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Fed Rate Hike Is Coming


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2015 Nov 6, 6:52am   30,760 views  62 comments

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2 year which needs to be over .80% is now at .90%

#Housing #Economics

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1   Strategist   2015 Nov 6, 7:37am  

Logan Mohtashami says

Fed Rate Hike Is Coming

Finally. Do it and move on. We are at the cusp of a major recovery.

2   Strategist   2015 Nov 6, 7:59am  

bgamall4 says

The only reason the economy is growing is anyone with a pulse can get approved for a car.

We now have Zero unemployment. Anyone who wants to work, can work for Uber.

3   _   2015 Nov 6, 8:08am  

Strategist says

We now have Zero unemployment. Anyone who wants to work, can work for Uber.

This group is struggling

- Drug users not in jail
- Criminally active Americans not in Jail
- High School Drop outs
- Non college educated Americans
- Non trade school Americans
- Disability
- Someone with a criminal record, hard to find a job with that

4   hanera   2015 Nov 6, 9:01am  

Someone said market should be up when there is a rate hike because it signals booming economy. How come it is down?

5   _   2015 Nov 6, 9:07am  

hanera says

Someone said market should be up when there is a rate hike because it signals booming economy. How come it is down?

6   Blurtman   2015 Nov 6, 9:11am  

The Dow is approaching 18,000.

7   Strategist   2015 Nov 6, 9:25am  

Logan Mohtashami says

Strategist says

We now have Zero unemployment. Anyone who wants to work, can work for Uber.

This group is struggling

- Drug users not in jail

- Criminally active America not in Jail

- High School Drop outs

- Non college educated American

- Non trade school American

- Disability

- Someone with a criminal record, hard to find a job with that

ha ha ha
Criminals struggling......is a good thing. Some of them should be struggling from the end of a rope.
School drop outs struggling......They will always be poor. $15.00 minimum wage coming to the rescue.
Disability.......lets help them.

8   Strategist   2015 Nov 6, 9:27am  

bgamall4 says

This may help you understand, Strategist:

I still don't understand.

9   Strategist   2015 Nov 6, 9:29am  

bgamall4 says

Ironman says

Logan Mohtashami says

Fed Rate Hike Is Coming

So is the Easter bunny....

If there is one it will be for show.

Thanks for taking your meds.

10   Heraclitusstudent   2015 Nov 6, 9:29am  

hanera says

Someone said market should be up when there is a rate hike because it signals booming economy. How come it is down?

It means the dollar is up and rates are up: slowing the economy.
Plus lower corporate profits as wages grow.
-> the 'inflation' is moving from assets toward the real economy.
The assets don't like it.

11   Strategist   2015 Nov 6, 9:34am  

hanera says

Someone said market should be up when there is a rate hike because it signals booming economy. How come it is down?

It recovered last month. Best October ever.

12   Blurtman   2015 Nov 6, 9:41am  

Ironman says

It appears to be going the wrong way for that..

Not if you look at the one month performance.

13   Heraclitusstudent   2015 Nov 6, 12:01pm  

The amazing thing is some stocks are acting surprised...

14   _   2015 Nov 6, 12:15pm  

In the last few months their was a group of us #JustGoForIT, a group that doesn't agree on everything, but we all agreed that the Fed should raise rates from 0 to 0.25%
As you can imagine we got bombarded by the token line

Fed will never raise rates

Which was similar to the group that said #QE would never end and it ended in America a year ago.

I chart every single economic index we possibly have in the world, no need to have Zero Rates

From the article I wrote back in August
http://loganmohtashami.com/2015/08/16/fed-and-the-first-rate-hike/

Fed has a dual mandate
1. Control Inflation
2. Facilitate Employment
I like to joke that they have a DUEL mandate; count the steps to 10, aim to kill and be first to shoot.
So, we are well below their unemployment metric which triggers a rate hike.
Via Doug Short

http://www.advisorperspectives.com/dshort/updates/Employment-Report.php
U RATE

– In an interview with Bloomberg I said they need to change their metric because unemployment is dropping too fast due to the Labor participation rate and that wage growth won’t likely come until 2015 based on their data metric of ECI wage inflation metric.
CPI inflation is not at a comfortable level for them but they don’t seem to mind this as much.
Via Doug Short
http://www.advisorperspectives.com/dshort/updates/CPI-Headline-and-Core.php
CPI-headline-core-since-2000

– Another view I’ve held for years is that they should raise their inflation metric 2.25%-2.50% on CPI.
In any case they haven’t. So in reality keep a close eye on 2’s — it’s itching to break out to an 80 handle.
It appears they are headed toward their first-rate hike in years.
If you wanted to ask a provocative question ask people what do they believe they will achieve with rate hikes now. You will get some real interesting answers.

I am sticking to my model that 3% FED Funds and 4.7% on 10’s are recessionary rates with some duration after these levels. Those rate metrics would be the lowest rate curve to create a recession post WWII. The best way to counter this call is to get more dollars into labor’s pockets.

Long Term Perspective On Federal Funds Rate, 10 year Yield and Inflation

Via Doug Short
http://www.advisorperspectives.com/dshort/updates/Treasury-Yields-in-Perspective.php

treasuries-FFR-since-1962

15   Entitlemented   2015 Nov 6, 12:22pm  

bgamall4 says

The only reason the economy is growing is anyone with a pulse can get approved for a car.

However, while in the past we had CRA and Subprime, we can now pull cash out of our cars.
https://www.titlemax.com/title-loans/

16   Entitlemented   2015 Nov 6, 12:25pm  

Logan Mohtashami says

This group is struggling

- Drug users not in jail

POTHEADUS used drugs - and he had just enough mental acuity remaining to get a JD. He then convinced members of this group who vote to vote. And then they voted.

17   _   2015 Nov 6, 12:28pm  

Entitlemented says

This group is struggling

- Drug users not in jail

When I mean drug users

- heavy hard core drug users
- People who are being supported by SoberLiving.com
- People who can't function in day to day life because of their drug abuse but aren't in a mental health institution because if they're being actually
treated in a institution we can't count them in labor force group

18   Heraclitusstudent   2015 Nov 6, 5:20pm  

Moronman says

They'll like it later when it makes for higher demand. Jesus! Did everybody forget how this works?

Extra demand is one thing, margin is an other, and p.e. multiple an other still.

19   Blurtman   2015 Nov 6, 6:03pm  

Many professionals - doctors, lawyers, judges, etc. - are functional recreational drug users. Folks like to get high just like they like a good brandy or fine meal. Pharmaceutical companies must be allowed to make recreational drugs that get people what they want but that have little or no dangerous side effects. It can happen, but this anal Puritanical aversion to happiness has got to go.

20   KgK one   2015 Nov 7, 9:41pm  

so how do you make money off of rate rise? short stocks , short bonds? what is the shorting code? logan enlighten me :)

21   indigenous   2015 Nov 7, 10:55pm  

They can't raise rates too much because of debt service. Remember as Ironman indicated dear leader will have doubled the budget by the time he leaves office. If my math is right a 1/4 percent would be 50 billion a year. 1 percent would be 200 billion and so on.

You could use an index fund that shorts the market.

22   _   2015 Nov 8, 6:51am  

KgK one says

so how do you make money off of rate rise? short stocks , short bonds? what is the shorting code? logan enlighten me :)

economic cycles have phases. rate cuts, their is a stall and then their is the hiking cycle.

At some point the rate hikes will impact the economy negatively and if you want to short the markets look for

Claims to rise over 300K on a w 4 week moving average (323K) the key number for me and it needs to happen without an one time economic event. Also, LEI to have 4 straight negative prints with that claims data line. Their is your cycle recession data line which means profit margins are going to be hit due to low demand

Stocks in this cycle have done since 2009 with all the economic data moving positive for the most part

I am always invested in stocks and adding each month, I am not a person who tries to time the market. Obviously a separate trading account for aggressive moves is something different Portfolio Looks like this

80% stocks
15% Bonds
5% Reits

Stock profile
50% S&P Index
20% International
10% Company called MASIMO it's my biggest position single position, ticker symbol MASI

Keep a eye on rate hikes and economic activity, I don't believe we will see 17 rate hikes like we saw in the start of 2004 getting up to 5.25%
3% Fed funds rate and 4.7% 10 year to me is recessionary, we might not even get their as this was my thought 5 years ago. If wage pick up happens then you can get their as CPI should be over 2% soon.

23   hanera   2015 Nov 8, 11:30am  

Logan Mohtashami says

50% S&P Index
20% International
10% MASI
15% Bonds
5% Reits

What so good about MASI? Why not BSX or MR?
What kind of bonds? Treasuries or corporate bonds?

24   _   2015 Nov 8, 11:43am  

hanera says

What so good about MASI?

From my own work, it was a undervalued company for a while, finally kicking into gear, it's had a great 2015, concentrated holdings 20-22 level, only off loaded some shares at 42.43 recently from a different account, adding to it in smaller amounts , it's had a massive run already in 2015, this one is keeper for me.

Bonds are simple ticker symbol PBDAX

As always, I don't care so much for the short term cycle moves that can 2-7 years in directions up or down, it's a long slow and steady race for another 20-25 years, then I will change up the allocation.

The main thing is adding $ each month, that's more cash flow concern, that's the boring truth of it all because even I don't use my own economic cycle tracking to move my allocation, I look at every down turn as a plus until I get into my 60's

Also BSX market cap 25 billion - too big for my taste looking longer term MASI 2.1 Billion

MR went private didn't it recently, it's had bad run since 2013. Not too familiar with that company

25   _   2015 Nov 9, 6:43am  

Key levels here
2.50%
2.66%
Break those and we test 3.04%

Tell the difference between a analyst and technical chart person

26   hanera   2015 Nov 9, 2:14pm  

Logan,

Do you think Fed would hike rate? What is the impact of rate hikes on RE in SFBA?

So far, stock market reacted poorly on possible rate hike in December.

27   🎂 Tenpoundbass   2015 Nov 9, 2:23pm  

bgamall4 says

The only reason the economy is growing is anyone with a pulse can get approved for a car.

Well you forgot that gas is sucking a trillion dollars less a month out of the world ecconomy than it was 2 years ago.

It's all right there doing exactly what I said $2.00 a gallon gas would do. Now Imagine when President Trump fires up those pipelines and gets gas down to .99 cents a gallon.

There will be an Escalade in every driveway like the good ole days.

28   _   2015 Nov 9, 4:37pm  

hanera says

Logan,

Do you think Fed would hike rate? What is the impact of rate hikes on RE in SFBA?

So far, stock market reacted poorly on possible rate hike in December.

Short term, it's algo city, until we break into a new highs, which I believe we can, soon the first rate hike will be forgotten and then the discussion will be how many hikes until we see the next recession.

hanera says

RE in SFBA?

29   Smallblock57   2015 Nov 16, 4:30pm  

The FED will never raise rates....period

It's so funny to keep hearing people talk about it.

30   JPfacebook   2015 Dec 14, 3:37pm  

IF THE FED GETS EVERYONE WORKED UP ABOUT AN INTEREST RATE HIKE AND THEN DOES NOTHING IT ACCOMPLISHES THE SAME AS THE HIKE WITHOUT THE NEGATIVE EFFECT! JAMES

that would be a real smart move....

THE FED WILL BE MAKING A TERRIBLE MISTAKE IF IT RAISES THE RATE EVEN A QUARTER POINT AND WILL HAVE TO LOWER IT IN FEBRUARY. IT WILL ALSO CAUSE THE MARKETS TO LOSE FAITH IN THE FEDS. ABILITY TO HANDLE THE ECONOMY!

31   narrator   2015 Dec 14, 9:53pm  

Not going to happen. All those quadrillions of interest rate derivatives would have to pay out and the broker/dealers never lose money on a trade.

32   justme   2015 Dec 14, 11:34pm  

Logan Mohtashami says

Fed has a dual mandate

1. Control Inflation

2. Facilitate Employment

Those are only the *stated* mandates for the Fed . The *real* mandate for the Fed is to maximize the profits of the banks and wall st through asset inflation and debt inflation. The Fed only gives a crap about Consumer inflation (in reality: wages) and Employment if either one of those get in the way of their real goal. In particular, the Fed does care quite a bit about keeping wages down for middle class.

Never mind what the Fed says, or what the statutes say. Watch what the fed DOES, and who benefits.

I don't know exactly how many times I have said the above in the last five years, but there seem to be plenty of people out there that still do not understand this simple truth.

33   tatupu70   2015 Dec 15, 5:03am  

justme says

Never mind what the Fed says, or what the statutes say. Watch what the fed DOES, and who benefits.

I don't know exactly how many times I have said the above in the last five years, but there seem to be plenty of people out there that still do not understand this simple truth.

Because it's wrong no matter how many times you say it.

34   narrator   2015 Dec 15, 5:03am  

Interest rate swaps went NEGATIVE in November. That's where the smart money thinks rates are going and the derivatives market is the absolute apex of the "smart money".

http://www.marketwatch.com/story/analysts-are-baffled-by-moves-in-this-esoteric-but-huge-market-2015-11-17

35   _   2015 Dec 15, 6:30am  

Not only is the market well over 70% on future expectations of a rate hike for the First time ever in the cycle

- Dollar up strong in the last 18 months
- 2 year is well above the key .80% level

However, Core CPI today finally got over 2%, this was the last and final metric they were waiting for.

36   Y   2015 Dec 15, 6:38am  

Sounds like it's time to start 5 year cd laddering...0.1%, 0.2%, 0.3%...

Logan Mohtashami says

However, Core CPI today finally got over 2%, this was the last and final metric they were waiting for.

37   _   2015 Dec 15, 6:38am  

One of things that people never decided to take into account is that the market has done half the work for the Fed

If you look back in history, the Dollar always makes it's strongest % before the first rate hike happens and it has done it again once.

I know this goes against a lot of the Anti American left and right economic thinkers, but if America was a bad as these cry babies talk about each day, we wouldn't be sitting as the best economy in the world today for a mature country

This is why the European were begging... like a dog for us not to raise rates, why we have currency wars around the world, why all the Anti American talk, never lead to the end of America

Because most of us, we don't cry, we don't whine, we don't beg, we get up, we go to work, we raise our families we do what we need to do to make our life as good as possible.

38   Y   2015 Dec 15, 6:41am  

The left hates the 'good ole days'. That means 'pc' would not exist...

Tenpoundbass says

There will be an Escalade in every driveway like the good ole days.

39   _   2015 Dec 15, 6:43am  

For this thread

1st. The notion that #QE would never end because America would collapse, that failed

2nd, For the people that said the Fed would never raise rates, never, because America couldn't take a 0.25%

Please, come on... it's a 0.25% rate the market has priced in 3 already

So going out from now

CPI core

ECI wage inflation index

Wage Growth/JOLTS data

You won't see a lot more hikes unless these 3 metrics grow like it has before... So be mindful

40   _   2015 Dec 15, 6:45am  

0.98%

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