Financial thread

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So peak US rates will be 5% . When will deflationary forces cause the Fed to begin reducing interest raises and return to QE 5 ? These forces will be coming from East Asia.

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Nov 8, 2022 21:48:17 GMT sennockian69 said:

So peak US rates will be 5% . When will deflationary forces cause the Fed to begin reducing interest raises and return to QE 5 ? These forces will be coming from East Asia.

The current projections for interest rates going forward are for around 5%, and to hold around that level for most of 2023. The trouble is that the gamble that the Fed seems to be relying on, that deflationary pressures will cure inflation is a pretty risky course to take, and the damage to the economy could be extreme if deflation goes on too long without any form of QE intervention from the FED. So I presume that they would only be able to tolerate deflation for a short time before they announce temporary QE, whatever form that would take. That would probably mean tentative interest rate cuts would be included in that QE package, but what they won't want to do is print trillions of dollars again if they don't want another round of extreme inflation, unless of course the banks need bailing out again, and or there is another black swan event.

Global forces will always have an effect, which particular Asian forces are you referring to? I'm thinking of the economic and political influence of China, via the amount of investment they have in the USD.

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I am thinking firstly about China and then Japan.

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Nov 9, 2022 10:30:36 GMT @cgr said:

Nov 8, 2022 21:48:17 GMT sennockian69 said:

So peak US rates will be 5% . When will deflationary forces cause the Fed to begin reducing interest raises and return to QE 5 ? These forces will be coming from East Asia.

The current projections for interest rates going forward are for around 5%, and to hold around that level for most of 2023. The trouble is that the gamble that the Fed seems to be relying on, that deflationary pressures will cure inflation is a pretty risky course to take, and the damage to the economy could be extreme if deflation goes on too long without any form of QE intervention from the FED. So I presume that they would only be able to tolerate deflation for a short time before they announce temporary QE, whatever form that would take. That would probably mean tentative interest rate cuts would be included in that QE package, but what they won't want to do is print trillions of dollars again if they don't want another round of extreme inflation, unless of course the banks need bailing out again, and or there is another black swan event.

Global forces will always have an effect, which particular Asian forces are you referring to? I'm thinking of the economic and political influence of China, via the amount of investment they have in the USD.

So do you think the Fed will rely more on repo interventions than QE to resolve liquidity problems going forward?

[Deleted]

Nov 10, 2022 7:32:28 GMT sennockian69 said:

Nov 9, 2022 10:30:36 GMT @cgr said:

The current projections for interest rates going forward are for around 5%, and to hold around that level for most of 2023. The trouble is that the gamble that the Fed seems to be relying on, that deflationary pressures will cure inflation is a pretty risky course to take, and the damage to the economy could be extreme if deflation goes on too long without any form of QE intervention from the FED. So I presume that they would only be able to tolerate deflation for a short time before they announce temporary QE, whatever form that would take. That would probably mean tentative interest rate cuts would be included in that QE package, but what they won't want to do is print trillions of dollars again if they don't want another round of extreme inflation, unless of course the banks need bailing out again, and or there is another black swan event.

Global forces will always have an effect, which particular Asian forces are you referring to? I'm thinking of the economic and political influence of China, via the amount of investment they have in the USD.

So do you think the Fed will rely more on repo interventions than QE to resolve liquidity problems going forward?

Good point. To date the FED's REPO programme has been reducing liquidity in the market, currently standing at something like $2 trillion on the books. Maybe they look at it as one of their tools to use for expansion.

Today, the US inflation rate came in cooler then expected at 7.7%, where the consensus was 8%. US pre markets are rocketing at the mo. Will be interesting to see how far it goes. Could see a good rally, as some traders will be seeing it as a reason for the Fed to pivot sooner rather then later. However, I still don't think they will do it yet, as it will stimulate further inflation. If it becomes a problem, I suppose we will hear some hawkish rhetoric from the Fed sooner rather then later to cool things down.

Update:- Looks like the next expected interest rate hike has now reduced from 0.75% to 0.5% in the US. You can probably expect the same for the UK.

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Thought. Can the BOE afford to not match what the Fed does? My opinion not if the events over September and October are any guide

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Nov 12, 2022 9:18:10 GMT sennockian69 said:

Thought. Can the BOE afford to not match what the Fed does? My opinion not if the events over September and October are any guide

Quite possibly. Although the BOE have duplicated the US the day after the Fed raised rates on the last two occasions, the UK is further along the business cycle than the US, and a little behind the EU, so maybe they will hold. But I did read late yesterday, but cannot remember the source, that the BOE will likely reduce the next hike, but not hold. Unfortunately, I cannot comment on the reliability of the source of the info.

I do agree with you though. The UK's multiple attempts to commit economic suicide over the last few years (I am not a brexiteer, a remainer, or politically aligned) within such an obvious global contraction, has resulted in a dire situation, and makes it difficult to justify raising rates further.  By holding, it could provide a little light to illuminate businesses in the UK, and could just be the tonic that is needed, as it seems that deflation and the recession will take care of inflation.

By the way, did you ever re-read "The Creature from Jekyll Island", and if so, did it reveal anything new to you?

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It didn't take long for Fed rhetoric to come in to cool the markets down. news.yahoo.com/fed-waller-warns-inflation-fight-230336481.html?fr=sycsrp_catchall

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Is the FTX fiasco the end result of a Deep State take down of the Crypto space ?

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Didn't Linda Lovelace star in that?

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Storm warnings ahead.

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For my 60th, I asked for and received, a book called ‘The Simple Path to Wealth’ by an American author, JL Collins

He essentially wrote it for his daughter, all about using a (just one) low cost index tracking fund to build wealth over time, way more effectively than using conventional (expensive) managed funds

I took it on holiday and devoured it on a sun bed, it’s an incredibly compelling concept, with the emphasis being on the words ‘simple’ and ‘low cost’, anyone could follow the principles, if only it had been around 30-40 years ago, I’d certainly have done things differently

Not a new book, it was released in 2016, but with Christmas coming, it would make an excellent gift for anyone, especially the younger generation, just starting out, could be a game changer for some

Anyone read it already?

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Nov 18, 2022 21:46:25 GMT sennockian69 said:

Storm warnings ahead.

Yep. The volatility index is dropping like a brick. As Michael Burry has pointed out recently, in the past, when yields are as deeply inverted as they are now, and the volatility index drops to low levels, it has resulted in a deep stock market correction or a violent crash, normally as a result of a black swan event (FTX contagion?, but it could originate from anywhere). The dot com bubble, and the GFC are two examples of this correlation.

Complacency may start to creep into the markets as we go forward, and this is a very dangerous attitude to take. With no major disruption resulting from the mid term elections in the US, it should provide the impetus for the markets to creep up, with the additional feeling that the bottom is already in. Of course, they may be right. However, it is no bad thing to apply risk management to investments as markets continue to rise into resistance levels that are not very far away.

[Deleted]

Nov 18, 2022 22:21:26 GMT pwe said:

For my 60th, I asked for and received, a book called ‘The Simple Path to Wealth’ by an American author, JL Collins

He essentially wrote it for his daughter, all about using a (just one) low cost index tracking fund to build wealth over time, way more effectively than using conventional (expensive) managed funds

I took it on holiday and devoured it on a sun bed, it’s an incredibly compelling concept, with the emphasis being on the words ‘simple’ and ‘low cost’, anyone could follow the principles, if only it had been around 30-40 years ago, I’d certainly have done things differently

Not a new book, it was released in 2016, but with Christmas coming, it would make an excellent gift for anyone, especially the younger generation, just starting out, could be a game changer for some

Anyone read it already?

I've not read this one, however, it is important for the youngsters to think out of the box more than ever.

[Deleted]

BBC News - Eleven gambles that went wrong for Liz Truss
www.bbc.co.uk/news/uk-63838387

Article by Nick Robinson, which not only shows what a complete bollix Truss made of things, but what a domineering individual she is.
Tempting to think that a few months more of her and Britain would have become a dictatorship.
Or, to really stoke conspiracy theory addicts, was she actually elected via a Putin intervention? Indeed, is she actually a Putin mole???
🤫😭🤯