ev-enthusiast
Active Member
What are the expectations in case we see a tiny rate hike today?
FED might decide to just up the rates a tiny little bit?
FED might decide to just up the rates a tiny little bit?
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Tesla Investor's General Macroeconomic / Market Discussion
- Thread starter FluxCap
- Start date
Nope... Nope... Just nope... Fed isn't allowed to hike rates up yet. They aren't even allowed to indicate a rate hike in the near future.. Even if they indicate a potential possibility of a small rate hike in the long term future assuming everything is good etc. etc... even that might be enough to cause a selloff of ~200pts on the dow.. so just nope.
I'm with ev-enthusiast. Just rip off the bandaid quickly. 25 point rise, which I guess would mean to a flat 0.25%, rather than the current 0-0.25%.
ev-enthusiast
Active Member
Back from fitness program
I agree.
While I think the uncertainity during the last months had some positive side effects future uncertainity will probably do more harm than good.
I think the FED needs to act precisely now and decide on a rate hike and give markets a clear sign.
Ongoing uncertainity will no longer help anybody.
BTW I heard about a possible rate hike of about an eight of a per cent (0.125%).
Maybe that's a good way.
We'll see in about an hour.
My quick take is mixed, but two things in comments stand out:
-Yellen basically confirmed that if China's economy dips, our markets will suffer. And I'd say there is an 80% chance of some further downside suprise out of Chinese economic stats as well as their markets this year.
-She said that QE4 is not off the table and one FOMC member wanted it now. You don't keep QE4 on the table in a healthy economy.
This does not look like a healthy economy to me at all despite the rhetoric.
We will see how the market reacts.
-Yellen basically confirmed that if China's economy dips, our markets will suffer. And I'd say there is an 80% chance of some further downside suprise out of Chinese economic stats as well as their markets this year.
-She said that QE4 is not off the table and one FOMC member wanted it now. You don't keep QE4 on the table in a healthy economy.
This does not look like a healthy economy to me at all despite the rhetoric.
We will see how the market reacts.
unchanged rate won't bode well for the market towards end of the year. First, uncertainty still remains; Second, Fed is not confident to raise the rate even with good labor market number. The biggest worry is the China and emerging market drag down, which hasn't bottomed yet. I would say the market consolidation will last until the first rate hike (end of 2015 or early 2016).
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I agree maoing.
On the subject of Chinese markets, do you think they have further to fall? It seems like so many mainland Chinese families want to sell their stocks but cannot due to party interventions and fearmongering. I have to believe that eventually they will be allowed to sell and when they do, Shanghai Composite will tank again, right?
I'm spending quite a bit of time theorizing about whether or not we are in fact at the beginnings of another bear market, and if the May 2015 top in the S&P was in fact THE top. Disregarding the nearly useless U-3 unemployment figures, I believe a Labor Force Participation rate that shows almost 40% of all able-bodied adult Americans are still not working is simply unsustainable. It is currently the lowest it has been in 38 years.
I see plausible similarities to our current situation and the Recession of 1937-38, which needed a full-scale New Deal level "socialist" government program to get us out of it.
From a recent note by Ray Dalio, one of the richest men on the planet, who called the 2008 financial crisis:
For your consideration:
If It Looks Like A Bear, Acts Like A Bear And Sounds Like A Bear | The Felder Report
I'm trying to make the counter-argument to this thesis and all I can come up with is that money is cheap which might spur investment, but that doesn't seem like enough. Thoughts?
I see plausible similarities to our current situation and the Recession of 1937-38, which needed a full-scale New Deal level "socialist" government program to get us out of it.
From a recent note by Ray Dalio, one of the richest men on the planet, who called the 2008 financial crisis:
For your consideration:
If It Looks Like A Bear, Acts Like A Bear And Sounds Like A Bear | The Felder Report
I'm trying to make the counter-argument to this thesis and all I can come up with is that money is cheap which might spur investment, but that doesn't seem like enough. Thoughts?
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I believe this is highly misleading. The total labor participation rate is currently 62.6%. It was only 1.5% higher (64.1%) in August 1982 [1]. That month marks the beginning of one of the greatest bull markets in American history.
The participation rate includes Americans of retirement age, who now comprise 14.3% of the population vs 11.2% in 1982 [2, 3]. After you account for this demographic shift, the effective rate is actually better today than in 1982. Not to mention the scores of bright, educated people who went back to school in the face of grim job prospects and are now about to re-enter the workforce. I believe the labor participation meme needs to be put to bed. I believe our economy is indeed recovering and growing, albeit more slowly than most would like.
As for whether or not we are about to enter a bear market, I am currently agnostic. I will say that those who got spooked and sold at the bottom in late August have missed a 7% bounce in the S&P. I read WSJ daily and the sheer number of gloom-and-doom headlines about market volatility suggest to me that this bull may have some more room to run.
[1] u.s. labor participation - Wolfram|Alpha
[2] u.s. age distribution in 2015 - Wolfram|Alpha
[3] u.s. age distribution in 1982 - Wolfram|Alpha
EDIT: Crunched the numbers:
August 1982
population: 234 million
labor participation rate: 64.1%
americans of retirement age: 25.7 million (11.2%)
labor participation sans retirees: 72%
Today
population: 332 million
labor participation rate: 62.6%
americans of retirement age 47.6 million (14.3%)
labor participation sans retirees: 73%
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Good research and thanks, dha. I edited my post above to show the chart that troubles me the most. I don't think we are at a healthy level of labor force participation, because the components of it that matter more than the relatively small number of retirement-age persons are long-term / discouraged / underemployed that are completely left out of other stats, even U-6.
Also, that is only one component of the bear market thesis I was mentioning (and my own), the rest (from Ray Dalio) are in my post above.
Also, that is only one component of the bear market thesis I was mentioning (and my own), the rest (from Ray Dalio) are in my post above.
Johan
Ex got M3 in the divorce, waiting for EU Model Y!
Flux; the only real good counter argument to the parallells to the events leading up to the great depression would be that quantitative easing isn't really the same as "printing money" but a qualitatively different method of stimulation. The validity of this argument though is pretty hard to judge. If you ask Bernanke or Yellen then of course they'll argue that QE is something very different to "printing money" while many others would say that in principle it's a variation on that theme. We did have some good discussion in this thread, that did get a bit political, that argued that QE is a kind of blunt, "top down" and therefore over time a quite ineffective stimulus. I share many of your/Dalio's bearish views.
My pleasure, I enjoy talking about this stuff. Thanks you for bringing it up on this forum.
Again, that chart is misleading because during the time period shown, the percentage of Americans above retirement age increased from 12.3% to 14.3%. The difference in retirement-aged persons is not "relatively small," it is +2% of all Americans during that period, which is equivalent to about 50% of the drop in that chart!
You'd see a significant flattening of the trend if you normalize the data to account for retirees as I did above. You'd see a further flattening if you normalize for the increased percentage of the population enrolled in school as enrollment in higher education spiked following the recession.
To frame the stat another way, right now, 73% of Americans between the ages of 16 and 64 are employed or seeking employment. Of the remaining 27% (90 million), around 35 million are enrolled in school. That leaves 17% (55 million) who are not participating or in school. Yes, some of those are indefinitely discouraged workers, but most are not. Most are either stay-at-home parents, people who are supported by spouses / family members and choosing not to work, early retirees or people on disability. These numbers are simply not that alarming.
I realize that I'm harping on this point but as a quantitatively oriented person it just irks me how much traction this talking point has been getting. It is a very misleading and cherry-picked stat that ignores key demographic trends. I apologize if I'm taking the discussion off track.
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That's really useful math, dha. Thank you again. While I'm not sure I agree there is a 'meme' that labor force participation is all that matters outside a very few wonks like myself and tend to think that most media emphasize U-3 above all else, I appreciate your unpacking the data more completely.
Interesting discussion. I am cautiously more optimistic in regards to another bear market, or at least one induced by macro fundamentals. I do think stocks have gotten ahead of themselves, and we could have a major pullback at some point for that reason, but I think the economy will continue to improve, albeit extremely slowly. It seems that credit is expanding again, albeit slowly, and that bodes well for the economy to continue to grow, as long as the credit growth remains sustainable. I do share your concerns about labor participation as well as income inequality, but I think as long as we continue grinding forward with no major setbacks, that our current growth trajectory is sustainable for quite a while, like several more years.
China for me is a big unknown. It seems they had a real estate bubble, and that concerns me given what we went through, but I don't know enough about China to come to any conclusions.
The only other thing is that if the Republicans happen to gain control of all three branches, things could get interesting. I believe that with your great depression analogy, wasn't there a change in power in Washington, and a change of perspective on the economy that arguably preceded the plunge back down? I haven't followed the GOP debates very closely, but happened to notice that Ben Carson has a balanced-budget amendment as one of his planks of his campaign. Can you imagine what that would do to our economy in the short run? We've already been reducing the annual budget deficit as it is. Imagine balancing it all of a sudden. But actually, if forced to choose someone from the GOP race to vote for, I actually would pick Ben Carson. Not because I agree with him on a lot of issues, but just because I think he is honest in his desire to do good for the country, and to find the right answers. Even a balanced-budget amendment, which I would believe would be a terrible mistake in the short-run, I could see an argument being made that in the very long run that it would be a good idea. I liked Warren Buffet's idea best of limiting our debt growth to 3% of GDP. That's the most reasoned voice, in my opinion.
Sorry to get political, but while I'm at it... I actually believe in making sure government doesn't overreach, so in that sense I share republican ideology. Where I can't get on board with them is this never-ending push that tax-cuts grow the economy, or that they are the more fiscally responsible party. I believe recent history (the past 20 years, I'm only 32) brings serious doubt to those two claims. So much so, I don't know how they claim those things with so much certainty. Actually, I don't know how they make those claims with a straight face. One of the main reasons why I have yet to vote Republican.
China for me is a big unknown. It seems they had a real estate bubble, and that concerns me given what we went through, but I don't know enough about China to come to any conclusions.
The only other thing is that if the Republicans happen to gain control of all three branches, things could get interesting. I believe that with your great depression analogy, wasn't there a change in power in Washington, and a change of perspective on the economy that arguably preceded the plunge back down? I haven't followed the GOP debates very closely, but happened to notice that Ben Carson has a balanced-budget amendment as one of his planks of his campaign. Can you imagine what that would do to our economy in the short run? We've already been reducing the annual budget deficit as it is. Imagine balancing it all of a sudden. But actually, if forced to choose someone from the GOP race to vote for, I actually would pick Ben Carson. Not because I agree with him on a lot of issues, but just because I think he is honest in his desire to do good for the country, and to find the right answers. Even a balanced-budget amendment, which I would believe would be a terrible mistake in the short-run, I could see an argument being made that in the very long run that it would be a good idea. I liked Warren Buffet's idea best of limiting our debt growth to 3% of GDP. That's the most reasoned voice, in my opinion.
Sorry to get political, but while I'm at it... I actually believe in making sure government doesn't overreach, so in that sense I share republican ideology. Where I can't get on board with them is this never-ending push that tax-cuts grow the economy, or that they are the more fiscally responsible party. I believe recent history (the past 20 years, I'm only 32) brings serious doubt to those two claims. So much so, I don't know how they claim those things with so much certainty. Actually, I don't know how they make those claims with a straight face. One of the main reasons why I have yet to vote Republican.
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Well, I tend to think that if we actually tried more austerity at the government level now, we would almost instantly plunge into recession. What we actually need is more spending, not less. But that's for another discussion. Here's a great primer for those that might want to dig a bit further into the long term credit cycle, the short term credit cycle, Government spending and credit, and how our economy really works:
A big concern of mine is that it isn't just the quantity of jobs that matter, but the quality. How many people do you know that expect they will retire comfortably after working their entire life for the same company anymore? How many make what they feel is a fair wage? How many feel secure in their jobs, or aren't working more than 40 hours per week for free?
Here's some food for thought:
The typical male U.S. worker earned less in 2014 than in 1973 | Brookings Institution
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Perfectlogic
Member
@schnell
"Where I can't get on board with them is this never-ending push that tax-cuts grow the economy"
Then you don't want to vote for Carlson, he talked positively about a flat tax in the 2nd GOP debate. I believe he mentioned a 10% flat tax even like it was attractive and backed it up by the logic that you shouldn't punish productivity. Sounds like a bad joke. At times watching the debate it got so far fetched that Trump seemed like the reasonable in the bunch (and that's saying something), needless to say I hope we see another democrat win. The debate was entertaining though, I'll give them that.
Just to keep it Tesla related; every republican candidate seem to be a climate change denier (how is that even possible), so democrat in the white house = good for TSLA.
"Where I can't get on board with them is this never-ending push that tax-cuts grow the economy"
Then you don't want to vote for Carlson, he talked positively about a flat tax in the 2nd GOP debate. I believe he mentioned a 10% flat tax even like it was attractive and backed it up by the logic that you shouldn't punish productivity. Sounds like a bad joke. At times watching the debate it got so far fetched that Trump seemed like the reasonable in the bunch (and that's saying something), needless to say I hope we see another democrat win. The debate was entertaining though, I'll give them that.
Just to keep it Tesla related; every republican candidate seem to be a climate change denier (how is that even possible), so democrat in the white house = good for TSLA.
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I think I was misunderstood. I was saying that if we had a balanced budget amendment and were forced to reduce our budget deficit to zero immediately, i.e. more austerity, than it would be a terrible mistake, because it would cause an almost immediate recession.
You're right, I don't want to vote for Carson. I will almost certainly vote democrat, if I vote at all. What I meant was that if I were forced to choose a republican, he's the one I would pick. I could even go with a 10% flat tax, (which I don't believe will ever happen), because at least we would all be paying the same percentage. Right now when including payroll taxes, the middle class pays anywhere from 20% - 50%, whereas most of the rich are able to take advantage of loopholes dropping them into the 15% - 25% tax rate. When I used to prepare taxes, I did a tax return for a person whose was an absolute genius when it came to legal tax mitigation. One year he made 100,000,000 (yes, that's one hundred million) and guess what he paid in taxes. Yep, exactly 15%. No gray areas in his return at all. He just took advantage of some excellent legal loopholes, credits for oil drilling being one of them. So our system is often already regressive. Going to flat tax would be an improvement.
Anyway, back to macro, if the republicans win all three branches, I will be shocked if its not followed by a recession within 6-12 months due to the almost inevitable austerity plans they will put in place. That's what I meant by "things could get interesting". I meant in a negative way.
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