patrick.net

GNL says

Will it work?

If they do a 50 basis point rise every month of 2023, it might. The fed also needs to sell off all it's mortgage backed securities.

Misc says

13 States are increasing the minimum wage in 2023. This will drive up wages among the entire population without increasing output.

Whaddya think is going to happen?

Only if the minimum wage is higher than the current prevailing bottom wage. For example, the minimum wage in VA is now $11/hr, yet Target, McDonalds et al are starting people at $15/hr.

https://finance.yahoo.com/m/d373673e-a093-3af0-bb42-b5fe65ac2cf3/the-fed-needs-to-jack-rates.html

The Fed needs to jack rates up by 10% right now

https://finance.yahoo.com/news/inflation-isnt-coming-down-without-162416982.html

Inflation isn't coming down without a recession and interest rates will continue to skyrocket, JPMorgan Asset Management investment chief says

The bank's chief investment officer said prices would only cool if the labor market weakens and predicted interest rates would top 6%.

Misc says

13 States are increasing the minimum wage in 2023. This will drive up wages among the entire population without increasing output.

Where's @Patrick with his chart about productivity and wage increases?

Wages are way behind productivity gains for about 50 years, there's plenty of room for wage improvement.

Plus we had decades of low interest rates and money printing, so capital is definitely not the problem.

There is massive disillusionment in the workforce and rightly so. Wages have not kept up with inflation, to buy a house they are looking at near record low affordability, about 40% carry a balance on their credit card and that balance keeps rising and companies long ago stopped promoting from within.

What does the workforce do??

Productivity is down 4.1% on an annualized basis, the biggest decline since the government started keeping track of the number back in 1948. --- Oct 7, 2022

The Fed wants to increase unemployment in an environment where there are not enough workers. That'll just stress out those that are already overworked even more. The country is headed for that great socialist paradise that many counties have failed into.

zzyzzx says

https://finance.yahoo.com/news/inflation-isnt-coming-down-without-162416982.html

Inflation isn't coming down without a recession and interest rates will continue to skyrocket, JPMorgan Asset Management investment chief says

The bank's chief investment officer said prices would only cool if the labor market weakens and predicted interest rates would top 6%.

Rates are already 6%. "Skyrocket"?

GNL says

zzyzzx says

https://finance.yahoo.com/news/inflation-isnt-coming-down-without-162416982.html

Inflation isn't coming down without a recession and interest rates will continue to skyrocket, JPMorgan Asset Management investment chief says

The bank's chief investment officer said prices would only cool if the labor market weakens and predicted interest rates would top 6%.

Rates are already 6%. "Skyrocket"?

He was talking Fed funds rate.

It's greed, pure and simple.

The greatest trick the establishment ever did, was convince the savers, that we need low interest rates, so that the Rich People wont have to spend so much money rewarding us for borrowing our money in their banks.

It's like chickens keeping the knives sharp for the farmer.

AmericanKulak says

Where's Patrick with his chart about productivity and wage increases?

Wages are way behind productivity gains for about 50 years, there's plenty of room for wage improvement.

Plus we had decades of low interest rates and money printing, so capital is definitely not the problem.

Here's the chart:




https://patrick.net/post/1341417/2021-09-20-wtf-happened-in-1971

Tenpoundbass says

The greatest trick the establishment ever did, was convince the savers, that we need low interest rates

Savers were not tricked into thinking low interest rates was a good idea, low interest rates were steamrollered onto savers with the support of reckless borrowers.

https://finance.yahoo.com/news/feds-williams-says-fed-needs-233645417.html

Fed's Williams says Fed needs more rate rises to cool inflation

zzyzzx says

https://finance.yahoo.com/news/feds-williams-says-fed-needs-233645417.html

Fed's Williams says Fed needs more rate rises to cool inflation

Thursday the U.S. central bank has more rate hikes ahead

GOOD!

https://finance.yahoo.com/news/federal-reserve-interest-rates-decision-february-1-174421486.html

Federal Reserve raises interest rates another 0.25%

The Federal Reserve raised short-term interest rates Wednesday by a quarter percentage point, bringing its benchmark rate to a new range of 4.50% and 4.75%, the highest level since October 2007.

Stocks for the long run.

clambo says

Stocks for the long run.

Are you saying stocks are at a low? Higher rates will help?

I'm saying I am happy that they raised interest rates only 0.25%, and the stock market was happy too.
Higher rates don't help, rather hurt stock prices.
When interest rates were almost 0%, and the the stock market dividend yield was 1.9%, everyone loved buying stocks.
When interest rates go much higher than the dividend yield, investors think about owning something besides stocks.
There is always new money out there looking for a place to be invested.
I'm going to let my capital appreciate for a few more years, and then start concentrating on income investments such as bond funds, dividend stock funds ("equity income" funds).

There is a significant response lag (9 months?) for the rise in rates to hit the economy. We are just seeing the effects of the initial rate hikes. Stay tuned.

Weak. .25 means the next hikes, if they occur, will also be measly .25 which isn't going to tame inflation anytime soon.

clambo says

There is always new money out there looking for a place to be invested.

I wish the mf'ers would stop printing it.

https://finance.yahoo.com/news/least-two-more-fed-rate-070207438.html

At least two more Fed rate hikes and no cut this year, say economists

With inflation still at more than twice the Fed's 2.0% target, 46 of 86 economists in the Feb. 8-13 Reuters poll predicted the U.S. central bank will go for two more 25 basis point hikes, in March and May, not just March.

zzyzzx says

https://finance.yahoo.com/news/mortgage-qualifying-rate-canada-may-184048144.html

Mortgage-Qualifying Rate in Canada May Top 8% After Latest Central Bank Hike

inflation fucking nuts, they struggling to keep it down

https://www.yahoo.com/now/fed-might-raise-policy-rates-121438851.html

Fed might raise policy rates to 6%

The 10 year UST is now over 4%. Do I hear 5?

https://www.cnbc.com/2023/03/06/stock-market-today-live-updates.html

Dow falls 200 points as Powell says rates are headed higher than expected

The comments seemed to suggest that the Fed may implement a larger rate hike than last month’s 25 basis point increase at its next policy meeting on March 21-22.

Market views on what's next for the benchmark fed funds rate have been whipped around recently. The Fed earlier this month appeared set to deliver a rate hike of 25 or 50 basis points, its ninth consecutive increase, as it deals with inflation sitting well above its 2% target.

Traders then began pricing in a possible pause for March after the collapse and seizure of Silicon Valley Bank fanned fears about a broader crisis in the banking sector.

Heading into Wednesday's decision, odds were tilted again toward an increase of 25 basis points in the fed funds rate, to a range of 4.75%-5%.
…………..
A pause would make people think the Fed has lost interest in fighting inflation. On the other hand, an increase of 50 basis-points is too much for some banks to handle at this point.

https://markets.businessinsider.com/news/stocks/svb-collapse-federal-reserve-meeting-interest-rates-bank-crisis-2023-3?op=1

Inflation varies widely between places. It should be 10% in the silly con valley for the last few years. In 3y, 1.1^3=33% and double in 7y unless there is a lot of productivity to offset. Cash is trash as long as (massive) QE is on in various forms including bank bailouts.

Blue says

Inflation varies widely between places. It should be 10% in the silly con valley for the last few years. In 3y, 1.1^3=33% and double in 7y unless there is a lot of productivity to offset. Cash is trash as long as (massive) QE is on in various forms including bank bailouts.

The workforce culture is what has a lot of effect on productivity and innovation. I recall the 1990s and the culture was do-more-with-less, total quality management, six sigma, Toyota Production System, etc. Yes we had "diversity Thursdays" where we had some form of political correctness training.

So they could jack of interest rates but costs may not go down because the quality of the workforce sucks or is more third world, including the executives (such as at silicon valley bank) are overpaid Woke operatives.

But now I heard all of that like culture emphasis on total quality management (TQM) has been shelved and has disappeared whereas it is all about ESG and DEI.

I wonder if DEI and ESG can co-exist with the culture of TQM and Six Sigma as well as "strive for excellence"

.

https://www.cnbc.com/2023/03/17/fed-poised-to-approve-quarter-point-rate-hike-next-week-despite-market-turmoil.html

Fed poised to approve quarter-point rate hike this week

https://finance.yahoo.com/news/a-fed-pause-could-do-more-harm-after-banking-crisis-morning-brief-093017739.html

A Fed pause could do more harm after banking crisis

Stock market news today: Stocks slide with all eyes on Fed meeting
Here's what's moving markets on Wednesday, March 22, 2023.

The Fed releases its decision and economic projections at 2 p.m. ET, and Powell gives a statement and takes questions starting around 2:30 p.m. ET.

“Powell’s challenge in the press conference will be to maintain focus on fighting inflation while signaling flexibility in how they deal with the banking crisis,” Michael Feroli, Chief U.S. Economist at JPMorgan, wrote in a note to clients.

https://finance.yahoo.com/news/stock-market-news-today-live-updates-march-22-2023-123738540.html

https://finance.yahoo.com/news/federal-reserve-interest-rate-decision-monetary-policy-march-22-164807780.html

Federal Reserve raises interest rates 0.25%

The rate hike brings the Fed’s policy rate, the federal funds rate, to a new range of 4.75% and 5%,

https://www.cnbc.com/quotes/US3M

3 month Tbill rates over 5%

zzyzzx says

3 month Tbill rates over 5%

Yield curve is inverted, not normal :-(
.



,



,

I saw today's CPI report.

12 month inflation or CPI is 5%. It was 6% last month.

CPI went up 0.4% from last month, mostly driven by housing costs. Egg prices and gas went down.

Economists were expect 5.2% and 0.2% (not 5% and 0.4%).

So now CPI is not greater than the Fed Funds rate, which is 5%.

When CPI gets below 1% of the Fed Funds rate, then there is enough margin to consider that real interest rates are positive.

Go back to Obama admin when 7 out of 8 years the Fed Funds rate was 0.25% and annual inflation was average around 1.5%.

A vast majority of Obama's terms were during negative interest rates.
,

.

With CPI dropping to 5% and equal to the Fed Funds rate, seems like the Federal Reserve will cap the Fed Funds rate to 5.25% or 5.5%.

Granted the monthly change was +0.4% from February to March 2023, but inflation seems to be more under control.
.

ad says

12 month inflation or CPI is 5%

That explicitly omits rents and fuel.