In all honesty, a 60/40 probability is pretty weak. It’s like saying they may raise the rate or they may not. Not a strong stance on either outcome.
All these chief economists do is come up with creative ways of saying they don’t know what will happen. In terms of accountability, buy side analyst > sell side analyst > economist.
Are we in a lose lose situation? Rates remain unchanged and provokes negative sentiment stemming from global fears, rates increase and lending starts to lag and the economy prepares for a restrictive period. Either way I do not see the upside potential. Does anyone have views that contrast with this?
they wont raise (by much at least) until inflation picks up and inflation won’t pick up until wages pick up and wages won’t pick up until the minimum wage hikes filter through and this assumes that the minimum wage effects are not offset by job losses (which i believe they won’t as corporations will likely accept the old, more normalized level of profit margins, rather than push to live in the elevated profit margin anomaly we currently live in).
high profit margins + historically low levels of business capex = low wages and low inflation. if businesses aren’t spending and wages aren’t growing, consumer inflation can’t exist as no incremental buyer exists to push up prices.
I agree with all of this. I thought it was telling that the futures market had no move priced in but all economists were predicting an increase…
Our employment problem isn’t a monetary one so if they’re truly going to wait for the labor market to improve before a raise, don’t hold your breath. That said, my guess is they’ll give up and do it since it isn’t working and the market distortions would no longer be worth it. It will be funny to see them use the same unemployment staistics they currently realize are irrelevant to justify the action. Just my $.02.
Fed funds futures market was pricing in around 30% chance of increase. However, these tend to overstate the odds of rate increase and should not be trusted.
Economists would give some probability, like “60% chance” or something. In other words, they don’t know anything.
did you fools see Bill Ackman on Charlie Rose last night? How fricking smart is that dude?
agreed with matt no inflation = no rate hike, that is my personal view of how things should be done. fed reasonining is there is global weakness, not to mention, mofos are raising rates. no need to strengthen our money if other peeps are weakening. its like they doing it for us. most importantly though, i really dont consider this an asset bubble or that the economy is bumpin. so with that in mind, there is no point in hiking rates.
im also a big fan of gundlach and buffett and they have said same thing.
i do find it funny that the market is down because they didnt raise rates and it adds to uncertainty. fed will raise rates eventually, the longer they delay the better it should be.
Haha, so basically they are waiting till the economy is “like totally smokin’ hot man”, which will never happen again, so it’s ZIRP forever waiting for a return of the good ol days. There will be a recession before they ever raise, then it’ll be some other form of desperate stimulus instead of letting the recession run its course, and the fiscal gap will widen dramatically (again), bringing the default ever closer.
They’ve totally got no plan.
If the japs can do it. Why can’t we!!! But they had a totally real asset bubble. I believe in the 1990s they traded at 70x. Then there multiple has been shrinking ever since. They are around 15x now. I think their debt to gdp ratio is like 250 percent. And honestly we shouldn’t really ever default. We ain’t Grece, we can print money like no tomorrow. The us also has a really good reputation, so even if we are assholes about the amount we print. We are relatively more responsible so other people don’t really have a choice, we are the cleanest shirt in a dirty bag of laundry. The shit the fed can’t say. They truly have the most awkward job, they have to pretend to be hawkish while they do the exact opposite. Keep diluting out currency as they promise to keep it strong.
in all honesty economies are in cycles. It is a terrible idea to assume that we will grow slowly forever. Look at Japan they are actually heating up. Sure it took them 30 years but it always comes back. That is like a worst case scenario. As an investor you don’t want to be in Japan during its slow death. Opportunities are made when people feel hurt really fast and really hard. Their slow painful death prolly pissed a lot of investors. But as a person within the economy I imagine it’s better and they handled their bubble very well.
I’m not really afraid of our fiscal problems. They are overblown. If we default it’s cuz we have a dysfunctional political system that likes drama. Brinkmanship and of course political extrememism. A classic example Is the support trump has gotten given what he has said which is too extreme. I actually am a big fan of him as a businessman. As a politician it is laughable. A leader is a dealer in hope. A person that inspires and brings people together. So extremism is a terrible thing. Fun fact though, all people who lead the polls early always lose. Some person always outstrips everyone near the very end. Data is limited though. I think the report looked at least 2 elections. From dems and reps. Could have been more but I hate reading political reports.
This, basically. It’s a lose-lose for investors as well. Rates go up, economic growth may slow down (emphasis on may). Rates don’t go up, portions of the capital markets remain in unhealthy and expanding bubbles. Broken.
Everyone says this, but it won’t work that way.
The NPV of USG forecasted CF has tripled over the last 10 years, from -$40T to -$130T. The negative amount which comes due each year grows larger fast. At some point there is no way the system can handle it. Print $1T in a year? $5T? $20T? $40T? The number just keeps getting larger until either nobody will loan more, or printing causes hyperinflation. At that point they are forced to default. It’s just math, there is no other possible outcome.
Uhh, not really. The US has the worst financial position of anyone, measured NPV (the correct measurement). It’s worse than Greece, Japan, etc. And creditors do have a choice about who they loan money. CN for example has been making moves for years which hint they are not so interested in throwing good money after bad.
LOL, seriously?
We have the reserve currency, the largest military, and the most influence of anyone on the globe. The US has plenty of problems and shortcomings, but default risk is not one. If necessary, we will start a war to avoid default and/or losing the reserve currency. In the mean time, we will crush smaller countries that have the natural resources we need and continually devalue the dollar at everyone else’s expense. The US debt problem will be “solved” by enslaving future generations and guaranteeing a lower standard of living for the benefit of the current baby boom generation. If that doesn’t work, we will change the rules for our benefit and/or start more wars. You can bet on it.
^ Bro sounds like a Brit in 1895. “The sun never sets on our empire. If anyone dare oppose us, and our economic might, we’ll crush them.”
I’m not surprised. The economy still sucks, regardless of how they try to spin it. Labor force participation is at half century lows. The knock on effects of lower commodity prices will be more of a drag than a tail wind, IMO.
I’ve said it before, maybe typed it here before, but I think people are lying to themselves about the future. I truly believe we have taken much of the productivity/efficiency gains by now and going forward don’t need as many people as we once did to maintain the same standard of living. That whole “do more with less” mantra is true.
And the Fed/EU has no effing clue what to do to unwind this clusterf*&*& they created. They realize that all of the options out are bad, so they’re just going to sit on the status quo and not do anything.
I’m not so sure. US influence is falling FAST and they do not even realize it, still living under the delusion they are in control of something. CN offers better terms including real relationships, US offers “do business with us or else, then we screw you”. Chinese are just plain smarter, they plan 100 years out while the Americans don’t plan at all. US will lose their reserve currency, or at least there will be multiple reserve currencies.
The US will eventually default because there is mathematically no other exit. But because of the military creditors can’t make them pay, but neither can their military make the world loan them money again. So they will just sit over there in their isolationist dream land printing money into their fake self-contained economy, and getting stranger and stranger, with 400lb pro wrestlers as presidents. Hahaha.
Buy seriously, not that the FOMC ever had any credibility with me, but they have zero now. I always said it was ZIRP forever, and Janet actually had me convinced she would pull the trigger, then she pussed out. The reality is that Zhou Xiaochuan is calling the global monetary shots, he forced the FOMC stay move. That’s the way of the sage, act without acting, win but don’t take credit. Some serious master strategists in Beijing.
Oh, I’m drinking while typing this, if you can’t tell. 
Exactly, that’s what I keep saying. The US has reached the end. Monetary policy is played out. Fiscal policy is played out. And there is no more growth available so just stop desperatly pushing for it already! They need to rewrite the economics books, decrease population, while decreasing GDP less, so more GDP per capita. And address the externalities, GDP doesn’t actually matter, improve quality of life (which is crap). Stop the childish “growth is everything!” philosophy. A new plan is required, yet their crusty old system can not change.
But this is all beyond the Fed, and beyond current economic thought, so agree they will just sit there confussed, terrified to act. Where else do they go? Negative rates?
There were no offshore trident missiles in 1895. Also, England is about half the size of one decent sized US state. For the US to lose its central position, it will take a large scale war in which we lose.