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Rates Low Thru '16?
In putting together the upcoming newsletter (free on the site) – I thought I’d share the graphic below released by the FOMC following the last meeting. While “Rates low thru ’14? was the gist of the headline – over 1/3 of the participants see ’15 and beyond as appropriate. The implications are severe from multiple fronts - a few to think about:
- While the case can be made for multiple expansion and the relative valuation of Equities to Fixed Income – there is going to be serious pressure in liability-sensitive corporate America.
- For the long the Index crowd, what happens to equity valuations if higher discount rates are thrown in your DCF model?
- How many greeters can Walmart hire if the baby boomers are forced to work thru retirement based on the fact that they can’t live off the income from their nest egg? Grandma and Grandpa are moving in folks.
- The same baby boomers chasing yield in equities can’t recover from another ’08 – yet they’re being set up for disappointment once again.
We’re in a Balance Sheet Recession, no question about it, and while goons pushing investment products have forward looking views of 3 weeks – lower yields and lower equity multiples are ahead.
Happy Friday… I guess
- advertisements -
Rates will never go up again. But products will disappear, bread lines will be formed and stretch out far, and the bread awaiting the patient will be stale. Is mold nutricious, I guess we'll be finding out soon. But, at least interest rates won't be going up.
Rates will spike when everyone leaves bonds all at the same time rushing into Equities...then the Wall Street cartel can start selling off Equities in mass to buy high interest bearing bonds with the proceeds forom retail...all over again...
I'm assuming they mean 2116, right?
"Rates Low Thru '16?"
The Fed does NOT operate in a vacuum. Higher rates may be forced by the market. Given the news today and the market surge UPwards(?!) one can't help feeling that the whole thing is "getting close".
DavidC
We are on a deflationary path. There is not enough demand for loans thus driving interest rates down on the long term and by manipulation on the short term. Even record government deficit can't reflate the debt ponzi, it barely compensates for pivate loan demand shortfall.
What market? There are only CBs and their agents anymore.
True that. I was thinking about what will force interest rates up? The CBs will keep all interest rates low until inflation becomes so in-your-face that they can't politically continue. There will not be a lead time, so you don't have to anticipate. It will happen fairly swiftly, within one presidential term. Conclusion => when headline inflation pops, sell PMs and park in cash until interest rates go up, then buy bonds. That's right, buy PMs on the rumor, sell on the news (of inflation).
Seniors and baby boomers who voted islamic in 2008 really f***ed their lives and other peoples lives. I actually have two elderly relatives who voted for Allah.
I have very little to do with them but when I do - I laugh at them and tell them they f**ked themselves. I rarely use profanity when speaking to older folks but they deserve zero respect.
Freddie, here is the problem with you and and the bile that you spew...
You are suffereing from a delusion that it would have been better if McCain and Palin won in '08...
I'll give you a hint, at best, it would be the same and more than likely it would have been worse given McCain was completely clueless and his top economics guy was Phil Gramm....
Why don't you go after the Administration that was responsible for applying scorched earth to the US Federal budget before O came along?
Can you even figure out which ones were responsible??
Let me guess...
Things would all be different and America would be strong and prosperous if only we had elected the douche with an (R) after his name instead of the doche with a (D) after his name?
You appear to be delusional my friend. You may want to seek help.
Damn Freddie, I don't know whether to up arrow or down arrow this one
Who is Allah? Would you prefer a Radical Christian?
For me, the big clue on low rates has always been how far out are automakers offering zero rate financing! Last I saw, GM advertised zero interest financing for 7 years on trucks.
But is that because GM sees ZIRP continuing, or because they are desperate to sell their historically high inventory to consumers with no cash?
The streets are littered with the muslim's zombie voters driving Chrysler and GM shitboxes that depreciate faster than the speed of light.
Not to worry because the muslim gives them new credit cards and new food stamp cards. The USA is now like a third world african or muzzy country.
Yes, and yes.
"QE to infinity in the entire Western financial world. There is no other alternative."
- Jim Sinclair, Mineset
Here I was, all set to quote Buzz Lightyear...