Fed's raise rates 1/4%

[Medic!]

1:00 PM
Stock market doing what stock market dose.
Down 351 points and falling.

DJI 17,144

Nervous nellies?

 

[Charliehorse]

Quadruple witching. Pretty much always unpredictable and volatile.

"A big options expiration day — when index futures, stock futures, index options and stock options all expire — is likely adding to volatility, with analysts suggesting a spike in volume at the close."

 

[Medic!]

How do you know all this stuff?

Your just supposed to be a rancher?

 

[Charliehorse]

How do you know all this stuff?

Your just supposed to be a rancher?

How do you think I pay for hay? lol Cause it sure doesn't grow in a Ponderosa forest.

Besides, I read the "Horsesh!t Daily"

 

[jbett98]

Obama gave a pep talk today saying "It's all good, no worries mate" so of course the markets start to tank.

 

[erudne]

Well, personally, I think this is insane. I also believe the stock markets' reactions were insane, as well.

Today the Fed decided a modest rise in our interest rates was called for. Why? Well, because ……. because they believe our economy if finally getting to solid footing. They're wrong, but, that's what they believe. But, let's examine this thought for a moment. Let's say what they believe is true. Let's pretend that our jobs we're starting to get aren't McJobs which pay subsistence wages. Let's pretend the American consumers are finally spending money they don't have, again. In other words, let's pretend the ZIRP has finally started to work! ………. So, they decided to fix that.

Why change something one believes has started to work? The official inflation rate (which we all know is hokum) has stayed well below the 2% benchmark. The only reason to increase interest rates is to counter a feared runaway inflationary period. That is, to slow an overheating economy. Even the Fed admits this isn't the rationale for their raising their interest rates. They're simply altering something they believe has finally started to work —– that's imbecility!

For those readers who may not be familiar with the implications of this rate hike …… this is the rate the Fed charges banks to borrow money. Banks, being in business to make money, will in turn raise their rates on borrowing. While the increase is very modest, what this means is that raising capital is now more expensive then what it was yesterday. This means buying a home will be more expensive than it was yesterday, buying car, or buying anything on credit will be more expensive than what it was yesterday. This is especially so for businesses trying to borrow startup or operating capital. …… Oh, btw, all other international competitors are moving in the opposite direction. That is to say, they're pushing for cheaper and more available capital.

Of course, it's doubtful the repercussions will be seen in the immediate future, or very noticeable. But, in a couple of years, it will be quantifiable.

While we're pretending, we may as well pretend a slight increase to the interest rates of the US Treasuries won't have a devastating impact on our ability to service our debt. Let's pretend this won't slow job growth. Let's pretend this won't alter the trajectory of consumer spending and business growth. Let's pretend a stronger dollar (it boosted on today's news) combined with more expensive capital won't export business offshore. Unicorns and rainbows for everyone!!!!!

You can read about <broken link removed> , and <broken link removed>

 

[CoastRange57]

Real estate market is getting a bit freaky right now, people are buying 70K pickups every day, bunch of junk financing, he flippers are getting greedy again.

From a financial dude:

DOES THE FED CHANGE MONETARY POLICY IN AN ELECTION YEAR?

The short answer is yes. While the Fed often pauses in the month or so prior to the November election, the Fed has changed policy (either raised or lowered rates or stopped or started quantitative easing [QE]) in every election year since at least 1968, and we don't expect anything different in 2016.

HAS THE "MARKET" PRICED IN A RATE HIKE AT THIS WEEK'S MEETING?

As of Monday, December 14, 2015, the fed funds futures market has priced in about an 80% chance of a 25 basis point (0.25%) rate hike at this week's meeting. The short end (as measured by the yield on the 2-year Treasury note) of the Treasury market has also been pricing in a hike in recent months, with the yield on the 2-year note moving from 0.55% in mid-October 2015, to 0.91% as of December 14. It is more difficult to discern whether other markets (equity, currency, fixed income, etc.) have priced in a hike or not, but the Fed's rhetoric in recent weeks and months along with the move in the fed funds futures markets have not gone unnoticed by investors in other markets. Still, because the Fed has not started a tightening cycle in more than 11 years (June 2004), there is likely to be some volatility in financial markets around the first hike.

 

[The Heretic]

Talked to my financial guy yesterday (runs my retirement accounts).

His take on it is that we are in for another up and down year. He seemed to think we will see more rate increases next year, periodically.

This last year my retirement investments, mostly in equity markets, were up and down all over the place, and the end result was that the return was mostly flat. I didn't lose anything, but I didn't really make anything either.

It looks like 2016 will be more of the same. I will probably put about $50K into bonds and CDs next year - low return, but it will help balance out what I have in equity markets.

My real estate has continued to increase in value though and I am going to start paying down my mortgage more aggressively to save on the interest I am paying, plus I am putting money and sweat equity into property improvements.

Of course, I am also investing in preps - probably $5K to $10K this year, and as much next year.

 

[CoastRange57]

We made some moves to bonds as well. The earnings were hit hit pretty hard in the last year, and I saw a couple of bites at principle, was going to call the financial guy, but he beat me to it.

Not going to add to the pot this year. I am going to put some money into the property and house, and get it fixed up and ready for a possible sale in about 8 years. This will give us about 5 years to live in the improved house and I think the real estate will cycle back up again after it crashes hard again in the next 2 to 3 years.

Probably put about 3K into preps, mostly into metal.

 

[The Heretic]

The other thing my financial guy said was that if you are purchasing bonds/CDs this next year, that you want to ladder them such that you will be able to take advantage of rising rates. I.E., don't get locked into the low rates that are present now, for a long period, when they will probably be rising over the next year.

 

[Medic!]

Dow down for the year 2015.

1939 was the last time it was down in a pre-election year.

 

[Charliehorse]

We made some moves to bonds as well. The earnings were hit hit pretty hard in the last year, and I saw a couple of bites at principle, was going to call the financial guy, but he beat me to it.
.

Be careful of those bonds. They are not the safe haven people think - unless you buy a specific bond and hold it until maturity.
Lot's of people are going to get burned the next several years thinking they bought 'safety of principle' by buying bonds.

Buying bond etf's or bond mutual funds - particularly in a (probable) rising interest rate environment - is a loser's game. Because those portfolio's are constantly changing, including new issues being added. Therefore the 'yield' you bought does not stay the same, and the value of your 'principle' is never locked in.
Also, and more to the point, as interest rate rise, the market value of your principle decreases.

>Remember, bonds are a teeter totter - when interest rates go up, existing bonds go down in value.
When interest rates go down, existing bonds go up in value (which explains why bond "past performance" the last decade look so good - interest rates have been in a long term slide all the way to zero...)

 

[Charliehorse]

Dow down for the year 2015.

1939 was the last time it was down in a pre-election year.

Curious if the alleged PPT "plunge protection team" will come in the last few minutes before the close and resolve that.

EDIT: Guess they went home early. lol

 

[Medic!]

1/8/16 Friday Morning.

Dow down 900 points for the week at 16,500.
China market still sucking. And they are set to take off there stock market breakers!

Oil at $33 a barrel. And projected to go as low as $15.
As Sadie's and Iran keep slugging it out. Dumping oil on the market.

It's a he11 of a day at sea!

 

[erudne]

I'm not touting this guy's business but he's a free MKT Libertarian and very, very smart