How about that stock market!

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Nice to be able to discuss these things on here without getting banned. I've been in trouble in the past for just talking about these things.
 
BABMusic said:
It's this zero interest rate thing that screwed up the housing market. If that's what the goal is with this sell-off, they are going to cause an even larger divide between the haves and have nots. Contrary to what people thing, the 4.25-4.5 interest rate we have now is not "high". If our system cannot even handle 4.5 rates, then that shows you how weak everything is.
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I think you are conflating the Fed rate with mortgage rates.

The housing market is locked because people that purchased > 2 years ago did so when mortgage rates were lower (~3%). Current mortgage rates are now 6.5%. Nobody wants to sell and jump into a higher rate, so there is no inventory, which keeps prices elevated and the housing market distorted.

The Fed uses the overnight lending rate (the rate you mentioned) to regulate monetary policy, raising rates when the economy is hot (by making money more expensive to borrow) and lowering the rates when the economy needs to be juiced (to encourage spending).

The Fed is/was expected to cut the overnight lending rate by 25-100 basis points depending on who you believe, which would (indirectly) lower mortgage rates. If the Fed anticipates higher inflation this year (they are not stupid, they understand tariffs are inflationary), they will hold rates steady or possibly raise rates to accommodate higher inflation (make money more expensive). Mortage rates move in tandem and would increase, making the housing market problem even worse. But if, at the same time, the economy slows with higher inflation the question is—what do they do? That's anyone's guess.
 
JackTripper said:
I think you are conflating the Fed rate with mortgage rates.

The housing market is locked because people that purchased > 2 years ago did so when mortgage rates were lower (~3%). Current mortgage rates are now 6.5%. Nobody wants to sell and jump into a higher rate, so there is no inventory, which keeps prices elevated and the housing market distorted.

The Fed uses the overnight lending rate (the rate you mentioned) to regulate monetary policy, raising rates when the economy is hot (by making money more expensive to borrow) and lowering the rates when the economy needs to be juiced (to encourage spending).

The Fed is/was expected to cut the overnight lending rate by 25-100 basis points depending on who you believe, which would (indirectly) lower mortgage rates. If the Fed anticipates higher inflation this year (they are not stupid, they understand tariffs are inflationary), they will hold rates steady or possibly raise rates to accommodate higher inflation (make money more expensive). Mortage rates move in tandem and would increase, making the housing market problem even worse. But if, at the same time, the economy slows with higher inflation the question is—what do they do? That's anyone's guess.
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What do you make of the few stocks that went up today were almost all home building supply companies or builders?
 
JackTripper said:
I think you are conflating the Fed rate with mortgage rates.

The housing market is locked because people that purchased > 2 years ago did so when mortgage rates were lower (~3%). Current mortgage rates are now 6.5%. Nobody wants to sell and jump into a higher rate, so there is no inventory, which keeps prices elevated and the housing market distorted.

The Fed uses the overnight lending rate (the rate you mentioned) to regulate monetary policy, raising rates when the economy is hot (by making money more expensive to borrow) and lowering the rates when the economy needs to be juiced (to encourage spending).

The Fed is/was expected to cut the overnight lending rate by 25-100 basis points depending on who you believe, which would (indirectly) lower mortgage rates. If the Fed anticipates higher inflation this year (they are not stupid, they understand tariffs are inflationary), they will hold rates steady or possibly raise rates to accommodate higher inflation (make money more expensive). Mortage rates move in tandem and would increase, making the housing market problem even worse. But if, at the same time, the economy slows with higher inflation the question is—what do they do? That's anyone's guess.
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The Fed Funds Rate was at zero from most of 2009-2020, which does directly determine what the banks can charge for a home loan. Housing loans were around 3-4% for most people. People were able to borrow a huge amount of money that they may not have been qualified for because the home loans were so low. This is one reason prices went up. Inventory isn't really as low as they claim. There's tons of rental homes out there, and if they can't find tenants, they go back on the market. Blackstone has actually sold off a lot of their homes in the last year because of this.

The problem is now, the sellers still think the prices shouldn't come down when the rates are at 6-7% or more. Most people cannot afford that, so the prices are coming down. States like Florida and Texas have seen declines in home prices, but not a crash (yet).

Another major problem that few people are even aware of, is that banks are sitting on a huge amount of low rate mortgages. That debt is losing them money because the FFR is higher than those mortgages. This alone could cause major problems for the banks at some point.
 
BABMusic said:
The Fed Funds Rate was at zero from most of 2009-2020, which does directly determine what the banks can charge for a home loan. Housing loans were around 3-4% for most people. People were able to borrow a huge amount of money that they may not have been qualified for because the home loans were so low. This is one reason prices went up. Inventory isn't really as low as they claim. There's tons of rental homes out there, and if they can't find tenants, they go back on the market. Blackstone has actually sold off a lot of their homes in the last year because of this.

The problem is now, the sellers still think the prices shouldn't come down when the rates are at 6-7% or more. Most people cannot afford that, so the prices are coming down. States like Florida and Texas have seen declines in home prices, but not a crash (yet).

Another major problem that few people are even aware of, is that banks are sitting on a huge amount of low rate mortgages. That debt is losing them money because the FFR is higher than those mortgages. This alone could cause major problems for the banks at some point.
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Good point, hedge funds own a lot of properties, and they continue to scoop them up in hotter markets and rent them out. Lots of states are cracking down on home-share rentals to counter.

Yeah, 2009-2020 was an historical anomaly for mortgage rates. There is absolutely no guarantee or indication rates will go back down to where they were prior to 2020. But people are holding off, which makes the lock-in effect worse.

Any market that has seen a price spike during the pandemic is correcting, then add to that rising costs (insurance, hurricanes) in places like Florida.
 
JackTripper said:
The Fed is/was expected to cut the overnight lending rate by 25-100 basis points depending on who you believe, which would (indirectly) lower mortgage rates. If the Fed anticipates higher inflation this year (they are not stupid, they understand tariffs are inflationary), they will hold rates steady or possibly raise rates to accommodate higher inflation (make money more expensive). Mortage rates move in tandem and would increase, making the housing market problem even worse. But if, at the same time, the economy slows with higher inflation the question is—what do they do? That's anyone's guess.
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The Fed rate doesn't necessarily affect long term rates. The last time the fed cut in September, the 10-year sold off. This is because money printing and rate suppression causes inflation. So the Fed is in a bind now, as they can't really cut without spiking inflation. Maybe if we enter a recession it will cause inflation to come down, offering some wiggle room, but I kind of doubt it, and instead see stagflation in a recession.

Tariffs on the other hand do not cause inflation. They increase prices for the goods that are being imported, yes, but it's not an overall rise in prices. The Fed causes inflation.
 
...and it is the countries that we have deficits with that are getting screwed. They are sending us goods and we are sending them green paper. I'm not saying it's a healthy situation, but we are not "subsidizing" anyone or giving away money. As for the military protection racket, yes, we paid for it, but it ensured US world hegemony that enabled us to trade 'green paper' for actual goods, as the USD is/was the world reserve currency.
 
BABMusic said:
I agree on that point. I don't know yet if this is the real crash. When your whole stock market is divorced from real earnings and based on momentum buying, then the collapse is manufactured as well. Some people believe that the crash is designed to lower rates again to zero. If that happens, the dollar is going to see hyperinflation.
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That’s not going to happen.
 
Bad Brain said:
Everyone is talking about getting "screwed" by other countries, but as Pelosi rightly pointed out, it was American corporations and their bought off politicians that screwed Americans. It was by design.
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Trump himself said he applauds China's rulers for what they have done because they acted in their countries best interest. The west is ruled by an international cosmopolitan elite that does not give a fuck about the countries they reside in. Nationalism is essential to having a functioning country.
 
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Floyd Eye said:
That’s not going to happen.
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I would say hyperinflation is the least likely scenario but it's not impossible. If we keep putting our rates at zero, eventually, all those countries we owe debt to are going to lose all confidence in the dollar. It didn't happen in 2009 because most QE went into the banks for the bailouts. It took years for that inflation to show up once the banks started lending very easily.
 
JackTripper said:
Bingo, coinciding with slowing if not negative GDP growth. Welcome to stagflation, something we haven't seen since the 1970s, and a tough cycle to break.
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Just the opposite, if tarrifs bring inflation which they won't as it will work mainly as pushing the demand curve to the left/down outweighing it's over2500-3000all normal effect on inflation in the long run......


Lets keep in mind this is already an inflated economy with inflation and interest rates both above normal historical numbers.... thats something you and conventional economist seem to forget or ignore all together.....


But say inflation goes higher which it is higher than the normal 2% the Fed would be forced to do the opposite and actually raise interest rates and not lower them and this is basic Econ 101.
 
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JackTripper said:
This may be the hope, but the fear is retaliatory tariffs. China just announced a 34% tariff, and they have found another supplier of soybeans. That's the equivalent of dropping an economic bomb in the Midwest. Expect tariffs on bourbon/whiskey--an economic bomb on TN and KY distillers and farmers. And so on, and you know exactly what states they are targeting.
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Im sorry but this "notion" of Free Trade this other guy and you speak off isn't really Free Trade and it never has been Free Trade....

If all farmers can do to remain relevant in 2025 is sell soy beans to China maybe American farmers should find something more productive to do or vote and do business some other way that doesnt coincide with their apparent ideals...........they say one thing yet act some other way .......


Maybe American Farmers can act as they vote and stop trying to eat their cake and have it too but that seems to be par for the course for those both on the left and right nowadays it seems whenever it seems convenient for them to do so.
 
The~Kid said:
Im sorry but this "notion" of Free Trade this other guy and you speak off isn't really Free Trade and it never has been Free Trade....

If all farmers can do to remain relevant in 2025 is sell soy beans to China maybe American farmers should find something more productive to do or vote and do business some other way that doesnt coincide with their apparent ideals...........they say one thing yet act some other way .......


Maybe American Farmers can act as they vote and stop trying to eat their cake and have it too but that seems to be par for the course for those both on the left and right nowadays it seems whenever it seems convenient for them to do so.
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Mark Cuban and others have recently said 20% of farms will not plant this year due to chaos at government agencies which lend them money to purchase seed and hire employees in spring. Those farms will bankrupt this year.
 
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