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US rate rise; All change
Topic Started: 2 Aug 2014, 07:11 PM (4,328 Views)
goldbug
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They might raise rates just to shake out some weak hands, then drop them precipitously thereafter. They did that here a half a decade back as we all know and quite a few little investors got badly burnt. I knew one guy who lost 4 homes including the ppor of course. Lost the marriage too. Women don't take it kindly when they lose their nest.
Shadow was hopelessly wrong about the Gold Bull Market.
What else is he wrong about?
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Mike
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peter fraser
3 Aug 2014, 10:02 AM
I disagree, I expect the transition to be quite smooth. I suspect that the misperceptions held by the markets are what the Fed is concerned with and that's why they are treading carefully.
I agree. The market be will more volatile for a little while but once people work out nothing has really changed life goes on.

A slow rising of interest rates as the economy continues to improve is needed to return the monetary policy back to normal levels.
http://mike-globaleconomy.blogspot.com.au/
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zaph
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peter fraser
3 Aug 2014, 10:02 AM
I disagree, I expect the transition to be quite smooth. I suspect that the misperceptions held by the markets are what the Fed is concerned with and that's why they are treading carefully.
The fed won't go from 50ks in reverse to 20ks in forward.
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Jimbo
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Mike
3 Aug 2014, 12:27 PM
I agree. The market be will more volatile for a little while but once people work out nothing has really changed life goes on.

A slow rising of interest rates as the economy continues to improve is needed to return the monetary policy back to normal levels.
I don't agree that the US economy is improving. Unemployment has just ticked up and in previous NFP releases, part time job increases have made up the net gain in employment numbers where full time jobs have been lost.
The UK is in a similar position where headline numbers mask the reality of growing trade and fiscal deficits.
Both countries are massively in debt and the last thing that either needs is a stronger currency (via rate rises).
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Jimbo
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goldbug
3 Aug 2014, 11:42 AM
They might raise rates just to shake out some weak hands, then drop them precipitously thereafter. They did that here a half a decade back as we all know and quite a few little investors got badly burnt. I knew one guy who lost 4 homes including the ppor of course. Lost the marriage too. Women don't take it kindly when they lose their nest.
The main function of interest rate policy is to maintain currency stability by controlling inflation.
Inflation erodes the value of currency but it also very conveniently, reduces the value of debt.

The big central banks are trying to print away their governments debt obligations with a combination of low interest rates, money printing (QE) and inflation "masking".

Have you ever wondered why house prices are not included in CPI?

If house prices were a component of CPI, we would have spent the last ten years or so in a near hyper inflationary environment.

In the 70's, high inflation was almost free housing for the baby boomers. They borrowed to buy a house and struggled for the first year or two, but high wage inflation reduced their repayments as a proportion of income every year. My parents last five years of mortgage slavery cost them about the same as a dozen eggs a week. Dad used to laugh about it.

If house prices were a component of CPI, we would have seen interest rates rise to control house price inflation and we would not be seeing high house prices as they are today.

Tying up currency in the housing market is like storing co2 beneath the Siberian permafrost.

As long as the currency stays locked up in the housing market and house price inflation does not contribute to CPI, you can print and inflate your sovereign debts away without affording the same privilege to your home owning population.

Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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newjez
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Jimbo
3 Aug 2014, 12:50 PM
I don't agree that the US economy is improving. Unemployment has just ticked up and in previous NFP releases, part time job increases have made up the net gain in employment numbers where full time jobs have been lost.
The UK is in a similar position where headline numbers mask the reality of growing trade and fiscal deficits.
Both countries are massively in debt and the last thing that either needs is a stronger currency (via rate rises).
They need wage inflation less.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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peter fraser
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Jimbo
3 Aug 2014, 03:04 PM
Have you ever wondered why house prices are not included in CPI?

If house prices were a component of CPI, we would have spent the last ten years or so in a near hyper inflationary environment.

No I've never spent lonely nights wondering about that. Rent is included and rent is a function of price.

What happened in the seventies was not engineered by the baby boomers, they were the generation who had to cope with inflation rates above double figures. Sure many of them did well as an accidental consequence, but many of them got screwed the process. There are always winners and losers in any economic change. No difference to the current market conditions which reward some and penalise others.

It's always easy to be clever in hindsight, but those making decisions at that time didn't have the wisdom of hindsight.

Any expressed market opinion is my own and is not to be taken as financial advice
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Mike
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Jimbo
3 Aug 2014, 12:50 PM
I don't agree that the US economy is improving. Unemployment has just ticked up and in previous NFP releases, part time job increases have made up the net gain in employment numbers where full time jobs have been lost.
The UK is in a similar position where headline numbers mask the reality of growing trade and fiscal deficits.
Both countries are massively in debt and the last thing that either needs is a stronger currency (via rate rises).
Unemployment is a lag indicator on where the economy was 3-6 months ago. It is not an indicator of present activity.

So what do you consider an improvement? 9 million new jobs, economic growth presently growing at 4%.

It takes time to undo the damage of the largest economic hit in 80 years, a lot of if it has now been repaired but still work to do. From here US job creation will expand and help employ those who entered the work force in recent years.

Lets wait and see over the coming months what the data reveals then we shall see who is right, I know what horse my money is on.

http://mike-globaleconomy.blogspot.com.au/
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Jimbo
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Mike
4 Aug 2014, 12:15 AM
Unemployment is a lag indicator on where the economy was 3-6 months ago. It is not an indicator of present activity.

So what do you consider an improvement? 9 million new jobs, economic growth presently growing at 4%.

It takes time to undo the damage of the largest economic hit in 80 years, a lot of if it has now been repaired but still work to do. From here US job creation will expand and help employ those who entered the work force in recent years.

Lets wait and see over the coming months what the data reveals then we shall see who is right, I know what horse my money is on.
Jobs growth needs to reduce unemployment levels to be considered real growth. US unemployment ticked up in Q2, so that is not a positive. Also, a look beneath the 4% growth figure (which is a prelim and will be revised), shows that a good chunk of that was accounted for by a growth in private inventory levels.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Jimbo
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Mike
4 Aug 2014, 12:15 AM
Lets wait and see over the coming months what the data reveals then we shall see who is right, I know what horse my money is on.
15 months later Mike.

How is your horse doing?


economist
3 Aug 2014, 12:02 AM
The fed will not raise rates in the next 12 months and likely longer.
You called it. Well played.
Jimbo
3 Aug 2014, 01:21 AM
Agreed, the Fed will not raise rates because they can't. They have spent the last couple of years playing interest rate poker. They bluff that they will tighten and then find a plausible excuse not to tighten. The BoE are playing the same game.
Well done me..
Edited by Jimbo, 12 Nov 2015, 07:32 AM.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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