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Will Janet Yellen be a fan of SP500-2000?
MGLICKER
Posts: 7,995 ✭✭✭
The recent Feds have been fans of benchmarks. Their claimed mandates are near full employment and 2% inflation (both subject to liberal change and interpretation)
Janet has noted that she thinks that segments of the equities and bond markets have become overheated. Sort of like handing out free beer and wondering why everyone is drunk.
At any rate, the SP 500 is approaching a huge benchmark. Will that phase the fed or will she ignore the number?
Janet has noted that she thinks that segments of the equities and bond markets have become overheated. Sort of like handing out free beer and wondering why everyone is drunk.
At any rate, the SP 500 is approaching a huge benchmark. Will that phase the fed or will she ignore the number?
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<< <i>The recent Feds have been fans of benchmarks. Their claimed mandates are near full employment and 2% inflation (both subject to liberal change and interpretation)
Janet has noted that she thinks that segments of the equities and bond markets have become overheated. Sort of like handing out free beer and wondering why everyone is drunk.
At any rate, the SP 500 is approaching a huge benchmark. Will that phase the fed or will she ignore the number? >>
Dont know and dont care.
Im long stocks
I give away money. I collect money.
I don’t love money . I do love the Lord God.
<< <i>
<< <i>The recent Feds have been fans of benchmarks. Their claimed mandates are near full employment and 2% inflation (both subject to liberal change and interpretation)
Janet has noted that she thinks that segments of the equities and bond markets have become overheated. Sort of like handing out free beer and wondering why everyone is drunk.
At any rate, the SP 500 is approaching a huge benchmark. Will that phase the fed or will she ignore the number? >>
Dont know and dont care.
Im long stocks >>
Good idea. 2000 is just a number. The Fed can't raise rates much or end QE for long. There won't be buyers of treasuries at under 2.5% and any reasonable Fed Funds rate (>2%) will maim equities so we know QE and ZIRP will be with us in one form or another for long, long, long time. Think decades long..........
<< <i>I still remember Greenspan talking about irrational exuberance and the impact he had on the stock market in the late 90's. It is funny that the driver behind irrational exuberance today is now the organization that Greenspan used to head. I think the FED and Janet are very happy with the S&P above 2000. >>
y are there hundreds, thousands of dotcom companies with no earnings or other companies with huge debtloads???...
or are the corps streamlined money makin machines?
<< <i>
<< <i>I still remember Greenspan talking about irrational exuberance and the impact he had on the stock market in the late 90's. It is funny that the driver behind irrational exuberance today is now the organization that Greenspan used to head. I think the FED and Janet are very happy with the S&P above 2000. >>
y are there hundreds, thousands of dotcom companies with no earnings or other companies with huge debtloads???...
or are the corps streamlined money makin machines? >>
I was thinking along the lines of easy, cheap money fueling an irrational run up in stock prices over the past few years. Just what the good FED wanted IMO.
Instead of thousands of dotcom companies with no earnings or huge debt loads we now have thousands of companies with earnings and sales growth driven from easy, cheap money. What happens when the party ends and someone has to pick up the mess? The party will come to an end whether it is FED driven or not. History tends to repeat itself and the markets move in cycles.
The FED has basically allowed large businesses, banks and consumers to re finance their balance sheets. When I look at LT debt on the balance sheets of large corporations, they have paid off high priced debt with low priced debt which is great for them. Easy money. The question is what happens when the FED stops dumping cash into the economy and rates start to rise to more traditional levels? Will customers still keep buying at these levels? Will businesses continue to expand at these rates?
I call it FED induced irrational exuberance based on loose monetary policy designed to stimulate the economy and the stock market.
I hope I am wrong and the streamlined money making corporations can handle inflation and rising interest rates better than what we saw in the 70's. Maybe the FED can keep printing money forever and rates / inflation will never go up. Who knows?....... I don't.
<< <i>Lol, y is all this money gonna disappear somehow???... >>
I will give you some examples:
When I worked as a controller for a fortune 500 company we did capital budgeting. In order to buy any fixed assets that cost over $1,500 and lasted over a year we had to do a capital budget. Any projects over $100,000 had to be approved by me. The only way they would get approved is if they had a positive net present value. As the risk free rate (treasury securities) and cost of debt went up, so did our cost of capital. As the cost of capital goes up, the present value of all projected cash flows went down. The net result of rising inflation and interest rates is that it will slow down corporate spending on large capital projects because they are no longer positive net present value projects. It has nothing to do with the amount of cash a large company has. It has to do with the rate of return on those expansion projects. As the cost of capital goes up, corporate spending goes down. The FED knows this and that is why they are happy with low rates but it has also led to irrational exuberance in my opinion.
Now let's talk about individual behavior. As inflation goes up and interest rates rise, consumers tend to buy less. First of all, their income is not keeping up with rising prices and secondly it costs more to borrow money. The FED knows this and that is why they are happy with low rates. Consumers have been buying over the past few years because money is cheap. Who wouldn't want to buy a car for 0% interest or a home at 2.9%.
So what I am trying to say is that the party is great until we experience inflation and rising interest rates. I feel the reason rates have been low since 2001 is because the FED has artificially pumped money into the system after 9/11 and also the real estate/banking crisis of 2008. If it ever changes course, we will be in for a recovery.
I am long stocks. I love the last few years. I just don't think it will last forever and I think it is exactly what the FED has wanted to happen.
I could be wrong..................
Appears the market may no longer be a fan of Yellen or of the FED:
"I do like gold here. It's priced as if the Fed will hike and QE will never start again. Those are likely bad assumptions." - Mike Shedlock
Janet Yellen is an Insult to Americans
"If you’re a girl and you’re old and you’re grey and you’re the size of a hobbit, who’s going to get angry at you? If your predecessor had all the qualities anyone could look for in a garden gnome, and his predecessor was known mainly as a forward drooling incoherent oracle, how bad could it get? Think maybe they select Fed heads on purpose for how well they would fit into the Shire?"
"Janet Yellen has a serious problem: the story no longer fits."
Keep an open mind, or get financially repressed -Zoltan Pozsar
Knowledge is the enemy of fear
<< <i>If QE is proven to be a failure, will it be repeated. >>
The benefactors of QE consider it a roaring success.
Keep an open mind, or get financially repressed -Zoltan Pozsar
I am an Eisenhower Republican and find the tone of today totally unacceptable. Let's discuss facts for a change.
Keep an open mind, or get financially repressed -Zoltan Pozsar
<< <i>
<< <i>If QE is proven to be a failure, will it be repeated. >>
The benefactors of QE consider it a roaring success. >>
Yep, just ask Bernanke's benfactors.
<< <i>
<< <i>If QE is proven to be a failure, will it be repeated. >>
The benefactors of QE consider it a roaring success. >>
The millions of homeowners who were bailed out of ill-timed purchases? The thousands of companies that refinanced higher interest rate debt? The not-so-pessimistic who took advantage of opportunity?
Knowledge is the enemy of fear
<< <i>
<< <i>
<< <i>If QE is proven to be a failure, will it be repeated. >>
The benefactors of QE consider it a roaring success. >>
The millions of homeowners who were bailed out of ill-timed purchases? The thousands of companies that refinanced higher interest rate debt? The not-so-pessimistic who took advantage of opportunity? >>
At the expense of the frugal, the saver, and the financially responsible. Like I said, roaring success for the benefactors. It's called a bailout for a reason and those not needing it pay the price.
Keep an open mind, or get financially repressed -Zoltan Pozsar
Knowledge is the enemy of fear
Keep an open mind, or get financially repressed -Zoltan Pozsar
<< <i>d2k then d3k ... >>
At some point in the future. Are you really liking Nasdaq though at a fourfold increase over the 2009 low?
Speak for yourself. The primary reason I've bought precious metals, both before 2008 and after - is because of a lack of trust. I'm much more pissed than I am scared, and if you consider buying pms during the last 5 years to have been a poor investment decision, I'd only observe that your perception of risk is different than mine. The country's financial management is even more corrupt than in 2007 and it is still being grossly mismanaged or I should say that middle class America is being milked more than ever by gov.com, marthasvinyard.com and thehamptons.com
You may have a different perspective but having a different perspective doesn't make the debt numbers and unfunded liabilities any less problematic.
I knew it would happen.
<< <i>Y not?, silver went up 6x from late 08 to 4/11... >>
Couldn't find a bear on CNBC this morning. All is well I suppose.
<< <i>Look-the most important thing is to average out your cost basis. If you put 1,000 dollars into the S&P 500 index every 3 months, whichever way the market is going...whether it be from 99-00 or from 04-07, or from 08-10, over time, you will get lucky and buy after downturns, and you will get unlucky and buy on October 12, 2007. If you continue to conservatively put in some of your paycheck every so often, whichever way the markets move-you don't have to time them. You keep it like I am keeping my holdings in the S&P 500. Over time, you will do much better than trying to time any market-whether it be stocks or metals. >>
Mostly agree with what you are saying. Tough part is sticking to the program. Easy to like the stock market now. Not so easy in 2008-9. Emotion takes over and folks flee in a decline. Also their are unusual examples like Japan where a young man who began investing in say 1985 would have a poor 30 year return, even with the recent uptick.
BTW....glad to see you back posting, CRH!
Liberty: Parent of Science & Industry
<< <i>There it is, 2000.07
Keep an open mind, or get financially repressed -Zoltan Pozsar
<< <i>$3T created by the FED, $2.3T of it on reserve deposit with the FED. Remaining $.7T mostly dumped into stocks by the banks. Wonder if we'll see SP3000 before the little chickens come home to roost. >>
Looks as if the administrations wealth redistribution program has worked, though not quite as advertised.
The Fed wants you to buy stocks, feel richer, and spend money.
You really don't need to know anything else. The Fed will continue to keep rates close to zero so
money will flow into stocks almost every day, pushing the market higher, creating a wealth effect.
<< <i>The only way the Fed can create a better economy is by driving the stock market higher.
The Fed wants you to buy stocks, feel richer, and spend money.
You really don't need to know anything else. The Fed will continue to keep rates close to zero so
money will flow into stocks almost every day, pushing the market higher, creating a wealth effect. >>
Until it doesn't.
At least the private pension funds won't need bailing out. . . yet.
Keep an open mind, or get financially repressed -Zoltan Pozsar
<< <i>The only way the Fed can create a better economy is by driving the stock market higher.
The Fed wants you to buy stocks, feel richer, and spend money.
You really don't need to know anything else. The Fed will continue to keep rates close to zero so
money will flow into stocks almost every day, pushing the market higher, creating a wealth effect. >>
....and what does the end of that reckless policy look like? Inflation in the US is running at 7% plus and those holding any government paper are getting hosed. That type of vacuum does not continue forever. When the bubble burst the taxpayers will get hit for the next round of TARP.
Nothing in the economic world is free, yet Bernanke and Yellen act/acted as if it were so. At least the European nations have taken some austerity steps to get their financial affairs in order.
<< <i>Why are so many people complaining when making money (with the Fed) is so easy? >>
History has shown that nothing is free and must be earned. Congratulations to those that have profited so far, but valuations are approaching the extreme side and though the fed carries immense influence, the game always ends up in the hands of the markets. Housing is an example of this, the fed pushed prices higher but ultimately to the distress of most participants, the market collapsed in an ugly and detrimental fashion.
The stock market is approaching that type of danger point. When the market reconciles interest rates to the nearly double digit inflation rate, equities crash and we revisit 2008.
<< <i>Why are so many people complaining when making money (with the Fed) is so easy? >>
Because they were "promised" PMs would protect them. And now they are pissed that everyone else is making money. Some are jealous. Some are angry. Some are dumbfounded. Some are hoping. Some are praying. Some ate wishing everyone else to share their misery.
Knowledge is the enemy of fear
<< <i>I can't take anyone seriously who bemoans S&P 2000 as extreme valuations and also thinks silver should be fairly valued at $50 an ounce or more. >>
Not me. Though I have dealt in precious metals, I have rarely been an investor beyond my inventory.
Quit buying gold for resale at $1400 and silver in the low 30's. I was out of both when prices collapsed. Extreme is extreme and is not married to any particular market.
Sadly in our quagmire of socialist/capitalist politics, the prudent are forced to bailout the risk takers. My tax dollars were used to save GM, Chrysler, AIG, American Express and every bank on Wall Street. Not to mention the homeowners that bought properties way over their heads.
Same will be true when equities and bonds tank.
I have done well in this stock market on selective shorting, and expect to do better when it slides. Concerned though for others in this country that are paying the price for the reckless and shameful monetary policy.
The attitude in America now is "to hell with the other guy", so I may as well tabulate the profits and keep my mouth shut!
When I worked as a controller for a fortune 500 company we did capital budgeting. In order to buy any fixed assets that cost over $1,500 and lasted over a year we had to do a capital budget. Any projects over $100,000 had to be approved by me. The only way they would get approved is if they had a positive net present value. As the risk free rate (treasury securities) and cost of debt went up, so did our cost of capital. As the cost of capital goes up, the present value of all projected cash flows went down. The net result of rising inflation and interest rates is that it will slow down corporate spending on large capital projects because they are no longer positive net present value projects. It has nothing to do with the amount of cash a large company has. It has to do with the rate of return on those expansion projects. As the cost of capital goes up, corporate spending goes down. The FED knows this and that is why they are happy with low rates but it has also led to irrational exuberance in my opinion.
Now let's talk about individual behavior. As inflation goes up and interest rates rise, consumers tend to buy less. First of all, their income is not keeping up with rising prices and secondly it costs more to borrow money. The FED knows this and that is why they are happy with low rates. Consumers have been buying over the past few years because money is cheap. Who wouldn't want to buy a car for 0% interest or a home at 2.9%.
So what I am trying to say is that the party is great until we experience inflation and rising interest rates. I feel the reason rates have been low since 2001 is because the FED has artificially pumped money into the system after 9/11 and also the real estate/banking crisis of 2008. If it ever changes course, we will be in for a recovery.
I am long stocks. I love the last few years. I just don't think it will last forever and I think it is exactly what the FED has wanted to happen.
I could be wrong..................
Thanks for the post, hchcoin. That's a good summary of classic finance. The reason it's classic is because it always works that way when the economy is normalized. The problem I see is that the economy hasn't been normalized since 1999 when Glass Stegall was repealed, and the government's finances are still being run as if they were la-la land and unfortunately the fallout is everywhere.
Basically, there is NO accountability.
I knew it would happen.
<< <i> The problem I see is that the economy hasn't been normalized since 1999 when Glass Stegall was repealed, >>
I would go back to the early 1980's when DC decided that prosperity could be charged to a future credit card. Some would successfully argue that the mid 60's and late 1930's were the beginning of our economic malaise.
<< <i>
<< <i> The problem I see is that the economy hasn't been normalized since 1999 when Glass Stegall was repealed, >>
I would go back to the early 1980's when DC decided that prosperity could be charged to a future credit card. Some would successfully argue that the mid 60's and late 1930's were the beginning of our economic malaise. >>
Normalized? Another obtuse word like "artificial".
Aint it a beetch that nothing ever stays the same? How did all those before us ever survive? I wonder what said about the stock market in 1913? " It's game over man!?"
Knowledge is the enemy of fear
<< <i>Aint it a beetch that nothing ever stays the same? >>
Plenty of change is good, some is not. Seems that we accept a corrupted government as long as we are in the receiving line. The welfare class will take anyone that fills their pockets.
Wall Street will favor the thief that pumps up the market and more importantly lets them know well in advance when the punch bowl will be pulled away.
The stupid middle class though puts their heads down and dutifully works more hours and receives less, to keep the charade afloat.
<< <i>
<< <i>Aint it a beetch that nothing ever stays the same? >>
Plenty of change is good, some is not. Seems that we accept a corrupted government as long as we are in the receiving line. The welfare class will take anyone that fills their pockets.
Wall Street will favor the thief that pumps up the market and more importantly lets them know well in advance when the punch bowl will be pulled away.
The stupid middle class though puts their heads down and dutifully works more hours and receives less, to keep the charade afloat. >>
So, you have disdain for the rich, the poor, AND the middle class? Is there anyone you do NOT hate?
(besides you're supremely wise and insightful self, of course?)
Liberty: Parent of Science & Industry
<< <i>So, you have disdain for the rich, the poor, AND the middle class? Is there anyone you do NOT hate? >>
I don't have a blanket hatred for anyone. I judge individuals on their own merits and defects.
A nation has an obligation to help those that are truly in need. Clearly a third of the population does not qualify, yet that seems to be the number of folks on some form of welfare.
I have great respect for those that have dedicated themselves to their careers and have become wealthy. Today though wealth comes less from hard work and more from government credits, questionable contracts and in the case of major league sports "free" stadiums. The medical industry tops the list of boondoggles, where the middle class worker is forced to cover his own through the roof costs as well as his neighbor's, as the $2,000,000 a year surgical recipient smirks all the way to the bank.
I have great empathy for the middle class as that is where most of my friends reside. They need to smarten up though as they continue to get hosed from the top and the bottom. A couple generations ago an average man could support a family of four or five on his income. Nice home, decent auto, plenty of Christmas gifts and a couple of modest vacations. Can that be done today on a $45,000 average income.....hell no.
Yet, as Baley points out and I agree that is certainly the way you come across in all your posts.
You seem unable to grasp this.
I wish you well living in the world you perceive around you.
<< <i>I don't have a blanket hatred for anyone."
Yet, as Baley points out and I agree that is certainly the way you come across in all your posts.
You seem unable to grasp this.
I wish you well living in the world you perceive around you. >>
Life is great, beautiful girlfriend, Summer place on the mountain and pretty much retired at 57.
Though I have no children, I have deep concerns for those of the next couple of generations. I wish I carried the optimism of others on the board, but reality is difficult to ignore.
Started my first business a couple of years out of college. Economy sucked in Detroit, but without 6 figures of student loans (paid for most of my own tuition) and not obligated to cover the whole nations extravagant health care costs, after a tough year, I succeeded.
Is that option realistic today for a young man or woman? Sure their will always be a Mark Zuckerberg and Bill Gates, but the rank and file will pretty much be beholden to the state sponsored too big to fails and cower to an overbearing boss.
Did we 40 and 50 somethings leave this country a better place for our kids? Absolutely not.
<< <i>Yo MG, without divulging any information you are not comfortable sharing with us-tell us about your business. I am interested. I got my notepad ready. >>
Always happy to share info with an ambitious forum member.
In 1979 I went to work for an independent manufacturers rep. Essentially you carry 10 or 15 lines of smaller and medium sized companies that cannot afford to hire a fulltime salesman for the state. In this case it was Michigan.
A couple of years later recession hit Detroit and my income dropped by 1/3. Figured that it was a good time to go out on my own.
The business carries a low initial overhead, but takes time to establish. First you need to contract with the manufacturers, establish a customer base and wait 60 to 120 days to get paid.
Michigan was a fertile marketplace at the time with K-Mart, Meijer and 3 or 4 good sized drug store chains. The state was also dotted with a good number of smaller discount retailers and various small chains in the 10 to 30 store range.
Business was good for about 15 years. Consolidation took hold and the little guys got absorbed by the out of state big boys. Then the larger drug chains were bought out and Kmart was on the verge of bankruptcy.
That is how things went under pre TARP capitalism.
I managed to get national rights on a medium sized optical line and moved out West to Arizona and did well until I switched to trading in rare coins.
All in all a good ride.
I think you mean 50 and 60 somethings. The 40s are the offspring if the early baby boomers, thank you very much
To add: The average age of a senator in 1987 was 54. In 2007 was 62. Only 10% of this years senators are in their 40s.
Knowledge is the enemy of fear