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Old 08-15-2019, 11:44 AM   #1
TeamAmerica
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Default Prepare for landing....the US economy

Prepare for landing - i'm starting to believe it will be a bit bumpy. The Fed has lowered interest rates as "insurance" for our economic expansion. they are winding down their balance sheet reduction program. Some say we have the BEST economy ever in history! all time highs in the S&P 500! record low unemployment!

What do you think? do you believe it?

10 year bond rates went below 1.6% (historic lows). The rates are "inverted" meaning you are getting a lower return on 10 year bonds than 2 year bonds. They say this is a recession warning like we had in 2007! bloomberg has reported that $16T in global debt is negative yielding. US REAL interest rates are negative (meaning that inflation is higher than what you can earn on your cash). god bless you if you are an american saver because the american borrower is hosing you on your interest income, they are getting cheap money to go spend on who knows what.

the Fed has never engineered a soft landing on a recession so be prepared. interest rates are already below "normal", so the Fed will have less room to lower them when we REALLY need it. do you have a cash reserve? when will you start buying again? on the way down, the way up?

what stocks would you buy right now? i think Matador (MTDR) oil and gas is a good buy. Ruger (RGR) is cheap for obvious reasons.
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Old 08-15-2019, 11:56 AM   #2
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While an inverted yield curve has preceded recessions in the past, not every inverted yield curve is followed by a recession. I think it was Chase that just said if the Gov't didn't own so many T-notes, the yield curve would not have inverted. I am not an economist but all I am hearing indicates that the inversion is not a great predictor of a recession this time. Janet Yellen just came out and said the same.
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Old 08-15-2019, 12:07 PM   #3
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Txhuntr2 - agree, there is no poison pill out there which makes this tough. the yield inversion doesn't bother me as much as the target Fed rate. End of 2007, the rate was 4.25%, currently we are at 2% - again, not much room to help when tough times arrive.

also, there are a number of articles that track uses of corporate debt. it seems an unusually high amount is being spent on share buybacks rather than investing in the business, acquisitions, etc. that would expand the economy. share buybacks are good for investors but means management may be out of ideas to grow the business (or it is too expensive to grow the business).
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Old 08-15-2019, 12:14 PM   #4
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All I know is when people start freaking out is when I start buying. 2008 when everything took a dump, I purchased two properties, a truck, and a RV. The way I look at it is it is all manipulated by those in power and I will not allow them to place fear in my life. I just keep rocking along.



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Old 08-15-2019, 12:25 PM   #5
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Don’t sweat it. Ole Hank said you’ll never get out of this world alive. And I ain’t ever seen an armored car in a funeral procession.
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Old 08-15-2019, 12:29 PM   #6
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All I know is when people start freaking out is when I start buying. 2008 when everything took a dump, I purchased two properties, a truck, and a RV. The way I look at it is it is all manipulated by those in power and I will not allow them to place fear in my life. I just keep rocking along.



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Iíll be ready too, with stacks of cash in hand. If things go south, Iím hoping to pick up a mid sized excavator and a D4XL size dozer for pennies on the dollar. Maybe even a big truck too. Where there is panic and chaos, there is money to be made.
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Old 08-15-2019, 12:36 PM   #7
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I'll wait and see what happens. Been watching a few stocks for a while. OPD and HOME are two I have been watching drop like a rock. Retail is not necessarily where I would want to be in a recession though. It is already a struggling area thanks to Amazon ruining retail.

Would be nice if rates go a little lower and I can refi the house for a lower note.
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Old 08-15-2019, 01:13 PM   #8
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Economists I follow are saying that the current yield curve shows a bubble in the bond market rather than impending economic collapse. It's hard to have a recession with historically low unemployment, increased wages, low interest rates, reduced government regulation, growing corporate profits, etc... The trade war and cost of the tariffs are definitely a drag, but (so far) not a big enough drag to offset all the rest of the positive fundamentals that currently exist in the economy. As low as interest rates are in the US, they're even lower in several other countries - even negative in a few. Lots of folks around the world that want to hold some safe bonds are buying US bonds since they pay more than other governments' bonds right now. Couple that with the Fed still holding huge amounts of Treasuries, and you have a really high demand for US bonds. That leads to higher prices, which leads to lower yields. It has nothing to do with some magical ability for the yield curve to predict or cause a recession.


There's definitely another recession coming eventually. There's always another one. Everything is cyclical. But the fundamentals will need to shift in a negative direction before that can happen. Right now the fundamentals are largely positive for continued growth.

None of that means that the stock market can't experience some wild volatility. It can and will, regardless of what reality is sometimes.
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Old 08-15-2019, 01:29 PM   #9
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FWIW, The US is practically the only place in the world overseas investors can get a positive return on treasuries/bonds. As a result their money is coming in like a tidal wave pushing our rates lower.

Also remember that after that 800pt slide the S&P was still up 13% for the year.
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Old 08-15-2019, 01:30 PM   #10
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What Shane said.

I define recession as people having a difficult time getting a job or making a living wage. I don't think we're even close. The media will define it any way they can to drum up drama and fear.

My W.A.G. is markets do ok until it looks like a (D) will become POTUS Then we're screwed.

Don't get me wrong. The whole system is a scam and will fall apart at some point... But when that happens I don't think it will matter how much anyone has in the markets.
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Old 08-15-2019, 01:43 PM   #11
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Originally Posted by RiverRat1 View Post
What Shane said.

I define recession as people having a difficult time getting a job or making a living wage. I don't think we're even close. The media will define it any way they can to drum up drama and fear.

My W.A.G. is markets do ok until it looks like a (D) will become POTUS Then we're screwed.

Don't get me wrong. The whole system is a scam and will fall apart at some point... But when that happens I don't think it will matter how much anyone has in the markets.
I agree- the stock market and economy are two very different things. But at some point unemployment can actually be too low (record low can be a bad thing)! business can't grow if labor is not available. i'm in commercial real estate in dallas. where the construction crane is the state bird! you see so much being built, it is scary but also reassuring that the number of jobs coming here should sustain us for a while.

and yes, politics should scare the crap out of us all. The biggest threat to Trump's re-election is a painful recession in 2020.
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Old 08-15-2019, 01:48 PM   #12
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The Dems are banging the rescission drum ahead of this up coming election. Throwing stuff at the wall and seeing what sticks...........
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Old 08-15-2019, 02:27 PM   #13
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They have been talking about this on Fox News for several days but this morning WalMarts quarterly earnings came in better than expected which is an indicator that consumer confidence in the economy is still fairly strong.
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Old 08-15-2019, 02:50 PM   #14
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Retail sales for July came out today and the number was strong. Remember the consumer makes up 2/3’s of the economy.

Est- .4% Act - 1.0%
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Old 08-15-2019, 03:01 PM   #15
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Quote:
Originally Posted by RiverRat1 View Post
What Shane said.

I define recession as people having a difficult time getting a job or making a living wage. I don't think we're even close. The media will define it any way they can to drum up drama and fear.

My W.A.G. is markets do ok until it looks like a (D) will become POTUS Then we're screwed.

Don't get me wrong. The whole system is a scam and will fall apart at some point... But when that happens I don't think it will matter how much anyone has in the markets.
The official definition of "recession" is two or more consecutive quarters of GDP declines (negative growth).

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Originally Posted by Russ79 View Post
They have been talking about this on Fox News for several days but this morning WalMarts quarterly earnings came in better than expected which is an indicator that consumer confidence in the economy is still fairly strong.
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Retail sales for July came out today and the number was strong. Remember the consumer makes up 2/3’s of the economy.

Est- .4% Act - 1.0%
Low unemployment + higher wages + lower taxes + low interest rates = strong consumer spending = strong corporate profits
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Old 08-15-2019, 04:44 PM   #16
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The current cycle of longer expansion followed by deep recession is stressful. 8 quarter moderate expansion followed by 2 quarter mild recession would be about perfect. There seems to be no way for the fed or government to control these things and when they do try, it usually backfires.
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Old 08-15-2019, 05:37 PM   #17
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Why would we want the government to control it? The free market is far more efficient.
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Old 08-15-2019, 06:07 PM   #18
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Better off not watching the news and making investment decisions from what they are screaming about on TV. They live for drama.

Lesson learned in 1997 when everyone I worked with was in panic attacks because we all lost a lot of money in 401k, mutual funds and other investments. I never did anything and kept investing, it all came back and then some. I am conservative by nature and do not pick any extremely high risk investments,maybe I should but my pea brain wont let me.
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Old 08-15-2019, 06:33 PM   #19
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Retail sales for July came out today and the number was strong. Remember the consumer makes up 2/3ís of the economy.

Est- .4% Act - 1.0%
Thatís good news.

Iíll second what was said earlier, long term rates wouldnít be so low if the Fed hadnít/wasnít still manipulating the long term rates. They still hold billions of dollars on their balance sheet that has artificially suppressed long term rates (imo). Therefore, if the Fed werenít involved and we were to let the market sort itself out, I donít think the yield curve would be inverted.
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Old 08-15-2019, 07:55 PM   #20
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Originally Posted by Shane View Post
Economists I follow are saying that the current yield curve shows a bubble in the bond market rather than impending economic collapse. It's hard to have a recession with historically low unemployment, increased wages, low interest rates, reduced government regulation, growing corporate profits, etc... The trade war and cost of the tariffs are definitely a drag, but (so far) not a big enough drag to offset all the rest of the positive fundamentals that currently exist in the economy. As low as interest rates are in the US, they're even lower in several other countries - even negative in a few. Lots of folks around the world that want to hold some safe bonds are buying US bonds since they pay more than other governments' bonds right now. Couple that with the Fed still holding huge amounts of Treasuries, and you have a really high demand for US bonds. That leads to higher prices, which leads to lower yields. It has nothing to do with some magical ability for the yield curve to predict or cause a recession.


There's definitely another recession coming eventually. There's always another one. Everything is cyclical. But the fundamentals will need to shift in a negative direction before that can happen. Right now the fundamentals are largely positive for continued growth.

None of that means that the stock market can't experience some wild volatility. It can and will, regardless of what reality is sometimes.

Right on the money.
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Old 08-15-2019, 08:19 PM   #21
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The Dems are banging the rescission drum ahead of this up coming election. Throwing stuff at the wall and seeing what sticks...........


X2
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Old 08-15-2019, 09:51 PM   #22
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The Dems are banging the rescission drum ahead of this up coming election. Throwing stuff at the wall and seeing what sticks...........
Yep. All it is. This is just the next play in line for them.
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Old 08-15-2019, 11:45 PM   #23
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I cannot disagree more. The kind of money that can create and inverted yield curve or cause a 3% daily swing in the market does not march to a dem or rep drummer at all. They march to their own drummer named ROI. They have more in common with foreigners of similar means than any political party. While others of you are feeling smug because in your mind buy and hold investing works and you doubled your money over time they increased their wealth 8X. On the down cycle they turn your ERISA money into their money - when your money goes to half it value they double theirs - then when you get back to even they have quadrupled theirs. Then when you have finally doubled they are 8X. This is the magic of when the finance industry writes laws for the finance industry. This is the magic of corporate sponsorship of our campaign finance system. So tonight bend over and give a good cheer for your nightly news tribe ("Go FOX - Go CNN") you won't even notice the tickle behind you.
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Old 08-16-2019, 06:46 AM   #24
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Yep. All it is. This is just the next play in line for them.
Yup, this was a trial run to see if itís hurts trump or not, I guarantee you the talk of recession will be back about 3 months before election. Itís all they have they canít win on policy or debate.
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Old 08-16-2019, 11:47 AM   #25
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I think it is kinda' ironic that a top ranking Democrat on the Finance committee said last week that the only thing that can stop Trump is a recession and for no apparent reason the Fed lowers interest rates.

Epoch Times reported this morning that the bond market is not signalling a recession. (Google "Bond Market Not Signaling a Recession, Experts Say")
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Old 08-16-2019, 01:26 PM   #26
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Originally Posted by Dusty Britches View Post
I think it is kinda' ironic that a top ranking Democrat on the Finance committee said last week that the only thing that can stop Trump is a recession and for no apparent reason the Fed lowers interest rates.

Epoch Times reported this morning that the bond market is not signalling a recession. (Google "Bond Market Not Signaling a Recession, Experts Say")
Yup. Theres absolutely no reason to lower rates. Needs to hold steady and shake out the chaff. That way economy actually progresses.
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Old 08-16-2019, 04:06 PM   #27
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Yup. Theres absolutely no reason to lower rates. Needs to hold steady and shake out the chaff. That way economy actually progresses.
Agreed, rates could even increase to reward savers. The rules which relaxed the cash reserves required to be held by banks along with the lowering of the fed rate to near zero put the last recovery squarely on the backs of those born before 1950 who held much of their savings in CDs. It was a good deal for the large financial institutions though. The were allowed to borrow money for nothing and lend it out at a profit. It is not the fault of political parties, just big time bankers helping out big time bankers.
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Old 08-16-2019, 06:01 PM   #28
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Agreed, rates could even increase to reward savers. The rules which relaxed the cash reserves required to be held by banks along with the lowering of the fed rate to near zero put the last recovery squarely on the backs of those born before 1950 who held much of their savings in CDs. It was a good deal for the large financial institutions though. The were allowed to borrow money for nothing and lend it out at a profit. It is not the fault of political parties, just big time bankers helping out big time bankers.
Boils down to legalized theft.
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Old 08-16-2019, 07:08 PM   #29
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Things aren’t really great up here economically right now, so I sure hope it doesn’t get too much worse.

It’s bound to crash out eventually, and I guess my neck of the woods is fairly insulated from major economic swings anyway. I think a lot of real estate/land investors stand to get burned on the next down turn. I see people paying quite a bit more than they should on ground that can’t make them a dollar and I’m sure there’s a ton more of that going on down there & in areas with larger population bases.

Last edited by Razrbk89; 08-16-2019 at 07:08 PM. Reason: Typo
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Old 08-16-2019, 07:45 PM   #30
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I think it is kinda' ironic that a top ranking Democrat on the Finance committee said last week that the only thing that can stop Trump is a recession and for no apparent reason the Fed lowers interest rates.
My thoughts as well.


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Old 08-16-2019, 07:47 PM   #31
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Lower interest rates is a stimulus.
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Old 08-16-2019, 11:34 PM   #32
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No recession this time. Too many people working, saving money, paying bills. If unemployment were higher - then yes a recession is happening. People have forgotten that a 2% interest rate is very stimulative to the economy. I think we should have stayed at 2% and let the world know that is what it is going to be for a while. That would create certainty. Now?? Why take a loan when you know the rate will be lower in the future?
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Old 08-17-2019, 12:57 AM   #33
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Quote:
Originally Posted by Razrbk89 View Post
Things arenít really great up here economically right now, so I sure hope it doesnít get too much worse.

Itís bound to crash out eventually, and I guess my neck of the woods is fairly insulated from major economic swings anyway. I think a lot of real estate/land investors stand to get burned on the next down turn. I see people paying quite a bit more than they should on ground that canít make them a dollar and Iím sure thereís a ton more of that going on down there & in areas with larger population bases.


I moved form North Carolina(Charlotte) in 2011 to Baton Rouge and it was like going back in time.

Carolina Banking 2008 crash to Baton Rouge and the influx of Catrina so there never was a slow down.


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Old 08-17-2019, 02:08 AM   #34
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Originally Posted by Shane View Post
Lower interest rates is a stimulus.
Agreed it should stimulate some industries that depend on working credit, also forces everyone except the accredited and in some cases sophisticated investors into the stock market. It is near that point already. Then we will get to enjoy the magic show as the small investors money turns into the financial institutions money as they short them all the way down.

(Go FOX, Go CNN) Ouch that doesn't tickle anymore
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Old 08-17-2019, 03:00 AM   #35
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Article is a carp but the charts are great. Spend some time on the 3 charts and create your own story.

https://www.cnbc.com/2019/07/02/this...n-history.html
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Old 08-17-2019, 09:00 AM   #36
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Originally Posted by Shane View Post
Economists I follow are saying that the current yield curve shows a bubble in the bond market rather than impending economic collapse. It's hard to have a recession with historically low unemployment, increased wages, low interest rates, reduced government regulation, growing corporate profits, etc... The trade war and cost of the tariffs are definitely a drag, but (so far) not a big enough drag to offset all the rest of the positive fundamentals that currently exist in the economy. As low as interest rates are in the US, they're even lower in several other countries - even negative in a few. Lots of folks around the world that want to hold some safe bonds are buying US bonds since they pay more than other governments' bonds right now. Couple that with the Fed still holding huge amounts of Treasuries, and you have a really high demand for US bonds. That leads to higher prices, which leads to lower yields. It has nothing to do with some magical ability for the yield curve to predict or cause a recession.


There's definitely another recession coming eventually. There's always another one. Everything is cyclical. But the fundamentals will need to shift in a negative direction before that can happen. Right now the fundamentals are largely positive for continued growth.

None of that means that the stock market can't experience some wild volatility. It can and will, regardless of what reality is sometimes.
I think I fear a bubble in the bond market much more than you imply here. Importance/Ability to borrow in our market can't be understated. We are addicted to debt. In my real estate industry it can have severe impacts on municipalities ability to fund infrastructure for development (sewers roads etc). Land developers and home builders will be passing that cost on to the homeowner. I hope they can continue to streamline banking regs to allow them to lend the cash they are sitting on now.

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Old 08-17-2019, 09:28 AM   #37
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The law of gravity says that what goes up must come down. Best thing is to place oneself in a position to catch some of what's falling.

That's it, I'm outta here.
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Old 08-17-2019, 03:24 PM   #38
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I think it is kinda' ironic that a top ranking Democrat on the Finance committee said last week that the only thing that can stop Trump is a recession and for no apparent reason the Fed lowers interest rates.
The fed decides whether to lower or raise rates based upon 8 regularly scheduled meetings per year. The timing would seem coincidental.

As for why they lowered it, they lay their reasoning out in this statement:

https://www.federalreserve.gov/monet...20190731a1.pdf

More detail from the meeting minutes will be available at the end of the month here:

https://www.federalreserve.gov/monet...ccalendars.htm

Note: this isn't my endorsement of their decision being the correct one. Just posting links.

Last edited by sir shovelhands; 08-17-2019 at 03:27 PM.
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Old 08-18-2019, 06:06 PM   #39
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Quote:
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I think I fear a bubble in the bond market much more than you imply here. Importance/Ability to borrow in our market can't be understated. We are addicted to debt. In my real estate industry it can have severe impacts on municipalities ability to fund infrastructure for development (sewers roads etc). Land developers and home builders will be passing that cost on to the homeowner. I hope they can continue to streamline banking regs to allow them to lend the cash they are sitting on now.

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I fear bonds also. May never happen but every city is bonded out for growth. A lot of them are banking on a lot of growth. Small cities have billions in bonds.

So what happens when something happens that stops population growth? IMO if our population went down across the country the stock market would be screwed WAY more than people think.
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Old 08-19-2019, 05:28 AM   #40
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After the Russia hoax, nothing else has worked for them. And of course, they have their friends in the MSM ready to parrot their doom and gloom.
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The Dems are banging the rescission drum ahead of this up coming election. Throwing stuff at the wall and seeing what sticks...........
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Old 08-28-2019, 05:15 PM   #41
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Saw another interesting note on the market (not necessarily the broad economy). Berkshire Hathaway (Buffet) has the highest level of cash reserves since shortly before the 2008 recession.

Still may not mean a recession but it is a signal that a correction may be here soon.
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Old 09-09-2019, 09:51 PM   #42
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I'll wait and see what happens. Been watching a few stocks for a while. OPD and HOME are two I have been watching drop like a rock. Retail is not necessarily where I would want to be in a recession though. It is already a struggling area thanks to Amazon ruining retail.

Would be nice if rates go a little lower and I can refi the house for a lower note.
How low are you waiting for? I've been locking 3.625% over and over with several 3.5%. We're within 1/8 of the lowest that interest rates have been in the history of home loans. I'm refinancing a dozen TBHers right now. I'd love to take a look at your scenario. Shout at me. Trey@treypowers.com
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Old 09-09-2019, 10:03 PM   #43
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I just locked my new home purchase 30yr fixed at 4.0%

I bought my house in 2008 and got 3.125%

Sent from my SM-G955U using Tapatalk
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Old 09-09-2019, 11:13 PM   #44
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Originally Posted by TeamAmerica View Post
Saw another interesting note on the market (not necessarily the broad economy). Berkshire Hathaway (Buffet) has the highest level of cash reserves since shortly before the 2008 recession.

Still may not mean a recession but it is a signal that a correction may be here soon.
That is interesting.
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Old 09-09-2019, 11:42 PM   #45
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Originally Posted by TeamAmerica View Post
Saw another interesting note on the market (not necessarily the broad economy). Berkshire Hathaway (Buffet) has the highest level of cash reserves since shortly before the 2008 recession.

Still may not mean a recession but it is a signal that a correction may be here soon.
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Originally Posted by PlanoDano View Post
That is interesting.
It could also mean that the cash that he normally might keep in bonds is just being held in cash right now, due to the low yields in the bond market and the possibility of a corresponding bubble in bond prices. Rather than parking it in bonds that could pay a little interest while waiting on the next acquisition, maybe he's just holding it in cash since the yield isn't much different than bonds but cash doesn't have the downside risk that bond values do.

?? Just another possibility. I don't know Mr. Buffet, so I couldn't say what his thinking is for sure.
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Old 09-09-2019, 11:45 PM   #46
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Or maybe BRK A is gonna start paying a dividend finally and he needs a pile of cash to fund it.
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Old 09-11-2019, 10:24 AM   #47
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Originally Posted by Shane View Post
It could also mean that the cash that he normally might keep in bonds is just being held in cash right now, due to the low yields in the bond market and the possibility of a corresponding bubble in bond prices. Rather than parking it in bonds that could pay a little interest while waiting on the next acquisition, maybe he's just holding it in cash since the yield isn't much different than bonds but cash doesn't have the downside risk that bond values do.

?? Just another possibility. I don't know Mr. Buffet, so I couldn't say what his thinking is for sure.
Buffett is not a bond investor. he has gone on record saying that he still prefers equities. https://www.cnbc.com/2019/02/25/buff...-a-second.html

But he is obviously not impressed with the current valuation of equities and still hurting from the kraft heinz acquisition. or is looking for the next Whale to buy.

Trump continued his push today for zero or negative interest rates. He seems to believe there are no losers in this scenario. aside from the fact that it would virtually eliminate any of the fed's tools to help with a recession, it would also reduce the incentives of foreign investors to send their capital here.

Trump appears to have a real estate mind set and believes we should just refinance our debt (maybe 100 year treasuries). he has been a borrower all his life and doesn't seem interested in the lenders' best interest (i.e. the american savers). the forecasts are one rate reduction this month, another before year end and one in 2020. hopefully some can refi their mortgages or buy the ranch they have been dreaming of!
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