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And what if rates fall in a few months?
They won't. :)

I don't think inflation will be controlled in next few months (2-3) so at a minimum rates stay the same or more likely climb as the fed hikes further. IMHO

Under what scenario do you see rates falling in the near term? Not saying it can't happen, I just don't see how.
 

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Under what scenario do you see rates falling in the near term? Not saying it can't happen, I just don't see how.
Taper tantrum scenario has played out a few times before

Fed starts to raise rates - market over reacts to the downside - Fed flinches

Fed already started to stutter today
 

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Under what scenario do you see rates falling in the near term? Not saying it can't happen, I just don't see how.
See what @m3s said.

I see many ways interest rates could fall (or QE could increase), both of which amount to the same kind of thing: more stimulus.

First thing that's guaranteed to happen is that investors and real estate investors are going to complain a lot. They're going to say the Fed has gone too far, is destroying prices and destroying the economy, and will push back. They will start begging and screaming to stop raising interest rates.

Average people may complain too. Both households and businesses rely on very low interest rates loans (lines of credit, business loans). These interest rates are going up dramatically and it's going to pinch many households and businesses. So I'm sure they will also beg and scream to stop raising interest rates.

Next is the possibility of a "market dislocation". Something in the financial markets could blow-up. For example, a crash in junk bonds, or maybe another crash in mortgage bonds. You can't ever predict what it's going to be, but when asset prices plummet, something can go severely wrong. If something blows up, then the central banks really could stop raising rates. They might even cut rates.

Another possibility is Trump. He's likely to win in 2024 and the last time he was in charge, he told the Federal Reserve to cut interest rates. He very directly interfered with Federal Reserve policy and he could easily do it again. Reducing interest rates is usually a crowd-pleaser as it's a way to juice up asset prices and the economy.

Trump is also unpredictable. He's mentally ill, so it's really hard to know what he may do. Push the Fed to raise rates? Lower rates? Who knows... a total wildcard.

Another way I see is that inflation could moderate. More supply from manufacturers, or maybe some resolution to the war, could alleviate rising prices. If inflation starts to level off and maybe looks like it's no longer running away, that changes the picture completely. At that point the central bank could stop aggressively hiking rates.

Interest rates continuing to rise for the next 10 years is likely, but not certain.
 

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Not questioning your math that the 5% compounding in a 10 year GIC is like getting a 6.28% dividend. But I guess it depends on what you do with the dividend. If re-invested it can potentially beat the 5% compounding GIC.
Ya you're right, it depends on what you do with the dividend. Bottom line is, even at 5% in this clown world I'm obligated to start locking in some decent rates. If they crash the economy/markets with higher rates, they could use that as an excuse to go back to zero rates or worse. They like to raise rates slowly but when there's a "crisis" they drop them fast.
 

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See what @m3s said.

I see many ways interest rates could fall (or QE could increase), both of which amount to the same kind of thing: more stimulus.

First thing that's guaranteed to happen is that investors and real estate investors are going to complain a lot. They're going to say the Fed has gone too far, is destroying prices and destroying the economy, and will push back. They will start begging and screaming to stop raising interest rates.

Average people may complain too. Both households and businesses rely on very low interest rates loans (lines of credit, business loans). These interest rates are going up dramatically and it's going to pinch many households and businesses. So I'm sure they will also beg and scream to stop raising interest rates.

Next is the possibility of a "market dislocation". Something in the financial markets could blow-up. For example, a crash in junk bonds, or maybe another crash in mortgage bonds. You can't ever predict what it's going to be, but when asset prices plummet, something can go severely wrong. If something blows up, then the central banks really could stop raising rates. They might even cut rates.

Another possibility is Trump. He's likely to win in 2024 and the last time he was in charge, he told the Federal Reserve to cut interest rates. He very directly interfered with Federal Reserve policy and he could easily do it again. Reducing interest rates is usually a crowd-pleaser as it's a way to juice up asset prices and the economy.

Trump is also unpredictable. He's mentally ill, so it's really hard to know what he may do. Push the Fed to raise rates? Lower rates? Who knows... a total wildcard.

Another way I see is that inflation could moderate. More supply from manufacturers, or maybe some resolution to the war, could alleviate rising prices. If inflation starts to level off and maybe looks like it's no longer running away, that changes the picture completely. At that point the central bank could stop aggressively hiking rates.

Interest rates continuing to rise for the next 10 years is likely, but not certain.
Hey James, Thanks for that post. I don't disagree with pretty much everything you said.

But the big caveat is that I'm considering what rates will do in the next 2-3 months before locking in any mid/longer term GIC's. Actually I really think we have at least 12 months with more increases.

Your post mostly relates to why rates could decrease in the longer term, that is longer than 2-3 months.

Yes, investors and real estate investors are going to complain but I think the fed's objective of lowering inflation trumps that. They are in fact relatively early in the cycle of raising rates and gauging the impact on inflation. This is a months long exercise. Likely many months.

The markets are already in turmoil. I think they keep raising rates, monitoring inflation as they try to get closer to the 2-3% objective. Markets be damned.

For sure Trump is a wild card but the next presidential election is not until November 5, 2024. That's 17 months down the road. Not a factor in the next 2-3 months or even 12 months. But I agree, if he gets in then juicing the economy will be a priority so rate cuts then would be likely.

It's a nice convergence of market correction and higher interest rates so can get some excellent dividends and finally good GIC rates to build a pretty good income portfolio.

But I guess it depends on your perspective. My son is not pleased about re-newing his mortgage next year.
 

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But the big caveat is that I'm considering what rates will do in the next 2-3 months before locking in any mid/longer term GIC's. Actually I really think we have at least 12 months with more increases.

Your post mostly relates to why rates could decrease in the longer term, that is longer than 2-3 months.
OK that's a good point, you're talking about the next 2-3 months. And I do agree that GIC rates will likely go higher in that time period.
 

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Hey James, Thanks for that post. I don't disagree with pretty much everything you said.

But the big caveat is that I'm considering what rates will do in the next 2-3 months before locking in any mid/longer term GIC's. Actually I really think we have at least 12 months with more increases.
Yes. short term and central bank overnight rates are moving higher by direct action. However, longer term rates take their cue from market forces. For instance, last week the Fed raised their overnight rate by 0.75% and the market moved the rate on long bonds down. We are past the point in this tightening cycle when the curve is making a parallel shift. It is now changing slope and shape. So in other words you may wish to reconsider your forecast and focus specifically on the expected evolution of the rate at the term you are waiting to purchase.
 

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OK that's a good point, you're talking about the next 2-3 months. And I do agree that GIC rates will likely go higher in that time period.
Steinbach now offering Limited-time GIC special 17-month: 3.80% And Oaken at 5% for 5 year.

With more rate hikes coming we could see these go higher still. Not a bad place to park increased cash allocation to wait out a recession.
 

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Timing interest rates is a dangerous game.

How do you know interest rates are going higher? Maybe they will go lower.
My middle name is Karnac. ;) Maybe dating myself but loved that Carson bit.

But can they lower rates anytime soon with inflation at ~8% ? Said it before, my bet is still rates go higher in near term.
 

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They can't lower rates, or even stop hiking them anytime soon, without losing all credibility. That would also create a further de-anchoring of price expectations, which is very dangerous when inflation is this elevated. Anecdotally, I've heard from friends that they are buying more of "x" because the price will only go up in the future. A buddy had the backseat of his car loaded with stuff he was planning to sell on Facebook Marketplace for 3x what he paid. Who knows if he will be successful, but that's the psychology at work due to inflation. Regular people are not even thinking about a recession right now.

IMO, it's gonna take more than 2-3 months to get inflation below 3%. Probably more like a year or longer. Assuming they only hike by .25% at each meeting, that suggests a rate peaking near 3.5% by this time next year. It's probably more likely to be 4-4.5% though. I could be wrong and they stop hiking earlier, but that would further damage their already tarnished credibility.
 

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IMO, it's gonna take more than 2-3 months to get inflation below 3%. Probably more like a year or longer. Assuming they only hike by .25% at each meeting, that suggests a rate peaking near 3.5% by this time next year. It's probably more likely to be 4-4.5% though. I could be wrong and they stop hiking earlier, but that would further damage their already tarnished credibility.
It could have peaked but hard to say how long it stays above 3%

It's like a self fulfilling prophecy where you have people stocking up and paying whatever prices because they assume prices are only going up. Could come down fast temporarily for the same reason - people already stocked up and then expect prices to collapse

I think we will have bullwhip effect for awhile I'm watching to see if the effect increases or decreases (like are we losing control or gaining control) Things are gonna swing back and forth and confuse the hell out of most people

Interesting to see if overstocked retail actually lower their prices
 

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The rates for brokerage HISA's continually oscillate from below competitive to above competitive, but on average they're in the ball park. Their real advantage is reducing any drag on yield from moving cash around to various external HISA accounts.

If I have a stock I am watching and want to buy, it may present an appealing price that I want to act upon immediately. If I make a bid and I'm successful, I have a T+2 settlement to satisfy with the clock ticking to come up with that cash. With a brokerage HISA, it's easy to satisfy at T+1, but what do you do if you are playing the HISA game? Can you get the cash that fast?

ltr
 
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