Author Topic: FED Buying  (Read 3356 times)

Joe Schmo

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FED Buying
« on: May 29, 2020, 04:37:15 PM »
Iím not the most wise investor but I hear stuff like ďThe FED is buying junk bonds in companies and the same mortgage bundles that led to the 08 crashĒ, etc.
is there any way to see what the FED is buying?
And how much they are buying of it?

MustacheAndaHalf

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Re: FED Buying
« Reply #1 on: May 30, 2020, 01:51:21 AM »
Fed chair Jerome Powell pointed out in a conference call yesterday that the Fed hasn't actually bought much.  But the Fed being willing to even buy junk bonds had the effect of calming markets, since investors knew the Fed would intervene to prevent mass bankruptcies.

Wrenchturner

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Re: FED Buying
« Reply #2 on: May 30, 2020, 01:58:19 AM »
I don't know what the Fed is specifically buying either.

Fed chair Jerome Powell pointed out in a conference call yesterday that the Fed hasn't actually bought much. 
The Fed will never buy "much".  They will categorically redefine what "much" means so that their purchases never fit the criteria.

MustacheAndaHalf

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Re: FED Buying
« Reply #3 on: May 30, 2020, 09:58:53 PM »
I don't know what the Fed is specifically buying either.

Fed chair Jerome Powell pointed out in a conference call yesterday that the Fed hasn't actually bought much. 
The Fed will never buy "much".  They will categorically redefine what "much" means so that their purchases never fit the criteria.
If you assume the Fed is trying to trick people, you need to cite the source for that conspiracy theory.

https://www.cnbc.com/2020/05/12/the-fed-is-starting-up-its-program-to-purchase-corporate-bond-etfs.html
"The Fed is starting its program to purchase corporate bond ETFs"

Wrenchturner

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Re: FED Buying
« Reply #4 on: May 30, 2020, 11:22:21 PM »
I don't know what the Fed is specifically buying either.

Fed chair Jerome Powell pointed out in a conference call yesterday that the Fed hasn't actually bought much. 
The Fed will never buy "much".  They will categorically redefine what "much" means so that their purchases never fit the criteria.
If you assume the Fed is trying to trick people, you need to cite the source for that conspiracy theory.

https://www.cnbc.com/2020/05/12/the-fed-is-starting-up-its-program-to-purchase-corporate-bond-etfs.html
"The Fed is starting its program to purchase corporate bond ETFs"

I think the Fed is playing a psychology game and will continue to do so for the foreseeable future.  They will continue to buy whatever they have to to suppress bond risk.  Pretending that they are well moderated is laughable.

celerystalks

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Re: FED Buying
« Reply #5 on: May 31, 2020, 06:06:32 AM »
I don't know what the Fed is specifically buying either.

Fed chair Jerome Powell pointed out in a conference call yesterday that the Fed hasn't actually bought much. 
The Fed will never buy "much".  They will categorically redefine what "much" means so that their purchases never fit the criteria.
If you assume the Fed is trying to trick people, you need to cite the source for that conspiracy theory.

https://www.cnbc.com/2020/05/12/the-fed-is-starting-up-its-program-to-purchase-corporate-bond-etfs.html
"The Fed is starting its program to purchase corporate bond ETFs"

I think the Fed is playing a psychology game and will continue to do so for the foreseeable future.  They will continue to buy whatever they have to to suppress bond risk.  Pretending that they are well moderated is laughable.

Of course. Since, Fiat currency is a psychology game. Everyone pretends that it is real and has value, so it does.  What happens if everyone looses faith at once?

Buffaloski Boris

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Re: FED Buying
« Reply #6 on: May 31, 2020, 07:24:07 AM »
Iím not the most wise investor but I hear stuff like ďThe FED is buying junk bonds in companies and the same mortgage bundles that led to the 08 crashĒ, etc.
is there any way to see what the FED is buying?
And how much they are buying of it?

The Fed will buy as it sees necessary to prop up bond markets and by extension equities markets.  The mere fact that they have committed to buy has dramatically calmed markets.  So far it doesn't appear that they've bought a whole lot of private bonds. More jawboning than actual action on that front. That could always change. Of course they continue to buy huge amounts of treasuries. 

The publicly stated objective of the Fed is to protect the economy, And they do a remarkable job, at least for the rent seeking class. If you're a worker or small business owner, well, it sucks to be you.     

GuitarStv

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Re: FED Buying
« Reply #7 on: May 31, 2020, 07:33:52 AM »
I don't know what the Fed is specifically buying either.

Fed chair Jerome Powell pointed out in a conference call yesterday that the Fed hasn't actually bought much. 
The Fed will never buy "much".  They will categorically redefine what "much" means so that their purchases never fit the criteria.
If you assume the Fed is trying to trick people, you need to cite the source for that conspiracy theory.

https://www.cnbc.com/2020/05/12/the-fed-is-starting-up-its-program-to-purchase-corporate-bond-etfs.html
"The Fed is starting its program to purchase corporate bond ETFs"

I think the Fed is playing a psychology game and will continue to do so for the foreseeable future.  They will continue to buy whatever they have to to suppress bond risk.  Pretending that they are well moderated is laughable.

Of course. Since, Fiat currency is a psychology game. Everyone pretends that it is real and has value, so it does.  What happens if everyone looses faith at once?

Probably the same thing that happens when people realize that most stocks have nothing whatsoever to do with a company or it's earnings beyond a name on a piece of paper.

MustacheAndaHalf

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Re: FED Buying
« Reply #8 on: May 31, 2020, 08:39:58 AM »
I don't know what the Fed is specifically buying either.

Fed chair Jerome Powell pointed out in a conference call yesterday that the Fed hasn't actually bought much. 
The Fed will never buy "much".  They will categorically redefine what "much" means so that their purchases never fit the criteria.
If you assume the Fed is trying to trick people, you need to cite the source for that conspiracy theory.

https://www.cnbc.com/2020/05/12/the-fed-is-starting-up-its-program-to-purchase-corporate-bond-etfs.html
"The Fed is starting its program to purchase corporate bond ETFs"
They will continue to buy whatever they have to to suppress bond risk.
You said that the Fed "will never buy much" and then that it "will continue to buy whatever they have to".  Which is it?

Wrenchturner

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Re: FED Buying
« Reply #9 on: May 31, 2020, 03:41:58 PM »
I don't know what the Fed is specifically buying either.

Fed chair Jerome Powell pointed out in a conference call yesterday that the Fed hasn't actually bought much. 
The Fed will never buy "much".  They will categorically redefine what "much" means so that their purchases never fit the criteria.
If you assume the Fed is trying to trick people, you need to cite the source for that conspiracy theory.

https://www.cnbc.com/2020/05/12/the-fed-is-starting-up-its-program-to-purchase-corporate-bond-etfs.html
"The Fed is starting its program to purchase corporate bond ETFs"
They will continue to buy whatever they have to to suppress bond risk.
You said that the Fed "will never buy much" and then that it "will continue to buy whatever they have to".  Which is it?

Both.  That's the sleight of hand here.

effigy98

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Re: FED Buying
« Reply #10 on: May 31, 2020, 04:59:14 PM »
There is a list on fed website. Moneygps YouTube video was going over it. Looks like a great time to buy junk bond ETFs. Up significant on hyg and junk call options. Thank you fed for free Tesla Model Y! Who cares what real economy is doing as long as fed funds our early retirements.

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« Last Edit: May 31, 2020, 05:01:41 PM by effigy98 »

ChpBstrd

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Re: FED Buying
« Reply #11 on: June 01, 2020, 07:32:32 AM »
Who cares what real economy is doing as long as fed funds our early retirements.

[ChpBstrd shudders from a flashback of late 1999]

Buffaloski Boris

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Re: FED Buying
« Reply #12 on: June 01, 2020, 11:19:45 AM »
Who cares what real economy is doing as long as fed funds our early retirements.

[ChpBstrd shudders from a flashback of late 1999]

Ainít that the truth. Iíve seen this movie before.


effigy98

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Re: FED Buying
« Reply #13 on: June 04, 2020, 10:43:56 AM »
More of a protest not what I'm really doing. I dont believe in bailouts and am pretty shell shocked not being a corrupted insider to know what to buy to front run the fed.

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Wrenchturner

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Re: FED Buying
« Reply #14 on: June 04, 2020, 03:09:56 PM »
Who cares what real economy is doing as long as fed funds our early retirements.

[ChpBstrd shudders from a flashback of late 1999]

Ainít that the truth. Iíve seen this movie before.

Is it different this time around?  Seems like the Fed has blinked and markets know it.  Liquidity risk has made the Fed show it's hand and now we have an even bigger systemic problem.  Maybe I'm wrong.  How do you see all this playing out?

Buffaloski Boris

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Re: FED Buying
« Reply #15 on: June 04, 2020, 03:40:57 PM »
Who cares what real economy is doing as long as fed funds our early retirements.

[ChpBstrd shudders from a flashback of late 1999]

Ainít that the truth. Iíve seen this movie before.

Is it different this time around?  Seems like the Fed has blinked and markets know it.  Liquidity risk has made the Fed show it's hand and now we have an even bigger systemic problem.  Maybe I'm wrong.  How do you see all this playing out?

Is this time different? No. The Fed knows who it works for. Theyíll expand the money supply as much as they possibly can.  Now because the underlying economy isnít all that hot and doesnít offer much in the way of wealth creating opportunities, most of that money will end up in financial markets. I.e. bonds and equities.

Financial asset values will increase well past the point of absurdity and then the bubble will pop. Just like it did in about 2000. And like 2000 a lot of the people left holding the bag will be individual investors who thought that the market was safe and couldnít go down. It seems to be about a 20-30 year cycle.

Not saying that equities are bad, but expecting them to continuously outperform isnít realistic. They have done well over the very long term. If you have a very long term investment horizon youíll probably be fine.


maizefolk

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Re: FED Buying
« Reply #16 on: June 04, 2020, 04:01:17 PM »
Is it different this time around?  Seems like the Fed has blinked and markets know it.  Liquidity risk has made the Fed show it's hand and now we have an even bigger systemic problem.  Maybe I'm wrong.  How do you see all this playing out?

I'm not sure I quite follow. What do you mean by the Fed blinking in this context?

Wrenchturner

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Re: FED Buying
« Reply #17 on: June 04, 2020, 05:24:47 PM »
Is it different this time around?  Seems like the Fed has blinked and markets know it.  Liquidity risk has made the Fed show it's hand and now we have an even bigger systemic problem.  Maybe I'm wrong.  How do you see all this playing out?

I'm not sure I quite follow. What do you mean by the Fed blinking in this context?

I'm under the impression that the Fed doesn't want to see any significant downside in stocks and will throw all the buying they can to support stock prices.  This game of chicken was lost in 2008 and markets know it.  Unlike in the early 2000s when rates could still be lowered.  Maybe I'm mistaken.

maizefolk

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Re: FED Buying
« Reply #18 on: June 04, 2020, 06:12:09 PM »
Is it different this time around?  Seems like the Fed has blinked and markets know it.  Liquidity risk has made the Fed show it's hand and now we have an even bigger systemic problem.  Maybe I'm wrong.  How do you see all this playing out?

I'm not sure I quite follow. What do you mean by the Fed blinking in this context?

I'm under the impression that the Fed doesn't want to see any significant downside in stocks and will throw all the buying they can to support stock prices.  This game of chicken was lost in 2008 and markets know it.  Unlike in the early 2000s when rates could still be lowered.  Maybe I'm mistaken.

Gotcha. I was just reading it backwards and thought you meant the Fed had blinked with regards to its willingness to keep buying bonds/assets during the current crisis so markets were panicking.

MustacheAndaHalf

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Re: FED Buying
« Reply #19 on: June 06, 2020, 01:22:38 AM »
I'm under the impression that the Fed doesn't want to see any significant downside in stocks and will throw all the buying they can to support stock prices.  This game of chicken was lost in 2008 and markets know it.  Unlike in the early 2000s when rates could still be lowered.  Maybe I'm mistaken.
If the Fed cares about stock prices, why aren't they buying stocks?  Why in March did the Fed sit back and watch as markets dropped -7% some days, without taking action?

There isn't much the Fed can do about business closures over a pandemic, which lead to the current unemployment levels.  Business are closing temporarily, and laying off workers temporarily, until they can reopen.  The Fed has a mandate to maximize employment.  I think they're taking the view that keeping businesses afloat will provide more jobs when those businesses reopen.  The Fed is buying bonds, which lets companies pay their bills.  Without that, companies go under, the economy shrinks, and there's fewer jobs.

MustacheAndaHalf

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Re: FED Buying
« Reply #20 on: June 06, 2020, 01:49:04 AM »
Financial asset values will increase well past the point of absurdity and then the bubble will pop. Just like it did in about 2000. And like 2000 a lot of the people left holding the bag will be individual investors who thought that the market was safe and couldnít go down.
I'm not sure if I agree, but I know how you can make a much stronger case for a bubble.  Look at the largest 3 companies that survived the last dot-com bubble: Microsoft, Apple, Amazon.  They're doing it again!  This time, joined by Google and Facebook, this group of 5 tech companies has gained +52% in the past 12 months.  Most of the U.S. stock market return for the past 12 months comes from just 5 companies... is that a bubble?

Buffaloski Boris

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Re: FED Buying
« Reply #21 on: June 06, 2020, 06:39:48 AM »
Financial asset values will increase well past the point of absurdity and then the bubble will pop. Just like it did in about 2000. And like 2000 a lot of the people left holding the bag will be individual investors who thought that the market was safe and couldnít go down.
I'm not sure if I agree, but I know how you can make a much stronger case for a bubble.  Look at the largest 3 companies that survived the last dot-com bubble: Microsoft, Apple, Amazon.  They're doing it again!  This time, joined by Google and Facebook, this group of 5 tech companies has gained +52% in the past 12 months.  Most of the U.S. stock market return for the past 12 months comes from just 5 companies... is that a bubble?

In my view, investing in those 5 companies is asking for subpar returns.  You can just take a look at the PE ratios and get a feel for how they're priced in comparison to other stocks.  AMZN has a PE of 110.  MSFT 35, with AAPL a relative bargain at 26. Could it just keep going up and stay high as a sort of new normal?  I guess that's possible.  History has shown though that "it's different this time" doesn't usually work out so well.   

Keep in mind that if you buy large cap, cap weighted index funds what you're really buying into is the top 50 or so US companies, and a relatively inconsequential amount of every other stock that makes up the index. And that 50 or so stocks is further concentrated into that top 5. For fun, check out the top 10 holdings of the ever popular VTSAX and see what investors are actually buying.  Is it a bubble?  We'll find out by looking at it in the rear view mirror some time in the future. Given the recent run up in US stock prices, especially the SP 5+495, in spite of unemployment and problems with the Main Street economy it sure does give one pause.

waltworks

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Re: FED Buying
« Reply #22 on: June 06, 2020, 07:13:00 AM »
My understanding is that Amazon is focused 100% on taking market share and doesn't even attempt to make a profit. I'd be wary of using P/E to value them. Honestly antitrust problems (if we start caring about that sort of thing again) would be a bigger concern for me, if I bought individual stocks.

MSFT P/E was at 50 in 2017-2018 (with a stock price of $90 or so). If you bought some... you doubled your money, as of today.

Ratios and fractions have a numerator AND a denominator, folks.

-W

Buffaloski Boris

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Re: FED Buying
« Reply #23 on: June 06, 2020, 07:54:51 AM »
My understanding is that Amazon is focused 100% on taking market share and doesn't even attempt to make a profit. I'd be wary of using P/E to value them. Honestly antitrust problems (if we start caring about that sort of thing again) would be a bigger concern for me, if I bought individual stocks.

MSFT P/E was at 50 in 2017-2018 (with a stock price of $90 or so). If you bought some... you doubled your money, as of today.

Ratios and fractions have a numerator AND a denominator, folks.

-W

Antitrust is a risk for most if not all of the top 5.  Notsomuch in the US with the possible exception of AMZN. Abroad, specifically in the EU, is probably more of a risk. 

Clearly the market is pricing in a belief that earnings will remain stable and grow in the future for the top 5 to justify the prices being paid.  I'm more than a little skeptical.  YMMV. 

waltworks

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Re: FED Buying
« Reply #24 on: June 06, 2020, 09:33:06 AM »
Clearly the market is pricing in a belief that earnings will remain stable and grow in the future for the top 5 to justify the prices being paid.  I'm more than a little skeptical.  YMMV.

I remember when I started vaguely being aware of the stock market/stocks (had to follow as part of a job as a graduate student) in the 90s. It was almost intellectually *offensive* to me that being smart and paying attention/putting in a lot of work didn't yield any better results than naive optimism when it came to investing. I struggled with that for a long time, probably because I'd spent my whole life doing stuff where working hard and being smart were critical.

Now I don't bother being skeptical of future earnings, or worry about any of the various metrics people like to employ, or panic about what the Fed/Iran/China/the Illuminati are doing, because that stuff just doesn't really seem to matter over reasonably long timeframes that I care about. It's just pseudo-intellectual masturbation because my brain likes numbers/finding patterns and the markets provide lots of numbers and what look like patterns every day. But it's hard to walk away from for a lot of people.

-W


Wrenchturner

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Re: FED Buying
« Reply #25 on: June 06, 2020, 02:30:37 PM »
I'm under the impression that the Fed doesn't want to see any significant downside in stocks and will throw all the buying they can to support stock prices.  This game of chicken was lost in 2008 and markets know it.  Unlike in the early 2000s when rates could still be lowered.  Maybe I'm mistaken.
If the Fed cares about stock prices, why aren't they buying stocks?  Why in March did the Fed sit back and watch as markets dropped -7% some days, without taking action?

There isn't much the Fed can do about business closures over a pandemic, which lead to the current unemployment levels.  Business are closing temporarily, and laying off workers temporarily, until they can reopen.  The Fed has a mandate to maximize employment.  I think they're taking the view that keeping businesses afloat will provide more jobs when those businesses reopen.  The Fed is buying bonds, which lets companies pay their bills.  Without that, companies go under, the economy shrinks, and there's fewer jobs.

You're right, the Fed cares about jobs moreso than stocks directly.  That's why they don't buy stocks directly.  But I think there is limited return on this investment with regard to jobs.  It's possible that the distortions in the economy from disrupting the price discovery of debt become the greater threat.

waltworks

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Re: FED Buying
« Reply #26 on: June 06, 2020, 02:33:33 PM »
You're right, the Fed cares about jobs moreso than stocks directly.  That's why they don't buy stocks directly.  But I think there is limited return on this investment with regard to jobs.  It's possible that the distortions in the economy from disrupting the price discovery of debt become the greater threat.

LOL. In his memoirs, Hoover wrote that Mellon advised him to "liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. ... enterprising people will pick up the wrecks from less competent people."

The reason the Fed exists is that "price discovery of debt" isn't something people can eat. When things really break, we fix them, because complex and fragile systems like the economy can go very very bad if left to their own devices.

We might cause other problems in the process, but those subsidiary problems are not as bad as starving kids in bread lines.

-W

Wrenchturner

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Re: FED Buying
« Reply #27 on: June 06, 2020, 02:47:20 PM »
The reason the Fed exists is that "price discovery of debt" isn't something people can eat. When things really break, we fix them, because complex and fragile systems like the economy can go very very bad if left to their own devices.
I am worried about the myopia and hubris here.  Monetary policy is still subject to secular risks and diminishing returns.  One of the issues with modern economics is sloppy modeling and policy that is built on that.


Quote
We might cause other problems in the process, but those subsidiary problems are not as bad as starving kids in bread lines.

-W
They aren't problems until they are.  Controlled burns are necessary once in a while in a capitalist economy.  It is a redistributive force.  If "old money" never dies through sclerosis then it starts parasitizing growth: see stagflation.  If the model is wrong, eventually the cure is worse than the disease and you end up with starving kids in bread lines anyway.

waltworks

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Re: FED Buying
« Reply #28 on: June 06, 2020, 02:51:24 PM »
I guess you're saying we learned the lessons of the great depression too well?

I suppose I could see an argument for that. But I see very strong arguments for the Fed (and the legislative branch) bailing out critical parts of the economy, moral hazard be damned. I'd like to see a generally more redistributive system (UBI!) but that has nothing to do with wanting to let big companies crash and burn and the economy to collapse for 20 years so we can have "creative destruction". There's a balance, and in general I think we do pretty well with it.

-W

Wrenchturner

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Re: FED Buying
« Reply #29 on: June 06, 2020, 03:02:25 PM »
I guess you're saying we learned the lessons of the great depression too well?

I suppose I could see an argument for that. But I see very strong arguments for the Fed (and the legislative branch) bailing out critical parts of the economy, moral hazard be damned. I'd like to see a generally more redistributive system (UBI!) but that has nothing to do with wanting to let big companies crash and burn and the economy to collapse for 20 years so we can have "creative destruction". There's a balance, and in general I think we do pretty well with it.

-W
If I really wanted to argue, I'd do my homework and read up on Austrian economics, which seems to be the usual nemesis of modern Keynesian economics.  My knowledge of economics is limited. 

All I know is--economic disparity continues to grow, economic growth has been floundering ever since 2008 or earlier, and there doesn't seem to be many tricks left in the bag.  I suppose we will see what happens with interest rates.  The predictability of central bank activity is a bad thing.

I'm still not sold on a UBI so that isn't exactly what I meant by redistribution, I was mostly referring to the liquidation of capital from useless companies which would drive opportunity and jobs and incentive to a better company.  Perhaps the economy could tolerate higher interest rates if we didn't have so many zombie companies around.

waltworks

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Re: FED Buying
« Reply #30 on: June 06, 2020, 03:11:14 PM »
The inequality and stagnation of the bottom 2/3 of the income distribution has been a problem since the 1970s, really. I don't think it's due to zombie companies (or interest rates, which have been all over the place until recently), though - we've had incredible innovation and progress in that time. The proceeds are just flowing to the wealthy (ie, me and most of the other folks on this forum).

I think everyone would be worse off without the Fed, historically. That doesn't mean they're perfect.

-W

maizefolk

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Re: FED Buying
« Reply #31 on: June 06, 2020, 03:28:41 PM »
All I know is--economic disparity continues to grow, economic growth has been floundering ever since 2008 or earlier, and there doesn't seem to be many tricks left in the bag.  I suppose we will see what happens with interest rates.  The predictability of central bank activity is a bad thing.

Is it though? As long as central banks have predictable responses to given sets of economic stimuli businesses can plan and model for the future and make rational choices. Once central banks become unpredictable, businesses and investors waste a lot of time and energy trying to read tea leaves and put a lot of resources into trying to preparing for many different possible outcomes.

I would say that the Fedís reactions both now and during the 2008 crash were a lot more predictable that the ECBís. And I sure slept better at night with my salary and cash savings in dollars than I would have on 2009/10/11 if they had been in euros.
« Last Edit: June 06, 2020, 04:50:29 PM by maizeman »

Buffaloski Boris

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Re: FED Buying
« Reply #32 on: June 06, 2020, 04:29:05 PM »
Clearly the market is pricing in a belief that earnings will remain stable and grow in the future for the top 5 to justify the prices being paid.  I'm more than a little skeptical.  YMMV.

I remember when I started vaguely being aware of the stock market/stocks (had to follow as part of a job as a graduate student) in the 90s. It was almost intellectually *offensive* to me that being smart and paying attention/putting in a lot of work didn't yield any better results than naive optimism when it came to investing. I struggled with that for a long time, probably because I'd spent my whole life doing stuff where working hard and being smart were critical.

Now I don't bother being skeptical of future earnings, or worry about any of the various metrics people like to employ, or panic about what the Fed/Iran/China/the Illuminati are doing, because that stuff just doesn't really seem to matter over reasonably long timeframes that I care about. It's just pseudo-intellectual masturbation because my brain likes numbers/finding patterns and the markets provide lots of numbers and what look like patterns every day. But it's hard to walk away from for a lot of people.

-W

Funny thing is Iíve come to pretty much the same conclusion. With a twist. I think that buying large cap US equities is a foolís game. But I go right ahead and do the same darn thing for international equities. Lulz😆😆😆😆

ChpBstrd

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Re: FED Buying
« Reply #33 on: June 08, 2020, 09:46:10 AM »
As @waltworks notes, feeling queasy about the Fed's asset purchases is a classic first world problem compared to the bread lines and mass unemployment of the past.

But as @maizeman notes,

Quote
As long as central banks have predictable responses to given sets of economic stimuli businesses can plan and model for the future and make rational choices. Once central banks become unpredictable, businesses and investors waste a lot of time and energy trying to read tea leaves and put a lot of resources into trying to preparing for many different possible outcomes.

The money supply function of government is very much running on a script. We've learned that recessions can be mitigated or even avoided all-together through QE and low interest rates. In 2017-18, we learned that even a slight bump in interest rates or a modest reduction in the Fed's balance sheet could cause an outsized economic slowdown, so QE became a one-way street. The future has been established: rates must stay near zero and can go negative, and the Fed's balance sheet must expand forever. There would be severe political consequences for whomever went against this mantra and let a recession happen. No other path could possibly be chosen by rational leaders / voters.

A condition of full employment seems to be that lots of companies will have to operate with low-single-digit margins and high leverage, and to utilize business models that would be unprofitable if borrowing rates were more than a few percent. The goal of full employment, therefore, seems to require the engineering of a low-interest-rate regime permanently teetering on the edge of deflation. In such a world, businesses can continue with low-margin, marginally productive activities that employ a lot of people.

The US has been able to run massive government deficits and expand its money supply for decades because it controls the world's reserve currency, and essentially provides liquidity for the majority of the world's trade. If Brazil's or South Africa's or Singapore's economies grow over time, they need more and more USD to transact for things like commodities and debt instruments. The US's expanding supply of currency simply goes overseas and does not ignite inflationary pressures at home. Thus, people outside of the US tend to sell things to the US cheaply in order to obtain the dollars they need to purchase their own imports. This alone explains much of the US's prosperity. Dollars are our main export.

This external demand for USD is critical for absorbing government deficits and money supply expansion. If it ever reversed or another reserve currency took over, US inflation would rise dramatically, all those low-margin businesses would end, and the US quality of life would plummet to a level more in line with our material productivity. Fortunately for the US, most other contenders for reserve currency status are in shambles (the Euro system is collapsing and the renminbi is known to have a few devaluations ahead of it, plus China has tight currency controls so that it can maintain its mercantilist economic advantages). 

Having the reserve currency gives the US the latitude to use QE to prevent or end recessions. It also helps that foreign investors scramble for dollars when recessions / instability occurs, conveniently bumping up demand at the same time QE occurs. One way of looking at it, is that the US would have experienced deflation for the last couple of decades had it not printed so many dollars. Thus QE is inevitable for both political and technical reasons.

The risk is twofold:

1) Asset bubbles form. Something like 70% of cities in the US are unaffordable for the median buyer. Stock market and junk bond risk premia are lower than ever in history. US government debt is so expensive it yields near zero. As bubbles inflate, they represent a misallocation of capital toward what is essentially gambling. When bubbles pop, they wipe out a significant amount of wealth and reduce consumption for years.

2) High costs restrict growth. Want to start a business in an area where a small storefront rents for $10k/mo? Want to buy a home in Manhattan? Want to earn an annualized 10% per year investing in stocks over the course of a decade? Want to start a factory when factory workers cost $125k/year each? At some point, the costs are so high they prevent startups from occurring and households from forming.

The known outcome of all this is Japanification: Low interest rates on the threshold of deflation. Low-margin, highly-leveraged oligopolies that are essentially the government's pets. A struggling middle class where young people don't form households or have kids, they just try to stay afloat. Reduced innovation, as the incumbent monopolists secure near-zero interest rates with which to fund themselves in perpetuity, thereby keeping competition away. National debts in excess of 200% of GDP. Dramatically reduced capabilities to do things like put people on the moon, fight wars, or address significant social needs.

maizefolk

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Re: FED Buying
« Reply #34 on: June 08, 2020, 10:12:15 AM »
ChpBstrd, the only points I'd make are

1) when functioning as the world's reserve currency it's not that we can run trade and fiscal deficits but that we have to run trade and fiscal deficits or bad things happen (dollar exchange rates run up so much it makes US exports even more non-competitive and outsourcing even more desirable).

A condition of full employment seems to be that lots of companies will have to operate with low-single-digit margins and high leverage, and to utilize business models that would be unprofitable if borrowing rates were more than a few percent. The goal of full employment, therefore, seems to require the engineering of a low-interest-rate regime permanently teetering on the edge of deflation. In such a world, businesses can continue with low-margin, marginally productive activities that employ a lot of people.

This didn't used to be the case, it was possible to get high employment rates, avoid substantial inflation, and have significantly positive interest rates.

What worries me is that, given we've shifted from a world where we can produce the needed number of jobs with positive interest rates to one where we can (sort of) produce the needed number of jobs with near zero nominal (and negative real) interest rates, why do we think the trend towards it being harder and harder to create enough jobs for people is going to stop here?

Particularly when the COVID situation has just demonstrated we can drop 10-15% of all workers in the labor force and the economy keeps running along surprisingly well without them.*

*Which is not to say the economy is running well, just that if you'd told me a year ago 10-15% of US workers would be fired over a period of two months, I'd have expected a lot more economic and supply chain disruptions than we see today.

ChpBstrd

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Re: FED Buying
« Reply #35 on: June 08, 2020, 10:37:21 AM »
ChpBstrd, the only points I'd make are

1) when functioning as the world's reserve currency it's not that we can run trade and fiscal deficits but that we have to run trade and fiscal deficits or bad things happen (dollar exchange rates run up so much it makes US exports even more non-competitive and outsourcing even more desirable).

A condition of full employment seems to be that lots of companies will have to operate with low-single-digit margins and high leverage, and to utilize business models that would be unprofitable if borrowing rates were more than a few percent. The goal of full employment, therefore, seems to require the engineering of a low-interest-rate regime permanently teetering on the edge of deflation. In such a world, businesses can continue with low-margin, marginally productive activities that employ a lot of people.

This didn't used to be the case, it was possible to get high employment rates, avoid substantial inflation, and have significantly positive interest rates.

What worries me is that, given we've shifted from a world where we can produce the needed number of jobs with positive interest rates to one where we can (sort of) produce the needed number of jobs with near zero nominal (and negative real) interest rates, why do we think the trend towards it being harder and harder to create enough jobs for people is going to stop here?

Particularly when the COVID situation has just demonstrated we can drop 10-15% of all workers in the labor force and the economy keeps running along surprisingly well without them.*

*Which is not to say the economy is running well, just that if you'd told me a year ago 10-15% of US workers would be fired over a period of two months, I'd have expected a lot more economic and supply chain disruptions than we see today.

I agree. The trend toward monetary expansion is inevitable for a reserve currency. The alternative would be massive deflation, which economies cannot tolerate. This is why cryptocurrencies have taken off - they offer the possibility of a reserve currency where nobody cares if deflation occurs and so maybe nothing will be done about it. Regular fiat currencies have a cap on how much they can rise before governments step to prevent their exports from becoming noncompetitive. Currencies of economies are kind of like a covered call - the position can drop in value dramatically but can only rise so much before another limiting process occurs.

I think you've hit the nail on the head when you note that it seems like extraordinary measures are now required to keep unemployment down. In previous decades, unemployment stayed low even with interest rates that would sink today's economy into depression. Imagine 8% for a one-year treasury instead of 0.18%. Now imagine that being normal and the economy growing just fine despite it. Clearly, something has structurally changed. Debt and demographics are the main suspects, and both trends are moving in the same direction they've been moving for decades. Their trajectories are not easily changed either.

Today there are many millions of employees doing activities that earn a 2-4% return on their salaries and their employers don't fire them only because they can finance their businesses at 1-3% and earn a slight margin on the activity. That's what full employment means in today's economy, or at least meant.

In the past, there were enough opportunities to earn 9% on employee salaries that employers would borrow at 8% and still earn a margin. And that was at technically much lower productivity than how today's workers operate! Imagine how much wages/consumption/GDP would have to fall for that to be true again.

maizefolk

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Re: FED Buying
« Reply #36 on: June 08, 2020, 11:39:37 AM »
I think you've hit the nail on the head when you note that it seems like extraordinary measures are now required to keep unemployment down. In previous decades, unemployment stayed low even with interest rates that would sink today's economy into depression. Imagine 8% for a one-year treasury instead of 0.18%. Now imagine that being normal and the economy growing just fine despite it. Clearly, something has structurally changed. Debt and demographics are the main suspects, and both trends are moving in the same direction they've been moving for decades. Their trajectories are not easily changed either.

Today there are many millions of employees doing activities that earn a 2-4% return on their salaries and their employers don't fire them only because they can finance their businesses at 1-3% and earn a slight margin on the activity. That's what full employment means in today's economy, or at least meant.

In the past, there were enough opportunities to earn 9% on employee salaries that employers would borrow at 8% and still earn a margin. And that was at technically much lower productivity than how today's workers operate! Imagine how much wages/consumption/GDP would have to fall for that to be true again.

In addition to debt and demographics, don't forget tech as an additional potential driver of the shift in how easy it is to keep the population employed and payed.

Unfortunately the example of Japan doesn't help disambiguate among these three potential causes (or combinations of the three) as they're ahead of the US and EU on demographic shifts, ahead of us on debt, and ahead of us on tech.

ChpBstrd

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Re: FED Buying
« Reply #37 on: June 08, 2020, 01:56:26 PM »
I think you've hit the nail on the head when you note that it seems like extraordinary measures are now required to keep unemployment down. In previous decades, unemployment stayed low even with interest rates that would sink today's economy into depression. Imagine 8% for a one-year treasury instead of 0.18%. Now imagine that being normal and the economy growing just fine despite it. Clearly, something has structurally changed. Debt and demographics are the main suspects, and both trends are moving in the same direction they've been moving for decades. Their trajectories are not easily changed either.

Today there are many millions of employees doing activities that earn a 2-4% return on their salaries and their employers don't fire them only because they can finance their businesses at 1-3% and earn a slight margin on the activity. That's what full employment means in today's economy, or at least meant.

In the past, there were enough opportunities to earn 9% on employee salaries that employers would borrow at 8% and still earn a margin. And that was at technically much lower productivity than how today's workers operate! Imagine how much wages/consumption/GDP would have to fall for that to be true again.

In addition to debt and demographics, don't forget tech as an additional potential driver of the shift in how easy it is to keep the population employed and payed.

Unfortunately the example of Japan doesn't help disambiguate among these three potential causes (or combinations of the three) as they're ahead of the US and EU on demographic shifts, ahead of us on debt, and ahead of us on tech.

My theory is that demographics came first. Reduced spending and increased money hoarding by old people reduces inflation and the natural rate of interest (I.e. the rate where inflation and deflation are in balance). Then comes debt because more people, businesses, and governments can go deeper into debt when interest rates go lower. Japan would be crushed if their national debt was at a 10% interest rate.

Tech is how we produce more output per unit of input, which drives down prices. Tech advances generally make things cheaper or invent ways to meet new needs. The making things cheaper part generally costs jobs and is deflationary (E.g. tractors made food Ucheaper and put farmers out of work). The inventing new products part may also be deflationary - my smartphone reduces my willingness to pay for a camera, GPS, fitness tracker, land line, and home internet service.

Buffaloski Boris

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Re: FED Buying
« Reply #38 on: June 08, 2020, 07:54:27 PM »
As @waltworks notes, feeling queasy about the Fed's asset purchases is a classic first world problem compared to the bread lines and mass unemployment of the past.

But as @maizeman notes,

Quote
As long as central banks have predictable responses to given sets of economic stimuli businesses can plan and model for the future and make rational choices. Once central banks become unpredictable, businesses and investors waste a lot of time and energy trying to read tea leaves and put a lot of resources into trying to preparing for many different possible outcomes.

The money supply function of government is very much running on a script. We've learned that recessions can be mitigated or even avoided all-together through QE and low interest rates. In 2017-18, we learned that even a slight bump in interest rates or a modest reduction in the Fed's balance sheet could cause an outsized economic slowdown, so QE became a one-way street. The future has been established: rates must stay near zero and can go negative, and the Fed's balance sheet must expand forever. There would be severe political consequences for whomever went against this mantra and let a recession happen. No other path could possibly be chosen by rational leaders / voters.

A condition of full employment seems to be that lots of companies will have to operate with low-single-digit margins and high leverage, and to utilize business models that would be unprofitable if borrowing rates were more than a few percent. The goal of full employment, therefore, seems to require the engineering of a low-interest-rate regime permanently teetering on the edge of deflation. In such a world, businesses can continue with low-margin, marginally productive activities that employ a lot of people.

The US has been able to run massive government deficits and expand its money supply for decades because it controls the world's reserve currency, and essentially provides liquidity for the majority of the world's trade. If Brazil's or South Africa's or Singapore's economies grow over time, they need more and more USD to transact for things like commodities and debt instruments. The US's expanding supply of currency simply goes overseas and does not ignite inflationary pressures at home. Thus, people outside of the US tend to sell things to the US cheaply in order to obtain the dollars they need to purchase their own imports. This alone explains much of the US's prosperity. Dollars are our main export.

This external demand for USD is critical for absorbing government deficits and money supply expansion. If it ever reversed or another reserve currency took over, US inflation would rise dramatically, all those low-margin businesses would end, and the US quality of life would plummet to a level more in line with our material productivity. Fortunately for the US, most other contenders for reserve currency status are in shambles (the Euro system is collapsing and the renminbi is known to have a few devaluations ahead of it, plus China has tight currency controls so that it can maintain its mercantilist economic advantages). 

Having the reserve currency gives the US the latitude to use QE to prevent or end recessions. It also helps that foreign investors scramble for dollars when recessions / instability occurs, conveniently bumping up demand at the same time QE occurs. One way of looking at it, is that the US would have experienced deflation for the last couple of decades had it not printed so many dollars. Thus QE is inevitable for both political and technical reasons.

The risk is twofold:

1) Asset bubbles form. Something like 70% of cities in the US are unaffordable for the median buyer. Stock market and junk bond risk premia are lower than ever in history. US government debt is so expensive it yields near zero. As bubbles inflate, they represent a misallocation of capital toward what is essentially gambling. When bubbles pop, they wipe out a significant amount of wealth and reduce consumption for years.

2) High costs restrict growth. Want to start a business in an area where a small storefront rents for $10k/mo? Want to buy a home in Manhattan? Want to earn an annualized 10% per year investing in stocks over the course of a decade? Want to start a factory when factory workers cost $125k/year each? At some point, the costs are so high they prevent startups from occurring and households from forming.

The known outcome of all this is Japanification: Low interest rates on the threshold of deflation. Low-margin, highly-leveraged oligopolies that are essentially the government's pets. A struggling middle class where young people don't form households or have kids, they just try to stay afloat. Reduced innovation, as the incumbent monopolists secure near-zero interest rates with which to fund themselves in perpetuity, thereby keeping competition away. National debts in excess of 200% of GDP. Dramatically reduced capabilities to do things like put people on the moon, fight wars, or address significant social needs.

Fascinating analysis and I thank you for taking the time to type it out. 

A question: if our major export is dollars, wouldn't a partial solution to some of the risk include buying productive assets outside the US?  Would that not offset the risk at the macro level? 

maizefolk

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Re: FED Buying
« Reply #39 on: June 08, 2020, 08:15:22 PM »
You mean instead of running a normal trade deficit we just have the government borrow a bunch of money and use it to buy on foreign assets? .... you know that might actually be a workable alternative (economically, obviously not politically). It still requires the creation of lots of dollar denominated assets for foreign reserve banks and sovereign wealth funds to invest in because the government would be running a deficit, and it would still keep exchange rates from blowing up because the US government would be constantly exchanging those borrowed dollars into foreign currencies to buy stocks or land or toll roads or what have you.

But I'm obviously no economist.

Buffaloski Boris

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Re: FED Buying
« Reply #40 on: June 08, 2020, 08:32:13 PM »
You mean instead of running a normal trade deficit we just have the government borrow a bunch of money and use it to buy on foreign assets? .... you know that might actually be a workable alternative (economically, obviously not politically). It still requires the creation of lots of dollar denominated assets for foreign reserve banks and sovereign wealth funds to invest in because the government would be running a deficit, and it would still keep exchange rates from blowing up because the US government would be constantly exchanging those borrowed dollars into foreign currencies to buy stocks or land or toll roads or what have you.

But I'm obviously no economist.

I would think it would need to be an "in addition to" rather than an "instead of." But yes, use debt to buy productive assets abroad rather than consumer goods. There's the advantage of interest rate arbitrage if nothing else.  The 10 yr in the US is trading at less than 1%.  In Brazil it's closer to 7%.  It seems obvious that if domestic companies in Brazil can get by with that sort of interest rate that there is a heck of an opportunity if you're able to borrow for a fraction of that.   

kenmoremmm

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Re: FED Buying
« Reply #41 on: June 08, 2020, 08:43:53 PM »
general question semi-related to this topic: is there a known tally of liquid assets compared to total debt issued, worldwide? just curious what the ratio might be. or, is there a liquid + illiquid tally?

maizefolk

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Re: FED Buying
« Reply #42 on: June 08, 2020, 09:00:47 PM »
general question semi-related to this topic: is there a known tally of liquid assets compared to total debt issued, worldwide? just curious what the ratio might be. or, is there a liquid + illiquid tally?

One random estimate I came across a while ago suggested there was about $230 trillion in real estate worldwide (relatively illiquid asset), $100 trillion in bonds (debt), $70 trillion in equities (of varying degrees of liquidity), and about $7.5 trillion in gold (reasonably liquid), and about $7.0 trillion in physical currency (can be extremely liquid, depending on the currency).

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Re: FED Buying
« Reply #43 on: June 09, 2020, 06:31:38 AM »
Buffaloski Boris - I think I reply to your posts more, because they have more data.  :)

Don't forget currency fluctuations when comparing 1% to 7% loan rates.  Back in Jan, $1,000 USD becomes 4100 BRL (Brazilian Real).  But last month, someone in Brazil needed 5900 BRL at the peak to convert back to $1,000 USD.  Saving 6% per year in interest might be offset by -30% losses in paying back the principal.
https://www.exchangerates.org.uk/USD-BRL-exchange-rate-history.html

ChpBstrd

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Re: FED Buying
« Reply #44 on: June 09, 2020, 11:35:03 AM »
A question: if our major export is dollars, wouldn't a partial solution to some of the risk include buying productive assets outside the US?  Would that not offset the risk at the macro level?

When you say productive assets, I think businesses (stocks, rentable real estate, bonds).

The question is whether these businesses are set up to earn USD by producing exports or if they supply  the people who do so. Where this is the case, one would have only invested in the other side of the same trade, which would not diversify away the risk of some sort of U.S. decline. Letís think through the scenarios.

If China made some policy changes and the renminbi became a serious contender for a reserve currency, then how much diversification would one get by buying shares in a Jamaican resort, or Canadian farmland, a Japanese automaker, or even a Brazilian oil company? The same could happen if the EU ever gets its shit together, like the US did as it transitioned from the Articles of Confederation to the Constitution.

If the US overreached with its government deficits and people around the world wanted to exchange their USD for some other currency, foreign assets that produce goods for sale in the US market (or for USD) would presumably switch to producing goods for the now-in-demand currency. But not all of these foreign assets would be equally able to make the switch. Shipping distances to the new reserve country would make some exporting assets unprofitable. Culturally-specific products might not have a profitable business model. In the short term, a dollar devaluation would cripple the business models of many foreign assets, but not all.


Buffaloski Boris

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Re: FED Buying
« Reply #45 on: June 09, 2020, 02:09:55 PM »
Buffaloski Boris - I think I reply to your posts more, because they have more data.  :)

Don't forget currency fluctuations when comparing 1% to 7% loan rates.  Back in Jan, $1,000 USD becomes 4100 BRL (Brazilian Real).  But last month, someone in Brazil needed 5900 BRL at the peak to convert back to $1,000 USD.  Saving 6% per year in interest might be offset by -30% losses in paying back the principal.
https://www.exchangerates.org.uk/USD-BRL-exchange-rate-history.html

WUT? Itís not because of my charm, wisdom, intelligence, foresight, and oh, my incredible humility? :-p

I figure Iíve got a bunch of folks who are very smart, often extremely wealthy in their own right, I can at least do a small amount of search engine research.

Hmmm. I think Iím missing something here. I get that there is risk of currency fluctuations that can hand you your head, but to me thatís sort of the feature, not the bug. There is always going to be some fluctuation. If you buy overseas equities at a time when the dollar is strong, youíre essentially getting assets in less desirable currencies on sale. Repatriating future  profits could be a problem if the currency in the country tanks over time, but you can attempt to time the FOREX to be more advantageous over time as well.

If you take a look at what a huge US corporation or government entity pays for debt, itís paltry. Youíre not in a position to have to make huge interest payments when the interest rate is 1 or 2%. You can sit on an investment for a long, long time. If you think about it, a company using debt leverage where the interest rate is say 7% has to get a return significantly above that. If someone who is only paying 1% can purchase equity in those sorts of companies, it seems like if youíre in the position to wait out currency fluctuation youíre going to be in a very nice position.

Some other thoughts from the IMF but Iíll save those for later when I have the numbers at hand.


maizefolk

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Re: FED Buying
« Reply #46 on: June 09, 2020, 02:21:20 PM »
Hmmm. I think Iím missing something here. I get that there is risk of currency fluctuations that can hand you your head, but to me thatís sort of the feature, not the bug. There is always going to be some fluctuation. If you buy overseas equities at a time when the dollar is strong, youíre essentially getting assets in less desirable currencies on sale.

I think the problem here is that implicit in your model ("when the dollar is strong") is the assumption that exchange rates are mean reverting.

A lot of countries get into trouble with the same assumption (that over the long term their currency will fluctuate around the same exchange rate with the dollar), and so decide to take on dollar denominated debt (at low interest rates) to invest internally, rather than borrowing in their own currency at high interest rates.

Then you end up with situations like Argentina which borrowed extensively in dollars in the 1990s at a 1:1 peso to USD exchange rate, and even today is still working to pay off that debt at a 70:1 peso:USD exchange rate.

Now someone who borrowed in US dollars, bought Argentinian assets (say commercial real estate or stocks) wouldn't have seen their purchases decline in value a full 70:1, but they still dropped more than enough to cancel out the potential benefits of borrowing in a lower interest currency to invest in an economy running on a high interest currency.

MustacheAndaHalf

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Re: FED Buying
« Reply #47 on: June 09, 2020, 11:46:00 PM »
Buffaloski Boris - I think I reply to your posts more, because they have more data.  :)
WUT? Itís not because of my charm, wisdom, intelligence, foresight, and oh, my incredible humility? :-p
Got data on those?
:)

Don't forget currency fluctuations when comparing 1% to 7% loan rates.  Back in Jan, $1,000 USD becomes 4100 BRL (Brazilian Real).  But last month, someone in Brazil needed 5900 BRL at the peak to convert back to $1,000 USD.  Saving 6% per year in interest might be offset by -30% losses in paying back the principal.
https://www.exchangerates.org.uk/USD-BRL-exchange-rate-history.html
Hmmm. I think Iím missing something here. I get that there is risk of currency fluctuations that can hand you your head, but to me thatís sort of the feature, not the bug. There is always going to be some fluctuation.
... when the interest rate is 1 or 2%. You can sit on an investment for a long, long time. If you think about it, a company using debt leverage where the interest rate is say 7% has to get a return significantly above that.
Are both of those likely to be the same, long-term?  The U.S. didn't have 1% interest rates in Jan.  Those will likely only last as long as the Fed needs to prevent business failures (and lost jobs).  At some point, the Fed will raise rates again.

Brazil's exchange rate graph shows something dramatic happened this year.  I suspect the 7% interest rate reflects problems in Brazil's economy (which is a COVID-19 hotspot, partially thanks to inaction by their President).  Most likely, their long-term interest rate is lower.

So in my view, over the medium term U.S. loans will have a higher than 1% interest rate, while Brazil's debt will have a lower than 7% interest rate.  Doesn't that spoil the long-term idea of holding US debts for investment in Brazil?

Wrenchturner

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Re: FED Buying
« Reply #48 on: June 15, 2020, 01:40:23 PM »
https://www.cnbc.com/2020/06/15/the-fed-says-it-is-going-to-start-buying-individual-corporate-bonds.html

"The Federal Reserve is expanding its foray into corporate credit to now buy individual corporate bonds, on top of the exchange-traded funds it already is purchasing, the central bank announced Monday.

As part of a continuing effort to support market functioning and ease credit conditions, the Fed added functions to its Secondary Market Corporate Credit Facility.

The program has the ability to buy up to $750 billion worth of corporate credit. Its March 23 initial announcement is largely considered a watershed moment for the financial markets, reeling from the coronavirus threat spread."

Not sure what the intended frequency of these purchases will be, I didn't see that mentioned in the article.

Xlar

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Re: FED Buying
« Reply #49 on: June 15, 2020, 04:27:10 PM »

The economist Michael Hudson says the Fed is buying everything, including stocks.

https://michael-hudson.com/2020/06/holding-the-bailout-bag/


And he said in December that the Fed was forward buying equities and forward selling gold.

https://michael-hudson.com/2020/01/democratizing-money-a-discussion/


While I'm here, I'll just point out the elimination of the uptick rule, a trading law that had been in effect since 1938 and, after decades of attempts by Wall Street, was finally gotten rid of in.... wait for it.... 2007.

Obviously changes like that plus supercomputer algorithms and even just online trading have changed the how and why of market moves and what one can reasonably expect. It's not, as they say, your grandparent's stock market nor John Bogle's nor Warren Buffet's. It sure seems like the market is largely decoupled from the economy and financially manipulated in a big way. The average length of a time a stock is held is less than 30 seconds. (IIRC the last figure I read was 28 seconds.)

Personally I find it disheartening. I don't want to play the game as it is run now, but I can't afford not to.

Do you have a reference for the 30 seconds? I found this from 2016 that quoted 4 months: https://www.politifact.com/factchecks/2016/jul/06/mark-warner/mark-warner-says-average-holding-time-stocks-has-f/