Fed Reduces Interest Rate

[retiredguy123]

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.

[Bogie Shooter]

Opposite of why they raise the rate……..
See, you can get gobbledygook right here.������

[tophcfa]

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.

That’s an easy one to answer. Our country, both government and most citizens, are up to their eyeballs in debt. Debt is like crack, and lower rates is like getting the needed crack fix at a much cheaper price. And just like with crack, too much debt never ends well. All the gobbledygook is just a smokescreen because nobody wants to address the real underlying problem.

All the news outlets are giddy about how the lower rates will help everyone in debt, but there is no mention about how it hurts senior citizens who need to earn a reasonable interest rate on their savings to supplement their social security and keep up with inflation.

[Stu from NYC]

Afraid of a recession starting now

[Normal]

I think the response time was a little slow. The cut was just right. It would have been a quarter if they were more certain of a recession was not coming. The economy is like a big ship, it takes a while to turn.

[CoachKandSportsguy]

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.

former finance guy to the rescue.

1) The current rates of inflation have trended down and is close or the core is at or below the fed's target rate of 2%. Primary goal accomplished! :highfive:

2) the labor market is much weaker than the headline numbers show. Why is that statement appear to be true? Because the annual true up adjustment was down about 700,000 jobs or so, which is about 70K per month overstated Likewise the month following the monthly inithialreading, true up adjustments are all negative / down as well. So for what every reporting source is being used for the initial monthly reading, is toohigh, and so the market is weaker in reality, than the BLS is portraying

3) The Sahm rule is right at the labor recession threshold, meaning that any further weakness in the labor market is signal a recession is imminent.

4) Powell is a being a bit more political than he would ever admit, but if there was ever a time to avoid any labor recessions or numbers or indicators showing that a recession is imminent, now is the time to reduce rates to avoid any negative economic press prior to the election.

Does that work for you?

[Aces4]

former finance guy to the rescue.

1) The current rates of inflation have trended down and is close or the core is at or below the fed's target rate of 2%. Primary goal accomplished! :highfive:

2) the labor market is much weaker than the headline numbers show. Why is that statement appear to be true? Because the annual true up adjustment was down about 700,000 jobs or so, which is about 70K per month overstated Likewise the month following the monthly inithialreading, true up adjustments are all negative / down as well. So for what every reporting source is being used for the initial monthly reading, is toohigh, and so the market is weaker in reality, than the BLS is portraying

3) The Sahm rule is right at the labor recession threshold, meaning that any further weakness in the labor market is signal a recession is imminent.

4) Powell is a being a bit more political than he would ever admit, but if there was ever a time to avoid any labor recessions or numbers or indicators showing that a recession is imminent, now is the time to reduce rates to avoid any negative economic press prior to the election.

Does that work for you?

You forgot to add that it pushes more money into the pyramid scheme (stock market) so it will look healthy and people will think they're getting rich.

I say people invested in CD's should pull all their money out of the financial institutions where people enjoy the use of their "free money" and see how long the stock market lasts. What a joke the whole thing is! :mornincoffee:

[Boomer]

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.

Inflation peaked at 9.1% in mid-2022 as we were making our way out of Covid.

NOW inflation is at 2.5%.


The Fed does not operate in a vacuum. There are 19 people on the committee and 12 of them get to vote. 11 of the 12 voted for the half point cut. The other one wanted a quarter point cut. But all agreed the time has come to cut and cut again.

The economy is not a horror like some are being led to believe. We are in recovery. Be glad.

This So Sad, Too Bad routine I have seen from those who have been rooting for a recession makes no sense to me. I must assume they have been dysinformed.

I accept the fact that my money market is going to take a hit, but I don't think we will have to return to nothing. I think this rate cut is going to drive the economy in an even more positive direction -- so I can give up something to get something. I hope to see 5% mortgages so the housing market can normalize and first time buyers can have a chance and corporate landlords won't have really cheap money to use to hog all the starter homes and gouge renters. That would be good for the economy on so many levels. Interest rates have been obscenely low for a lot of this century. Maybe, just maybe, we are on our way to normal.

Boomer

[Aces4]

Inflation peaked at 9.1% in mid-2022 as we were making our way out of Covid.

NOW inflation is at 2.5%.


The Fed does not operate in a vacuum. There are 19 people on the committee and 12 of them get to vote. 11 of the 12 voted for the half point cut. The other one wanted a quarter point cut. But all agreed the time has come to cut and cut again.

The economy is not a horror like some are being led to believe. We are in recovery. Be glad.

This So Sad, Too Bad routine I have seen from those who have been rooting for a recession makes no sense to me. I must assume they have been dysinformed.

I accept the fact that my money market is going to take a hit, but I don't think we will have to return to nothing. I think this rate cut is going to drive the economy in an even more positive direction -- so I can give up something to get something. I hope to see 5% mortgages so the housing market can normalize and first time buyers can have a chance and corporate landlords won't have really cheap money to use to hog all the starter homes and gouge renters. That would be good for the economy on so many levels. Interest rates have been obscenely low for a lot of this century. Maybe, just maybe, we are on our way to normal.

Boomer

Some are overlooking the fact in home pricing that this inflation created higher wages and very expensive building materials. If they believe that an interest adjustment will save the world, they should stay tuned.

[retiredguy123]

None of this makes sense to me. To me, debt does not create wealth, the lack of debt creates wealth. I have done very well by staying out of debt. Interest rates should be controlled by the market based on supply and demand, not by the Government.

[Two Bills]

I would imagine many young families, struggling their way up the ladder of life, will be more than happy to see a rate reduction.
The oldies, still fighting to be the richest people in the cemetery, not so happy.:ho:

[midiwiz]

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.

it's all physcological it does very little over all except for that. It's unfortunate they don't discuss the other methods they have.

[Caymus]

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.

Maybe a reduction in job postings has them concerned. They were too slow in raising and now may be too fast in cutting.

Remember when they kept saying that inflation was "transitory".

[Cuervo]

Increasing interest rate is usually put in place to slow the economy and slow down inflation.
A segment of the public has an excess of money and production cannot keep up with the demand.
The pandemic was the perfect example of this and put us in the situation where inflation ruled the day.
Now there are signs that the demand for employment has slowed, and manufacturing has increased, whether within our boarders or not.
So, by decreasing the interest rate it helps with spending and investment.
The hold thing is a balancing act.
And other than some tax incentives government has very little to do with where the economy is today or tomorrow.
What drive this are the average American. What they want and when they want it and are the products there to meet their demand.

[NoMo50]

Inflation peaked at 9.1% in mid-2022 as we were making our way out of Covid.

NOW inflation is at 2.5%.


Boomer

Don't be fooled by the spin. Sure, 2.5% inflation is better than 8%, but let's be careful calling it a win. This is on top of the cumulative high inflation rates over the past 3 years. Don't kid yourself...you feel it with every trip to the grocery store, the gas station, your favorite restaurant, etc.

Yes, the operation was a success...but the patient died.

[RoseyRed]

:1rotfl::1rotfl::1rotfl: I would imagine many young families, struggling their way up the ladder of life, will be more than happy to see a rate reduction.
The oldies, still fighting to be the richest people in the cemetery, not so happy.:ho:
The richest in the cemetery comment is hilarious!

[CoachKandSportsguy]

None of this makes sense to me. To me, debt does not create wealth, the lack of debt creates wealth. I have done very well by staying out of debt. Interest rates should be controlled by the market based on supply and demand, not by the Government.

First, the government is the opposite of a consumer or a corporation. The goal of the government is NOT to be a consumer and not to be a corporation, each to maximize after tax cash flow. That is the mistake that most people make after listening to certain viewpoints criticizing the government when compared to a consumer or a corporation.

The federal reserve only affects the interest rates to the banks, called the federal funds rate.
The treasury only affects the interest rates on the sales of treasury bills, notes and bonds. Mortgage rates, money markets, bank savings account interest rates, are all set by the private market, but the influence from the treasury and the fed is not zero. .

The bank has also a third role as the lender of last resort, to keep the banking system from imploding, and banks going under. So that requires the ability to create money to give to the banks to prevent runs and insolvency.

I would also say that the immense govt borrowing does not originate with the fed or the banks or the treasury. The source of debt is the spending by Congress for their projects. The federal government manages the infrastructure, safety and defense, the common spending of the 50 states of the republic. The government blends that role with the employer of last resort. Many of people I know who have a hard time staying employed in the private sector, have found jobs in the government/public sector. The problem with the government is that is a legal system, and it's run by lawyers. Lawyers have the same human biases, greed and power as the rest of the population, but somewhat more so as they want to look like servants, but still act as they would in the private sector. . Therefore there are more sociopaths than actual servants to the people.

So your gripe about the debt is more with congress than with the banking and treasury system. And all the election rhetoric about taxes is mostly just voting pandering than real policy. However, lawyers believe in precedence, and maintaining the status quo of the system, that's how they are trained, and work. So

good luck to us.

[RoseyRed]

Maybe a reduction in job postings has them concerned. They were too slow in raising and now may be too fast in cutting.

Remember when they kept saying that inflation was "transitory".
Seems every establishment has a sign for hiring. How would it change things if employers changed their posting to "NOT hiring" we have a full staff and stop posting signs for "hiring"? Would it draw more customers to the fully staffed establishments, knowing the service offered would not be less due to no staff? Talk about shaking things UP!

[daca55]

Lowering the rates by 1/2 point IMO was too much too fast. I was expecting a 1/4. Can’t help but think the fed has another agenda that is politically motivated. Time will tell!

[Sandy and Ed]

None of this makes sense to me. To me, debt does not create wealth, the lack of debt creates wealth. I have done very well by staying out of debt. Interest rates should be controlled by the market based on supply and demand, not by the Government.
Simplistic?? Yeah, maybe. But I agree. Let the system work without all these gyrations.

[retiredguy123]

First, the government is the opposite of a consumer or a corporation. The goal of the government is NOT to be a consumer and not to be a corporation, each to maximize after tax cash flow. That is the mistake that most people make after listening to certain viewpoints criticizing the government when compared to a consumer or a corporation.

The federal reserve only affects the interest rates to the banks, called the federal funds rate.
The treasury only affects the interest rates on the sales of treasury bills, notes and bonds. Mortgage rates, money markets, bank savings account interest rates, are all set by the private market, but the influence from the treasury and the fed is not zero. .

The bank has also a third role as the lender of last resort, to keep the banking system from imploding, and banks going under. So that requires the ability to create money to give to the banks to prevent runs and insolvency.

I would also say that the immense govt borrowing does not originate with the fed or the banks or the treasury. The source of debt is the spending by Congress for their projects. The federal government manages the infrastructure, safety and defense, the common spending of the 50 states of the republic. The government blends that role with the employer of last resort. Many of people I know who have a hard time staying employed in the private sector, have found jobs in the government/public sector. The problem with the government is that is a legal system, and it's run by lawyers. Lawyers have the same human biases, greed and power as the rest of the population, but somewhat more so as they want to look like servants, but still act as they would in the private sector. . Therefore there are more sociopaths than actual servants to the people.

So your gripe about the debt is more with congress than with the banking and treasury system. And all the election rhetoric about taxes is mostly just voting pandering than real policy. However, lawyers believe in precedence, and maintaining the status quo of the system, that's how they are trained, and work. So

good luck to us.
I don't know what you mean by the private interest rate market, but the Fed seems to have a huge effect on the interest rate for money market accounts, bank CDs, and private bonds. When I retired, I was making substantial interest on my money market account until the Fed started reducing interest rates. Then the interest rate went almost zero.

[MX rider]

:1rotfl::1rotfl::1rotfl:
The richest in the cemetery comment is hilarious!
Lmao!!

[spinner1001]

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.

@retiredguy123, what you asked for —

Logical reason:

As an institution, the Fed’s fundamental goals are ‘moving the economy toward maximum employment and stable prices’.[1] These are long-term goals, not goals for the next five minutes.

Maximum employment — Lower interest rates lower borrowing costs for businesses, encouraging them to invest in growth (expansion, capital assets), and hire more people.

Stable prices — Lower interest rates lead to lower expected inflation, other things equal (see Fisher’s interest rate theory [2]). Geico cave man says: ‘high inflation bad, low inflation good’. Higher inflation leads to unstable prices and lower inflation leads to more stable prices.


This is what you asked for @retiredguy123. But this ‘logical reason’ business you express in multiple posts doesn’t make sense to ask unless you want philosophy. I assume you don’t. Logic is philosophy (lots of philosophers around) and math (not many mathy folks around). But economics isn’t about logic. It’s about empirical evidence, analysis, and policy making. You want empirical evidence, not logical reasoning, right? I suggest in the future you ask for ‘sound reason’ instead of ‘logical reason’. Sound reasonable?

The logical reason you hear ‘gobbledygook’ on TV about the Fed’s policy decision is that is what TV does — sell advertising from more viewers who want entertaining. TV talking heads are often entertainers creating lots of noise, having a low signal-to-noise ratio. @retiredguy123, if you actually want to learn more you this, subscribe to The Economist and read it. You won’t learn much about it from TV channels and social media.

[1] The Fed Explained - Monetary Policy (https://www.federalreserve.gov/aboutthefed/fedexplained/monetary-policy.htm)

[2] Fisher equation - Wikipedia (https://en.wikipedia.org/wiki/Fisher_equation)

[waterflower]

The fed is on its way out. The market has to "crash" for the sleepy eye, than the finacial reset will occur. There will be several cuts coming. We are watching the debit economy (that has no value) find its beginning 0. Fiat currencies always return to its true intrinsic value. 0 zip nada. The printing machine ran out of ink. No more Wooodrow Wilson economics. Look at 2017 .50 bases point reduction. This time we have a new system in place. Gold backed currencies and other natural recources. No more OPEC style of (gun in your face) $$ oil trading. Research the BRICS nations and the international economy they are building.

[FredMitchell]

Maybe try a primary source instead of secondary (news media). (https://www.federalreserve.gov/newsevents/pressreleases/monetary20240918a.htm)

[Jazzman]

Inflation peaked at 9.1% in mid-2022 as we were making our way out of Covid.

NOW inflation is at 2.5%.


The Fed does not operate in a vacuum. There are 19 people on the committee and 12 of them get to vote. 11 of the 12 voted for the half point cut. The other one wanted a quarter point cut. But all agreed the time has come to cut and cut again.

The economy is not a horror like some are being led to believe. We are in recovery. Be glad.

This So Sad, Too Bad routine I have seen from those who have been rooting for a recession makes no sense to me. I must assume they have been dysinformed.

I accept the fact that my money market is going to take a hit, but I don't think we will have to return to nothing. I think this rate cut is going to drive the economy in an even more positive direction -- so I can give up something to get something. I hope to see 5% mortgages so the housing market can normalize and first time buyers can have a chance and corporate landlords won't have really cheap money to use to hog all the starter homes and gouge renters. That would be good for the economy on so many levels. Interest rates have been obscenely low for a lot of this century. Maybe, just maybe, we are on our way to normal.

Boomer
The economy is better? Well when you pick and choose specific data points you can make data look whatever way you wish. Here are three data points that you missed: Credit card debt is at an all time high. The highest it’s been since the data started to be recorded. Auto loan defaults are at a record high. And the personal savings rate is at 2.9% whereas for quite a number of years the average has hovered around 8%. And one more comment. Powell stated that the unemployment numbers are affected by the number of immigrants available in the workforce. Okay so he’s talking about those who are here without a work visa, student visa or green card, or social security card, like those living for example in hotels in NYC. Historically unemployment was measured using data from states as to those who are unemployed and collecting benefits, those who are no longer eligible to collect but remain unemployed, large layoffs in specific quarters of the year and employer open positions not being filled. So pick a data point you like. “In God we trust, everyone else, bring data”.

[SHIBUMI]

The unemployment rate is a farce...........2% of this rate are people who dont want to work........so unemployment is low

The inflation rate is a similar farce as the metrics dont make sense

That being said, the economists on this board can be tasked with explaining how the current inflation metrics work so we can agree or disagree

The fed simply controls the ability to go into more debt, at 3% debt is wonderful, at 7% people stop spending and prices go down.......pretty simple stuff...........the fed is the knight on the white horse that counter acts peoples stupidity.........people are obviously getting less stupid so rates can come down, BUT, stupid is as stupid does, so that could change......as it always has, they are protecting us from ourselves...........:crap2:



@retiredguy123, what you asked for —

Logical reason:

As an institution, the Fed’s fundamental goals are ‘moving the economy toward maximum employment and stable prices’.[1] These are long-term goals, not goals for the next five minutes.

Maximum employment — Lower interest rates lower borrowing costs for businesses, encouraging them to invest in growth (expansion, capital assets), and hire more people.

Stable prices — Lower interest rates lead to lower expected inflation, other things equal (see Fisher’s interest rate theory [2]). Geico cave man says: ‘high inflation bad, low inflation good’. Higher inflation leads to unstable prices and lower inflation leads to more stable prices.


This is what you asked for @retiredguy123. But this ‘logical reason’ business you express in multiple posts doesn’t make sense to ask unless you want philosophy. I assume you don’t. Logic is philosophy (lots of philosophers around) and math (not many mathy folks around). But economics isn’t about logic. It’s about empirical evidence, analysis, and policy making. You want empirical evidence, not logical reasoning, right? I suggest in the future you ask for ‘sound reason’ instead of ‘logical reason’. Sound reasonable?

The logical reason you hear ‘gobbledygook’ on TV about the Fed’s policy decision is that is what TV does — sell advertising from more viewers who want entertaining. TV talking heads are often entertainers creating lots of noise, having a low signal-to-noise ratio. @retiredguy123, if you actually want to learn more you this, subscribe to The Economist and read it. You won’t learn much about it from TV channels and social media.

[1] The Fed Explained - Monetary Policy (https://www.federalreserve.gov/aboutthefed/fedexplained/monetary-policy.htm)

[2] Fisher equation - Wikipedia (https://en.wikipedia.org/wiki/Fisher_equation)

[dewilson58]

Afraid of a recession starting now

Bingo

[CybrSage]

One point to think bout is that too low of an unemployment rate is also bad. A 3 - 5% unemployment is what is sought.

[CoachKandSportsguy]

I don't know what you mean by the private interest rate market, but the Fed seems to have a huge effect on the interest rate for money market accounts, bank CDs, and private bonds. When I retired, I was making substantial interest on my money market account until the Fed started reducing interest rates. Then the interest rate went almost zero.

your account of what happened, fact check: TRUE

in the interest rate bond world:
public debt = also called govt debt, are treasuries, govt agencies, municipal bonds
private debt = public and private company debt, private equity, financial institutional funds

In the equity world:
public companies = public ownership with investable with tradable stock
private companies = non publicly investable with no trade le stock
read up on the NFL opening the ownership to PE firms.
NFL is currently a private company, owned by the team owners.
Some of the owners have sold

but the money market account is not run by the fed, but is run by a private, non govt entity.
the money market invests in short term debt, mostly treasuries, but there are other short term debt instruments which yielded more return, which other similar short term funds can invest in.

The reason why bank run savings accounts get only a small amount of interest, again, privately owned short term account, is due to the limitations of its range of instruments in which the fund can invest for its advertised return and liquidity. savings accounts can absolutely get a higher interest rate if the bank wants to attract the money, as the spread is very wide.

instead of money market account, the better choices with high liquidity and competitive interest rates are Bond ETFS

BIL invests in treasury bills and its current dividend rate is approximately equal to the 3-6 month treasury bill interest rate. Liquidity is a bit less, meaning you can't get your money until the next day if you sell, versus a current day money market fund, which has to hold a portion of the total assets in cash for redemptions, which reduces the net interest earned to you. BIL is currently giving about 5% annualized in distributions.

in addition, BIL distributions are considered dividends and are taxes at different rates than true interest rate accounts. win/win

there are also similar ETFs with corporate short term debt, rated AAA, and you get higher still distribution rates. .

It pays to look around for yield in addition to bank accounts. One can also set up automated transfers of cash received from investments to checking account, which gets you just about the same effect as a money money account


I just took about 100K of cash in my dad's estate and invested in
50% BIL @5% short term treasuries
40% MBB @ 4%+ govt agency debt
10% PFF @ 7% preferred stocks with dividends

estimated total annual distribution rate is 4.9%, plus capital gains with the effect of lower interest rates when they occur in that market. not worth spending time in money market accounts,

[Marine1974]

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.
Interest only payments on our national debt just hit 1.trillion per year .and they’re getting ready to borrow more . More disturbing is the government borrows 1 trillion every 100 days .
Employment reports indicated layoffs .
The fed if not a branch of government and should not be
determining interest rates . Supply and demand would make banks compete for our $$$$ .
Nixon Taking our dollar off the gold standard was a failure. Our dollar has lost 90 % of its value to the U.S. postage stamp .

[Aces4]

I would imagine many young families, struggling their way up the ladder of life, will be more than happy to see a rate reduction.
The oldies, still fighting to be the richest people in the cemetery, not so happy.:ho:

This remark reminds me of teenagers and the younger generation grousing at retirees for being "rich". Never mind the fact that many of us worked so hard and long for our money and hope to have enough to get us out the door. If anyone requires assisted living toward the end of their days, they can expect expenses from $6,000. to $10,000. a month.

When raising our young family and both of us working with excellent credit ratings, we encountered interest rates in the late 1970's and early 80's at 17%. We didn't start blaming our retired parents because they were living off their savings. We appreciated the fact that they knew, as we did, how to cut corners, live smaller and work.

I just love people who sarcastically indicate every retiree planning on making their funds work as being rich. Perhaps it's because they are sitting on a pot of gold but it's not becoming.barf

[Aces4]

Interest only payments on our national debt just hit 1.trillion per year .and they’re getting ready to borrow more . More disturbing is the government borrows 1 trillion every 100 days .
Employment reports indicated layoffs .
The fed if not a branch of government and should not be
determining interest rates . Supply and demand would make banks compete for our $$$$ .
Nixon Taking our dollar off the gold standard was a failure. Our dollar has lost 90 % of its value to the U.S. postage stamp .

Ain't it the truth? I tired of the manipulation of what should be private money to pump up the way overvalued stock market, which is funny money. If people ever stood back, analyzed and cast a critical eye at what the stock market really is, it would collapse within days, IMO.

[mtlee024]

Inflation peaked at 9.1% in mid-2022 as we were making our way out of Covid.

NOW inflation is at 2.5%.


The Fed does not operate in a vacuum. There are 19 people on the committee and 12 of them get to vote. 11 of the 12 voted for the half point cut. The other one wanted a quarter point cut. But all agreed the time has come to cut and cut again.

The economy is not a horror like some are being led to believe. We are in recovery. Be glad.

This So Sad, Too Bad routine I have seen from those who have been rooting for a recession makes no sense to me. I must assume they have been dysinformed.

I accept the fact that my money market is going to take a hit, but I don't think we will have to return to nothing. I think this rate cut is going to drive the economy in an even more positive direction -- so I can give up something to get something. I hope to see 5% mortgages so the housing market can normalize and first time buyers can have a chance and corporate landlords won't have really cheap money to use to hog all the starter homes and gouge renters. That would be good for the economy on so many levels. Interest rates have been obscenely low for a lot of this century. Maybe, just maybe, we are on our way to normal.

Boomer

No way current inflation is 2.5%, inflation is an accunulative thing. Something in 2020 that cost $10 at 9.1 infkation cost $10.91. If as you sugget inflation is just 2.5% then that item now cost $11.81. Seems to me my $10 iinflation is 10.81%. We can do anything we want with numbers and statistics. So don';t listen to that 2.5% inflation BS.

[Federspiel]

When did the Feds quit including energy and groceries in the inflation percentage?

[Aces4]

When did the Feds quit including energy and groceries in the inflation percentage?

When they became a nuisance and messed up the illusion they were trying to create.

[rsmurano]

Good Debt creates wealth, for both people and businesses. If the interest rates are low, you can take out a loan to buy a house or a car instead of cashing out of equities that gives you much better returns than paying off a cheap loan. Same goes for companies especially small businesses. They can use this cheap money to expand their business instead of taking money out of the cash reserves of the company.
I’ve made a fortune for 30 years by using debt to buy houses and cars on debt (low interest rates) when I could have easily pay cash for them. For example, say I bought a house for $1M and at that time, I could buy it using a 3% loan for 30 years or sell equities that are making me anywhere from 10% to 40%, which makes more sense? Some will say you don’t always make that much return on your money, and this is true, but when the market tanks, thats the worst time to sell equities to buy a house or a car.
I think Ramsey and Orman are dead wrong in regards to debt and home debt. They think by paying off a house, you will then have money 7-10 years down the road to invest. That’s wrong! You will lose 7-10 years of compounded interest gains, and losing 10 years of investing, you have to quadruple your monthly amount to invest and still not get you to where you would have been investing throughout this time. In my experience, my last few homes in the early 2000’s, I was making enough money in dividends alone in a year to pay for 3-4 mortgages. That’s free money!

[jimjamuser]

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.
It is actually pretty simple. The FED RAISED rates to combat INFLATION. They now feel that inflation is under CONTROL, so they can reduce rates.

[jimjamuser]

That’s an easy one to answer. Our country, both government and most citizens, are up to their eyeballs in debt. Debt is like crack, and lower rates is like getting the needed crack fix at a much cheaper price. And just like with crack, too much debt never ends well. All the gobbledygook is just a smokescreen because nobody wants to address the real underlying problem.

All the news outlets are giddy about how the lower rates will help everyone in debt, but there is no mention about how it hurts senior citizens who need to earn a reasonable interest rate on their savings to supplement their social security and keep up with inflation.
Seniors will NOT be hurt by the Fed. bringing down the interest rate. Yes seniors with interest paying investments will get less gain (less money) but that money will NOW go further because things that they want to buy are going DOWN in price.......such as gas prices, food, clothing and etc. NOTE: those prices will NOT go down INSTANTLY, it will take a few months. Prices tend to LAG interest changes.

[jimjamuser]

I think the response time was a little slow. The cut was just right. It would have been a quarter if they were more certain of a recession was not coming. The economy is like a big ship, it takes a while to turn.
Right now ONLY 30% of economic experts think that we will have a recession. Not getting a recession will be very impressive for the Fed because it is difficult for them to "tiptoe" the line that they must walk to keep the US out of recession. The FED is to be applauded.

[jimjamuser]

former finance guy to the rescue.

1) The current rates of inflation have trended down and is close or the core is at or below the fed's target rate of 2%. Primary goal accomplished! :highfive:

2) the labor market is much weaker than the headline numbers show. Why is that statement appear to be true? Because the annual true up adjustment was down about 700,000 jobs or so, which is about 70K per month overstated Likewise the month following the monthly inithialreading, true up adjustments are all negative / down as well. So for what every reporting source is being used for the initial monthly reading, is toohigh, and so the market is weaker in reality, than the BLS is portraying

3) The Sahm rule is right at the labor recession threshold, meaning that any further weakness in the labor market is signal a recession is imminent.

4) Powell is a being a bit more political than he would ever admit, but if there was ever a time to avoid any labor recessions or numbers or indicators showing that a recession is imminent, now is the time to reduce rates to avoid any negative economic press prior to the election.

Does that work for you?
Some will call me naive, but I feel that the FED has been allowed to stay independent and above politics in recent years.

[jimjamuser]

You forgot to add that it pushes more money into the pyramid scheme (stock market) so it will look healthy and people will think they're getting rich.

I say people invested in CD's should pull all their money out of the financial institutions where people enjoy the use of their "free money" and see how long the stock market lasts. What a joke the whole thing is! :mornincoffee:
The stock market will last as long as America as we know it will last. Only a nuclear holocaust could stop the sock markets of the world.

[jimjamuser]

Inflation peaked at 9.1% in mid-2022 as we were making our way out of Covid.

NOW inflation is at 2.5%.


The Fed does not operate in a vacuum. There are 19 people on the committee and 12 of them get to vote. 11 of the 12 voted for the half point cut. The other one wanted a quarter point cut. But all agreed the time has come to cut and cut again.

The economy is not a horror like some are being led to believe. We are in recovery. Be glad.

This So Sad, Too Bad routine I have seen from those who have been rooting for a recession makes no sense to me. I must assume they have been dysinformed.

I accept the fact that my money market is going to take a hit, but I don't think we will have to return to nothing. I think this rate cut is going to drive the economy in an even more positive direction -- so I can give up something to get something. I hope to see 5% mortgages so the housing market can normalize and first time buyers can have a chance and corporate landlords won't have really cheap money to use to hog all the starter homes and gouge renters. That would be good for the economy on so many levels. Interest rates have been obscenely low for a lot of this century. Maybe, just maybe, we are on our way to normal.

Boomer
A nearly PERFECT post......excellent.

[Aces4]

Good Debt creates wealth, for both people and businesses. If the interest rates are low, you can take out a loan to buy a house or a car instead of cashing out of equities that gives you much better returns than paying off a cheap loan. Same goes for companies especially small businesses. They can use this cheap money to expand their business instead of taking money out of the cash reserves of the company.
I’ve made a fortune for 30 years by using debt to buy houses and cars on debt (low interest rates) when I could have easily pay cash for them. For example, say I bought a house for $1M and at that time, I could buy it using a 3% loan for 30 years or sell equities that are making me anywhere from 10% to 40%, which makes more sense? Some will say you don’t always make that much return on your money, and this is true, but when the market tanks, thats the worst time to sell equities to buy a house or a car.
I think Ramsey and Orman are dead wrong in regards to debt and home debt. They think by paying off a house, you will then have money 7-10 years down the road to invest. That’s wrong! You will lose 7-10 years of compounded interest gains, and losing 10 years of investing, you have to quadruple your monthly amount to invest and still not get you to where you would have been investing throughout this time. In my experience, my last few homes in the early 2000’s, I was making enough money in dividends alone in a year to pay for 3-4 mortgages. That’s free money!

So one made a fortune off other people's "cheap money". Bully for them and therein, people lies the problem. We did very well using our own money paying off mortgages that weren't cheap and the free money one used from the market... people, I rest my case. What a screwed up mess this country is in today.

[Aces4]

A nearly PERFECT post......excellent.

Guess some don't have to grocery shop, provide day care for children, buy clothing and medical care and on and on. The post missed on almost every mark.

[Aces4]

The stock market will last as long as America as we know it will last. Only a nuclear holocaust could stop the sock markets of the world.

Too bad one doesn't have another 40 years to witness the collapse. A nuclear holocaust isn't necessary, unfortunately, it will implode from the inside from the unmanageable debt and other countries having their country money/script being the worldwide financial base. But just keep coasting...

[Aces4]

Right now ONLY 30% of economic experts think that we will have a recession. Not getting a recession will be very impressive for the Fed because it is difficult for them to "tiptoe" the line that they must walk to keep the US out of recession. The FED is to be applauded.

I say, don't waste the applause. The can has been kicked down the road.

[Aces4]

Seniors will NOT be hurt by the Fed. bring down the interest rate. Yes seniors with interest paying investments will get less gain (less money) but that money will NOW go further because things that they want to buy are going DOWN in price.......such as gas prices, food, clothing and etc. NOTE: those prices will NOT go down INSTANTLY, it will take a few months. Prices tend to LAG interest changes.

What price reduction? Are the employees who received much larger salaries to keep up with inflation going to give back their raises? Are insurance rates going drop from the huge increases? Are property taxes going to retract and schools decline money because inflation is now gone.

Suggestion: one shouldn't hold one's breath.

[Aces4]

It is actually pretty simple. The FED RAISED rates to combat INFLATION. They now feel that inflation is under CONTROL, so they can reduce rates.

Inflation is not under control, why aren't they monitoring the price of food, clothing and other basics that are excluded.

[Bill14564]

Inflation is not under control, why aren't they monitoring the price of food, clothing and other basics that are excluded.

Inflation is not running at 9% any longer and appears to be decreasing below 3%. What is *your* definition of "under control?"

As far as food, clothing, and other basics go, simply find the CPI number that includes those.

[Bill14564]

No way current inflation is 2.5%, inflation is an accunulative thing. Something in 2020 that cost $10 at 9.1 infkation cost $10.91. If as you sugget inflation is just 2.5% then that item now cost $11.81. Seems to me my $10 iinflation is 10.81%. We can do anything we want with numbers and statistics. So don';t listen to that 2.5% inflation BS.

You lost me $11.81 and 10.81%. Where did those numbers come from.

Inflation is measured from one year to the next (or sometimes from one month to the next). Yes it is cumulative, but the numbers that are used and compared are those for year-over-year.

[jimjamuser]

One point to think bout is that too low of an unemployment rate is also bad. A 3 - 5% unemployment is what is sought.
You have a 3 % rate from people just changing jobs like looking for better jobs.

[jimjamuser]

When did the Feds quit including energy and groceries in the inflation percentage?
Actually, a long time ago because they were so volatile.

[Normal]

It has to be a part of the adjustment upward of unemployment numbers at the beginning of the month and the increase mid month. I’m sure also that there are the global inflation numbers abating and the screeching halt of sales in the housing market.

[Stu from NYC]

Inflation is not running at 9% any longer and appears to be decreasing below 3%. What is *your* definition of "under control?"

As far as food, clothing, and other basics go, simply find the CPI number that includes those.

Based on what we normally buy in terms of food, I believe inflation in this area is well above what the cpi has been telling us.

[Bill14564]

Based on what we normally buy in terms of food, I believe inflation in this area is well above what the cpi has been telling us.

BLS statistics say 2.1% in August.

- That is across the country and may vary in a particular area

- That is an average and may vary depending on what you normally buy

My cumulative food expenditures this year, including dining out, are very close to what they were last year. The difference appears to be under 2%.

[manaboutown]

Based on what we normally buy in terms of food, I believe inflation in this area is well above what the cpi has been telling us.

The CPI does not represent what the typical consumer experiences. Inflation has far exceeded the CPI's rate. My grocery, gasoline, utility bills and other items tell me this. Grocery prices literally soared over the past 3-4 years and are still going up but at a lower rate. True current inflation substantially exceeds the official 2.1%

USPS in July hiked the price of a first-class mail stamp to 73 cents from 68 cents and raised overall mailing services product prices by 7.8%. Stamp prices are up 36% since early 2019 when they were 50 cents.

Gasoline prices:

2016 $2.14
2017 $2.41
2018 $2.74
2019 $2.64
2020 $2.17
2021 $3.05
2022 $3.29
(Source: Gas Price History: List of Prices by Year (https://www.creditdonkey.com/gas-price-history.html))

[Bill14564]

The CPI does not represent what the typical consumer experiences. Inflation has far exceeded the CPI's rate. My grocery, gasoline, utility bills and other items tell me this. Grocery prices literally soared over the past 3-4 years and are still going up but at a lower rate. True current inflation substantially exceeds the official 2.1%

Do you have any proof the BLS is providing false data? My personal data, actual accounting, are in line with the 2.1%.

[MorTech]

With the inflation target at 2% they are telling you that they are going to steal half your stuff very 35 years.

It is like being married to the State.

Selling your labor for fiat USD is really a fools errand (as the young are starting to figure out). When Bernanke announced the new 2% inflation target is when I started to get into Bitcoin.

[CoachKandSportsguy]

The CPI does not represent what the typical consumer experiences. Inflation has far exceeded the CPI's rate. My grocery, gasoline, utility bills and other items tell me this. Grocery prices literally soared over the past 3-4 years and are still going up but at a lower rate. True current inflation substantially exceeds the official 2.1%


math crime alert!
you are mixing and matching time periods. .
you are also mixing and matching local versus national rates
you can't compare the past 3-4 years with the current rate of inflation. .
you can't compare here versus nationally

There are several measures of inflation, each measuring different viewpoints.

The big ones are for latest Q3 year over year change:
CPI = 2.59%
Core CPI = 3.27%
Core CPI less shelter costs = -3.8%
shelter costs (owners rent equivalent)
PCE = july 5.3%
Core PCE = July 2.62%


The Fed uses core PCE calculation for their policy
pick your poison!

note that the owners equivalent rent or shelter costs is a cluster fuss of a calculation,
and that insurance costs are even a bigger cluster in data estimation. .

[Moderator]

NO POLITICAL REFERENCES ARE ALLOWED ON THE WEBSITE.

VIOLATION OF THESE RULES CAN LEAD TO ACCOUNT TERMINATION AND BAN.

Just to be clear, blaming anything on the election is political.

Keep the comments directed to the economics.

[Aces4]

Inflation is not running at 9% any longer and appears to be decreasing below 3%. What is *your* definition of "under control?"

As far as food, clothing, and other basics go, simply find the CPI number that includes those.

That is so funny! Prices won't retract to pre-inflation levels and inflation is still going on even if it's lower now.

A good analogy is a fire ripping through one's home, leaving ashes before the local fire department can extinguish all the flames. The fire department finishes and hands the burned off door knob to the owner and says, there you go, it's safe now with no more fire. Enjoy your evening at home.:a20:

[Aces4]

BLS statistics say 2.1% in August.

- That is across the country and may vary in a particular area

- That is an average and may vary depending on what you normally buy

My cumulative food expenditures this year, including dining out, are very close to what they were last year. The difference appears to be under 2%.

What's for dinner every night, the MacDonald's $5. bargain meal?

[Bill14564]

That is so funny! Prices won't retract to pre-inflation levels and inflation is still going on even if it's lower now.

A good analogy is a fire ripping through one's home, leaving ashes before the local fire department can extinguish all the flames. The fire department finishes and hands the burned off door knob to the owner and says, there you go, it's safe now with no more fire. Enjoy your evening at home.:a20:

So you don't understand what inflation is and what it means to have inflation under control.

[Aces4]

So you don't understand what inflation is and what it means to have inflation under control.

That's right, I don't understand by today's standards. I'm old school and follow that methodology for correct, stricter, more exact measurements of inflation and recovery. I know I am supposed to allow for fudging...

[Caymus]

I see many articles about how people are having trouble paying household expenses. Does cutting rates reduce or increase normal living expenses?

https://www.msn.com/en-us/money/markets/millions-of-virginians-are-struggling-to-pay-household-bills/ar-AA1qTyG2?ocid=msedgntp&pc=HCTS&cvid=44ad5298dbb244db94321a526b144249&ei=154

[Bhighley]

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.

Good thing you came to this forum for straight answers and no gobldygook!

[bark4me]

that’s an easy one to answer. Our country, both government and most citizens, are up to their eyeballs in debt. Debt is like crack, and lower rates is like getting the needed crack fix at a much cheaper price. And just like with crack, too much debt never ends well. All the gobbledygook is just a smokescreen because nobody wants to address the real underlying problem.

All the news outlets are giddy about how the lower rates will help everyone in debt, but there is no mention about how it hurts senior citizens who need to earn a reasonable interest rate on their savings to supplement their social security and keep up with inflation.
👏 👏 👏 👏 👏 👏 👏 👏 👏

[Altavia]

///

[Bill14564]

If you are not going to read through the thread then for your own sake at least look at post #62.

[Altavia]

A perspective from Neil Gilfedder, Executive Vice President of Investment Management and Chief Investment Officer, Edelman Financial Engines, LLC

On Wednesday of this week, the Federal Reserve made a long-awaited decision to start cutting interest rates. I wanted to share with you what we think about this and how we are stewarding your investments.

First, let’s cover the facts. The Fed has kept its target “Fed funds rate” at the same level since it paused its rate increases in July 2023 in its fight against inflation. This week’s decision marks an assessment by the Fed that inflation is largely under control. So far, we’ve managed to avoid falling into recession, and lower interest rates should help lower that risk. The Fed’s decision to implement a half-percent reduction signals a strong conviction, in contrast to what could have been a more modest 0.25% change.

There are two remaining Fed meetings this year, in November and December. It is widely expected that more cuts totaling a further half- to full-percentage point reduction are coming by the end of the year, but there’s no guarantee. Expectations have changed a lot over 2024, with news about inflation and the economy painting an unclear picture. The speed and magnitude of further cuts will depend on how inflation and economic growth continue to evolve.

So, what does this mean for the bond and stock market outlook, and what are we doing to look after your investments?

First, keep in mind that the Fed only controls short-term interest rates. By way of contrast, looking at the five-year Treasury yield shows the rate was trending down even before this week’s decision (from about 4.7% in April down to below 3.5% in September). This shows that bond investments are driven by factors other than just Fed decisions, such as inflation, recession risk, global events, the election and other factors. The same is true for stock markets.

The lengthy list of potential market-moving events means there will surely be some surprises in the coming months. We do expect interest rates to continue to fall, which will help mitigate what bonds have experienced in the last couple of years. That’s why for portfolios invested for long-term growth, we recommend a portion be invested in bonds. Some parts of the bond market may move faster than others, so we aim to hold a diverse mix of bonds, comprising different issuers (Treasurys, corporates and mortgage-backed) and different maturity exposures (short, intermediate and long-term).

Bonds of varying types offer different potential rewards for taking on risk, and they usually belong in a well-diversified portfolio along with stocks.

We’re maintaining our disciplined approach of sticking with portfolio strategies designed for long-term growth at a risk level suitable for you. That means not being tempted to try to outguess exactly when interest rates are going to move or making a big bet on whether a recession happens.

Falling interest rates may have other impacts on your household finances, whether it’s due to falling CD yields or lower mortgage rates.

If you have a pension and are considering retiring soon, lower interest rates could have some impact on the value of lump sum pension payouts. Now may be a good time to review your pension options and talk with your planner about your retirement goals.

...

[jimjamuser]

I see many articles about how people are having trouble paying household expenses. Does cutting rates reduce or increase normal living expenses?

https://www.msn.com/en-us/money/markets/millions-of-virginians-are-struggling-to-pay-household-bills/ar-AA1qTyG2?ocid=msedgntp&pc=HCTS&cvid=44ad5298dbb244db94321a526b144249&ei=154
It reduces the RATE of increase. Over time the cost of everything (goods and labor) goes up. When I got out of high school, I bought a nicely running used car for $60. That is about what you would pay today for a used bicycle. I believe that over time the price inflation averages out to around 3% per year. Each year the price of anything goes up about 3%.
........Think of it this way, in 1950 a penny was a USEFUL currency, not TODAY.

[Aces4]

It reduces the RATE of increase. Over time the cost of everything (goods and labor) goes up. When I got out of high school, I bought a nicely running used car for $60. That is about what you would pay today for a used bicycle. I believe that over time the price inflation averages out to around 3% per year. Each year the price of anything goes up about 3%.
........Think of it this way, in 1950 a penny was a USEFUL currency, not TODAY.

Think of it this way, when you got out of high school there was a correlation between wages and costs. That has been totally skewed in the year 2024.:$:

[jimjamuser]

Think of it this way, when you got out of high school there was a correlation between wages and costs. That has been totally skewed in the year 2024.:$:
There is a double correlation between wages and costs. This is called the wage SPIRAL. As wages go UP prices for goods goes UP. But, as prices go UP that INCREASES demand for wages to go UP.
......Compared to other advanced economies the US in 2023 had STRONGER GDP and the lowest inflation.In general , after Covid people talk about the US recovering better than Europe.
.......Adjusted for inflation the 2024 minimum wage is 40% LOWER than the 1970 minimum wage. My OPINION ......is that was caused by greedy outsourcing to China.

[jimjamuser]

That is so funny! Prices won't retract to pre-inflation levels and inflation is still going on even if it's lower now.

A good analogy is a fire ripping through one's home, leaving ashes before the local fire department can extinguish all the flames. The fire department finishes and hands the burned off door knob to the owner and says, there you go, it's safe now with no more fire. Enjoy your evening at home.:a20:
Prices won't RETRACT. Historically they go up 3% each year. The FED has just reduced the BORROWING rate by 1/2 of a percent. They initially raised the RATE to keep prices from going up (say 7%) now they are satisfied that PRICES have STOPPED going up. Now they hope that PRICES will go back to about a 3% rise. So, they reduce the BORROWING rate by 1/2 of a percent.
.........The FEDS purpose is to prevent a wild price SPIRAL that gets out of control.

[MorTech]

All that really needs to happen is for the Fed to stop monetizing government debt...Inflation will go to about minus 4% which would be natural in a free productive market.

[Aces4]

Prices won't RETRACT. Historically they go up 3% each year. The FED has just reduced the BORROWING rate by 1/2 of a percent. They initially raised the RATE to keep prices from going up (say 7%) now they are satisfied that PRICES have STOPPED going up. Now they hope that PRICES will go back to about a 3% rise. So, they reduce the BORROWING rate by 1/2 of a percent.
.........The FEDS purpose is to prevent a wild price SPIRAL that gets out of control.

Too late, it's already out of control.

[Aces4]

There is a double correlation between wages and costs. This is called the wage SPIRAL. As wages go UP prices for goods goes UP. But, as prices go UP that INCREASES demand for wages to go UP.
......Compared to other advanced economies the US in 2023 had STRONGER GDP and the lowest inflation.In general , after Covid people talk about the US recovering better than Europe.
.......Adjusted for inflation the 2024 minimum wage is 40% LOWER than the 1970 minimum wage. My OPINION ......is that was caused by greedy outsourcing to China.

Cause no longer makes any difference, it's worse and getting more so.

[Bill14564]

All that really needs to happen is for the Fed to stop monetizing government debt...Inflation will go to about minus 4% which would be natural in a free productive market.

The last time inflation was anything close to -4% was during the recession of 2007-2009. Wasn't a great time then, isn't something to try repeating.

[jimjamuser]

All that really needs to happen is for the Fed to stop monetizing government debt...Inflation will go to about minus 4% which would be natural in a free productive market.
I seem to remember that there are problems with an inflation rate that is negative. i believe that the FED tries for plus 2%.

[MorTech]

The last time inflation was anything close to -4% was during the recession of 2007-2009. Wasn't a great time then, isn't something to try repeating.

Because it was counterfeited monetary inflation of the 20s that caused it...Bernanke even admitted to this. The Fed counterfeit money racket is pure evil. It is theft.

With a counterfeit money racket you can "volatility wash" almost anything to zero...First thru inflation...then deflation (John Law/Mayer Rothchild figured this out). Thomas Jefferson was far smarter than any government worshipping stooge.

Notice how Greenspan/Rubin/Clinton masked inflation by suppressing the price of gold that caused the DotCom bubble and the huge bust aftershock. BRICS+ is working to get away from the USD/Euro because they are not stupid...What they replace it with will be less stupid :)

[Bill14564]

Because it was counterfeited monetary inflation of the 20s that caused it...Bernanke even admitted to this. The Fed counterfeit money racket is pure evil. It is theft.

The 1920s?? And it took 88 years before it caused a recession?? Or was the recession of 2008 a reaction to something that was going to happen in the 2020s, 12 years later?!


Even conspiracy theories have to make a little sense.

[biker1]

I think you are confused. Prices have not stopped going up, as you claim. The rate of increase has slowed.

Prices won't RETRACT. Historically they go up 3% each year. The FED has just reduced the BORROWING rate by 1/2 of a percent. They initially raised the RATE to keep prices from going up (say 7%) now they are satisfied that PRICES have STOPPED going up. Now they hope that PRICES will go back to about a 3% rise. So, they reduce the BORROWING rate by 1/2 of a percent.
.........The FEDS purpose is to prevent a wild price SPIRAL that gets out of control.

[Bill14564]

What are you even talking about?

Just a guess but I would think I was talking about the post that I quoted that attributed the recession in 2008 with the counterfeited monetary inflation of the 20s.

I assumed (perhaps a mistake) that "the 20s" meant either the 1920s or the 2020s but perhaps "the 20s" meant something else.

[Bill14564]

I think you are confused. Prices have not stopped going up, as you claim. The rate of increase has slowed.

Prices rarely stop going up. If they start going down we begin to talk about a recession.

If the rate of increase has slowed then we say we are getting inflation under control.

EDIT: As you point out below, these two statements are in agreement. I misunderstood and answered as if you were arguing inflation was not under control because prices have not stopped going up. I see now that was not your position at all.

[biker1]

I think that is what I said. I was just responding to yet another insane comment by our favorite serial poster ;-)

Prices rarely stop going up. If they start going down we begin to talk about a recession.

If the rate of increase has slowed then we say we are getting inflation under control.

[jimjamuser]

I think you are confused. Prices have not stopped going up, as you claim. The rate of increase has slowed.
Gas at Sam's has gone DOWN to $ 2.77 per gallon. When people talk about "Prices" you have to keep in mind there are short term prices and long term prices. Obviously, long term - prices are going to go UP. Just like my example of buying a well running used car for $ 60 when I was 18 years old. But, short term, like one or two years, prices can go DOWN. The FED saw that prices had stopped going up, so they dropped the prime rate down 1/2 of a %.

[Normal]

I’m for the gold/silver standard. The theft of our purchasing power through the printing of money has gotten way out of hand. DC has never had a dollar they didn’t want to spend on votes. The Ponzi scheme of printing dollars has to end.

[biker1]

Reread your own post. You said prices have stopped going up. Not true no matter how much you cherry pick a few examples of highly volatile commodities.

Gas at Sam's has gone DOWN to $ 2.77 per gallon. When people talk about "Prices" you have to keep in mind there are short term prices and long term prices. Obviously, long term - prices are going to go UP. Just like my example of buying a well running used car for $ 60 when I was 18 years old. But, short term, like one or two years, prices can go DOWN. The FED saw that prices had stopped going up, so they dropped the prime rate down 1/2 of a %.

[Bay Kid]

Because it was counterfeited monetary inflation of the 20s that caused it...Bernanke even admitted to this. The Fed counterfeit money racket is pure evil. It is theft.

With a counterfeit money racket you can "volatility wash" almost anything to zero...First thru inflation...then deflation (John Law/Mayer Rothchild figured this out). Thomas Jefferson was far smarter than any government worshipping stooge.

Notice how Greenspan/Rubin/Clinton masked inflation by suppressing the price of gold that caused the DotCom bubble and the huge bust aftershock. BRICS+ is working to get away from the USD/Euro because they are not stupid...What they replace it with will be less stupid :)

It is now just funny money.

[FxTrader]

former finance guy to the rescue.

1) The current rates of inflation have trended down and is close or the core is at or below the fed's target rate of 2%. Primary goal accomplished! :highfive:

2) the labor market is much weaker than the headline numbers show. Why is that statement appear to be true? Because the annual true up adjustment was down about 700,000 jobs or so, which is about 70K per month overstated Likewise the month following the monthly inithialreading, true up adjustments are all negative / down as well. So for what every reporting source is being used for the initial monthly reading, is toohigh, and so the market is weaker in reality, than the BLS is portraying

3) The Sahm rule is right at the labor recession threshold, meaning that any further weakness in the labor market is signal a recession is imminent.

4) Powell is a being a bit more political than he would ever admit, but if there was ever a time to avoid any labor recessions or numbers or indicators showing that a recession is imminent, now is the time to reduce rates to avoid any negative economic press prior to the election.

Does that work for you?

You are correct on all 4 points. However, only the RATE of inflation (how fast prices are going up) have slowed down. Actual prices? Maybe they dropped a little, but everything is still over 2x 2021 prices. What's scary is Crude is back to 2021 prices, but gas is not. What's going to happen on the next wave.... And you can bet we get it. With rate cuts and the government spending money like a drunken sailor, it's sure to happen.

We should also point out (not always, but many times) rate cuts are overall bearish for the stock market. See 2007. The market topped a few weeks later after they started cuts on exactly the same day back then.

The political landscape looks like 1968, so does the stock market. It topped in November back then. Maybe we get another trip up into Q4 2025, but too soon to tell. I need to see where this leg tops. S&P500 between 5900 & 6200, we might be done for awhile. Lower before a drop & my scenario into 2025 plays out.

As for why the indices are up so high -- Well if prices have 2x & 3x for everything, it makes sense an index of 30 or 500 stocks also would cost more to own.

Addressing point #2 you made -- Yeah, and that's part of what leads to a recession.

The BLS has revised everything. How they report CPI, weighting of individual components, and of course as you know, somehow managed to sneak in a revision of 813,000 jobs lost which no one will pay attention to until the election is over.

[Normal]

You are correct on all 4 points. However, only the RATE of inflation (how fast prices are going up) have slowed down. Actual prices? Maybe they dropped a little, but everything is still over 2x 2021 prices. What's scary is Crude is back to 2021 prices, but gas is not. What's going to happen on the next wave.... And you can bet we get it. With rate cuts and the government spending money like a drunken sailor, it's sure to happen.

We should also point out (not always, but many times) rate cuts are overall bearish for the stock market. See 2007. The market topped a few weeks later after they started cuts on exactly the same day back then.

The political landscape looks like 1968, so does the stock market. It topped in November back then. Maybe we get another trip up into Q4 2025, but too soon to tell. I need to see where this leg tops. S&P500 between 5900 & 6200, we might be done for awhile. Lower before a drop & my scenario into 2025 plays out.

As for why the indices are up so high -- Well if prices have 2x & 3x for everything, it makes sense an index of 30 or 500 stocks also would cost more to own.

Addressing point #2 you made -- Yeah, and that's part of what leads to a recession.

The BLS has revised everything. How they report CPI, weighting of individual components, and of course as you know, somehow managed to sneak in a revision of 813,000 jobs lost which no one will pay attention to until the election is over.

I agree with everything , but wouldn’t correlate the gas with oil proportional to prior to 2021 prices. Refining expenditures for labor have increased due in large part to inflation and new regulations.

[FxTrader]

I agree with everything , but wouldn’t correlate the gas with oil proportional to prior to 2021 prices. Refining expenditures for labor have increased due in large part to inflation and new regulations.

That's just it -- The cost of EVERYTHING has gone up and remained up while The Fed is cutting and we're still spending. How can another wave of inflation NOT be at our doorsteps in the near future?

If everything was so rosy, there would be no need to cut.

[Normal]

That's just it -- The cost of EVERYTHING has gone up and remained up while The Fed is cutting and we're still spending. How can another wave of inflation NOT be at our doorsteps in the near future?

If everything was so rosy, there would be no need to cut.

Inflation will always happen because after a while, a human only wants MORE. It’s kind of like the raccoon who is trapped in the log, because they won’t let go of the shiny tin foil.

[Caymus]

The September Consumer Confidence Index had a big drop. Maybe The Fed had an advanced warning.

[CoachKandSportsguy]

people are starting to get quoted mortgage rates in the 4s %, that will kick start the housing market!

Just in time for the chilly snow creatures to start thinking about a FL house!

[asianthree]

people are starting to get quoted mortgage rates in the 4s %, that will kick start the housing market!

Just in time for the chilly snow creatures to start thinking about a FL house!

None of our 4 banks are offering 4%, nor our 2 independent mortgage guys. Could you reference the financial banks or companies? I am sure some would be happy to use them at 4%

[Aces4]

people are starting to get quoted mortgage rates in the 4s %, that will kick start the housing market!

Just in time for the chilly snow creatures to start thinking about a FL house!


House pricing has gone crazy with inflation. Wages, material, lots, utility hooks ups and a huge flood of additional people cramming the housing market to drive up prices even more so that rate cut isn't enough to significantly dent housing sales.

Affordability is a real issue and pushing rates lower will only raise the prices more. Supply and demand.

[Normal]

people are starting to get quoted mortgage rates in the 4s %, that will kick start the housing market!

Just in time for the chilly snow creatures to start thinking about a FL house!

One could hope? But, actually rates went up today, the cuts were already factored in before the announcement by most lenders. 5.49% is the best offering , but the national average is 6.21%.

Current Mortgage Rates: Compare Today's Rates | Bankrate (https://www.bankrate.com/mortgages/mortgage-rates/?mortgageType=Purchase&partnerId=br3&pid=br3&pointsChanged=false&purchaseDownPayment=114000&purchaseLoanTerms=30yr%2C5-1arm%2C5-6arm&purchasePoints=All&purchasePrice=570000&purchasePropertyType=SingleFamily&purchasePropertyUse=PrimaryResidence&searchChanged=false&ttcid&userCreditScore=780&userDebtToIncomeRatio=0&userFha=false&userVeteranStatus=NoMilitaryService&zipCode=32725)

Banks got burned lending at low rates during COVID, they won’t do it again. Underwater lending was a huge error as many now maintain mortgage loans at 2.3% while paying twice that on their CDs to the same customers. I doubt you will see much movement in interest rates for the customer for quite some time. Builders are doing some deals, but it all comes out in the wash later. Rates will likely stay solid in the mid 5s to 6% area at the very least till years end.

[kkingston57]

Inflation peaked at 9.1% in mid-2022 as we were making our way out of Covid.

NOW inflation is at 2.5%.


The Fed does not operate in a vacuum. There are 19 people on the committee and 12 of them get to vote. 11 of the 12 voted for the half point cut. The other one wanted a quarter point cut. But all agreed the time has come to cut and cut again.

The economy is not a horror like some are being led to believe. We are in recovery. Be glad.

This So Sad, Too Bad routine I have seen from those who have been rooting for a recession makes no sense to me. I must assume they have been dysinformed.

I accept the fact that my money market is going to take a hit, but I don't think we will have to return to nothing. I think this rate cut is going to drive the economy in an even more positive direction -- so I can give up something to get something. I hope to see 5% mortgages so the housing market can normalize and first time buyers can have a chance and corporate landlords won't have really cheap money to use to hog all the starter homes and gouge renters. That would be good for the economy on so many levels. Interest rates have been obscenely low for a lot of this century. Maybe, just maybe, we are on our way to normal.

Boomer

And my preferred stocks are getting back to reasonable pricing

[kkingston57]

Don't be fooled by the spin. Sure, 2.5% inflation is better than 8%, but let's be careful calling it a win. This is on top of the cumulative high inflation rates over the past 3 years. Don't kid yourself...you feel it with every trip to the grocery store, the gas station, your favorite restaurant, etc.

Yes, the operation was a success...but the patient died.;.s

Lets get fuel out of the equation. Saw diesel at <$3.00 a gallon on 9/24 in Florida Paid $5 in the 2000's

[MorTech]

When you rob Peter to pay Paul using inflation, Paul doesn't complain...cuz Paul is a Cantillionaire.

Be the Cantillionaire...Not the fool.

I actually feel sorry for people who throw away their one and only life for $30 per hour. No wonder there is psychological derangement, childless families and drug addiction problems...how could there not be?

[Aces4]

;.s

Lets get fuel out of the equation. Saw diesel at <$3.00 a gallon on 9/24 in Florida Paid $5 in the 2000's

Ah, the year 2000... Covid is on steroids in the US.

[Caymus]

So, what day will the yield on the 90-day T-bill fall below the 2 year?

Treasury Rates, Interest Rates, Yields - Barchart.com (https://www.barchart.com/economy/interest-rates#:~:text=Treasury%20Rates.%20This%20table%20l ists%20the)

[CoachKandSportsguy]

Just to keep an open mind to the bear case in this link, which can happen after the fed starts cutting fed funds rates, as in this historical chart. yes, this is your broken clock bearish reminder . . .

https://x.com/BankofVol/status/1839167755242594719
In the past fed rate cuts from these levels, they were right before a significant market down turn, which is still possible. This chart is why there are people actually get bearish. . Yes the market bounces back, but remember that in retirement, you are dependent upon the total amount of investments lasting a long time. .



So the 2000 dot com bust was too much small cap speculation on companies with no visible return on investments, and rising interest rates, before the fed funds rate cuts.

So in the 2007/8 housing bubble, there was too much borrowing in the housing market and when oil prices went sky high, and interest rates hit some level of significance, no could afford their payments any more and pay for gas to go to work.

So where might the 2024/25 bubble bursting indicators show up? Passive index investments correlations rising to very high levels, (one of the inherent risks in indexing) and the treasury having poorly received auctions as the dollar keeps falling. .

just don't assume that market corrections have been eliminated after almost 20 years, especially with government spending being a larger and larger part of GDP growth, due to automation and technology advancements eliminating many middle class jobs. .


sorry to run, but the doorbell just rang, and the neighbor across the street has a clock in his hands which isn't moving. .

[Pugchief]

So where might the 2024/25 bubble bursting indicators show up? Passive index investments correlations rising to very high levels, (one of the inherent risks in indexing) and the treasury having poorly received auctions as the dollar keeps falling. .



Another reason to maybe consider some gold in your portfolio...

[dewilson58]

Another reason to maybe consider some gold in your portfolio...

Gold prices have no support behind them.
No earning, No assets, No earning capacity, No liquidation value.
Kinda smells like Bitcoin.

:popcorn::popcorn::popcorn:

[CoachKandSportsguy]

Gold prices have no support behind them.
No earning, No assets, No earning capacity, No liquidation value.
Kinda smells like Bitcoin.

:popcorn::popcorn::popcorn:

although financially true, if I can make money with it as an orthogonal diversifier, I will use it. The demand / usage is mostly jewelry and industrial, but as jewelry, it represents physical money, and can be exchanged for money very easily.

Correlation is not causation, but one can make money with correlation without there being direct causation. .

[tophcfa]

Gold prices have no support behind them.
No earning, No assets, No earning capacity, No liquidation value.
Kinda smells like Bitcoin.

:popcorn::popcorn::popcorn:

Hmm, let’s address each gold characteristic mentioned.

While agreeing it has no earnings capacity as far as income (interest or dividends), it certainly has very real capital gains capacity.

It definitely doesn’t own assets like a business, but it is, in an of itself, an asset.

It definitely has liquidation value if owned in the right form, such as minted coins and bars. Gold certainly has a significantly wider bid/ask spread (about 5/8 of 1%) than traditional stocks and bonds, but it can easily be liquidated.

Gold is nothing like Bitcoin. It is a physical asset that can be held in your hand, it’s been around practically forever, and there is a longstanding and well established global market for it. Bitcoin is a digital entry, it’s new and unproven by historical standards, and requires the leap of faith that someone else will be willing to pay you something to have the digital ownership transferred to them.

But then again Dewi, you’re a smart guy and know all that. Perhaps with the hurricane passing by it’s too windy to go fishing, so doing some trolling instead?

[Pugchief]

Gold prices have no support behind them.
No earning, No assets, No earning capacity, No liquidation value.
Kinda smells like Bitcoin.

:popcorn::popcorn::popcorn:

Must be why the BRICS are developing a gold-backed currency to compete with the USD. Maybe they know something.....

[Pairadocs]

[QUOTE=tophcfa;2371777]That’s an easy one to answer. Our country, both government and most citizens, are up to their eyeballs in debt. Debt is like crack, and lower rates is like getting the needed crack fix at a much cheaper price. And just like with crack, too much debt never ends well. All the gobbledygook is just a smokescreen because nobody wants to address the real underlying problem.

All the news outlets are giddy about how the lower rates will help everyone in debt, but there is no mention about how it hurts senior citizens who need to earn a reasonable interest rate on their savings to supplement their social security and keep up with inflation.[/QUOTE

On target with every point... debt likened to crack addiction is spot on, and we've been on the crack for decades now...definitely not going to end well, and don't think any political party would ever make a serious effort ... almost too far down the line now with the years of artificial "fairy dust" the fed has spread for years. No long emphasizing history (especially world history) in public schools any more has greatly helped to provide a generation (actually two) who have no idea of what happens to countries who go down that path. You might add to your excellent comments: election time is drawing near, recession will not help either party. And if any candidate from either party talks straight talk of what it is going to take to stop this madness, the public will probably trample that person to death, no way would people accept what it would take....IMO.

[Pairadocs]

Hmm, let’s address each gold characteristic mentioned.

While agreeing it has no earnings capacity as far as income (interest or dividends), it certainly has very real capital gains capacity.

It definitely doesn’t own assets like a business, but it is, in an of itself, an asset.

It definitely has liquidation value if owned in the right form, such as minted coins and bars. Gold certainly has a significantly wider bid/ask spread (about 5/8 of 1%) than traditional stocks and bonds, but it can easily be liquidated.

Gold is nothing like Bitcoin. It is a physical asset that can be held in your hand, it’s been around practically forever, and there is a longstanding and well established global market for it. Bitcoin is a digital entry, it’s new and unproven by historical standards, and requires the leap of faith that someone else will be willing to pay you something to have the digital ownership transferred to them.

But then again Dewi, you’re a smart guy and know all that. Perhaps with the hurricane passing by it’s too windy to go fishing, so doing some trolling instead?

Perhaps we could return to the tulip standard ? :a20::a20:

[Pairadocs]

sp errorGold prices have no support behind them.
No earning, No assets, No earning capacity, No liquidation value.
Kinda smells like Bitcoin.

:popcorn::popcorn::popcorn:

As I mentioned, tulip bulbs, tulip bulbs are the future, bitcoin's day has passed, tulip bulbs the future.... order your Beck's catalog now...LOL !

[Caymus]

Gold prices have no support behind them.
No earning, No assets, No earning capacity, No liquidation value.
Kinda smells like Bitcoin.

:popcorn::popcorn::popcorn:

But they have the support of Costco;) $200 Million/month in gold bar sales.

https://www.msn.com/en-us/money/markets/costco-s-gold-bars-are-flying-off-the-shelves-demand-is-pushing-the-metal-to-record-prices/ar-AA1rkVem?ocid=msedgntp&pc=HCTS&cvid=3fd3ba0436d44811a87db610c8da89f8&ei=19

[dewilson58]

But they have the support of Costco;) $200 Million/month in gold bar sales.

https://www.msn.com/en-us/money/markets/costco-s-gold-bars-are-flying-off-the-shelves-demand-is-pushing-the-metal-to-record-prices/ar-AA1rkVem?ocid=msedgntp&pc=HCTS&cvid=3fd3ba0436d44811a87db610c8da89f8&ei=19

Cool, but less than 1/100th of a %..........won't provide any support.

[Aces4]

As I mentioned, tulip bulbs, tulip bulbs are the future, bitcoin's day has passed, tulip bulbs the future.... order your Beck's catalog now...LOL !
Last edited by Pairadocs; 09-26-2024 at 10:09 PM. Quote


You wish!

[Aces4]

////

[Caymus]

Cool, but less than 1/100th of a %..........won't provide any support.

...but wait till Costco finally opens Villages stores. Gold bar sales will be in the $ Billions each month.:jester:

[jimjamuser]

When you rob Peter to pay Paul using inflation, Paul doesn't complain...cuz Paul is a Cantillionaire.

Be the Cantillionaire...Not the fool.

I actually feel sorry for people who throw away their one and only life for $30 per hour. No wonder there is psychological derangement, childless families and drug addiction problems...how could there not be?
Childless families are caused by difficulties with young people buying houses. Today the houses are costly and the interest cost is high. In the time periods before 1975 houses were affordable. US population was lower and unions kept the wages of average people up. Outsourcing to foreign countries had NOT yet happened. The income tax rates favored the middle and not upper class back then. Drug addictions today depend on supply keeping the costs down. With MORE agents at the southern border the supply could be better controlled. The government seems reluctant to PAY for more Border agents.

[Normal]

Childless families are caused by difficulties with young people buying houses. Today the houses are costly and the interest cost is high. In the time periods before 1975 houses were affordable. US population was lower and unions kept the wages of average people up. Outsourcing to foreign countries had NOT yet happened. The income tax rates favored the middle and not upper class back then. Drug addictions today depend on supply keeping the costs down. With MORE agents at the southern border the supply could be better controlled. The government seems reluctant to PAY for more Border agents.

9% on a home loan was affordable?

[JMintzer]

9% on a home loan was affordable?

It was, back in the day... I paid 10% on my first home in 1986. My PITI was less than my 2 BR 2 BA apartment. Granted, it was a started home ($104,500) 3BR/2BA, a single family, the size of a townhouse with a single car garage. I paid 9.5% on my 2nd home in 1991. Our 3rd home was 6.5% (15 year fixed) in 2004

But I remember rates well into the mid/upper teens in the early 80's...

[Caymus]

I wonder if Helene will lead to a significant spike in inflation due to increased building costs and insurance premiums.

[Normal]

I wonder if Helene will lead to a significant spike in inflation due to increased building costs and insurance premiums.

Not likely, the event was a natural tendency and not an anomaly. Normally we get more than one hurricane, tornado, wildfire, yada-yaada per year.

[MikeVillages]

Can anyone provide a logical reason why the Fed reduced interest rates by 0.5 percent? I watched several financial TV shows and got nothing but a bunch of gobbledygook.
I could be political but we are not supposed to talk about that. :)