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05-21-2014, 03:33 PM
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#1
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Recycles dryer sheets
Join Date: Mar 2014
Location: Laguna Hills
Posts: 137
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Fed Policy Change
What are the predicted effects when the fed eases up on it's stimulus programs? Have read predictions all over the place in online financial forums. I am concerned both for equities and real estate. On the other hand modest inflation to boost bond and CD yields would be nice  .
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05-21-2014, 03:49 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 16,673
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The FOMC has been steadily reducing stimulus for some months now. Look around and tell us what you think the effect is...
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"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."
- Will Rogers
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05-21-2014, 05:49 PM
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#3
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Recycles dryer sheets
Join Date: Mar 2014
Location: Laguna Hills
Posts: 137
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Good point but response to economic change is almost never linear. At some point the artificial stability created by this prolonged period of printing $$ and borrowing will show up in our inflation and interest rates. Sure makes me uncomfortable.
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05-21-2014, 06:20 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 16,673
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Quote:
Originally Posted by longranger
Good point but response to economic change is almost never linear. At some point the artificial stability created by this prolonged period of printing $$ and borrowing will show up in our inflation and interest rates. Sure makes me uncomfortable.
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So they are transitioning to no more money printing and you get to see in real time what impact that has on things as they do it. The bond market watches all of this with rapt attention and you can look at the term structure of interest rates to see what the consensus of the best and brightest observes is on future rates and inflation. What more do you need?
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"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."
- Will Rogers
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05-21-2014, 06:35 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Nov 2013
Location: Bay Area
Posts: 2,268
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Quote:
Originally Posted by longranger
What are the predicted effects when the fed eases up on it's stimulus programs? Have read predictions all over the place in online financial forums. I am concerned both for equities and real estate. On the other hand modest inflation to boost bond and CD yields would be nice  .
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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.
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Pura Vida
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05-22-2014, 08:32 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 13,537
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I think we'll survive.
But anyone who hasn't de-levered with these historically low rates deserves to go broke...
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Have Funds, Will Retire
...not doing anything of true substance...
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05-22-2014, 12:40 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2011
Posts: 5,203
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Quote:
Originally Posted by brewer12345
The FOMC has been steadily reducing stimulus for some months now. Look around and tell us what you think the effect is...
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Agreed. I believe the effect has already been baked into the market.
I would expect a minor freak-out (a few days) near October based on some knuckleheaded comment by some know-nothing...followed by another backfill.
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Living well is the best revenge!
Retired @ 52 in 2005
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05-22-2014, 01:40 PM
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#8
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Recycles dryer sheets
Join Date: Jul 2012
Posts: 103
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As brewer points out, there has been very little impact to the first small steps at removing the stimulus. The Fed itself acknowledges that the current stimulus is having little beneficial effect. It stands to reason that removing it would, likewise, have little effect.
The larger question is how the Fed can reduce its balance sheet. I'm of the opinion that they will not be able to do so.
And the larger question beyond that is where will the debt and deficit model of all major economies lead? I suspect it won't end well.
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Jeff
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05-22-2014, 01:53 PM
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#9
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Recycles dryer sheets
Join Date: Mar 2014
Location: Laguna Hills
Posts: 137
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Jager if history is a guide, which in this unique case it may not be, it will end poorly for greater than 99.9% of us. The others will be dumbfounded as to what all the complaining is about.
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05-22-2014, 02:43 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 16,673
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Just guessing, but I am expecting that the Fed bond holdings will probably just sit there and let the bonds mature. That allows them to keep a hammer handy in case inflation gets out of hand, but if it does not turn out to be needed letting the bonds simply mature avoids some unpleasant political issues that stem from the dividends the Fed send up to Congress as a slush fund every year suddenly stopping.
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"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."
- Will Rogers
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05-24-2014, 03:15 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 10,527
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So far it's been interesting that the early movers to lower duration bonds and bond funds have suffered due to their expediency. Although, those moves will likely pan out in the long run.
This is one of the few times I'm glad I procrastinated.
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"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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05-27-2014, 12:06 PM
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#13
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Moderator Emeritus
Join Date: Oct 2007
Posts: 4,930
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Quote:
Originally Posted by Helena
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After holding prices flat since 2006 on the menu (ex sugar-based junk which they hiked a while back as part of the dietary incentives program).
I'm reasonably sure that we haven't just encountered a burst of food-related inflation of 3% to 33% in the past year.
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05-27-2014, 12:51 PM
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#14
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Full time employment: Posting here.
Join Date: Aug 2006
Posts: 916
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Quote:
Originally Posted by M Paquette
I'm reasonably sure that we haven't just encountered a burst of food-related inflation of 3% to 33% in the past year.
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" May 23 (Reuters) - U.S. food price inflation is expected to rise by 2.5 percent to 3.5 percent in 2014, higher than 2013 but roughly in line with long-term norms, the U.S. Department of Agriculture said on Friday. "
U.S. faces higher food price inflation 2014, led by meats -USDA | Reuters
CPI-W [which is used to calculate the Social Security COLA] has risen the past two months.
Consumer Price Index (CPI-W)
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05-27-2014, 12:59 PM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 44,790
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Whatever happened to the looming doom of deflation?
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Numbers is hard
Charter resident of the lumpen slums of cyberspace
Retired in 2005 at age 58, no pension
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05-27-2014, 01:27 PM
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#16
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Full time employment: Posting here.
Join Date: Aug 2006
Posts: 916
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Quote:
Originally Posted by REWahoo
Whatever happened to the looming doom of deflation?
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It's cyclic...
We have been in deflation. Whether the current rise in prices are a fluke... or if inflation is ready to take off... remains to be seen.
After going down the past several years, home prices here in DFW have increased the past several months and houses are selling fast. A neighbor bought his home three years ago and just sold it in record time for a $40,000 profit. He did nothing to increase the value... prices have gone up that much in the past several months. Another family I know put their house on the market and sold it within a week.
Have you noticed the price of beef lately ?
The price of eggs [a good, cheap protein] has gone up at least 50% from a year ago.
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05-27-2014, 01:42 PM
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#17
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Administrator
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 28,095
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Quote:
Originally Posted by Helena
We have been in deflation. Whether the current rise in prices are a fluke... or if inflation is ready to take off... remains to be seen.
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Well, technically, we had deflation in '09 and we've been in low inflation since then. The price of residential housing is not part of CPI but rent and imputed rent is considered.
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05-27-2014, 06:02 PM
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#18
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Moderator Emeritus
Join Date: Oct 2007
Posts: 4,930
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Meh. Still no velocity of money.
All that cash has to be moving through the economy to produce inflation. If it's just parked on bank balance sheets, it doesn't interact in the economy.
Food prices are cyclic and weather driven, among other things. Out here in drought-land, ranchers knew that they wouldn't have very good grazing pastures, and that feedlot fodder would become expensive, so a fair amount of the beef herds were slaughtered several months ago.
The price of beef regionally went down. OMG! Teh deflations!
Now that the herds are smaller, and less beef than normal is coming to market, the price is rising.
Gosh. It's almost like it fluctuates for some reason or another. Probably the Fed. Or maybe HAARP... Bavarian Illuminati!
Hasty generalizations... We has them!
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05-27-2014, 09:46 PM
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#19
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Thinks s/he gets paid by the post
Join Date: Jul 2009
Location: Miraflores,Peru
Posts: 1,619
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Does anybody here believe that Belgium just "magically" became the World's third largest buyer of treasuries since the taper began?
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05-28-2014, 02:15 AM
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#20
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Full time employment: Posting here.
Join Date: Aug 2006
Posts: 916
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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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