5 ms·

Back to zero by end of year. Negative in response to deflationary bust next year.

by jarsin 4y ago

JumpCrisscross 4y ago
> zero by end of year This is what the stock market is betting, and being continuously disappointed, on. It’s a hell of a bet, and I think it’s dead wrong.
- jarsin 4y ago
  Market double bottomed June/Oct at 3600. Now 4100. Not seeing the disappointment. Mr. Market has you right where it wants you, on the sidelines or short.
  - JumpCrisscross 4y ago
    > Now 4100. Not seeing the disappointment Yes, when rates are cut valuations go up. This is finance 101. American stocks are rich because a recession and low rates are priced in. If that doesn’t happen, if rates go where the Fed forecasts, the market needs to drop. You’re in good company, by the way. Prominent managers are long equities and quality credit [1] on the hypothesis that rate cuts will keep valuations buoyed. (It’s also why the curve is inverted [2].) This is the dominant financial debate du jour. The market (specifically: professional money managers) are fighting the Fed. (My belief is this is more tied to fees and AUM than a fundamental read on the economy.) [1] https://www.ft.com/content/e3d5ee33-5cc6-4be5-bf68-fcd92a75b950 https://www.ft.com/content/e3d5ee33-5cc6-4be5-bf68-fcd92a75b... [2] https://www.bloomberg.com/news/articles/2023-02-09/treasury-yield-curve-inversion-reaches-deepest-level-since-1980s https://www.bloomberg.com/news/articles/2023-02-09/treasury-...
    - paganel 4y ago
      Slightly OT but related to your links, can you say that the FT has maintained its "impartiality" (for lack of a better word) in its finance and economics section? I'm asking because I used to read the FT on and off for 15 years going on 20 now, but the last couple of years have been really dire in terms of their biases and their lack of impartiality (especially in the politics and the international sections). At the same time your links made me miss their finance pieces, which I agree most of the times might have looked very "dry" but for a person outside finance (like I am) they were illuminating nonetheless. I'd go back to reading the FT again just for those.
      - JumpCrisscross 4y ago
        > especially in the politics and the international sections Most British coverage of American politics is abysmal. For international, the FT has biases, but they tend to get the facts straight. (Definitely Eurocentric.)
- drexlspivey 4y ago
  No one is betting on this. The implied interest rate for end of year based on market data is 5%
  - kasey_junk 4y ago
    While that’s not 0 that does seem low given the fed has said they are setting it higher than that. The market has been undershooting the whole time the fed has been raising rates. It’s a little strange frankly.
    - lotsofpulp 4y ago
      Source for Fed stating they are setting fed funds rate higher than 5%? 5% and 0% are already world apart given the last two decades.
    - drexlspivey 4y ago
      The expectation is to go higher and then lower, for example after the September meeting it’s around 5.5% https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...
silisili 4y ago
Serious question. Do you feel then that all of these layoffs are a wink wink nudge nudge 'aye aye captain' gesture to fall in line with the Fed? Or do you(and they) think a recession is coming, and that in turn will drive rates down? It's hard to me to imagine it all, with inflation having been so bad the last two years. But I'm not versed enough I feel to propose any kind of argument either way.
- imtringued 4y ago
  You can't sustain high government debt and high interest at the same time. "Federal government current expenditures: interest payments" are now at 0.9 trillion dollars annually. If inflation increases tax revenue fast enough then ok no big deal but that would still mean the interest rate has to be lower than inflation and if inflation has a downward trend then I would expect the interest rate to follow it with a huge lag.
- jarsin 4y ago
  I believe the layoffs were in response to the stock prices and the general market sentiment that the fed caused. The rates will come down at first because inflation has been beat. Then it will come down more when it becomes clear that the fed screwed up both ways and now has to try to fix the economy. Then the consumer will stop buying things because prices are going the other way fast. AKA a deflationary bust which can be much worse than anything we have seen in our lifetimes.
drexlspivey 4y ago
This has to be a joke. If you truly believe that you can make a killing by betting on it.
- jarsin 4y ago
  No, its not a joke. The fed can screw up and cause inflation but they can't screw up the other way and cause a deflationary death spiral? It will be the single biggest fight ever of every central bank to stop the death spiral that shows up on the back of their forced recession in the name of fighting inflation. They will go negative and QE much larger than pandemic.

Back to zero by end of year. Negative in response to deflationary bust next year.

by jarsin 4y ago

Back to zero by end of year. Negative in response to deflationary bust next year.

> zero by end of year This is what the stock market is betting, and being continuously disappointed, on. It’s a hell of a bet, and I think it’s dead wrong.

jarsin 4y ago
Market double bottomed June/Oct at 3600. Now 4100. Not seeing the disappointment. Mr. Market has you right where it wants you, on the sidelines or short.
- JumpCrisscross 4y ago
  > Now 4100. Not seeing the disappointment Yes, when rates are cut valuations go up. This is finance 101. American stocks are rich because a recession and low rates are priced in. If that doesn’t happen, if rates go where the Fed forecasts, the market needs to drop. You’re in good company, by the way. Prominent managers are long equities and quality credit [1] on the hypothesis that rate cuts will keep valuations buoyed. (It’s also why the curve is inverted [2].) This is the dominant financial debate du jour. The market (specifically: professional money managers) are fighting the Fed. (My belief is this is more tied to fees and AUM than a fundamental read on the economy.) [1] https://www.ft.com/content/e3d5ee33-5cc6-4be5-bf68-fcd92a75b950 https://www.ft.com/content/e3d5ee33-5cc6-4be5-bf68-fcd92a75b... [2] https://www.bloomberg.com/news/articles/2023-02-09/treasury-yield-curve-inversion-reaches-deepest-level-since-1980s https://www.bloomberg.com/news/articles/2023-02-09/treasury-...
  - paganel 4y ago
    Slightly OT but related to your links, can you say that the FT has maintained its "impartiality" (for lack of a better word) in its finance and economics section? I'm asking because I used to read the FT on and off for 15 years going on 20 now, but the last couple of years have been really dire in terms of their biases and their lack of impartiality (especially in the politics and the international sections). At the same time your links made me miss their finance pieces, which I agree most of the times might have looked very "dry" but for a person outside finance (like I am) they were illuminating nonetheless. I'd go back to reading the FT again just for those.
    - JumpCrisscross 4y ago
      > especially in the politics and the international sections Most British coverage of American politics is abysmal. For international, the FT has biases, but they tend to get the facts straight. (Definitely Eurocentric.)
drexlspivey 4y ago
No one is betting on this. The implied interest rate for end of year based on market data is 5%
- kasey_junk 4y ago
  While that’s not 0 that does seem low given the fed has said they are setting it higher than that. The market has been undershooting the whole time the fed has been raising rates. It’s a little strange frankly.
  - lotsofpulp 4y ago
    Source for Fed stating they are setting fed funds rate higher than 5%? 5% and 0% are already world apart given the last two decades.
  - drexlspivey 4y ago
    The expectation is to go higher and then lower, for example after the September meeting it’s around 5.5% https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...

silisili 4y ago

Serious question. Do you feel then that all of these layoffs are a wink wink nudge nudge 'aye aye captain' gesture to fall in line with the Fed? Or do you(and they) think a recession is coming, and that in turn will drive rates down? It's hard to me to imagine it all, with inflation having been so bad the last two years. But I'm not versed enough I feel to propose any kind of argument either way.

imtringued 4y ago
You can't sustain high government debt and high interest at the same time. "Federal government current expenditures: interest payments" are now at 0.9 trillion dollars annually. If inflation increases tax revenue fast enough then ok no big deal but that would still mean the interest rate has to be lower than inflation and if inflation has a downward trend then I would expect the interest rate to follow it with a huge lag.
jarsin 4y ago
I believe the layoffs were in response to the stock prices and the general market sentiment that the fed caused. The rates will come down at first because inflation has been beat. Then it will come down more when it becomes clear that the fed screwed up both ways and now has to try to fix the economy. Then the consumer will stop buying things because prices are going the other way fast. AKA a deflationary bust which can be much worse than anything we have seen in our lifetimes.

drexlspivey 4y ago

This has to be a joke. If you truly believe that you can make a killing by betting on it.

jarsin 4y ago
No, its not a joke. The fed can screw up and cause inflation but they can't screw up the other way and cause a deflationary death spiral? It will be the single biggest fight ever of every central bank to stop the death spiral that shows up on the back of their forced recession in the name of fighting inflation. They will go negative and QE much larger than pandemic.