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It's interesting that Fed members have downplayed the recent volatility: http://uk.reuters.com/article/uk-usa-fed-dudley-idUKKCN0UT2JE http://uk.reuters.com/art

It's interesting that Fed members have downplayed the recent volatility: http://uk.reuters.com/article/uk-usa-fed-dudley-idUKKCN0UT2JE http://uk.reuters.com/article/uk-usa-fed-dudley-idUKKCN0UT2J... '''"The short-term volatility is not something that worries me for monetary policy; it reflects market participants trying to make sense of global developments," Williams told reporters on Friday, adding that he sees no signs of distress or a weak economy in declining asset values, and is unsurprised that stock prices .SPX would decline as the Fed raises rates.''' That's a pretty clear signal that the Fed have knowingly and openly popped a bubble. This is going to be painful.

Spooky23 11y ago
I think there's something to be said for spring cleaning. If your balance sheet is such that the incredibly marginal increase in borrowing costs is anything other than a bump, than you are a dead man walking anyway.
- blazespin 11y ago
  The economy structured itself around near ZIRP rates. We were at .25 for a long time which gave whole industries (not just VC) the chance to live on the edge of their financing. This wasn't a marginal increase. It was a very dramatic tightening. Marginal would be going from 2.5% to 2.75% or 3% .. this was doubling. And they did not telegraph anything. If you tracked the CME fed funds probability you'd see that it waffled up until a couple of months beforehand and we were at 0.25 for a very long time. The reason 0.25 used to work as a min step was because a) we were never at such low rates for so long before and b) things didn't have a chance to settle into a particular rate structure so it wasn't really an issue. The difference this time was everyone started building businesses based on 0.25 and had time to do so. Agreed, you shouldn't be doing that. But heck, the economy is pretty messed up so the rules have changed.
  - zwischenzug 11y ago
    "And they did not telegraph anything." - are you kidding? It has to be the most telegraphed interest rate rise in history!
    - blazespin 11y ago
      Yes, and then they waffled and said they'd do a rate rise based on the numbers coming in rather than any strict ideology of having to raise the rates. When numbers turned south, the CME probability declined.
      - Shog9 11y ago
        I'm reminded of folks who ignore evacuation orders during a hurricane, latching on to any small lull as evidence that the storms will lift before it's too late. Of course, one tends to hear these stories after it is too late. No doubt plenty of people ignore the warnings and get by just fine, right up until they don't. And then it's someone else's fault.
  - electic 11y ago
    You might want to look over your fed meeting minutes from over a year ago. They have indicated numerous times that they plan to do this and continue to do this in 2016. [1]. [1] http://www.wsj.com/articles/fed-chief-janet-yellen-rate-increases-draw-nearer-as-economy-strengthens-1424790001 http://www.wsj.com/articles/fed-chief-janet-yellen-rate-incr...
    - blazespin 11y ago
      I've been following everything, watching live interviews. No worries there! The FOMC can't just raise rates based on some date. It has to raise them based on inflation/employment numbers.
      - electic 11y ago
        You are reading this backwards. The inflation/employment numbers were taken into account and they warned that the economy has sufficiently recovered and a raise was imminent. The date has nothing to do with it. The Fed however did indicate in their comments their line of thinking that if the current trend continues, they would begin raising rates around this timeframe. They did.
      - cmurf 11y ago
        When was the last time the Fed raised or lowered the federal funds rate by 5 basis points? And when was the last time they raised or lowered it by 50 or 75 basis points? If you've been following, you'd sooner expect the next increase to be 50 or 75 basis points than 15 let alone 5.
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  - sulam 11y ago
    By this logic, the next bump will only be a 50% increase!
  - Spooky23 11y ago
    I barely follow this topic, and I was aware of it 18 months ago. Living on the edge is always a risk, and those who do should be prepared for the risks associated with it.
  - toomuchtodo 11y ago
    > The economy structured itself around near ZIRP rates. We were at .25 for a long time which gave whole industries (not just VC) the chance to live on the edge of their financing. Then its time for those industries to restructure (and, if they must, fail).

Spooky23 11y ago

I think there's something to be said for spring cleaning. If your balance sheet is such that the incredibly marginal increase in borrowing costs is anything other than a bump, than you are a dead man walking anyway.

blazespin 11y ago
The economy structured itself around near ZIRP rates. We were at .25 for a long time which gave whole industries (not just VC) the chance to live on the edge of their financing. This wasn't a marginal increase. It was a very dramatic tightening. Marginal would be going from 2.5% to 2.75% or 3% .. this was doubling. And they did not telegraph anything. If you tracked the CME fed funds probability you'd see that it waffled up until a couple of months beforehand and we were at 0.25 for a very long time. The reason 0.25 used to work as a min step was because a) we were never at such low rates for so long before and b) things didn't have a chance to settle into a particular rate structure so it wasn't really an issue. The difference this time was everyone started building businesses based on 0.25 and had time to do so. Agreed, you shouldn't be doing that. But heck, the economy is pretty messed up so the rules have changed.
- zwischenzug 11y ago
  "And they did not telegraph anything." - are you kidding? It has to be the most telegraphed interest rate rise in history!
  - blazespin 11y ago
    Yes, and then they waffled and said they'd do a rate rise based on the numbers coming in rather than any strict ideology of having to raise the rates. When numbers turned south, the CME probability declined.
    - Shog9 11y ago
      I'm reminded of folks who ignore evacuation orders during a hurricane, latching on to any small lull as evidence that the storms will lift before it's too late. Of course, one tends to hear these stories after it is too late. No doubt plenty of people ignore the warnings and get by just fine, right up until they don't. And then it's someone else's fault.
- electic 11y ago
  You might want to look over your fed meeting minutes from over a year ago. They have indicated numerous times that they plan to do this and continue to do this in 2016. [1]. [1] http://www.wsj.com/articles/fed-chief-janet-yellen-rate-increases-draw-nearer-as-economy-strengthens-1424790001 http://www.wsj.com/articles/fed-chief-janet-yellen-rate-incr...
  - blazespin 11y ago
    I've been following everything, watching live interviews. No worries there! The FOMC can't just raise rates based on some date. It has to raise them based on inflation/employment numbers.
    - electic 11y ago
      You are reading this backwards. The inflation/employment numbers were taken into account and they warned that the economy has sufficiently recovered and a raise was imminent. The date has nothing to do with it. The Fed however did indicate in their comments their line of thinking that if the current trend continues, they would begin raising rates around this timeframe. They did.
    - cmurf 11y ago
      When was the last time the Fed raised or lowered the federal funds rate by 5 basis points? And when was the last time they raised or lowered it by 50 or 75 basis points? If you've been following, you'd sooner expect the next increase to be 50 or 75 basis points than 15 let alone 5.
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- sulam 11y ago
  By this logic, the next bump will only be a 50% increase!
- Spooky23 11y ago
  I barely follow this topic, and I was aware of it 18 months ago. Living on the edge is always a risk, and those who do should be prepared for the risks associated with it.
- toomuchtodo 11y ago
  > The economy structured itself around near ZIRP rates. We were at .25 for a long time which gave whole industries (not just VC) the chance to live on the edge of their financing. Then its time for those industries to restructure (and, if they must, fail).