in terms of APY.
The debt that ZIRP (effectively) and QE made permanent (effectively since QT will be stopped) are NOT benign salves for an ailing economy. Over-insuring risk assets, free-riding (margin investing on the Powell Put), moral hazard problems (CLO's without default covenants --because the presumption is that there will be another TARP in case it all goes south) to say nothing of the present consumption of future goods on a planet that is environmentally overheated might suggest that we are circling in a pattern of "secular stagnation" whose orbit will eventually decay.
4
The United States is the one part of the world that still has a strong economy. It has great companies like Apple and Google, a huge consumer market, and just had pretty massive corporate tax cuts.
Where else you going to put you money? Europe is going the way of Japan in the 90s. Asia is trying to deal with lower China growth and a possible real estate bubble there. Africa could do really good or maybe not but their is no certainty there. Resource based economies will be hurt by lower China growth. The one bright spot is the United States so that is where the money goes. Trump tweets and crazy talk about green new deals don't change the good economic fundamentals of the USA.
Another slap in the face of the American middle class.
But that's what the middle class is for: to serve and be discarded by the bourgeoisie. They are the henchmen of the dominant class after all.
34
The Fed will eventually raise rates to 3.5-4% before the next recession, that and QA will be necessary to stimulate.
Fed slowed down the economy with interest rate hikes. Their last hike made no sense. They can go back to napping or whatever else they do Inflation is low. Wage increases are low. Most importantly the ten year is st 2.6% Go back to napping Fed let the free market work. Currently inflation is low.
1
@Ralph Petrillo
This rigging by the Fed is the exact opposite of a free market!
4
For those of us who don’t have a super computer and a stable of MIT PhD’s, it’s probably smart to keep things simple. The U.S. economy is showing no signs of slipping into recession. If anything, growth is limited by a tight labor supply.
Stocks don’t appear overpriced. The aggregate P/E ratio of the S&P 500 was under $20 at the beginning of the year — the lowest level since 2014. That’s not cheap. But it’s not whacky.
Trump will continue to flog Powell to not raise rates (a factor not mentioned in the article). This will be a plus for the economy over the short term at least.
Finally, what else are you going to do with your money that gives you a positive return after taxes and inflation?
Buy a good S&P index fund and wait until we see a real sea change.
3
@Scott Brown
The PE for S&P is 16 currently not 20.
@Ralph Petrillo
That PE figure is artificially low because companies are buying back stock left and right to reduce their PEs. They aren't using the money to invest in employees or growth. This stock market party will end only when big money is out and retail investors are fully invested with their savings. Then the big money will short the markets to oblivion. Amazing to me that no matter how many times this occurs, that so many are surprised.
1
@Opie Taylor
If you are worried by SPXS. When Trump reaches a deal with China look for 7% gain in market. The PE is is historically at an average level right now.
1
Good to see the Fed doing it's job (not) supporting the stock market after being admonished by POTUS last year.
The Fed Chair should re-read it's mandate -- supporting the market is not in it.
58
The lack of the Federal Reserve confidence in our economy speaks volumes. We are walking on the egg shells of excessive debt in our primary consumers- the middle class while China and Europe are in danger of recession.
The underlying dynamics of the Chinese economy are unknowable, but the glimpses their opaque system allows are not comforting.
The last great depression was preceded by huge increases in our country's wealth that was distributed with extreme inequity.
The New Green Deal may be on the cusp of conditions that will make it widely palatable.
11
We've seen this Kabuki play a thousand times. The Fed plans to raise rates, Wall Street acts like their fainting, the Fed relents. Unfortunately, that leaves the Fed with even less options the next time Wall Street really does faint.
100
@Richard Mclaughlin Not to worry, I fully expect the band of crooks that run our government, big business, and wall street to support negative interest rates when the time comes. How else can they steal our savings, possibly eliminate the FDIC? That regulation is killing banking, it must be repealed for the free market!
4
I wonder what happens the day no one shows up at the bank to borrow the cheap money because they're so far indebted, they can't afford to borrow at already rock-bottom rates to buy more stock. Add to that, profit forecasts miss the mark and they can't even afford to pay the interest on the monies they've so far borrowed. Many of those stocks, comprising the DOW, S&P and NASDAQ have been buoyed for years by artificial demand brought to us by stock buy-backs using cheap money and recently stock buy-backs using cheap treasury money in the form of tax cuts. So the prevailing solution it seems is to keep the cheap money flowing?
I hope all of these low interest loans to buy stock are someday able to be repaid, but I'm so far not optimistic.
24
@TerryZ
Don’t worry look at European rates. Some were negative . Get ready for a rate cut next year.
3
Wall Street loves to drive the market, either up or down, so that the traders can make money. They may even push up and down in one day. But for long-term investors, no clear trend has yet emerged since last Sept.
16
Expiration for the aged "Fed put" is long past due. For too long it has been integral to precarious Bubble Dynamics. It has promoted speculation and speculative leverage. It is indispensable to a derivatives complex that too often distorts, exacerbates and redirects risk. The "Fed put" has been integral to momentous market misperceptions, distortions and structural maladjustment. It has been fundamental to the precarious "moneyness of risk assets," the momentous misconception key to Trillions flowing freely into ETFs and other passive "investment" products and strategies. The "Fed put" was central to a prolonged financial Bubble that over time imparted major structural impairment upon the U.S. Bubble Economy.
Propping up stock prices at the expense ( for a decade) of savers with artificially low rates is folly. Inflation is a monetary phenomenon. Having a crew of firemen but lacking the water pressure to put out fire will prove disastrous somewhere down the road. It is NOT different this time.
36
If the speculators are thinking that "this is a good time to get involved" then it may be an even better time for long-term investors, who shop for quality, to sit on the sidelines and wait for the next panic amongst margin buyers. Panic-sale-day follows borrow-to-buy day as a rule.
13
Hmm, I am no expert but I’m not sure if dumping a bunch of money in the stock market is warranted because as far as I can tell, it seems like this does nothing to change the actual value of these securities, am I right? What about all this concern that stocks are already overpriced? Maybe someone can explain a different perspective. To me this just sounds like it might postpone an inevitable but overdue correction. Something about this article conjures up a ‘fools rush in’ narrative. (I say this as my 401k automatically continues investing).
17
Agreed. IF you have money to invest I would keep it in revolving annual bonds (example 20K in a year long bond, and another three months out etc) and wait for the downturn.
Smart investing is boring. It should be.
7
this is exactly what we've been doing, on a 3 month/ 13 week basis.
1
Our entire economy and the stock market are run on cheap money. At some point this will end bad but when is anyone's guess.
6
@Jack
Even with low rates real estate is correcting suggesting deflation due to the tax deduction of $10,000. If real estate valuation continues to fall, deflation will occur.
4
@Jack
The stock market and much of the economy at large are running on borrowed money. It will get bad.
3