Buy and Sell Signals, and Other Market Perspectives Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Buy and Sell Signals, and Other Market Perspectives

SPY 681.86

-0.7%

4:00 PM EST

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

Recommended by:

GROUND ZERO™

kimberley

mark2market

To: robert b furman who wrote (112245)	10/10/2018 9:59:10 PM
From: Peace	3 Recommendations Read Replies (2) of 220928

Bob, It is not that simple. The Fed is increasing short term rates. The longer term rates are market driven and investors have been complacent largely due to lack of inflation. The fed in my opinion is largely behind the curve thanks to Janet Yellen. Powell is actually a more practical and smart guy and will not be influenced by politics or market corrections. We have a strong economy and tight labor markets with potential for rapid inflation. Equity valuations are rich and so are credit spreads. I don't think Powell's Fed will worry about a stock market decline and will continue to raise rates as long as the economy is on track. In fact a stock market correction is healthy as it keeps bubbles in check. On the other hand the massive amount of debt issued over the past decade is what the Fed will be keeping an eye on. When credit spreads start becoming problematic and BBB and lower debt becomes too expensive for corporations to finance, we may be looking at bankruptcies and recession. But thats for later. On the fed balance sheet roll off, please understand that the fed is not an issuer of debt and thus is not retiring anything. In fact the fed is an investor like you and me and post the 2008 crisis bought tremendous amount of treasuries, mortgage backed securities etc to provide support to the capital markets and put it away (QE). As these securities mature or pay interest & principal on a monthly basis like MBS, the fed used to take the cash received and reinvest it by buying more securities. What they are doing now is keeping the that cash and in addition they are periodically selling off some securities from their portfolio. The result of this is that the fed is a net seller of these securities in the market (QT). Unwinding the fed balance sheet, getting the term structure of interest rates back in line before inflation hits and without derailing the economy and/or bursting the credit bubble is a near impossible task for the fed. The last thing they would care for is a normal correction in equity markets here.

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next