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Why Stock Market Bulls Should Hope Interest Rates Don't Rise

Tyler Durden's picture




 

Submitted by Lance Roberts via STA Wealth Management,

 

 

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Thu, 05/01/2014 - 14:18 | 4716971 Zirpedge
Zirpedge's picture

Savers are terrorists. Interest rates should be negative.

Thu, 05/01/2014 - 14:22 | 4716986 LawsofPhysics
LawsofPhysics's picture

I was wondering what happened to you Ben.

Thu, 05/01/2014 - 14:29 | 4717002 dryam
dryam's picture

Everyone involved in paper wealth in any way, shape, or form should be worried about rising interest rates.

Rising interest rates equals game-over.  This is why rates will stay low for a lot longer than everyone is predicting.  

Thu, 05/01/2014 - 15:41 | 4717344 NotApplicable
NotApplicable's picture

Silly people keep identifying a political economy as a market economy for some strange reason.

ZIRP will rule as long as the dollar does.

Thu, 05/01/2014 - 17:01 | 4717666 StacksOnStacks
StacksOnStacks's picture

GOT PHYS???

Thu, 05/01/2014 - 17:01 | 4717665 Bernoulli
Bernoulli's picture

But can they really be held low?

Thu, 05/01/2014 - 17:46 | 4717809 tarsubil
tarsubil's picture

What if the last two stock implosions were to keep interest rates low? Interest rates have to stay down to keep the central masters in power and they make money if stocks go up or down. What if they are getting ready to do it again?

Thu, 05/01/2014 - 14:26 | 4717005 ArkansasAngie
ArkansasAngie's picture

All them insolvent arsehats will be ... well ... insolvent.

Liquidity?

Screw'em

Thu, 05/01/2014 - 14:24 | 4716998 The Most Intere...
The Most Interesting Frog in the World's picture

Spend your fucking money or hang by your neck at City Hall, your choice!

Thu, 05/01/2014 - 14:18 | 4716972 Flakmeister
Flakmeister's picture

Rising interest rates would result in a real Great Depression....

Thu, 05/01/2014 - 14:21 | 4716984 LawsofPhysics
LawsofPhysics's picture

...and the death of fiat is going to be better?

good luck with that.

Thu, 05/01/2014 - 14:43 | 4717089 Flakmeister
Flakmeister's picture

All paths are fraught with peril...

Thu, 05/01/2014 - 14:49 | 4717112 LawsofPhysics
LawsofPhysics's picture

oh please let me have just a little bit of peril, there's only 350 of them...

Thu, 05/01/2014 - 14:22 | 4716988 Grande Tetons
Grande Tetons's picture

What about falling rates? No Sarc. 

Thu, 05/01/2014 - 14:37 | 4717060 Unknown Poster
Unknown Poster's picture

Rates fell after QE1 & 2 ended.

Thu, 05/01/2014 - 15:44 | 4717352 NotApplicable
NotApplicable's picture

They've gotta flatten out that yield curve some more in order to 'buy' themselves a little more time, I reckon.

Or will they introduce 50 year bonds first????

Thu, 05/01/2014 - 14:29 | 4717023 ArkansasAngie
ArkansasAngie's picture

It would indeed ... for some.  All those shats who have borrowed money thinking that inflation was going to save them ... well ... negative net worth is negative net worth.  

 

Thu, 05/01/2014 - 15:40 | 4717333 ejmoosa
ejmoosa's picture

Or rising rates would attract funds that are now sitting idle.  Rates will only rise so far as those dollars satisfy the demand for them.

 

Those dollars are the market's way of setting the price based on supply and demand.

 

What good are low rates if there is no demand?  As we can see, there is No good.

 

For God's sake, can't we get back to letting the market place iron this out for us?  It really did work well, before all the meddlers got involved.

Thu, 05/01/2014 - 14:20 | 4716977 LawsofPhysics
LawsofPhysics's picture

What garbarge is this? With the oligarchs in most contries doing whatever the fuck the want, the answer to how long this can continue (no rule of law/contracts etc.) is very clear.

It can and will continue until the bread, circuses, and oil can no longer actually be delivered.

Then and only then will things get very fucking real.

Thu, 05/01/2014 - 14:33 | 4717033 The_Ungrateful_Yid
The_Ungrateful_Yid's picture

Nuclear powered subs with nuclear tipped MIRv warheads guaranfuckingtees it will continue until theres nothing left.

Thu, 05/01/2014 - 17:36 | 4717782 RaceToTheBottom
RaceToTheBottom's picture

Did you mean Nuclear Powered FED with Nuclear tipped ZIRPs warheads?

Thu, 05/01/2014 - 14:21 | 4716982 rlouis
rlouis's picture

Interest rates won't go up until after the great reset - until then, nothing of significance.

Thu, 05/01/2014 - 14:44 | 4717093 Flakmeister
Flakmeister's picture

And after that reset, nobody is going to be caring about interest rates...

Thu, 05/01/2014 - 14:33 | 4716985 Dr. Engali
Dr. Engali's picture

Does CNBS really have to push me a push an alert every fucking time somebody signs up for Zerocare? Here is an idea... send me an alert when somebody pays their bill.

 

BTW... Rates are never going up above 3.5% on the ten year.

 

Edit: It's been my prediction and I'll reiterate it now, we will see a one handle on the ten year before this is over with.

Thu, 05/01/2014 - 14:34 | 4717043 CrashisOptimistic
CrashisOptimistic's picture

Every Senate Democrat up for election is going to live or die on Obamacare, even though most want to talk about something else. Their strategists have concluded they can't change the subject so their only hope is to persuade the populace that it is a rousing success.

That will be the narrative for the next 6 mos.

Thu, 05/01/2014 - 14:51 | 4717114 LawsofPhysics
LawsofPhysics's picture

if this is the case it sets all the dems up for that "it's the economy stupid" response by voters...

Thu, 05/01/2014 - 15:47 | 4717377 NotApplicable
NotApplicable's picture

How about a two handle on the thiry?

BTW, I consider those CNBS alerts to be the best infotainment money can't buy. I can't count the number of times I've gotten one about the same time as I see a ZH post on the same subject... with the exact OPPOSITE interpretation.

As always, do it for teh LULZ.

Thu, 05/01/2014 - 19:18 | 4718097 LooseLee
LooseLee's picture

OK. I'm interested. At 1% on the 10yr, what do the NAS, DOW, S&P, and GOLD trade at? You are implying MASSIVE deflation, you know?

Thu, 05/01/2014 - 14:22 | 4716990 jubber
jubber's picture

forgot to mention the Zillions in debt....

Thu, 05/01/2014 - 14:26 | 4717008 fonzannoon
fonzannoon's picture

The fed basically owns the long end of the curve. So yields can't explode higher. Everyone figured out last yr that at 3% on the 10yr the EM's started blowing up so that is the redline. so now everyone is piling into bonds. The fed's actually trying to force the long end up (big NFP) to stop everyone from piling in because they know there is a cap...and oh yeah negative gdp....

They need to just set the 10yr at 2.75% and the 30yr at 4% and execute anyone who tries to move it off those targets.

Thu, 05/01/2014 - 14:29 | 4717026 LawsofPhysics
LawsofPhysics's picture

"They need to just set the 10yr at 2.75% and the 30yr at 4% and execute anyone who tries to move it off those targets." -

Okay, that's funny shit.

Thu, 05/01/2014 - 14:32 | 4717032 Grande Tetons
Grande Tetons's picture

He is a desparate man that is about to lose a sandwich. 

Thu, 05/01/2014 - 14:35 | 4717038 LawsofPhysics
LawsofPhysics's picture

Very monty-python "ish"...

All liquidity is fungible.  Plenty in the hands of the PDs, and with treasure issuance down (smaller deficit, now matching taper) they have some room to relax for a while.

The real cost of energy over the next year will be what makes things interesting.

Thu, 05/01/2014 - 14:35 | 4717048 fonzannoon
fonzannoon's picture

a virtual sandwich, whatever that is. i'm still torn on this one and would not put a real sandwich on it. There is a chance yellen is holding a flaming bag of shit.

Thu, 05/01/2014 - 14:36 | 4717054 Dr. Engali
Dr. Engali's picture

Ooh....ooh... what's the bet? I might want in on the action?

Thu, 05/01/2014 - 14:35 | 4717050 Dr. Engali
Dr. Engali's picture

Does he have another bet out there that I don't know about?

Thu, 05/01/2014 - 14:40 | 4717076 Grande Tetons
Grande Tetons's picture

NFP miss is the bet. I am on the miss side. 

Thu, 05/01/2014 - 14:34 | 4717045 pods
pods's picture

Sounds plausible fonz.

What are your thoughts bout the Mexicans?

pods

Thu, 05/01/2014 - 14:47 | 4717086 fonzannoon
fonzannoon's picture

"Leo the fart was a good man...a flatulent man"

(my favorite arnold quote)

the mexicans are a fine people pods. good hardworking people, family people. but would they not be better off being used as speed bumps? that is the question we all need to be asking.

Thu, 05/01/2014 - 14:38 | 4717063 CrashisOptimistic
CrashisOptimistic's picture

I'd say no.

Way too many member banks pressuring their local Fed governor to avoid killing housing.  Personally I can't think a few bps on the mortgage matters, but by now they are desperate and will demand the Fed not allow a single uptick in those mortgage rates.

So it's hard to rationalize a managed level higher by any amount at all.

Thu, 05/01/2014 - 14:44 | 4717094 The Most Intere...
The Most Interesting Frog in the World's picture

I thought Belgium owned the long end???

Thu, 05/01/2014 - 19:20 | 4718111 LooseLee
LooseLee's picture

You have just defined a 'COMMUNIST' organization, you know?

Thu, 05/01/2014 - 14:26 | 4717009 vote_libertaria...
vote_libertarian_party's picture

"if interest rates are a reflection of economic growth, inflation and wages, as the first chart above suggests, then rates are likely "fairly valued.""

 

The big friggin other driver of interest rates is the supply/demand equilibrium.  As the Treasury has ramped up supply over the past 5 years it was equaled (exceeded?) by the demand from the Fed.  When the Fed pulls away their portion of the demand prices will drop.  Bonds will drop like a rock because there is no replacement for $100B per MONTH.

 

Except for Belgium of course...

Thu, 05/01/2014 - 14:30 | 4717029 TheRideNeverEnds
TheRideNeverEnds's picture

Well interest rates are falling like a rock from the sky and the markets are milling about at all time highs.  The sum is super bullish; new highs are a given, dramatically higher highs at that.  There is no question that this market is going higher, none.  

Thu, 05/01/2014 - 14:33 | 4717037 useless_fact
useless_fact's picture

Manulife One is a unique all-in-one account that allows you to combine your mortgage, personal loans and lines of credit with your income and short-term savings. This could save you thousands of dollars over the life of your mortgage

Thu, 05/01/2014 - 14:35 | 4717051 AvoidingTaxation
AvoidingTaxation's picture

Just fix BY LAW an interest rate at 2% on the 30y bonds.

So easy.

FEMA camp for the dissenters.

Thu, 05/01/2014 - 14:39 | 4717070 CrashisOptimistic
CrashisOptimistic's picture

Not inconceivable.

Thu, 05/01/2014 - 14:41 | 4717080 buzzsaw99
buzzsaw99's picture

they don't need a law they have the fed

Thu, 05/01/2014 - 15:49 | 4717387 NotApplicable
NotApplicable's picture

Mandates, bitchez!

Thu, 05/01/2014 - 15:08 | 4717163 pitz
pitz's picture

You know how many billions, if not trillions of $$ that would basically be handing the pension funds, for doing nothing of value? 

Thu, 05/01/2014 - 15:43 | 4717354 22winmag
22winmag's picture

Storm the camps. Fire on anyone in a black uniform or blue helmet. Watch the weenies fold up like inexpensive lawn chairs.

Thu, 05/01/2014 - 14:36 | 4717055 buzzsaw99
buzzsaw99's picture

everybody knows interest rates will rise. yEAH, right! LAUGH MY ASS OFF!!

Thu, 05/01/2014 - 15:22 | 4717136 Flakmeister
Flakmeister's picture

Closely related to all this:

 

BP takes $520 mil writedown after ditching plan to develop US Utica shale
London (Platts)–29Apr2014/657 am EDT/1057 GMT

BP said Tuesday it is dropping plans to develop its Utica shale acreage in northeastern Ohio as it moves to overhaul its poorly performing onshore shale assets in the US.

 BP said it has taken a $521 million write-off relating to the Utica shale for the first quarter of 2014 after lackluster appraisal results from initial well tests.

“As a consequence of appraisal results. BP has decided not to proceed with development plans in the Utica shale,” the company said in an earnings release.

The move comes almost two months after BP announced plan to shift its shale-rich onshore oil and gas assets in the US to a new business to better compete with smaller, more efficient companies such as those which spearheaded the US shale gas boom.

BP said it needed a more nimble business model to reap greater value from the assets, with faster decision-making, quicker field developments and more efficient cost management.

Shell last year announced a strategic review of its US shale portfolio after taking a $2.1 billion impairment on its position due to dire US gas prices.

In Shell’s case, it is targeting its loss-making Americas and oil-product divisions which are tying up a combined $80 billion, or 35% of its total capital employed.

BP signed an agreement to lease about 84,000 acres in the Utica/Point Pleasant Shale formation in northeastern Ohio in March 2012. The play is at a depth of about 6,000 feet and is of a similar thickness to the Marcellus Shale, with the potential to deliver “higher liquids rates,” BP said at the time.

The Ohio Department of Natural Resources estimated a recoverable Utica shale potential of 1.3 billion-5.5 billion barrels of oil and 3.8 Tcf-15.7 Tcf of natural gas, BP has said.

BP holds a significant portfolio of unconventional resources in the US which are estimated to hold a total of 7.6 billion barrels of oil equivalent.

The assets, which include stakes in the Fayettevile and Eagle Ford shale plays, cover a total 5.5 million acres and an interest in over 21,000 wells.

BP currently produces around 300,000 boe/d in the continental US states, also know as the onshore Lower 48, much of which is gas from shale or other unconventional sources.

Thu, 05/01/2014 - 15:04 | 4717150 ebworthen
ebworthen's picture

Please God, please...8% on the 30 year Treasury...

Thu, 05/01/2014 - 15:06 | 4717158 pitz
pitz's picture

Bye-bye insurance companies, banks, and most pensions if that happened.  As they're chock-full of that long-term crap currently marked at dramatically lower interest rates.

Thu, 05/01/2014 - 15:13 | 4717182 ebworthen
ebworthen's picture

Boo-fuckin'-hoo for the Banks and Insurers.

.Gov can bail out the pensions this time instead, or at least the pensioners.

Thu, 05/01/2014 - 15:05 | 4717156 pitz
pitz's picture

People should look to Canada over the past 35 years to see an example of an economy where there was zero realized equity risk premium.  It survived, although there are relatively few rich people there, and until recently, there wasn't a financial scammer on every streetcorner trying to take your money. 

Probably good to own gold/silver and the miners in a rising interest rate environment.  Raising the minimum IRR (MIRR) most profoundly has an impact on project feasibility, which ultimately serves to constrain supply and investment. 

Thu, 05/01/2014 - 15:07 | 4717157 The Most Intere...
The Most Interesting Frog in the World's picture

IDK kind of a compelling read but Ron Insana agrees to disagree...

Thu, 05/01/2014 - 15:27 | 4717222 besnook
besnook's picture

that chart more closely correlates with the inflation caused by going full fiat than interest rates. if interest rates rise this time it will be because the dollar has lost its reserve status(the ultimate sanction) and the sandp will launch to the moon a la zimbabwe.

Thu, 05/01/2014 - 16:25 | 4717534 SheepDog-One
SheepDog-One's picture

'Rising rates'....yea sure, I'll believe that fantasy when I actually see it...ZIRP 4eva.

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