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Old 05-28-2014, 07:09 AM   #21
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" With much hotter CPI & PPI reports the last two months and another hot set coming right before the Fed meeting with the PPI coming on Friday June 13th, and CPI coming out on Tuesday June 17th. We anticipate these reports to be on the high side of estimates with higher food, energy and rising wage cost pressures; and that the Fed will probably have to address these new inflation pressures in their statement and the following press conference by Janet Yellen. "

Hot Inflation Reports to Dominate Next Fed Meeting | EconMatters

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Is this your view, that inflation is going to rise sharply in the next few days, the Fed is going to raise rates, fixed income prices are in a bubble and are going to burst?
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Old 05-28-2014, 11:17 AM   #22
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Originally Posted by MichaelB View Post

Is this your view, that inflation is going to rise sharply in the next few days, the Fed is going to raise rates, fixed income prices are in a bubble and are going to burst?

When I post an article it's because I think it is interesting
and the information worthy of discussion.

The only thing certain is change.

Sooner or later the Fed will raise rates.


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Old 05-28-2014, 11:33 AM   #23
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When I post an article it's because I think it is interesting
and the information worthy of discussion.

The only thing certain is change.

Sooner or later the Fed will raise rates.


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It is customary and expected when you post something you think worthy of discussion that you provide your perspective on the topic to begin that discussion.
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Old 05-28-2014, 12:05 PM   #24
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It is customary and expected when you post something you think worthy of discussion that you provide your perspective on the topic to begin that discussion.

Those interested in the economy and how it may affect their money, their lifestyle and their retirement should weigh a lot of various information and opinions so they can make educated decisions about their personal finances. That is what I do. I like thinking outside the box. As I posted previously, deflation/inflation is cyclic and economic trends change. When I first came to this forum, I posted about deflation which was not yet part of the accepted mantra. On this topic, I have posted an article about inflation, which is now being reintroduced to the financial collective consciousness.


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Old 05-28-2014, 12:19 PM   #25
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Those interested in the economy and how it may affect their money, their lifestyle and their retirement should weigh a lot of various information and opinions so they can make educated decisions about their personal finances. That is what I do. I like thinking outside the box. As I posted previously, deflation/inflation is cyclic and economic trends change. When I first came to this forum, I posted about deflation which was not yet part of the accepted mantra. On this topic, I have posted an article about inflation, which is now being reintroduced to the financial collective consciousness.
Always happy to have another voice to add to the forum financial collective consciousness, but the discussion and debate about (and between) deflation and inflation has been fully underway for years.

There are some very good threads going back a couple of years for anyone interested. A search for "deflation+inflation+Fed" should bring up quite a few.
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Old 05-28-2014, 12:26 PM   #26
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Always happy to have another voice to add to the forum financial collective consciousness, but the discussion and debate about (and between) deflation and inflation has been fully underway for years.
+1
Helena, I notice you have been away from the forum for several years. Do a search and you will find many discussions related to this topic.

Edit : X-post with MichaelB.
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Old 05-28-2014, 01:13 PM   #27
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Sooner or later the Fed will raise rates.
Yup. And my experience has been that the Fed will raise rates a few months after everyone else has already raised rates, for high quality private issues and market bond trades (via discount from face value).

It is very unlikely that a Fed hike will come as a shock to the market.
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Old 05-28-2014, 01:28 PM   #28
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There's a good reason why predictions are all over the map. That's b/c no one knows for sure. After 30 years of investing & tracking the equity market, the only thing I am sure about global/US economy is that it is far more complex than beyond anyone's imagination.
+1
Validated by the long, failed history of "predictions". Validated by extensive research as well.
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Old 05-28-2014, 03:11 PM   #29
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The problem with Fed policy is it has very little direct effect so its quantifiable effects are small. The largest effect is probably changes in investor and consumer confidence. The problem with this is that it is unsupported by any direct effect which means it comes about because people think Fed policy is having an effect and can disappear as soon as they stop thinking that. So I tend not to hang my hat on that as its not quantifiable and very finicky.

Federal fiscal policy on the other hand has a very quantifiable direct effect the problem is we aren't using it. The federal deficit is too small to create significant improvement in the economy and if politicians take their deficit cutting too far (which seems likely) they will end up causing another 2008 style depression in 10 - 15 years.
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Old 05-28-2014, 06:49 PM   #30
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Here is what the bond market currently predicts:

Sept 2015 - Fed tightens to 1/2%
March 2016 - 1%
Feb 2017 - 2%
Sep-2018 - 3%
mid-2022 - 4%

capecod over on M* points out that it's extremely likely that we have a recession before for 2022, so chances are the rates will drop again before rising to that 4% value.

In 2019, the 5yr Treasury is expected to yield 3.5% (currently 1.48%).

Inflation expectations over the next:
5 yrs: 1.98%
10 yrs: 2.19%
30 yrs: 2.32%

this is all courtesy of UPDATE: Market-Based Rate Predictions

So we are probably talking an incredibly gradual Fed tightening cycle, almost 2 years to get to a Fed funds rate of 2%. And what we have seen so far is that as the Fed becomes less accommodative, long term interest rates continue to drop. Why? Well, less help for the economy tends to slow the economy, reducing the expectations of high interest rates in the future.

Personally, I doubt we see serious inflationary pressures until 2017, when the unemployment rate might start dropping suddenly due to worker shortages. Yes - you heard that right, worker shortages due to demographics. This may create wage pressures, and wage pressures do tend to fuel inflation.

In the meantime, the slowing global economy and still highish unemployment rate act to dampen inflationary pressures.

Even though food and fuel prices increases hit people in their pocket book, they don't create inflationary pressures on an economy. Rather, they act like a drag or a tax, limiting the funds that can be spent on other items. They tend to slow the economy rather than goose it.

Just my perspective.

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Old 05-28-2014, 09:56 PM   #31
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Another interesting article:

" Goldman Sachs Group Inc. (GS) President Gary Cohn said
low volatility and interest rates that are holding in tight ranges
have resulted in an “abnormal” trading market. "

Goldman’s Cohn Says Inactive Trading Environment Is Abnormal - Bloomberg

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Old 05-29-2014, 05:19 AM   #32
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Quote:
Originally Posted by Helena View Post
.

Another interesting article:

" Goldman Sachs Group Inc. (GS) President Gary Cohn said
low volatility and interest rates that are holding in tight ranges
have resulted in an “abnormal” trading market. "

Goldman’s Cohn Says Inactive Trading Environment Is Abnormal - Bloomberg

.
That's funny. Poor guys can't make any money unless there is volatility.

Volume has been dropping over the years anyway. Seems like the amount of high frequency trading has dropped.
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Old 05-29-2014, 10:21 AM   #33
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That's funny. Poor guys can't make any money unless there is volatility.

Volume has been dropping over the years anyway. Seems like the amount of high frequency trading has dropped.

Baron Rothschild, who made a mint during the panic following Napoleon's Waterloo, is reported to have said "buy when there is blood in the streets."

Some claim the Rothschild banking family fostered such panics.


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Old 05-29-2014, 10:30 AM   #34
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Originally Posted by audreyh1 View Post
Here is what the bond market currently predicts:

Sept 2015 - Fed tightens to 1/2%
March 2016 - 1%
Feb 2017 - 2%
Sep-2018 - 3%
mid-2022 - 4%

capecod over on M* points out that it's extremely likely that we have a recession before for 2022, so chances are the rates will drop again before rising to that 4% value.

In 2019, the 5yr Treasury is expected to yield 3.5% (currently 1.48%).

Inflation expectations over the next:
5 yrs: 1.98%
10 yrs: 2.19%
30 yrs: 2.32%

The Fed wants to keep interest rates lower than the inflation rate to keep the government's debt under control by paying it down with inflated dollars. They will only increase interest rates higher than the inflation rate if inflation appears to be getting out of control. During the next recession with rates already so low, the only option the Fed has is to resume more QE which really doesn't help the economy, just the banks. We most likely will see more deflation in asset prices. Following the deflation, inflation will likely return, but at what level is anybody's guess. If it gets out of hand and confidence is lost in the dollar, things could get really interesting.
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Old 05-29-2014, 10:34 AM   #35
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The Fed wants to keep interest rates lower than the inflation rate to keep the government's debt under control by paying it down with inflated dollars. They will only increase interest rates higher than the inflation rate if inflation appears to be getting out of control. During the next recession with rates already so low, the only option the Fed has is to resume more QE which really doesn't help the economy, just the banks. We most likely will see more deflation in asset prices. Following the deflation, inflation will likely return, but at what level is anybody's guess. If it gets out of hand and confidence is lost in the dollar, things could get really interesting.

We may already be at this stage.


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Old 05-29-2014, 10:57 AM   #36
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The Fed wants to keep interest rates lower than the inflation rate to keep the government's debt under control by paying it down with inflated dollars. They will only increase interest rates higher than the inflation rate if inflation appears to be getting out of control. During the next recession with rates already so low, the only option the Fed has is to resume more QE which really doesn't help the economy, just the banks. We most likely will see more deflation in asset prices. Following the deflation, inflation will likely return, but at what level is anybody's guess. If it gets out of hand and confidence is lost in the dollar, things could get really interesting.
And pile into which currency? Europe economy and inflation is lower than US, global economy is slowing. It's hard to see an alternative.

People piled into gold during the panics of 2011, and look at where we are now.
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Old 05-29-2014, 11:42 AM   #37
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And pile into which currency? Europe economy and inflation is lower than US, global economy is slowing. It's hard to see an alternative.

If deflation us on its way, cash is king. But need to be ready move as things like inflation develop. The price of gold has been heading down and would probably be good to add physical gold to a portfolio, up to 10% or so. Stocks should be in companies that provide needs, such as transportation, energy, food, and things that have the ability to raise prices as costs go up. Avoid financial stocks or leveraged stocks.
Or just go along for the ride and hope this is all just doomsday rhetoric.
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Old 05-29-2014, 11:58 AM   #38
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And pile into which currency? Europe economy and inflation is lower than US, global economy is slowing. It's hard to see an alternative.

People piled into gold during the panics of 2011, and look at where we are now.

China, Russia and Brazil want to stop using the US Dollar as the world's reserve currency, so a financial crisis that results in loss of confidence in the dollar could trigger that. Who knows? We may end up back on the gold standard or using a new world currency through the IMF as the new reserve currency.
Gold prices have been repressed by the world"s central banks for years. To go back on the gold standard it would have to be priced five or six times higher than it is now. I'm not predicting it will happen, just that it is a possibility in a crisis.
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Old 05-29-2014, 02:08 PM   #39
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And pile into which currency? Europe economy and inflation is lower than US, global economy is slowing. It's hard to see an alternative.

People piled into gold during the panics of 2011, and look at where we are now.
Yeah, everytime I read these posts on various forums that sound like Porter Stansbury wrote them, I ask: what's the alternative? It ain't the Yuan. It ain't the Euro. It ain't the Yen... before the dollar goes away, something has to replace it, and there is no currency out there that's a remote threat at this point, IMO.

There is no doubt in my mind that at some point, something will replace the dollar as the world's currency of choice. I just don't think it's going to happen in my lifetime.
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Old 05-29-2014, 02:09 PM   #40
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China, Russia and Brazil want to stop using the US Dollar as the world's reserve currency...
Of course they do. It's in their interest to do so. But it's not really in the interest of anyone else at this point...
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