[Covariance]

Fed is already starting to sound dovish today

They more paper hands than I thought

What a mess

Interested to know what you are referencing. All the Feds I hear are saying another 75 in July.

 

[m3s]

Interested to know what you are referencing. All the Feds I hear are saying another 75 in July.

I don't doubt it

I'm just reading between the lines and comparing to what they've done in the past

Can't take them at face value

 

[james4beach]

I don't doubt it

I'm just reading between the lines and comparing to what they've done in the past

Can't take them at face value

This is true. Looking at central bank history, more often than not, they are seen stimulating & pumping assets than actually tightening conditions.

Alan Greenspan started this whole mess in the mid 1990s. When the 2000 crisis hit, he seemed to think it was the central bank's duty to rescue markets and household wealth. Everyone has forgotten this, but as he slashed interest rates, Greenspan told Americans to take variable rate mortgages and -- specifically -- ARMs.

So the Federal Reserve directly pumped real estate in the early 2000s, directly encouraging the behaviour which then led to the runaway housing asset bubble.

And then once their new bubble crashed (2008), they started the massive QE program and kept interest rates low forever. Yet again pumping up all asset prices and creating what we ended up with... the bubble in everything... stocks, bonds, real estate.

One could think that today they are posturing again, as they've done countless times before. Pretending to be hawkish. But it might be just a matter of time before they start stimulating and pumping assets again.

 

[londoncalling]

It might be a reason to keep buying a bit over the summer. I have kept my durations short but for the time being rates are not moving as fast as they did after the first hike. another 75 in July should mean better rates. I will be buying a bit more fixed income between now and fall. I know a few that have opted for preferred shares that will renew in the next year thinking they will capture the spread when they are called.

 

[m3s]

I have kept my durations short but for the time being rates are not moving as fast as they did after the first hike. another 75 in July should mean better rates.

Seems the market priced in the expected rate hikes. Things can get volatile if the Fed suddenly changes expectations. I don't expect it but their action and words have so much impact

Bond rates in Japan are apparently starting to go crazy. Not sure what is happening maybe BOJ is losing control of the market

 

[james4beach]

Beware that the unwinding of QE picks up steam in September. The Federal Reserve has started reducing their balance sheet but they are taking baby steps. The real unwinding begins in Sept. We've never seen this done at this scale ever before in history, and economists have no idea what the impacts might be.

I'll bet that if the Fed even implies that they might back off QT, the market could go crazy, all asset prices to the moon.

This will be an interesting year either way.

 

[m3s]

I'll bet that if the Fed even implies that they might back off QT, the market could go crazy, all asset prices to the moon.

This will be an interesting year either way.

That's the thing we've barely started and look at the market

I actually want a bear market both for tax reasons and accumulation reasons. Going to the moon that fast is no good

It's like some kind of rubber band effect or vehicle swerving back and forth before losing control

 

[Gator13]

Pandemic, war, crazy inflation, etc. A few calm years focused on actual company results would be nice.

The overload and speed of information has to be a big contributor to the market swings. Maybe we're living the new normal??

Edit: My typing stinks.

 

[londoncalling]

Rate hikes in NA were a shock to the system. I can't imagine the attention the increases in Japan saw. That country's interest rate has been ridiculously low forever.

 

[m3s]

I can't imagine the attention the increases in Japan saw. That country's interest rate has been ridiculously low forever.

Apparently they were already in yield curve control pre-pandemic. Now they are printing Yen as if it's toilet paper

NA is trying to avoid yield curve control

 

[m3s]

Beware that the unwinding of QE picks up steam in September. The Federal Reserve has started reducing their balance sheet but they are taking baby steps. The real unwinding begins in Sept. We've never seen this done at this scale ever before in history, and economists have no idea what the impacts might be.

I'll bet that if the Fed even implies that they might back off QT, the market could go crazy, all asset prices to the moon.

This will be an interesting year either way.

I think we could be in for a massive economic whiplash - the perfect storm is brewing

The Fed is way too slow to react to past data that is changing in real time before their changes even take place. They are out of sync and there are massive economic disruptions coming

By the time they get around to unwinding in Sept they might have to start again

 

[m3s]

Bond market currently doesn't believe the Fed will raise rates as much as they claim

Bond market is calling J Pow's bluff.

 

[KaeJS]

Bond market currently doesn't believe the Fed will raise rates as much as they claim

Bond market is calling J Pow's bluff.

I never did.
Said it many times I've been buying bonds.
Maybe I'm retarded. Who knows.
But I think there are lots of capital gains to be made and you can lock in 4% YoC for no risk.

 

[Covariance]

Actually, what is happening is the market is factoring In an increasing expectation the Fed will continue to raise and bring about a recession.

If the market didn’t think the policy rate was moving high enough the long bonds would be tanking as they did in Q1. You may notice long bonds are well off their YTD lows.

 

[m3s]

Actually, what is happening is the market is factoring In an increasing expectation the Fed will continue to raise and bring about a recession.

Actually.. fed fund futures are expecting the opposite.

But I'm looking further out so we are talking about different things here

Most disagreements in finance I find are people with different time horizons

 

[Covariance]

Actually.. fed fund futures are doing the exact opposite.

Raising in the near term, too high, obviates a need for a higher rate later because economy tanks.