Booming jobs and falling gas prices make this the best economy in 15 years

[akphidelt]

That type of inflexibility would be absurd as things can and do change. However, the obstacles to deviate from a set policy should be far greater than they are. I said that in a previous thread.

It isn't a joke, atleast make the fed go through congress to enact such radical change on a whim over what they perceive as excessive weakness.

Why in the world would you ever want the Fed to go through Congress? That is the worst idea ever. You want people in Congress determining monetary policy? The last thing we ever need is the Sarah Palin/Ted Cruz types having control over our monetary system.

And it's not that I don't read their stuff, it's just the talking points never change. It's always the governments fault. That's their job in their think tanks is to figure out ways to place blame on the government to push their weird ass conservative ideology.

 

[akphidelt]

If it was as easy as saying "increase rates, good economy, decrease rates, bad economy", the Fed's job would be easy as shit. There is just simply no correlation between interest rates which means interest rates don't entirely determine demand for credit. In fact, if you look at the housing bubble, the macro effect on lending was not even that significant. To me all the evidence points to regulatory problems within that single sector. I mean you look at the graph, the two points of the lowest interest rates we had correspond to two of the lowest increases in bank credit we have had. There's just no evidence that interest rates are the driving force behind demand for credit. One of the reasons QE1/2/3 was doomed for failure from the beginning.

 

[PatsFan1283]

Whatever form of gov't you think it needs to go through. There just needs to be more discussion/transparency of fed policy given it's massive impact on our economic system.

Maybe going through Congress isn't perfect, but neither is just being able to change rates so drastically on a whim based on perception. As we've discussed this helps create bubbles. Whether it be in stocks, housing, corporate debt.

Let's just make money cheap because the economy is weak and there will be no negative fallout whatsoever seems like a decision that should have more obstacles before being enacted.

 

[SheriffJoe]

 

[akphidelt]

Whatever form of gov't you think it needs to go through. There just needs to be more discussion/transparency of fed policy given it's massive impact on our economic system.

Maybe going through Congress isn't perfect, but neither is just being able to change rates so drastically on a whim based on perception. As we've discussed this helps create bubbles. Whether it be in stocks, housing, corporate debt.

Let's just make money cheap because the economy is weak and there will be no negative fallout whatsoever seems like a decision that should have more obstacles before being enacted.

You've simply provided no reason as to why the alternative would be better, just have pointed out there are flaws in our current system. And as the economy grows over the centuries and technology advances, there will always be new problems that can arise. But just because a group of surgeons make a mistake doesn't mean they should ask the groundskeepers to help them.

 

[PatsFan1283]

You've simply provided no reason as to why the alternative would be better, just have pointed out there are flaws in our current system. And as the economy grows over the centuries and technology advances, there will always be new problems that can arise. But just because a group of surgeons make a mistake doesn't mean they should ask the groundskeepers to help them.

http://cdn.theatlantic.com/static/m...erest rates and home prices shiller-56453.php

That is a graph of the Case-Shiller home price index and the fed funds rate. It clearly shows lower rates brought us higher prices. Well how did the prices get higher? That graph would seem to indicate lower rates played a role in that demand. I never said it wouldn't have happened regardless but by making money cheap you can incentivize speculation and risk. Isolated that is fine but as you know our economy is highly interconnected and policies like this become a major moral hazard.

I feel like everything I'm saying you pretty much know.

I don't even know if some type of congressional approval would work but it couldn't hurt. Just drastically changing policy like that should be much more of a national discussion than just being done anytime our country hits any type of snag in its growth.

 

[SheriffJoe]

You've simply provided no reason as to why the alternative would be better, just have pointed out there are flaws in our current system. And as the economy grows over the centuries and technology advances, there will always be new problems that can arise. But just because a group of surgeons make a mistake doesn't mean they should ask the groundskeepers to help them.

Boom! *Cue the Jon Stewart laugh track*

Just accept the fact you aren't very bright.

 

[akphidelt]

http://cdn.theatlantic.com/static/mt/assets/business/assets_c/2011/07/interest%20rates%20and%20home%20prices%20shiller-56453.php

That is a graph of the Case-Shiller home price index and the fed funds rate. It clearly shows lower rates brought us higher prices. Well how did the prices get higher? That graph would seem to indicate lower rates played a role in that demand. I never said it wouldn't have happened regardless but by making money cheap you can incentivize speculation and risk. Isolated that is fine but as you know our economy is highly interconnected and policies like this become a major moral hazard.

I feel like everything I'm saying you pretty much know.

I don't even know if some type of congressional approval would work but it couldn't hurt. Just drastically changing policy like that should be much more of a national discussion than just being done anytime our country hits any type of snag in its growth.

It doesn't show that at all. In fact it shows that regardless of interest rates home prices were relatively stable for over a century. That graph like I said before, pretty much has no correlation whatsoever. There are other mechanism that are driving home prices than interest rates. And the evidence points to major changes in lending standards and risk being mitigated within the mortgage market. There is simply no conclusion you can come to by looking at this graph that is statistically significant at all.

 

[PatsFan1283]

So what you are saying is the slashing of rates didn't play a role in increasing demand for housing? It was just underwriting standards?

It had nothing to do with the cost of capital becoming significantly cheaper over a short period of time?

I mean here is the Wiki entry for it

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#

Some market observers have been concerned that Federal Reserve actions could give rise to moral hazard.[SUP][35][/SUP] AGovernment Accountability Office critic said that the Federal Reserve Bank of New York's rescue of Long-Term Capital Management in 1998 would encourage large financial institutions to believe that the Federal Reserve would intervene on their behalf if risky loans went sour because they were “too big to fail.”[SUP][281][/SUP]
A contributing factor to the rise in house prices was the Federal Reserve's lowering of interest rates early in the decade. From 2000 to 2003, the Federal Reserve lowered the federal funds rate target from 6.5% to 1.0%.[SUP][282][/SUP]This was done to soften the effects of the collapse of the dot-com bubble and of the September 2001 terrorist attacks, and to combat the perceived risk of deflation.[SUP][279][/SUP]
The Fed believed that interest rates could be lowered safely primarily because the rate of inflation was low; it disregarded other important factors. According to Richard W. Fisher, President and CEO of the Federal Reserve Bank of Dallas, the Fed's interest rate policy during the early 2000s (decade) was misguided, because measured inflation in those years was below true inflation, which led to a monetary policy that contributed to the housing bubble.[SUP][283][/SUP]

 

[SheriffJoe]

 

[akphidelt]

So what you are saying is the slashing of rates didn't play a role in increasing demand for housing? It was just underwriting standards?

It had nothing to do with the cost of capital becoming significantly cheaper over a short period of time?

I mean here is the Wiki entry for it

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis#

Some market observers have been concerned that Federal Reserve actions could give rise to moral hazard.[SUP][35][/SUP] AGovernment Accountability Office critic said that the Federal Reserve Bank of New York's rescue of Long-Term Capital Management in 1998 would encourage large financial institutions to believe that the Federal Reserve would intervene on their behalf if risky loans went sour because they were “too big to fail.”[SUP][281][/SUP]
A contributing factor to the rise in house prices was the Federal Reserve's lowering of interest rates early in the decade. From 2000 to 2003, the Federal Reserve lowered the federal funds rate target from 6.5% to 1.0%.[SUP][282][/SUP]This was done to soften the effects of the collapse of the dot-com bubble and of the September 2001 terrorist attacks, and to combat the perceived risk of deflation.[SUP][279][/SUP]
The Fed believed that interest rates could be lowered safely primarily because the rate of inflation was low; it disregarded other important factors. According to Richard W. Fisher, President and CEO of the Federal Reserve Bank of Dallas, the Fed's interest rate policy during the early 2000s (decade) was misguided, because measured inflation in those years was below true inflation, which led to a monetary policy that contributed to the housing bubble.[SUP][283][/SUP]

Don't get me wrong, there are effects to the Fed's actions especially in financial markets. My argument isn't that interest rates mean nothing, it's just that interest rates do not dictate the demand for credit. It can have a reactionary affect to it but the data shows you can have high interest rates, high demand, high interest rates, low demand, low interest rates, low demand, low interest rates, high demand. There's simply no conclusion you can come to based on interest rates.

Given this understanding, I simply don't believe the grass is greener and that if the Fed doesn't lower rates that things wouldn't be worse. I think the Great Depression is a great example of how inaction can lead to far worse problems than what we experience from bubbles and busts that could be caused by lower interest rates.

 

[PatsFan1283]

So what do you think will happen to the assets that have already spiked when rates raise , or do you think they can just stay cheap forever?

 

[SheriffJoe]

Bubble? Meet The $25 Million Grilled-Cheese Truck



Submitted by Tyler Durden on 02/09/2015 23:24 -0500


There are some time-honoured signs of an impending market top.

One of them is that margin debt has peaked.

Another is that interest rates are going through the floor.

Another is that the velocity of money is also going through the floor.

Another is that Goldman Sachs’ Senior US Investment Strategist Abby Joseph Cohen reckons the stock market is relatively cheap, an opinion which she generously gave at a recent Barrons roundtable.

Barrons actually gave us two signs of a market top for the price of one (but then everything’s devalued these days) – their February 6th edition pointed out that the value of fine art sold at auction had quadrupled from $3.9 billion in 2004 to some $16.2 billion in 2014.

Barrons then tastefully offered readers a choice between the conclusions of malign ‘bubble’ and benign ‘boom’.

The problem is that in an environment of ubiquitous government manipulation, markets can trade at whatever levels central bankers want them to trade at, for a period at least.

So we’re not going to be rash enough to call a market top; we’ll merely draw attention to some anecdotal evidence of a certain, how shall we put it, irrational exuberance at work in the US stock market.

We tip our hat to the Wall Street Journal for the recent news that Carmine “Tom” Biscardi is on the hunt for Bigfoot, and is planning an IPO to fund the expedition:

“Mr. Biscardi and his partners hope to raise as much as $3 million by selling stock in Bigfoot Project Investments. They plan to spend the money making movies and selling DVDs, but are also budgeting $113,805 a year for expeditions to find the beast. Among the company’s goals, according to its filings with the Securities and Exchange Commission: “capture the creature known as Bigfoot.”

“Investment advisers caution that this IPO may not be for everyone. For starters, it involves DVDs, a dying technology, said Kathy Boyle, president at Chapin Hill Advisors. Then there is the Sasquatch issue. She reckons only true believers would be interested in such a speculative venture.”


​

This is a wonderful instance of life imitating art. Note the similarities between the Bigfoot IPO and The Onion’s satirical market scoop from November 1999 (the date is instructive):

“LAKE ERIE—Seeking to capitalize on the recent IPO rage on Wall Street, Lake Erie-based blue-green algae Anabaena announced Tuesday that it will go public next week with its first-ever stock offering.

“Anabaena, a photosynthesizing, nitrogen-fixing algae with 1999 revenues estimated at $0 billion, will offer 200 million shares on the NASDAQ exchange next Wednesday under the stock symbol ALG. The shares are expected to open in the $47-$49 range.”


​

Markets are allowed their petty indiscretions, of course. But these petty indiscretions seem to be piling up.

Bloomberg last week drew attention to the fact that shares of The Grilled Cheese Truck Inc. had commenced trading on the OTCQX marketplace under the ticker GRLD:

“Let’s look at the fundamentals of the Ft. Lauderdale, Florida-based company. Based on the 18 million shares outstanding and a recent stock price of $6 the company has a market value of about $108 million.

No matter how much you like grilled cheese… I can’t see this as a reasonable valuation.

“If you go to the company’s website, you will learn that ‘The company currently operates and licenses grilled cheese food trucks in the Los Angeles, CA area and Phoenix, AZ and is expanding into additional markets with the goal of becoming the largest operator in the gourmet grilled cheese space.’

“[A]ccording to the company’s financial statements, it has about $1 million of assets and almost $3 million in liabilities. In the third quarter of 2014, it had sales of almost $1 million, on which it had a net loss of more than $900,000.”

“I can’t think of a more interesting sign of the old irrational exuberance in equity markets than a publicly traded grilled cheese truck (four in this case) business trading at a $100-million-plus valuation. That sort of thing doesn’t happen unless there is significant excess in the markets.”
​

Any reference to a company seeking to dominate the “gourmet grilled cheese space” is desperately seeking a twin reference to a slogan from late 1999 (right before the bubble burst):

“Our business strategy is to lose money on every sale but make up for it in volume."​

 

[akphidelt]

So what do you think will happen to the assets that have already spiked when rates raise , or do you think they can just stay cheap forever?

Well, theoretically the objective of raising rates is to stop the level of increase in asset prices. So you expect there will be a very minor pullback. Not necessarily in the asset price itself but in the rate of increase of the asset price. We have decreased and increased rates many times in history, and most effects are short term. Asset prices can still rise or decrease regardless of minor changes to interest rates. If there's one thing we have learned in the last decade, central banks have much less power than people give them.

 

[SheriffJoe]

Grow your way out of debt???

 

[PatsFan1283]

I'm gonna buy like 500 shares of the Grilled Cheese truck tomorrow. Looks like a winner

Valuation down to 73M

 

[SheriffJoe]

I'm gonna buy like 500 shares of the Grilled Cheese truck tomorrow. Looks like a winner

Valuation down to 73M

“[A]ccording to the company’s financial statements, it has about $1 million of assets and almost $3 million in liabilities. In the third quarter of 2014, it had sales of almost $1 million, on which it had a net loss of more than $900,000.”

You can run any business as long as you can keep borrowing money.

 

[PatsFan1283]

The Grilled Cheese Truck, Inc. is an American entrepreneurial “emerging growth” company with a brand and menu that is widely followed throughout the nation. We believe that gourmet grilled cheese is the “new pizza”. Americans have grown up with this “culinary common denominator”, and the grilled cheese sandwich is the epitome of comfort food. The Grilled Cheese Truck is a fast growing, early mover in the gourmet food truck industry. Management believes that we are one of the most followed gourmet food trucks on Facebook, and we believe we are the only known gourmet food truck verified by Twitter.

 

[NFLTrends]

I just already have to deal with Joe's loon theories and I know how you operate so there is no reason to converse about this. I will give you a link to economists that believe the numbers would be lower, then you will say you don't believe them, and absolutely nothing will get done.

So you post a link and quote as a "fact"... but it is only what they "believe"?.

So how is it a fact?

So there is no proof that all those "millions" of jobs were created? No proof that those millions of jobs were "saved"?

So, technically, today, I created and save quite a dozen myself.

 

[NFLTrends]

How are the jobs "Booming" when the Labor Force participation rate is getting worse and worse?

http://data.bls.gov/timeseries/LNS11300000