Author Topic: POLL: Fed and interest rates  (Read 9656 times)

shalab

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POLL: Fed and interest rates
« on: December 22, 2018, 08:16:55 AM »
The markets tanked after the Fed chair communicated about relying on models and pretty much guaranteeing rate hikes next year. The yield curve has flattened further - https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield

Let us use this poll to figure out what the group is thinking


EliG

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Re: POLL: Fed and interest rates
« Reply #1 on: December 22, 2018, 08:48:29 AM »
Yes, it had to be done, to assert Fed's independence after Trump's meddling on twitter.


Cardboard

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Re: POLL: Fed and interest rates
« Reply #2 on: December 24, 2018, 10:17:35 AM »
LOL!

If that is the true reason then you prove my claim that Powell is an idiot.

Data is what should count, not making some assertion. Too many people depend on proper decision making.

My assumption is that their model is way too static and fails to take into consideration global impact on the economy or things like a very strong USD.

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Nomad

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Re: POLL: Fed and interest rates
« Reply #3 on: December 24, 2018, 10:44:03 AM »
I'm reminded here of the possibly apocryphal quotation from Zhou Enlai when asked about the impact of the French Revolution: It's too soon to tell.

That being said, I do think there has been too much focus on the interest rate normalization and less focus on the arguably more important process of balance sheet run-off. I think there now appears to be a general consensus among central bankers that quantitative easing tends to create significant distortions in asset prices. And they're probably right - unfortunately, much of the cash that has been pouring into the system since the financial crisis has not been used for productive investment. Just look at all of the companies buying back their stock instead of making capital expenditures and funding R&D. This spending does nothing to increase the size of the company's pie; it merely reshuffles who gets the forks. Meanwhile, on the ground, wage and productivity growth continue to be weak by historical standards.

I think the Powell et al would rather see short term pain in asset prices if it results in greater long-term stability for the system as a whole and have been tightening accordingly. In my personal opinion, that is probably the right calculation, but as with anything in markets, nobody knows.

Liberty

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Re: POLL: Fed and interest rates
« Reply #4 on: December 24, 2018, 11:02:36 AM »
How about not having an opinion because fed policy is outside my circle of competence? I'd guess it's outside of the circle of many others here, including some of those with the strongest opinions.
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LC

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Re: POLL: Fed and interest rates
« Reply #5 on: December 24, 2018, 11:09:02 AM »
How about not having an opinion because fed policy is outside my circle of competence? I'd guess it's outside of the circle of many others here, including some of those with the strongest opinions.

I don't think you have to be an expert here. To use the WB quote about being approximately correct:

From a birds eye view the economy has been doing great under a low interest environment for what, 7 years? Therefore, time to start raising rates. That's my "approximately correct", 1000 ft view.

Regarding the minutiae as to "well they should've done XYZ 6 months ago or whatnot", well just seems like noise...trying to figure out if the guy on the scale is 200 lbs or 205 lbs.
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Liberty

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Re: POLL: Fed and interest rates
« Reply #6 on: December 24, 2018, 11:20:12 AM »
How about not having an opinion because fed policy is outside my circle of competence? I'd guess it's outside of the circle of many others here, including some of those with the strongest opinions.

I don't think you have to be an expert here. To use the WB quote about being approximately correct:

From a birds eye view the economy has been doing great under a low interest environment for what, 7 years? Therefore, time to start raising rates. That's my "approximately correct", 1000 ft view.

Regarding the minutiae as to "well they should've done XYZ 6 months ago or whatnot", well just seems like noise...trying to figure out if the guy on the scale is 200 lbs or 205 lbs.

Oh, I think you can have a 5-sec opinion like that. But to have an informed opinion on macro-economics, it's something you have to actively study for a while, and I haven't, and I don't think many here have.
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shalab

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Re: POLL: Fed and interest rates
« Reply #7 on: December 29, 2018, 08:52:23 PM »
I am surprised by how there are still more votes in support of the Fed. There are some that want even more rate hikes in 2019 - either the votes are politically motivated or people don't see what is going on. The 2018 economic gain in the US was because of the one time tax cut.

Canada has kept interest rates low (1.8%) eventhough there is a housing bubble.

https://www.theglobeandmail.com/real-estate/article-canadas-house-price-data-centre/

China has been cutting interest rates as well. Euro is at 0%.

Oil price futures 2019 - flat compared to 2018:

https://longforecast.com/oil-price-today-forecast-2017-2018-2019-2020-2021-brent-wti

Housing market cooling in 2019:

https://therealdeal.com/2018/12/26/us-housing-market-will-continue-to-cool-in-2019-redfin/

Car market under pressure:

https://www.bworldonline.com/mild-recovery-in-car-market-seen-in-2019-but-pressures-remain/
« Last Edit: December 29, 2018, 09:20:36 PM by shalab »

John Hjorth

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Re: POLL: Fed and interest rates
« Reply #8 on: December 30, 2018, 12:42:15 AM »
Well, the poll does not tie well with the activity level in the Druckenmiller and Trump were right topic, right? [ : - ) ]

Getting back to "normal" interest territory in the US is not a bad thing at all. Yes, it creates volatility etc. [- perhaps even some pain some places -] in some markets right now, but then you avoid a multiplier effect on the pain now instead of it gets worse at a later point in time. [I think Viking has mentioned that earlier somewhere.]

It also - gradually - brings back the interest tool in the toolbox of the FED.
« Last Edit: December 30, 2018, 12:44:15 AM by John Hjorth »
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shalab

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Re: POLL: Fed and interest rates
« Reply #9 on: December 30, 2018, 07:58:53 AM »
John - you are right that all else being equal, it is good for the fed to have the tools at their disposal.

However, it is not clear to me that they understand the economic machine and the interaction between various components.

A fed chief once said Ray Dalio had better statistics than the federal reserve, so I will be watching Ray Dalio closely.

Europe looks like it will have a secular decline for a long period of time - here is a projection of Germany's population in 2050.

https://www.pop.org/germany-to-shrink-by-10-million-people-by-2050/


Well, the poll does not tie well with the activity level in the Druckenmiller and Trump were right topic, right? [ : - ) ]

Getting back to "normal" interest territory in the US is not a bad thing at all. Yes, it creates volatility etc. [- perhaps even some pain some places -] in some markets right now, but then you avoid a multiplier effect on the pain now instead of it gets worse at a later point in time. [I think Viking has mentioned that earlier somewhere.]

It also - gradually - brings back the interest tool in the toolbox of the FED.
« Last Edit: December 30, 2018, 08:14:27 AM by shalab »