bostonbubble.com Forum Index bostonbubble.com
Boston Bubble - Boston Real Estate Analysis
 
 FAQFAQ   SearchSearch   MemberlistMemberlist   UsergroupsUsergroups   RegisterRegister 
 ProfileProfile   Log in to check your private messagesLog in to check your private messages   Log inLog in 

SPONSORED LINKS

Advertise on Boston Bubble
Buyer brokers and motivated
sellers, reach potential buyers.
www.bostonbubble.com

YOUR AD HERE

 
Go to: Boston real estate bubble fact list with references
More Boston Bubble News...
DISCLAIMER: The information provided on this website and in the associated forums comes with ABSOLUTELY NO WARRANTY, expressed or implied. You assume all risk for your own use of the information provided as the accuracy of the information is in no way guaranteed. As always, cross check information that you would deem useful against multiple, reliable, independent resources. The opinions expressed belong to the individual authors and not necessarily to other parties.

Fed Reserve and Interest Rates
Goto page Previous  1, 2, 3 ... 7, 8, 9 ... 15, 16, 17  Next
 
Post new topic   Reply to topic    bostonbubble.com Forum Index -> Greater Boston Real Estate & Beyond
View previous topic :: View next topic  
Author Message
Real Estate Guy
Guest





PostPosted: Sun Oct 01, 2017 2:43 am GMT    Post subject: Reply with quote

Quote:
Unwinding QE is a deflationary exercise and will not cause inflation. Neither will it cause a spike in rates since these are set by arbitrage with the expected short rate


MPR you seem fairly educated so I'm confused by your academia. The Fed has called to initially start reduction of their balance sheet at 10 billion per month and after a few months up that to 50 billion per month. In 6 months, the Fed will be rolling off 600 billion a year in treasuries they will no longer be "buying back" which they have been doing for 10 years to specifically lower rates and obviously has suppressed yields. You honestly think this will not cause a spike/raise in rates as they reverse course? Seriously?


In regards to your opinion of the Fed always setting rates so how is it I can suggest QE is any different:

https://goo.gl/images/zQwc37

In regards to inflation being under control. Apparently you and the Fed don't know where to look:

https://goo.gl/images/XDGmBR
Back to top
mpr



Joined: 06 Jun 2009
Posts: 344

PostPosted: Sun Oct 01, 2017 2:52 am GMT    Post subject: Reply with quote

Define spike in interest rates. How many basis points are we talking about here ? But seriously, no I think there will be little or no discernible effect.
if you really believe a spike is coming there are ways for you to put your money where your mouth is and make a lot of money. Of course if you're wrong you'll lose your shirt.

As for your last link, that's not inflation. You can't just make up your own definitions. You can argue that there are measures other than inflation which are important, but please don't just redefine terms to suit yourself
Back to top
View user's profile Send private message
Real Estate Guy
Guest





PostPosted: Sun Oct 01, 2017 3:16 am GMT    Post subject: Reply with quote

I do consider housing to be inflation. Why should it not be? Do Americans not need to buy housing to live or rent? Have you been to a grocery store lately? Haven't noticed sharp rise is prices? Please. Core CPI is academic bullshit. Out here in the real world real things matter.
As far as define "spike in rates": I would constitute a 30% rise over a year a spike. Fair enough to you? Last year 30 year fixed 3.25%. This year 4-4.125%. I suspect next year 5%+.......and growing. I could easily see 6%+ by 2019 with fed fund rate at 3+%. If you don't think that will impact bubbles then as you say, keep buying. As for "betting" on my belief on rates.....forget it. Just as I said before, I'd be "betting" on the Fed and not on true economics. The Fed is not credible. If markets crash, they could reverse course and start QE 4(more academic bullshit) and start dropping rates. This would cause the value to drop out of the dollar as the rest of the world has seen enough of our fake economy. More money printing to buy back more treasuries. We're not backed by gold any more but by faith and goodwill. Once that's exhausted, we're finished.
Back to top
Real Estate Guy
Guest





PostPosted: Sun Oct 01, 2017 3:24 am GMT    Post subject: Reply with quote

http://www.slate.com/blogs/moneybox/2014/02/24/housing_inflation_the_cpi_is_a_disaster.html
Back to top
mpr



Joined: 06 Jun 2009
Posts: 344

PostPosted: Sun Oct 01, 2017 3:24 am GMT    Post subject: Reply with quote

You're mixing together lots of different things. Rents are a component of the CPI, but thats not the same as housing prices. Your grocery store is just an anecdote. Actual data like the billion prices project doesn't agree with you - you never address that.

I suspect you're overestimating future interest rates, but the scenario you outline with 6% is not ridiculous - it would only occur if the economy was really firing. You can call this a spike if you like, but it isn't clear why that scenario is so bad. It would mean a very robust economy with historically normal interest rates.
Back to top
View user's profile Send private message
mpr



Joined: 06 Jun 2009
Posts: 344

PostPosted: Sun Oct 01, 2017 3:29 am GMT    Post subject: Reply with quote

Real Estate Guy wrote:
http://www.slate.com/blogs/moneybox/2014/02/24/housing_inflation_the_cpi_is_a_disaster.html


Ok, that's an interesting proposal, but still not about asset prices. Just suggesting we look at new rents, rather than old rents.
Back to top
View user's profile Send private message
Real Estate Guy
Guest





PostPosted: Sun Oct 01, 2017 3:43 am GMT    Post subject: Reply with quote

Hi MPR. Would could debate inflation for days. Ultimately inflation is what it is to each individual buyer. I don't personally put much credence in core numbers or the data you provided. I don't believe food and energy are that volatile that excluding them is appropriate. We shouldn't exclude necessities people need to buy every day. Those prices are most certainly up. Housing is also up as you even acknowledge the bubbles these policies have created.
As far as rates/yields/ QT: It won't take much. Even rates of 5+% will cause a correction. 6% will be a MAJOR correction.
I enjoy your intellect. I disagree with your academic mindset, but appreciate your intelligence.
You never answered my question: What happens to our country(more specifically the dollar) if the bubbles pop(fair assumption) and the Fed has to reverse course and start QE 4 and print more money? Given our already 20 trillion debt and deficit of 105% of GDP, where will we be?
Back to top
mpr



Joined: 06 Jun 2009
Posts: 344

PostPosted: Mon Oct 02, 2017 3:16 pm GMT    Post subject: Reply with quote

What happens under QE4 ? Depends on the factors leading to QE4. A drop in the value of the dollar is possible under some scenarios but you never answered *my* question as to why that would be a bad thing.

Your intuition that our system is unsustainable is correct, but you're wrong to blame the fed for it. The fed only has certain tools, and those tools aren't well suited for addressing issues like inequality, which is why problems like bubbles and malinvestment seem to recur. You really need fiscal and tax policy to address these.

Actually there is a critique that the Fed is partly responsible for the situation. but its deeper and different than the one you're making. It involves them raising interest rates too much at certain time in the past. You can find it here

http://www.interfluidity.com/v2/2942.html

Actually you might find quite a lot you're interested in at interfluidity. For example this

http://www.interfluidity.com/v2/213.html

and this

http://www.interfluidity.com/v2/5561.html
Back to top
View user's profile Send private message
Real Estate Guy
Guest





PostPosted: Tue Oct 03, 2017 12:43 pm GMT    Post subject: Reply with quote

Quote:
What happens under QE4 ? Depends on the factors leading to QE4. A drop in the value of the dollar is possible under some scenarios but you never answered *my* question as to why that would be a bad thing.


Mpr: A devalued dollar is good for large corporations the export our goods and services and bad for Americans that need to buy things here(imported in or domestic). This low growth economy has not benefited average Americans. Wages are and have been flat. When the dollar goes down, Americans need to use more dollars to get the same product. Corporations have outsourced labor and not paid American workers increases. Frankly, Corporate earnings aren't even that good. They're being artificially propped up their using low interest rate and injected money to buy back shares, making them appear stronger than they are. Fed Reserve policies have created mal investment and asset bubbles. Americans and Corporations aren't investing because the Fed won't get the hell out of the markets. The markets are so distorted no one with a brain wants to put money to work in it. This is secular stagnation, and I believe it's sole because of Fed policies. As far as the devaluing dollar: If the market corrects and wages stay flat, QE 4 further devalues the dollar, then Americans get financially hit from every direction. Even if the Fed continues manipulating the market to keep it propped up, but the value gets devalued we still lose. What good is Dow 22,000 if the money we have buys 50% less than it did. This still robs Americans of their wealth. I'm saddened more people just don't get it. The Fed Reserve is the problem. There are certain other problems with budgets, tax reform, government policies, etc. However, the markets will never correct, nor will our economy run properly until the Fed gets out of it. Past normally policy of short term raising and lowering the fed funds rate has always been appropriate to deal with market cycles. Ten years of such rate decreases and the additional of adding QE(printing our money to buy back assets-bonds and MBS) should be considered what it is-a crime. It has ruined our economy, which is no longer "free" and very sick. If they don't get out of it soon, it will be lost forever, as will much American wealth with it.
Back to top
mpr



Joined: 06 Jun 2009
Posts: 344

PostPosted: Tue Oct 03, 2017 2:12 pm GMT    Post subject: Reply with quote

Real Estate Guy wrote:
This is secular stagnation, and I believe it's sole because of Fed policies.


This is a religious belief ? (You don't give any actual arguments).

You're argument that a weak dollar lowers buying power is correct, but it turns out that distributional effects are far more important. People can't buy anything, cheap or expensive, if they don't have jobs. A lower dollar is stimulative since it makes exports more competitive. This isn't an argument for deliberate devaluation, but it means it isn't the end of the world if the dollar drops 10%.

I have to say this discussion with you is kind of sad, because you obviously have some intuition that 'something is wrong', but whatever information sources you use have persuaded you that up is down and down is up, so that you end up arguing for policies which would benefit creditors at the expense of average people. (Or maybe you are a creditor and are just talking your own book).

There is a real argument that the Fed has been depressing wages, but it has nothing to do with QE. Read the first link to interfluidity,
Back to top
View user's profile Send private message
Real Estate Guy
Guest





PostPosted: Tue Oct 03, 2017 3:24 pm GMT    Post subject: Reply with quote

Quote:
This is a religious belief ? (You don't give any actual arguments).



I thought it was self explanatory. Here is a definition from a standard economic text:

"The key to understanding this situation lies in the concept of secular stagnation [5], first put forward by the economist Alvin Hansen in the 1930s. The economies of the industrial world, in this view, suffer from an imbalance resulting from an increasing propensity to save and a decreasing propensity to invest. The result is that excessive saving acts as a drag on demand, reducing growth and inflation, and the imbalance between savings and investment pulls down real interest rates. "

By keeping QE in effect for way too long as well as keeping fed fund rate too low for way too long, the Fed has created massive bubbles and a lot of money is sitting in safe/low risk savings/equivilents(getting low return) as people and Corps are waiting for normalization in asset prices. This is prohibiting real CAPITAL investment which would help the economy. Some are putting in Stocks and that has created a bubble(or as some prefer to say"highly valued"). people and corporations with cash are not stupid. Money will not be disbursed into true growth investments until the Fed gets out of the business of providing a "free lunch" to the markets, altering and falsely raising the effects of once free market asset prices. To further add to the insanity, the fed choosing to slowing unwind thins to normalization will only drag out any hope for a true rest in a real economy. Hopeful this will change when Trump replaces the idiots up for reaapoi9ntment, and thank god they are many.
When I say I wish the market crashed back in 2008, it's not that I wish tragedy on people, It's that I know corrections are needed to reset asset prices and bring true investment back into the cycle. As I also have said, given the extreme nature of 2008, I can even see ultra low rates, and possible even a little QE. Three rounds has caused the stagnation by over inflating assets and not providing for real growth. Not that I like any Fed Reserve person, but Kevin Warsh was on the Fed durring the crisis and was disgruntled but agreed to allow the first round of QE under the consensus among them that it would be short term and normalized rapidly. After Bernanke and his fellow academic morons wouldn't stop the madness, Warsh reigned in 2011. Hopefully if Trump appoints him, he can change the whole philosophy with the FED by weeding out this academic thought processes and the think tanks over there that have proven to be incompetent to the degree of destroying our entire country.
He's got my vote:

https://www.cnbc.com/2017/10/03/kevin-warsh-would-take-a-hammer-to-the-fed-but-he-wouldnt-break-it.html

Back to top
Real Estate Guy
Guest





PostPosted: Tue Oct 03, 2017 3:49 pm GMT    Post subject: Reply with quote

Quote:
I have to say this discussion with you is kind of sad, because you obviously have some intuition that 'something is wrong', but whatever information sources you use have persuaded you that up is down and down is up, so that you end up arguing for policies which would benefit creditors at the expense of average people. (Or maybe you are a creditor and are just talking your own book).


I am not a creditor. I am an "average person". I am an investor, first and foremost in real estate(commercial and residential). I'm tired of navigating in asset pricing set for years of stagnation or more likely decline. I own stocks, never loved stocks but own some. I certainly invested 2012-2016/17 knowing these policies would falsely the high valuations in equities. I also hedged in emerging markets and some metals. 2012-2017 has not been proper investing. It has been investing based on the FED. That's not being free, that's being controlled. I want to again invest in real estate and other capital investments that will truly rise because of their value, backed by a good economy. I want wages to rise as this happens and hope many GOOD paying jobs result. I wish this for younger Americans also they wish to invest without fear of a massive correction due to the Fed's intervention and bubbles they have created. I also wish people could buy housing at a fair market value again. Values that would appreciate normally over time based on wage growth and solid economy. Slow, normal growth. REAL GROWTH. Unfortunately, this will only happen when rates are normalized, QE is removed and I suspect a correction ensues.
Back to top
mpr



Joined: 06 Jun 2009
Posts: 344

PostPosted: Tue Oct 03, 2017 10:13 pm GMT    Post subject: Reply with quote

I don't understand the connection you're making between high asset prices and (supposed) lack of capital investment. The kind of assets which are (supposedly) in a bubble (stocks, real estate etc) are not the kind of assets companies invest in when they're looking to expand output or create new technologies.

That would be factories, research and development etc. Those are not more expensive now. On the contrary, QE makes it less expensive to finance investments of this kind (that's one of the main points of QE).

Kevin Warsh is your man if you want someone who's been consistently wrong.

http://www.businessinsider.com/kevin-warsh-was-on-the-wrong-side-of-fed-policy-debate-during-crisis-2017-9

Thanks for the explanation about where you are as an investor. Yes, low interest rates make investment in some assets more risky that's true, and you don't like that. Tough. There's no LAW of the Universe which says you're entitled to carry your assets forward in time risk free.
Back to top
View user's profile Send private message
Real Estate Guy
Guest





PostPosted: Wed Oct 04, 2017 12:43 am GMT    Post subject: Reply with quote

Well, we certainly disagree on the Fed, it's policies and their effect on markets. That's OK. You've had your run of this type of policy for 10 years. It's changing, get used to it. What still raises my curiosity about your opinion is, if the Fed is doing such a great job and the economy is so good, why do we have Trump? Fed candidates that are indicative of "complete reform"? Apparently much of the Country is not as happy as you. In fact, so unhappy they are waking up.
As far as how this story ends, I suspect it's easy for you to look at all these assets bubbles and point to what you call success. That's easy because the "punch bowl" is still there. It will be important to revisit this after its gone to analyze just how bad it went.
As for the last ten years, my opinion is it's been a mess. The lack of capital investment has been atrocious(by the way factories are real estate last time I checked). Companies also haven't invested in domestic expansion. They've used the free money to buy back shares, not grow, because the economy is not really growing. These policies are smoke and mirrors, nothing more.
The fact that I'm unhappy about low interest rates ruining investment due to bubbles is a problem many feel about what's happened. "Tough" is not accurate or a fair statement. Americans are pissed. I am pissed. Look around, take the blinders off and hopefully the change we need from people with real experience is coming.
So, MPR, what's your excuse? Let me guess, your a professor? Curiosity kills the cat, but I'm pegging you for an academic.
Back to top
mpr



Joined: 06 Jun 2009
Posts: 344

PostPosted: Wed Oct 04, 2017 12:53 am GMT    Post subject: Reply with quote

As I said, your intuition that 'something isn't right' is on the money. I'm not calling the current situation 'success'. But it doesn't follow that the Fed is the main actor responsible.

Its like a patient who ends up in the hospital after a heart attack because of poor diet and lack of exercise. The doctors manage to save their life, but then you criticize them because the patient still isn't fit a year later. You claim that its actually the heavy drug regimen that the doctors have the patient on which is causing the problem.

Its actually an interesting question as to whether Trump will choose Warsh or keep Yellen. The one thing he is good at is self preservation, so I'm betting on Yellen.
Back to top
View user's profile Send private message
Display posts from previous:   
Post new topic   Reply to topic    bostonbubble.com Forum Index -> Greater Boston Real Estate & Beyond All times are GMT
Goto page Previous  1, 2, 3 ... 7, 8, 9 ... 15, 16, 17  Next
Page 8 of 17

 
Jump to:  
You can post new topics in this forum
You can reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum


Forum posts are owned by the original posters.
Forum boards are Copyright 2005 - present, bostonbubble.com.
Privacy policy in effect.
Powered by phpBB © 2001, 2005 phpBB Group