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TheCountOfNowhere

Why Do The Markets Want Rate Rises?

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Because the economy is suffering from misallocation of capital, away from productive assets, which holds back economic growth.

Rising IR towards its correct level is a corrective to this.

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I think the markets don't believe this rate rise will hold. The march t bond futures are well up this morning. Commodities are not up, on the contrary.

As for the stock markets, they go up with low rates(stock buy backs) and go up with raised rates (the economy must be great)

the baltic dry index making new all time lows, and full oil tankers parked at sea, are also saying there is no economic recovery.

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Financials were desperate for this, you can't make money on zirp loans, not a decent enough spread.

As previously mentioned capital has disappeared from productive Equity into financing the public sector (bonds) pure speculation into useless lumps of metal (gold) and mucking about selling property to each other.

All above have tripled this century (even gold, was up sixfold at one point), UK Equity has fallen. (FTSE 100 makes up 80% of market cap so no argument that it is nominally less than 1999 in spite of a doubling of inflation)

Edited by crashmonitor

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I would say the main thing is confidence , nobody can possibly invest in large capital projects if the near future is uncertain.

Unless of course you are a uk house buyer.

Edited by frederico

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I would say the main thing is confidence , nobody can possibly invest in large capital projects if the near future is uncertain.

Unless of course you are a uk house buyer.

Indeed if you want a collapse in property then the propensity to cheer on the 16 year demise in Uk Equity (beloved on here) is probably sealing your own coffin. It reinforces the fact that property is your pension and becomes the favoured method of saving. a complete U turn from the period 1980-2000 when almost 50% of UK assets were Equity related, now about 20%, and then house prices were at post war lows (1995).

Edited by crashmonitor

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simple question, as above.

why does the markets want a rate rise.

the ftse is soaring today, an index that is surely boosted by money printing and low rates.

why?

Boom innit

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the baltic dry index making new all time lows, and full oil tankers parked at sea, are also saying there is no economic recovery.

Maybe there won't be any economic recovery in the usual sense? Maybe China and other BRICs went on a massive expansion process, spending massively since the early 2000s. All production brought forward. They've expanded in 10yrs , when maybe a slower rate woukld have taken 20-30yrs ?

I'm not familiar with the Baltic index. Maybe world trade is now back to where it was before the fast expansion and what we are seeing is "normal" ?

Or maybe I'm havering ? :blink:

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I think the markets don't believe this rate rise will hold. The march t bond futures are well up this morning. Commodities are not up, on the contrary.

As for the stock markets, they go up with low rates(stock buy backs) and go up with raised rates (the economy must be great)

the baltic dry index making new all time lows, and full oil tankers parked at sea, are also saying there is no economic recovery.

No, theyre saying theres a +ve supply shock.

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Maybe there won't be any economic recovery in the usual sense? Maybe China and other BRICs went on a massive expansion process, spending massively since the early 2000s. All production brought forward. They've expanded in 10yrs , when maybe a slower rate woukld have taken 20-30yrs ?

I'm not familiar with the Baltic index. Maybe world trade is now back to where it was before the fast expansion and what we are seeing is "normal" ?

Or maybe I'm havering ? :blink:

I think may be we should be worrying more about our own brought forward growth in the form of a tripling in public sector debt to make up for a private sector that was deleveraging (inflation adjusted by 20% since 2007).

China was always a nice yarn about officials fixing GDP and a good bit of mischief for the Western press and those who wanted to create market turmoil. Two billion souls in China and India still at near subsistence level and an eastern economy suddenly going to slow dramatically, I don't think so.

Western Governments who have promised their boomers the moon in retirement, may be there lies the elephant in the room.

Edited by crashmonitor

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There's so much leverage out there - both ways, that the markets will swing wildly once any sort of momentum is built up. Once the peak has passed i bet the FED are shit scared the whole complex will go on the short side with huge leverage provided by none other than the FED!

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Without QE the Fed has no control.

Beginning in the second quarter, the selling of leveraged instruments like commodities futures, leveraged emerging markets debt and equity bought on margin, and especially junk debt, began to cause liquidity to dry up. Commercial paper yields started rising in the summer (90 day paper has risen 30-35 bp since July). The junk bond market has blown sky high in the last six weeks taking out hedge funds and mutual funds in the process.

Yellen had no choice but to hike. Prudently, she would have done so at least a year ago. But her record as a forecaster is abysmal, as we know from her public utterances in 2007.

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Without QE the Fed has no control.

Beginning in the second quarter, the selling of leveraged instruments like commodities futures, leveraged emerging markets debt and equity bought on margin, and especially junk debt, began to cause liquidity to dry up. Commercial paper yields started rising in the summer (90 day paper has risen 30-35 bp since July). The junk bond market has blown sky high in the last six weeks taking out hedge funds and mutual funds in the process.

Yellen had no choice but to hike. Prudently, she would have done so at least a year ago. But her record as a forecaster is abysmal, as we know from her public utterances in 2007.

Youre the wall of fear the markets like to climb

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simple question, as above.

why does the markets want a rate rise.

the ftse is soaring today, an index that is surely boosted by money printing and low rates.

why?

They don't.

Over the last 20 years, stocks have fallen for the first half of December then Santa Claus rally. It's simply seasonality.

Edited by Killer Bunny

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Because the economy is suffering from misallocation of capital, away from productive assets, which holds back economic growth.

Rising IR towards its correct level is a corrective to this.

+1 on this.

The markets have decided they want to kick the opium of low interest rates.

We need higher returns on investment to incentivise proper allocation of resources, to provide an alternative to excessive risk-taking, and to chip away at the cheap credit that has been driving bubbles & volatility for a long time now.

In short, this is a sign of strength, not weakness, and that's why the markets have reacted positively.

Edited by norseraider

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I would say the main thing is confidence , nobody can possibly invest in large capital projects if the near future is uncertain.

Unless of course you are a uk house buyer.

Agree.....debt and rents along will stagnant wages will see that little spare to spend on insurances, additional services and upgrades....most jobs are in the service sector and financial sector.... Who has the money spare to purchase insurance, extra debt and enjoying oneself with costly extras?......trust in fate and learn to enjoy the better things in life that are generally mostly free.

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There's so much leverage out there - both ways, that the markets will swing wildly once any sort of momentum is built up. Once the peak has passed i bet the FED are shit scared the whole complex will go on the short side with huge leverage provided by none other than the FED!

That scenario is worthy of a brown trousers analogy

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Denningers take...

https://market-ticker.org/post=230973

Expect disclocation sooner rather than later...I think he mentioned low liquidity (although he has mentioned that many times over the past year or so)

Actual effective funds rate unchanged.

Comments interesting.. Its good being a bank

beginning Thursday morning, the Fed plans to pay banks and other financial firms not to lend below its new benchmark rate.

. Its good being a bank

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Nothing to do with confidence (whatever that means), misallocation of capital or the other wonderful ideas / beliefs suggested.

https://t.co/Z8HzFSRKLb It's simply seasonal.

By mid Jan we'll know what the markets really think.

Edited by Killer Bunny

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Denningers take...

.........

Expect disclocation sooner rather than later...I think he mentioned low liquidity (although he has mentioned that many times over the past year or so)

Actual effective funds rate unchanged.

Comments interesting.. Its good being a bank

beginning Thursday morning, the Fed plans to pay banks and other financial firms not to lend below its new benchmark rate.

. Its good being a bank

It's the only job in town worth having. Bonuses for failure and fraud and now paid not to lend. For them it's just sit back and relax and count the money pouring in being gifted.

Hey it's Christmas and they're worth it.

Edited by billybong

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