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Fed Ends Zero-Rate Era

bloomberg.com

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Re: Fed Ends Zero-Rate Era

#131

Post by shostack »

downandout wrote: post #77

This will have an impact on the flow of money to VC's, which will have an impact on the flow of burnable cash to unprofitable startups. No more $1.5 million rounds for apps like Yo [1] (the investor community should be embarrassed and horrified that this kind of thing was getting financed anyway). Winter is indeed coming for those that don't have a business model, and that's a good thing. [1] http://www.businessinsid…

I wonder how big an impact this will have though. As much as there are apps without business models, there are many solid products solving real problems that already have real revenue and customers behind them contrary to the dotcom bubble.

Sure some tightening of the belt might happen, but is there really any way to say how much?

Re: Fed Ends Zero-Rate Era

#132

Post by beat »

cft wrote: post #120
roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. This means the end of 70% of the unicorns.

So maybe the industry might have to take some risks on younger businesses, rather than piling on yet another zillion dollars for the Series Q round of Unicorn Inc along with the timid institutional investors?

Re: Fed Ends Zero-Rate Era

#133

Post by eli »

brc wrote: post #129
roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

>We need the Federal government to stimulate aggregate demand at the consumer level. How? Investing tax dollars in a smarter manner Everyone - and I do mean everyone - would be better off if the fed government (and state and local) invested those tax dollars smarter by leaving the majority of them in the hands of those that earnt them . "There are four ways in which you can spend money. You can spend your own money o…

That seems like something that reasonable people could disagree about.

Re: Fed Ends Zero-Rate Era

#134

Post by brc »

msellout wrote: post #113
zeveb wrote: post #102

Earlier quoted context omitted.

> We need the Federal government to stimulate aggregate demand at the consumer level. Investing tax dollars in a smarter manner. Isn't it highly unlikely that tax dollars will be spent or invested more wisely than the original owners of those dollars would have spent or invested them, since no-one would have known the owners' preferences as well as the owners themselves? Keynesian pump-priming ends up thinking it mak…

> more wisely than the original owners ... would have invested It depends. If the original owners were a handful of wealthy oligarchs, that's likely to be worse (ie. more centralized) than as spent by a large, distributed bureaucracy. If the original owners were a large population of mostly middle-income and poor, that's likely to be better (ie. more decentralized) than government spending/investment. > government sp…

How do you categorise a set of 'wealthy oligarchs' as having 'worse' spending than a monolithic government, which we all know has terrible spending patterns and priorities.

Politicians spend money on vain projects to get themselves popular and re-elected- how is that not worse than a wealthy oligarch spending money on a gold plated fountain? At least the gold plated fountain would not be built on promises that the future (unborn) taxpayers will make up the tab.

The point here is that people tend to see the government as a relatively benign spender who sometimes gives money to others, while they automatically see a rich person spending money as terribly misdirected. When you impugn a government with perfect morals and individuals with terrible morals the thinking that results simply has to be wrong.

Re: Fed Ends Zero-Rate Era

#135

Post by redler »

brc wrote: post #114
dsr_ wrote: post #50

Earlier quoted context omitted.

If you want to stimulate aggregate demand at the consumer level, you need more people to have good jobs, so they can make money, so they can spend money. This would represent a reversal of the trend since 1970 towards greater income inequality. It is not clear to me that anyone is doing anything about that (except, of course, in the negative sense.)

Consumer demand is meaningless. Trying to push it is like trying to push a string. Demand is an artefact of production. Unless your economy is producing, you won't increase quality of life and wealth for all citizens. This point is obvious, but gets completely lost in all the frenzy around 'stimulating demand'. To buy something, first you have to produce something worthy of exchange. Everyone has to start from this p…

Supply and demand are entwined in a perpetual dance, and "if you build it they will come" only goes so far. A product has to find a market capable of making the purchase. Opening a Whole Foods supermarket in rural Tanzania isn't going to boost sales of Tom's of Maine Wicked Cool Toothpaste -- a product apparently worthy of exchange among sufficiently wealthy consumers in a different context.

Re: Fed Ends Zero-Rate Era

#136

Post by ones_and_zeros »

mywittyname wrote: post #117
pjungwir wrote: post #56

Earlier quoted context omitted.

Rising interest rates also mean that house prices should drop (or deaccelerate), right? If you figure a buyer has a fixed budget, the more they are paying in interest the less they can pay in principal. Not saying 0.25% will have much effect, but in principle don't they have that relationship?

Right, but 25 basis points is such a miniscule increase that it's not really going to do much. It's only a few hundred dollars to buy that amount in discount points.

Did you see that they anticipate to end 2016 at about 1.4% and 2018 somewhere over 3%?

Re: Fed Ends Zero-Rate Era

#137

Post by shostack »

dragonwriter wrote: post #84
pjungwir wrote: post #56

Earlier quoted context omitted.

Rising interest rates also mean that house prices should drop (or deaccelerate), right? If you figure a buyer has a fixed budget, the more they are paying in interest the less they can pay in principal. Not saying 0.25% will have much effect, but in principle don't they have that relationship?

> Rising interest rates also mean that house prices should drop (or deaccelerate), right? Compared to without the policy change (not necessarily compared to before the policy change, though implications of the latter type are frequently treated as if they were of the former type) higher interest rates should mean (with the common assumptions about the dynamics of the rest of the market) both lower prices and fewer sa…

I think the big question though is that in super hot markets like SF and the Peninsula, will the demand actually go down enough to slow things? There's a LOT of all cash offers still coming in from overseas. Sure they might have less competition, but I feel like the aggregate demand is so massive and available supply is so restricted (in large part due to Prop 13) that even higher interest rates wouldn't put a big damper on things.

Re: Fed Ends Zero-Rate Era

#138

Post by eli »

vinceguidry wrote: post #72
kasey_junk wrote: post #19

Earlier quoted context omitted.

Treasuries always dry up in front of fed announcements. It's marked on the calendar like job numbers and other macro items that can cause wild swings. Its much cheaper to just not trade during those times than it is to build out the models/risk management components for most market makers.

I'm home shopping at the moment, and my mortgage broker told me that he noticed a large hike in mortgage rates, is that due to this announcement and that I should wait a few weeks before locking in a rate?

http://www.cnbc.com/2015/12/16/why-the-fed-move-doesnt-matte...

Trying to time the market is tricky business.

Re: Fed Ends Zero-Rate Era

#139

Post by ubernostrum »

hodwik wrote: post #94
alttab wrote: post #75

Earlier quoted context omitted.

Can't tell if this is sarcasm or not. Sign of the times I guess.

Has to be sarcasm. People who actually believe that wouldn't say "politicians", they'd use some other euphemism, because they believe in some abstract trustworthy organization that's always being hampered by those damn politicians. Statists love their euphemisms: “investment” instead of “government spending” “shared sacrifices” instead of "wealth redistribution" "government officials" instead of "un-elected bureaucra…

Statists love their euphemisms

My irony detector has just exploded. Can you direct me to a completely-unregulated minarchist free-for-all market where I can buy one that merely poisons me and everyone in a hundred-mile radius? Because at least it would actually work.

Re: Fed Ends Zero-Rate Era

#140

Post by jpadkins »

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> We need the Federal government to stimulate aggregate demand at the consumer level. How? Investing tax dollars in a smarter manner.

How do you get 535 people (congress) to spend $3 trillion smarter? It's an impossible task. A fools errand. Even if we elected the 500 smartest people to congress, the results wouldn't be much better.

We need less of the economy flowing thru the federal government, not more.

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