I like to base my long term investment decisions on sound fundamentals. Low rates doesn't count as a sound fundamental reason to buy. Hence, I have exactly zero exposure to the stock market. I've already missed out on quite a bit of upside, but it doesn't bother me a bit. I hope to pick up some mining stocks next year.
References: Too many to list. PM for details. 100% satisfaction both as buyer and seller. As a seller, I ship promptly and keep buyers updated.
There's no question The Fed has the stock market at all time highs. Remove the life support and watch equities plummet to their real values. That's why we're into our 6th consecutive year of ZIRP and QE.
Nobody really believes in today's economy equities would be anywhere near all-time highs without The Fed owning 20% of the U.S. equity market and keeping interest rates at 0% for what will end up being a decade. It's impossible to watch 50% (and growing number) of Americans on public aid, wages falling for 5 straight years, and seeing valuations predicated on future cash flows equal to today's money and think otherwise.
A company I used to work for is nearing its all-time high price ($40+) and all-time high market cap of over $2 billion. They have made little money the last 5 years, have a P/E of 30+, and are horribly managed. They had fallen to $9 in 2009 and last I checked were borrowing money to keep their dividends going. They have a lot of company these days............
Stocks (S&P 500) are up 165% from the March 2009 lows. The Fed has certainly helped, but that is just part of the reason. The S&P is only up 19% from Oct 2007 and the earnings and dividends are higher now.
The financial environment which includes the Fed has been very positive for stocks.
The real goal of very low rates, QE, etc., was to boost real estate. That has not happened to anywhere near the same degree because of liquidity. I can buy $1,000,000 worth of SPY for $6.99 cost. Sell it for the same cost (+ very small SEC fee). No 5% broker commission, no transfer tax, no mortgage recording tax, et. al.
The article mentions JNJ and PEP. Both are earning more now than in 2007 and paying much higher dividends.
The real question is, where should you be invested when rates start to rise? Last week when the Fed just alluded to scaling back on their current policies (what is it, QE34 by now), both stocks and PMs started to fall. Obviously, the stock market likes cheap money, and PMs rise when the dollar is weak. If the dollar strengthens, the best place to be invested is probably your local bank.
"It's far easier to fight for principles, than to live up to them." Adlai Stevenson
<< <i>The real question is, where should you be invested when rates start to rise? Last week when the Fed just alluded to scaling back on their current policies (what is it, QE34 by now), both stocks and PMs started to fall. Obviously, the stock market likes cheap money, and PMs rise when the dollar is weak. If the dollar strengthens, the best place to be invested is probably your local bank. >>
History has proven that stock markets rally when rates rise. We even saw this earlier this year. Or you can go with the " this time is different" crowd, and pray.
<< <i>The real question is, where should you be invested when rates start to rise? Last week when the Fed just alluded to scaling back on their current policies (what is it, QE34 by now), both stocks and PMs started to fall. Obviously, the stock market likes cheap money, and PMs rise when the dollar is weak. If the dollar strengthens, the best place to be invested is probably your local bank. >>
History has proven that stock markets rally when rates rise. We even saw this earlier this year. Or you can go with the " this time is different" crowd, and pray. >>
Nobody's praying. We know The Fed owns 20%+ of the equity markets AND has them 30%+ overvalued based on ZIRP. The valuations of two years ago were realistic in today's macro-picture but they continue to shovel money into the hands of the wealthy, killing savers and senior citizens who can't or don't participate in their charade. If making the top 5% more wealthy is their goal? They have succeeded at the expense of the majority of Americans.
<< <i>The real question is, where should you be invested when rates start to rise? Last week when the Fed just alluded to scaling back on their current policies (what is it, QE34 by now), both stocks and PMs started to fall. Obviously, the stock market likes cheap money, and PMs rise when the dollar is weak. If the dollar strengthens, the best place to be invested is probably your local bank. >>
History has proven that stock markets rally when rates rise. We even saw this earlier this year. Or you can go with the " this time is different" crowd, and pray. >>
Nobody's praying. We know The Fed owns 20%+ of the equity markets AND has them 30%+ overvalued based on ZIRP. The valuations of two years ago were realistic in today's macro-picture but they continue to shovel money into the hands of the wealthy, killing savers and senior citizens who can't or don't participate in their charade. If making the top 5% more wealthy is their goal? They have succeeded at the expense of the majority of Americans. >>
I had no idea the fed owned 20+% of the stock market. What do they own? I know the Treasury may still own some FNMA Freddie and a little AIG and GM, but the Fed? wow, I'd like to know if they have any biotech positions, because since they are in with the FDA, they probably know what phase II and Phase III trials will lead to drug approval. We could make some serious money here people.
Rising interest rates are widely considered bad for stocks. Higher rates make bank savings account more attractive than dividend paying stocks, for example. I've never heard anyone argue that higher rates are good for stock prices. If there's evidence you can cite to support that theory, please post it.
"Men who had never shown any ability to make or increase fortunes for themselves abounded in brilliant plans for creating and increasing wealth for the country at large." Fiat Money Inflation in France, Andrew Dickson White (1912)
$85 BILL per month + the Bernanke "put" on the SM means it doesn't go down until Ben says it does. Until then the HFT's have a free ride.
Interest rates are low for only one major reason - $250 TRILL in otc interest rate swaps held by our 5 TBTF banks....and another $650 TRILL held by the rest of the world's big banks. Amazing what a $900 TRILL bet will do when the entire gaming table is worth only a tiny fraction of that amount. Take away those $900 TRILL in interest rate contracts and see what happens. The FED is punishing anyone for putting money anywhere but in the stock market. A market controlled by $1.2 Quad in derivatives is not related to supply/demand or by any normal market forces. Normal market forces pretty much left the building in 2002-2003. It's been the Wild Wild West ever since. 13 year expanding wedges are not the resutl normal market forces. Those result because of excessive manipulation and govt interference in markets. However, normal market forces will eventually reign in that expanding wedge and take the DJIA back to 6,000.
<< <i>"I had no idea the fed owned 20+% of the stock market."
That makes two of us. VanHalen, can you expound on this please? It is quite shocking that this is not widely known or discussed. Your sources please. >>
<< <i>"I had no idea the fed owned 20+% of the stock market."
That makes two of us. VanHalen, can you expound on this please? It is quite shocking that this is not widely known or discussed. Your sources please. >>
Let's see, The Fed has $4 trillion on the books (acknowledged) and the U.S. equity markets are around $21 trillion in value. That's 20% of the equity markets because that's where the money went.
Of course 90% of that money went into the portfolios of the top 5%, meaning 16 million Americans gained an average of $250k over the past 5 years due to The Fed's inflatable balloon. This will all come out as common knowledge in the long run when the sheep are sheared once again.
<< <i>We know The Fed owns 20%+ of the equity markets >>
<< <i>Let's see, The Fed has $4 trillion on the books (acknowledged) and the U.S. equity markets are around $21 trillion in value. That's 20% of the equity markets because that's where the money went. >>
Having the equivalent of 20% of the stock market on your books is not the same thing as owning 20% of the stock market. None of that $4T on the FED's books is in stocks. Congress is complicit in the money creation that is fueling the the stock market but that does not mean Congress owns or is buying stocks.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
<< <i>Rates are low because the markets dictate, not the FED. Rates are low all across the globe--even in some highly speculative countries.
Stocks are worth more today because companies are more profitable and financial sound.
Or you can believe that the FED is behind it all----and you can continue to suffer from the disillusionment of PMs. >>
Wrong! Short term rates are low because of the Fed Funds rate which the Fed controls. Long term rates are low because the Fed is buying massive amounts of long-term debt, thereby bringing those long-term rates down.
References: Too many to list. PM for details. 100% satisfaction both as buyer and seller. As a seller, I ship promptly and keep buyers updated.
<< <i>We know The Fed owns 20%+ of the equity markets >>
<< <i>Let's see, The Fed has $4 trillion on the books (acknowledged) and the U.S. equity markets are around $21 trillion in value. That's 20% of the equity markets because that's where the money went. >>
Having the equivalent of 20% of the stock market on your books is not the same thing as owning 20% of the stock market. None of that $4T on the FED's books is in stocks. Congress is complicit in the money creation that is fueling the the stock market but that does not mean Congress owns or is buying stocks. >>
Yes, all nod heads in agreement. But we live in a socialist economy where that money ends up in stocks. In our greed driven society we maintain a corrupt and dysfunctional government. Watch for the fall. 30% of our economy is currently being propped up by smoke and mirrors behind The Fed's grand curtain.
<< <i>Rates are low because the markets dictate, not the FED. Rates are low all across the globe--even in some highly speculative countries.
Stocks are worth more today because companies are more profitable and financial sound.
Or you can believe that the FED is behind it all----and you can continue to suffer from the disillusionment of PMs. >>
Wrong! Short term rates are low because of the Fed Funds rate which the Fed controls. Long term rates are low because the Fed is buying massive amounts of long-term debt, thereby bringing those long-term rates down. >>
<< <i>Rates are low because the markets dictate, not the FED. Rates are low all across the globe--even in some highly speculative countries.
Stocks are worth more today because companies are more profitable and financial sound.
Or you can believe that the FED is behind it all----and you can continue to suffer from the disillusionment of PMs. >>
Wrong! Short term rates are low because of the Fed Funds rate which the Fed controls. Long term rates are low because the Fed is buying massive amounts of long-term debt, thereby bringing those long-term rates down. >>
OK. You win. Believe what you want. >>
I work in the industry so I'm quite familiar with this. Every major central bank in the world is using QE to keep rates low. As more money is flushed into the system, that money flows into bonds (among other things) that have higher yields thereby bringing those yields down too.
I'm all for market determined interest rates. But that just isn't happening.
References: Too many to list. PM for details. 100% satisfaction both as buyer and seller. As a seller, I ship promptly and keep buyers updated.
History has proven that stock markets rally when rates rise.
The reverse is typically how it goes. Typically, as the economy improves, prices and costs for goods and labor both increase. At that point, the central banks typically "take away the punch bowl". When that happens, investors seek a higher return and rates go up.
What's happening now is that capital flight has caused the economy to stall out and the additions of more liquidity aren't helping to attract capital back into viable businesses. The capital is being chased away by both bad government tax policy (i.e. obamacare) and free money - and speculation in stock prices is being promoted.
If the market wanted higher rates it would have them. Global economic growth does not warrant higher rates. All is just as it should be.
Global economic growth does not warrant higher rates, but it sure doesn't warrant balance sheet expansion by the central banks either. There is no accountability, don't kid yourself.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>History has proven that stock markets rally when rates rise. >>
I would expect multiple compression, i.e., falling PE ratios, if interest rates rise significantly. If the "risk free" rate of return is 10%, I'm not going to pay a PE of 10 for any company that doesn't have fantastic growth prospects.
Take a look at the PE ratios from 1979 to 1981, when interest rates were at a high. A PE of 3 wouldn't be uncommon. It makes perfect sense when you could get 18% on a bank CD.
VanHalen
Posts: 3,856 ✭✭✭✭✭
Comments
1. low rates
2. low rates
3. low rates
4. low rates
Obvious where the FED wants money to go. Anyone wonder why? Oops, I forgot, they're not juicing the markets.
Think of the stock exchanges as an airline hub - a place where transfers take place. Seems like we've seen this trap before.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
Stocks are worth more today because companies are more profitable and financial sound.
Or you can believe that the FED is behind it all----and you can continue to suffer from the disillusionment of PMs.
Knowledge is the enemy of fear
Nobody really believes in today's economy equities would be anywhere near all-time highs without The Fed owning 20% of the U.S. equity market and keeping interest rates at 0% for what will end up being a decade. It's impossible to watch 50% (and growing number) of Americans on public aid, wages falling for 5 straight years, and seeing valuations predicated on future cash flows equal to today's money and think otherwise.
A company I used to work for is nearing its all-time high price ($40+) and all-time high market cap of over $2 billion. They have made little money the last 5 years, have a P/E of 30+, and are horribly managed. They had fallen to $9 in 2009 and last I checked were borrowing money to keep their dividends going. They have a lot of company these days............
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
that is just part of the reason. The S&P is only up 19% from Oct 2007 and the earnings and dividends
are higher now.
The financial environment which includes the Fed has been very positive for stocks.
The real goal of very low rates, QE, etc., was to boost real estate. That has not happened
to anywhere near the same degree because of liquidity. I can buy $1,000,000 worth of SPY for
$6.99 cost. Sell it for the same cost (+ very small SEC fee). No 5% broker commission, no transfer tax, no mortgage recording
tax, et. al.
The article mentions JNJ and PEP. Both are earning more now than in 2007 and paying much higher dividends.
<< <i>I guess I've hear it all - the FED's doesn't set interest rates.
I do understand the truth can be quite hilarious when ones thoughts are based on conspiracy and manipulation theory..
Knowledge is the enemy of fear
<< <i>The real question is, where should you be invested when rates start to rise? Last week when the Fed just alluded to scaling back on their current policies (what is it, QE34 by now), both stocks and PMs started to fall. Obviously, the stock market likes cheap money, and PMs rise when the dollar is weak. If the dollar strengthens, the best place to be invested is probably your local bank. >>
History has proven that stock markets rally when rates rise. We even saw this earlier this year. Or you can go with the " this time is different" crowd, and pray.
Knowledge is the enemy of fear
<< <i>
<< <i>The real question is, where should you be invested when rates start to rise? Last week when the Fed just alluded to scaling back on their current policies (what is it, QE34 by now), both stocks and PMs started to fall. Obviously, the stock market likes cheap money, and PMs rise when the dollar is weak. If the dollar strengthens, the best place to be invested is probably your local bank. >>
History has proven that stock markets rally when rates rise. We even saw this earlier this year. Or you can go with the " this time is different" crowd, and pray. >>
Nobody's praying. We know The Fed owns 20%+ of the equity markets AND has them 30%+ overvalued based on ZIRP. The valuations of two years ago were realistic in today's macro-picture but they continue to shovel money into the hands of the wealthy, killing savers and senior citizens who can't or don't participate in their charade. If making the top 5% more wealthy is their goal? They have succeeded at the expense of the majority of Americans.
<< <i>
<< <i>
<< <i>The real question is, where should you be invested when rates start to rise? Last week when the Fed just alluded to scaling back on their current policies (what is it, QE34 by now), both stocks and PMs started to fall. Obviously, the stock market likes cheap money, and PMs rise when the dollar is weak. If the dollar strengthens, the best place to be invested is probably your local bank. >>
History has proven that stock markets rally when rates rise. We even saw this earlier this year. Or you can go with the " this time is different" crowd, and pray. >>
Nobody's praying. We know The Fed owns 20%+ of the equity markets AND has them 30%+ overvalued based on ZIRP. The valuations of two years ago were realistic in today's macro-picture but they continue to shovel money into the hands of the wealthy, killing savers and senior citizens who can't or don't participate in their charade. If making the top 5% more wealthy is their goal? They have succeeded at the expense of the majority of Americans. >>
I had no idea the fed owned 20+% of the stock market. What do they own? I know the Treasury may still own some FNMA Freddie and a little AIG and GM, but the Fed? wow, I'd like to know if they have any biotech positions, because since they are in with the FDA, they probably know what phase II and Phase III trials will lead to drug approval. We could make some serious money here people.
Thanks in advance for any tip
Interest rates are low for only one major reason - $250 TRILL in otc interest rate swaps held by our 5 TBTF banks....and another $650 TRILL held by the rest of the world's big banks.
Amazing what a $900 TRILL bet will do when the entire gaming table is worth only a tiny fraction of that amount. Take away those $900 TRILL in interest rate contracts and see what happens.
The FED is punishing anyone for putting money anywhere but in the stock market. A market controlled by $1.2 Quad in derivatives is not related to supply/demand or by any normal market forces.
Normal market forces pretty much left the building in 2002-2003. It's been the Wild Wild West ever since. 13 year expanding wedges are not the resutl normal market forces. Those result because of excessive
manipulation and govt interference in markets. However, normal market forces will eventually reign in that expanding wedge and take the DJIA back to 6,000.
<< <i>However, normal market forces will eventually reign in that expanding wedge and take the DJIA back to 6,000. >>
and gold to 3,000.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
That makes two of us.
VanHalen, can you expound on this please?
It is quite shocking that this is not widely known or discussed.
Your sources please.
<< <i>"I had no idea the fed owned 20+% of the stock market."
That makes two of us.
VanHalen, can you expound on this please?
It is quite shocking that this is not widely known or discussed.
Your sources please. >>
FED does not purchase or own stocks. It does make it very easy (and profitable) for the gambling arm of the large banks to do so.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
<< <i>"I had no idea the fed owned 20+% of the stock market."
That makes two of us.
VanHalen, can you expound on this please?
It is quite shocking that this is not widely known or discussed.
Your sources please. >>
Let's see, The Fed has $4 trillion on the books (acknowledged) and the U.S. equity markets are around $21 trillion in value. That's 20% of the equity markets because that's where the money went.
Of course 90% of that money went into the portfolios of the top 5%, meaning 16 million Americans gained an average of $250k over the past 5 years due to The Fed's inflatable balloon. This will all come out as common knowledge in the long run when the sheep are sheared once again.
<< <i>We know The Fed owns 20%+ of the equity markets >>
<< <i>Let's see, The Fed has $4 trillion on the books (acknowledged) and the U.S. equity markets are around $21 trillion in value. That's 20% of the equity markets because that's where the money went. >>
Having the equivalent of 20% of the stock market on your books is not the same thing as owning 20% of the stock market. None of that $4T on the FED's books is in stocks. Congress is complicit in the money creation that is fueling the the stock market but that does not mean Congress owns or is buying stocks.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
<< <i>Rates are low because the markets dictate, not the FED. Rates are low all across the globe--even in some highly speculative countries.
Stocks are worth more today because companies are more profitable and financial sound.
Or you can believe that the FED is behind it all----and you can continue to suffer from the disillusionment of PMs. >>
Wrong! Short term rates are low because of the Fed Funds rate which the Fed controls. Long term rates are low because the Fed is buying massive amounts of long-term debt, thereby bringing those long-term rates down.
<< <i>
<< <i>We know The Fed owns 20%+ of the equity markets >>
<< <i>Let's see, The Fed has $4 trillion on the books (acknowledged) and the U.S. equity markets are around $21 trillion in value. That's 20% of the equity markets because that's where the money went. >>
Having the equivalent of 20% of the stock market on your books is not the same thing as owning 20% of the stock market. None of that $4T on the FED's books is in stocks. Congress is complicit in the money creation that is fueling the the stock market but that does not mean Congress owns or is buying stocks. >>
Yes, all nod heads in agreement. But we live in a socialist economy where that money ends up in stocks. In our greed driven society we maintain a corrupt and dysfunctional government. Watch for the fall. 30% of our economy is currently being propped up by smoke and mirrors behind The Fed's grand curtain.
<< <i>
<< <i>Rates are low because the markets dictate, not the FED. Rates are low all across the globe--even in some highly speculative countries.
Stocks are worth more today because companies are more profitable and financial sound.
Or you can believe that the FED is behind it all----and you can continue to suffer from the disillusionment of PMs. >>
Wrong! Short term rates are low because of the Fed Funds rate which the Fed controls. Long term rates are low because the Fed is buying massive amounts of long-term debt, thereby bringing those long-term rates down. >>
OK. You win. Believe what you want.
Knowledge is the enemy of fear
<< <i>
<< <i>
<< <i>Rates are low because the markets dictate, not the FED. Rates are low all across the globe--even in some highly speculative countries.
Stocks are worth more today because companies are more profitable and financial sound.
Or you can believe that the FED is behind it all----and you can continue to suffer from the disillusionment of PMs. >>
Wrong! Short term rates are low because of the Fed Funds rate which the Fed controls. Long term rates are low because the Fed is buying massive amounts of long-term debt, thereby bringing those long-term rates down. >>
OK. You win. Believe what you want. >>
I work in the industry so I'm quite familiar with this. Every major central bank in the world is using QE to keep rates low. As more money is flushed into the system, that money flows into bonds (among other things) that have higher yields thereby bringing those yields down too.
I'm all for market determined interest rates. But that just isn't happening.
<< <i>I'm all for market determined interest rates. But that just isn't happening. >>
It will, just a matter of time before the FED loses control of rates. The bond market will see to that.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
<< <i>
<< <i>I'm all for market determined interest rates. But that just isn't happening. >>
It will, just a matter of time before the FED loses control of rates. The bond market will see to that.
I hope soon! My savings account is losing money in inflation adjusted terms. It's not fair to reward spenders and punish savers!
<< <i>
<< <i>
<< <i>I'm all for market determined interest rates. But that just isn't happening. >>
It will, just a matter of time before the FED loses control of rates. The bond market will see to that.
I hope soon! My savings account is losing money in inflation adjusted terms. It's not fair to reward spenders and punish savers! >>
While your dollars are not growing they will allow you to later buy more things that are shrinking. Asset deflation is good for those with cash.
"How many times can a man turn his head and pretend he just doesn’t see?” - Bob Dylan
If the market wanted higher rates it would have them. Global economic growth does not warrant higher rates. All is just as it should be.
BTW--Im in the industry also.
Knowledge is the enemy of fear
Knowledge is the enemy of fear
The reverse is typically how it goes. Typically, as the economy improves, prices and costs for goods and labor both increase. At that point, the central banks typically "take away the punch bowl". When that happens, investors seek a higher return and rates go up.
What's happening now is that capital flight has caused the economy to stall out and the additions of more liquidity aren't helping to attract capital back into viable businesses. The capital is being chased away by both bad government tax policy (i.e. obamacare) and free money - and speculation in stock prices is being promoted.
If the market wanted higher rates it would have them. Global economic growth does not warrant higher rates. All is just as it should be.
Global economic growth does not warrant higher rates, but it sure doesn't warrant balance sheet expansion by the central banks either. There is no accountability, don't kid yourself.
I knew it would happen.
<< <i>History has proven that stock markets rally when rates rise. >>
I would expect multiple compression, i.e., falling PE ratios, if interest rates rise significantly. If the "risk free" rate of return is 10%, I'm not going to pay a PE of 10 for any company that doesn't have fantastic growth prospects.
Take a look at the PE ratios from 1979 to 1981, when interest rates were at a high. A PE of 3 wouldn't be uncommon. It makes perfect sense when you could get 18% on a bank CD.