Free speech be damned --- Curt Schilling fired

[BK METS]

As for the markets, we had elevated cash levels heading into this and I'm in no hurry to bargain-hunt. For clients we bought nothing today, not even tempted. Normally a down 600 day has me bargain-hunting, but today I saw nothing but some nice short-lived flip trades off the opening lows.

On the other hand, US treasury bonds have been a safe haven today and interest rates for mortgages will be much lower for the distant future, with no Fed raise in rates anytime soon. As much as today sucked for most in the market, it will be good for the long term real estate market, which is what drives the US Economy. A rise in rates (due to a fabricated "better" US Economy) would not have helped and caused further issues. There is some positive here.

[Gekko]

in a free market, interest rates would rise (and probably a lot). low interest rates are rotting the economic floor and the average joe doesn't even know it.

[KJ Duke]

As for the markets, we had elevated cash levels heading into this and I'm in no hurry to bargain-hunt. For clients we bought nothing today, not even tempted. Normally a down 600 day has me bargain-hunting, but today I saw nothing but some nice short-lived flip trades off the opening lows.

On the other hand, US treasury bonds have been a safe haven today and interest rates for mortgages will be much lower for the distant future, with no Fed raise in rates anytime soon. As much as today sucked for most in the market, it will be good for the long term real estate market, which is what drives the US Economy. A rise in rates (due to a fabricated "better" US Economy) would not have helped and caused further issues. There is some positive here.

I wouldn't call real estate the driving force in the economy, it should be an offshoot of an otherwise healthy economy with a growing population. Instead, it has become a speculative byproduct of low interest rates and constrained supply created by low confidence. Likewise, I wouldn't call keeping interest rates low to support further speculative gains in home prices and higher rental rates a long-term plus for the economy.

[KJ Duke]

in a free market, interest rates would rise (and probably a lot). low interest rates are rotting the economic floor and the average joe doesn't even know it.

Rates rise either because of strong demand for capital or increasing relative risk.

If you're arguing that in a free-er market, demand would be higher, yes. If you're arguing the Fed is unnaturally suppressing rates, I'd disagree. Demand for capital is weak = part demographics, part low confidence to borrow for the purpose of investing, both are deflationary.

On the risk front, relative risk is trending no worse as every major developed country is pretty much doing what we are doing - monetary stimulus - but they don't have the advantage of being a reserve currency, so I would argue relative is not increasing.

[headhunters]

wasn't the UK the "reserve currency" at one time?

[Gekko]

Interest rates go back to "customary" % and the stock market and govt debt payments Go BOOM! Sorry Duke, interest rates are a part of the political machine now more than ever. They will never let them go much higher, unless the market (or citizens) FORCES them to

[BK METS]

As for the markets, we had elevated cash levels heading into this and I'm in no hurry to bargain-hunt. For clients we bought nothing today, not even tempted. Normally a down 600 day has me bargain-hunting, but today I saw nothing but some nice short-lived flip trades off the opening lows.

On the other hand, US treasury bonds have been a safe haven today and interest rates for mortgages will be much lower for the distant future, with no Fed raise in rates anytime soon. As much as today sucked for most in the market, it will be good for the long term real estate market, which is what drives the US Economy. A rise in rates (due to a fabricated "better" US Economy) would not have helped and caused further issues. There is some positive here.

I wouldn't call real estate the driving force in the economy, it should be an offshoot of an otherwise healthy economy with a growing population. Instead, it has become a speculative byproduct of low interest rates and constrained supply created by low confidence. Likewise, I wouldn't call keeping interest rates low to support further speculative gains in home prices and higher rental rates a long-term plus for the economy.

Let me rephrase and say, the real estate market is the driving force in a "recovery" (always has been). In a booming economy, its just one factor, I agree. Keeping rates low is something that the Fed has no choice but doing, at this point. Previously, it was due to a sluggish economy and real estate market, now there is another reason. Low rates are not a bad thing, if it is making purchasing a home more affordable.

There would be no reason to raise rates until a sign of recovery is imminent and this latest development isn't going to help.

[DOUGHBOYS]

What is 'customary'?
Over the history of the U.S. 240 year span, the average interest rate has been 5.18%
Most of that being early in its history.
History tells us that trouble follws when America hits the five percent mark.
From 1946 to 1981, the U.S. was on a rather steady climb from two percent to 10 percent interest rates.
From 1981 to present has taken us down the roller coaster ride.
America seems to saucer with low and high tides of interest rates in 20-40 year increments.
I believe we are better off with rates as is.

But I also believe that Byung Ho Park will bust out and have a better second half.

[KJ Duke]

Interest rates go back to "customary" % and the stock market and govt debt payments Go BOOM! Sorry Duke, interest rates are a part of the political machine now more than ever. They will never let them go much higher, unless the market (or citizens) FORCES them to

No doubt inflation would kill the budget, then politics would pressure the Fed to suppress rates. But we're in a deflationary world right now so that's not really a concern. In fact the opposite ... the silliness of the Fed talking about raising rates shows their unfounded fear of inflation even when there is none, along with their perpetual over-estimation of economic growth.

[KJ Duke]

What is 'customary'?
Over the history of the U.S. 240 year span, the average interest rate has been 5.18%
Most of that being early in its history.
History tells us that trouble follws when America hits the five percent mark.
From 1946 to 1981, the U.S. was on a rather steady climb from two percent to 10 percent interest rates.
From 1981 to present has taken us down the roller coaster ride.
America seems to saucer with low and high tides of interest rates in 20-40 year increments.
I believe we are better off with rates as is.

But I also believe that Byung Ho Park will bust out and have a better second half.

Too high, too low, unstable ... all indicate underlying problems and/or monetary mismanagement.

Byung Ho rebound in H2 ... sounds like you're on the Fed payroll !

[KJ Duke]

Low rates are not a bad thing, if it is making purchasing a home more affordable.

Don't tell that to anyone that bought in '07 and '08. Affordability based on income is already poor at current median prices, if we keep pulling forward demand with lower rates and higher prices it will end in the same as it did in 2008.

It's the same with any asset ... is lowering margin requirements for banks so they can lend more a good thing, or reducing margin borrow rates to buy stocks also a good thing because it makes them affordable?

"More affordable" sounds good ... but in practice it means "more "leverage" in the system, which is nice until prices turn the other way.

[Gekko]

ZERP (Zero Interest Rate Policy) causes companies/people to do things that they would otherwise not do because they are, at their core, uneconomic.

ZIRP causes bbbbbbbbubbles in:
1. ASSETS. think your house is worth what is says on Zillow, etc? Nope that's the price with ZIRP. Once rates go back up, the value of your house (asset) goes back down and probably much more than you think
2. STOCK MARKET. ZIRP implicitly forces Joe Citizen to "gamble" with their savings, since they can't earn much in a savings account or a CD. in other words, the equity market gets "gamble" money that has nothing to do with the performance of companies
3. HOUSEHOLD DEBT. If you are being honest, you know most families are in debt up to their eyeballs, fueled by ZIRP. if you are in debt once rates go up. BOOM!
4. COLLEGE TUITION. look how affordable college is!!!! let's get all these mostly young kids to take on massive amounts of debt (fueled by ZIRP and government backing) and then make it illegal for them to discharge it via bankruptcy, IE FINANCIAL SLAVES AND LOTS OF THEM. man, these banksters really are smarter than all of us. nice revenue streams baby!!

in summary, the country is 20 trillion in debt with years of ZIRP and countless rounds of QE. these fucking politicians and fiscal/monetary experts don't know jack shit about how to run an economy. all they are doing is kicking this big fucking ponzi scheme of an economy down the road as long as they can. once Joe Citizen has endured enough pain, there will be a "change", maybe as graceful as BREXIT or maybe something a bit more sinister. my vote is on the sinister lever

[BK METS]

Low rates are not a bad thing, if it is making purchasing a home more affordable.

Don't tell that to anyone that bought in '07 and '08. Affordability based on income is already poor at current median prices, if we keep pulling forward demand with lower rates and higher prices it will end in the same as it did in 2008.

It's the same with any asset ... is lowering margin requirements for banks so they can lend more a good thing, or reducing margin borrow rates to buy stocks also a good thing because it makes them affordable?

"More affordable" sounds good ... but in practice it means "more "leverage" in the system, which is nice until prices turn the other way.

07 and 08 purchasers were doomed by ridiculously liberal lending practices. Giving mortgages to people who did not have a job, could not verify income, or had bad credit. The "everyone should own a home" mentality of the federal government back then was as ridiculous as it sounds. These people were given adjustable rates, with low teaser rates that were artificially showing that they could afford it. Lending practices now are extremely conservative and not getting any easier. Interest rates are nearly always fixed now. The mortgage industry is a complete 180 from where it was in 2007 and one of the reasons why the real estate market hasn't taken off, with these extremely low rates, is the ultra conservative lending in the industry.

[BK METS]

ZERP (Zero Interest Rate Policy) causes companies/people to do things that they would otherwise not do because they are, at their core, uneconomic.

ZIRP causes bbbbbbbbubbles in:
1. ASSETS. think your house is worth what is says on Zillow, etc? Nope that's the price with ZIRP. Once rates go back up, the value of your house (asset) goes back down and probably much more than you think
2. STOCK MARKET. ZIRP implicitly forces Joe Citizen to "gamble" with their savings, since they can't earn much in a savings account or a CD. in other words, the equity market gets "gamble" money that has nothing to do with the performance of companies
3. HOUSEHOLD DEBT. If you are being honest, you know most families are in debt up to their eyeballs, fueled by ZIRP. if you are in debt once rates go up. BOOM!
4. COLLEGE TUITION. look how affordable college is!!!! let's get all these mostly young kids to take on massive amounts of debt (fueled by ZIRP and government backing) and then make it illegal for them to discharge it via bankruptcy, IE FINANCIAL SLAVES AND LOTS OF THEM. man, these banksters really are smarter than all of us. nice revenue streams baby!!

in summary, the country is 20 trillion in debt with years of ZIRP and countless rounds of QE. these fucking politicians and fiscal/monetary experts don't know jack shit about how to run an economy. all they are doing is kicking this big fucking ponzi scheme of an economy down the road as long as they can. once Joe Citizen has endured enough pain, there will be a "change", maybe as graceful as BREXIT or maybe something a bit more sinister. my vote is on the sinister lever

ZIRP isnt the cause. It's the effect.

[KJ Duke]

07 and 08 purchasers were doomed by ridiculously liberal lending practices. Giving mortgages to people who did not have a job, could not verify income, or had bad credit. The "everyone should own a home" mentality of the federal government back then was as ridiculous as it sounds. These people were given adjustable rates, with low teaser rates that were artificially showing that they could afford it. Lending practices now are extremely conservative and not getting any easier. Interest rates are nearly always fixed now. The mortgage industry is a complete 180 from where it was in 2007 and one of the reasons why the real estate market hasn't taken off, with these extremely low rates, is the ultra conservative lending in the industry.

Lending has loosened much in last couple years, not to the degree of '07 but back to "normal" not "extremely conservative".

Agree lending practice was a leading cause, but ultra-low rates can have similar effect. Anything that jacks prices relative to underlying buyer income can do the same. Income to price should be a consideration ... it isn't, it's income to payment which is fine if your cash flow doesn't go away, your rates are fixed and you never need/want to sell ... but it becomes problematic if rates rise and you need to exit into the resulting price decline. You can probably count on rising rates at some point in the next decade which could easily push today's buyers into negative territory, especially with lagging real income growth. Lending should be looser when rates are high and more restrictive when rates are low, but banks don't think like that.

[KJ Duke]

wasn't the UK the "reserve currency" at one time?

Sort of ... but weren't they still on the gold standard ... or was that immediately following off the GS? A far less inter-connected world then than now, however, gives us greater advantages by comparison with free-flowing global capital. Don't think Brits could ever have done what we're doing without igniting inflation.

[Gekko]

So greeny, u are saying ZIRP does not cause asset bubbles??? U are delusional. No wonder this country is going to hell in a hand basket

[King of Queens]

4. COLLEGE TUITION. look how affordable college is!!!! let's get all these mostly young kids to take on massive amounts of debt (fueled by ZIRP and government backing) and then make it illegal for them to discharge it via bankruptcy, IE FINANCIAL SLAVES AND LOTS OF THEM. man, these banksters really are smarter than all of us. nice revenue streams baby!!

Get federal student loans, and after 25 years, the loans are forgiven. Lots of ways to pay $0 (or close to it) between Years 1 and 25.

Only downside is the amount forgiven is treated as income, and you have to pay tax on that. Of course, lots of ways around that, as well.

[Gekko]

4. COLLEGE TUITION. look how affordable college is!!!! let's get all these mostly young kids to take on massive amounts of debt (fueled by ZIRP and government backing) and then make it illegal for them to discharge it via bankruptcy, IE FINANCIAL SLAVES AND LOTS OF THEM. man, these banksters really are smarter than all of us. nice revenue streams baby!!

Get federal student loans, and after 25 years, the loans are forgiven. Lots of ways to pay $0 (or close to it) between Years 1 and 25.

Only downside is the amount forgiven is treated as income, and you have to pay tax on that. Of course, lots of ways around that, as well.

Good luck with that!!! LOL

[BK METS]

So greeny, u are saying ZIRP does not cause asset bubbles??? U are delusional. No wonder this country is going to hell in a hand basket

Sorry, but I disagree that low interest rates are the cause of asset bubbles. There are many causes of asset bubbles and many causes of lower rates. In many cases, low interest rates aren't a manipulation by the government, but simply a supply and demand effect of the safe haven for investors who otherwise have nowhere to go with their money. Today, for example, Treasury bond yields plummeted simply because there was nothing to with billions being taken out of stock markets. It went to one of the only safe havens available, US Treasury Bonds. The Fed does have a strong effect on short term interest rates, but long term rates are mostly an effect of the Economy as a whole and where it is trending. Stocks go down, rates fall. Real estate sales go down, rates fall. Unemployment goes up, rates fall.

As far as real estate, I don't believe homes values are a fabrication, based upon interest rates. i believe as long as the Economy is sluggish and worldwide economies are uncertain, long term treasury bonds will remain low, thus mortgage rates will remain low. The Fed raises and lowers rates based upon the outlook for the future economy, but 30 year fixed rates are not based upon what the Federal Reserve does or doesn't do. The 10 year treasury and mortgage backed securities are the basis for mortgage rates. Lower rates don't cause asset bubbles. This type of liberal thinking is why current politicians have no clue what to do to stimulate the Economy. I am in the business of interest rates on a daily basis Mark. For 30 years. I know what I am talking about.

[KJ Duke]

Any compound growth rate in anything that does not have a terminal date (that is, a date at which said growth ceases) is by mathematical definition and trivial mathematical proof a fraud.

Look at the pension managers over the last 30+ years. They have and continue to this day to believe in 8%+ gains on a compounded, permanent basis. This is impossible to sustain; you cannot have growth in an asset base that exceeds that of GDP, and GDP cannot permanently expand at a rate beyond that of advancement in technology and population.

Not true actually, the sustainable rate of return is not bound by % GDP growth. Sustainable equity investment gains are a function of the avg annual ROIC for publicly-traded businesses over the course of a business cycle, adjusted for dividend payout rates. That 7-8% growth number (and higher total returns with dividends) has been a fairly consistent and sustainable number across all business cycles since WWII, and as such a reasonable perpetual mathematical growth rate in general (for equities, not blended portfolios with heavy bond exposure which is more dependent on the level of interest rates). Corporate profits and ROIC have held up just fine thru this business cycle even with tepid GDP growth.

GDP is a completely different number unrelated to a mathematically sustainable investment return. It reflects the total value of goods and services domestically produced which is a function of population growth, demographic cycles, economic maturity, the level of exports and productivity, whereas ROIC has more to do with the cost of capital, corporate competitiveness, innovation. Not to say that factors that influence GDP don't influence ROIC and can't impact interim growth rates, but the numbers are not specifically tied to each other in any way mathematically.

Likewise, you can have persistent compound growth, being a function of inflation plus real economic returns.

What you cannot have is persistently high inflation in the cost of government-sponsored spending without eventually crowding out and in fact overwhelming the productive aspects of society. That is one of several things that calls into question the future rate of growth and returns, because we are reaching the point of breaking the system with respect to near-future liabilities with medicare and soc security, along with excessive spending elsewhere. It's precisely the reason that Bernie, as lovable a grandpa and nice guy as he may be, would be an economic nightmare for accelerating such entitlements. Hilary, likewise, would do the same although probably worse given her penchant for supporting corruptive, anti-competitive legislation that would further damage the entrepreneurial growth elements within society, as we've seen with Obama. Neither our President, nor the Dem nominee, show the slightest clue as to how tax policies and regulation impact business decisions, employment and economic growth, which is the fundamental problem of having lifelong political actors/lawyers making economic decisions and regulating business.

There are OBVIOUS, OBVIOUS things that can be done that would immediately stimulate growth, which party-controlled Dems cannot and will not do because their constituencies have been duped into believing they're bad and/or unfair, so can't change now. I think Trump would employ many of these obvious pro-growth policies which would be very stimulative and positive for everyone economically, but we'd have to hope he doesn't also make a bunch of anti-growth protectionist moves that could offset these benefits, so he's no slam dunk either but at least offers glimmers of hope. If he brings in legit, qualified, principled advisors, that will be the biggest tell leading up to the election more so than his blowhard nature.

Sadly, this election is highly critical given the ever-nearer budget bomb on the horizon, and without some highly-effective pro-growth policies we have little or no chance of surviving without another major economic crisis, quite possibly worse and longer-lasting that the last one within the next decade or so. And to avoid this, we are in no position to elect a President who may be more likeable or just less unlikeable, we need to get it right economically no matter how distasteful. Think of it this way ▬ if you need heart surgery would you rather have it done by Greg Ambrosius because you think he's a nice guy, or because he says things that sound good to you or you share his values, or you gonna hire an actual heart surgeon even though he's a complete narcissistic mean-spirited prick ??? And no, you don't have your choice of a different surgeon, it's either Ambrosius or the prick surgeon. That is your/our choice. I don't like it either.

[Gekko]

[edited due to fire and brimstone clause]

[Gekko]

Any compound growth rate in anything that does not have a terminal date (that is, a date at which said growth ceases) is by mathematical definition and trivial mathematical proof a fraud.

Look at the pension managers over the last 30+ years. They have and continue to this day to believe in 8%+ gains on a compounded, permanent basis. This is impossible to sustain; you cannot have growth in an asset base that exceeds that of GDP, and GDP cannot permanently expand at a rate beyond that of advancement in technology and population.

Not true actually, the sustainable rate of return is not bound by % GDP growth. Sustainable equity investment gains are a function of the avg annual ROIC for publicly-traded businesses over the course of a business cycle, adjusted for dividend payout rates. That 7-8% growth number (and higher total returns with dividends) has been a fairly consistent and sustainable number across all business cycles since WWII, and as such a reasonable perpetual mathematical growth rate in general (for equities, not blended portfolios with heavy bond exposure which is more dependent on the level of interest rates). Corporate profits and ROIC have held up just fine thru this business cycle even with tepid GDP growth.

GDP is a completely different number unrelated to a mathematically sustainable investment return. It reflects the total value of goods and services domestically produced which is a function of population growth, demographic cycles, economic maturity, the level of exports and productivity, whereas ROIC has more to do with the cost of capital, corporate competitiveness, innovation. Not to say that factors that influence GDP don't influence ROIC and can't impact interim growth rates, but the numbers are not specifically tied to each other in any way mathematically.

Likewise, you can have persistent compound growth, being a function of inflation plus real economic returns.

What you cannot have is persistently high inflation in the cost of government-sponsored spending without eventually crowding out and in fact overwhelming the productive aspects of society. That is one of several things that calls into question the future rate of growth and returns, because we are reaching the point of breaking the system with respect to near-future liabilities with medicare and soc security, along with excessive spending elsewhere. It's precisely the reason that Bernie, as lovable a grandpa and nice guy as he may be, would be an economic nightmare for accelerating such entitlements. Hilary, likewise, would do the same although probably worse given her penchant for supporting corruptive, anti-competitive legislation that would further damage the entrepreneurial growth elements within society, as we've seen with Obama. Neither our President, nor the Dem nominee, show the slightest clue as to how tax policies and regulation impact business decisions, employment and economic growth, which is the fundamental problem of having lifelong political actors/lawyers making economic decisions and regulating business.

There are OBVIOUS, OBVIOUS things that can be done that would immediately stimulate growth, which party-controlled Dems cannot and will not do because their constituencies have been duped into believing they're bad and/or unfair, so can't change now. I think Trump would employ many of these obvious pro-growth policies which would be very stimulative and positive for everyone economically, but we'd have to hope he doesn't also make a bunch of anti-growth protectionist moves that could offset these benefits, so he's no slam dunk either but at least offers glimmers of hope. If he brings in legit, qualified, principled advisors, that will be the biggest tell leading up to the election more so than his blowhard nature.

Sadly, this election is highly critical given the ever-nearer budget bomb on the horizon, and without some highly-effective pro-growth policies we have little or no chance of surviving without another major economic crisis, quite possibly worse and longer-lasting that the last one within the next decade or so. And to avoid this, we are in no position to elect a President who may be more likeable or just less unlikeable, we need to get it right economically no matter how distasteful. Think of it this way ▬ if you need heart surgery would you rather have it done by Greg Ambrosius because you think he's a nice guy, or because he says things that sound good to you or you share his values, or you gonna hire an actual heart surgeon even though he's a complete narcissistic mean-spirited prick ??? And no, you don't have your choice of a different surgeon, it's either Ambrosius or the prick surgeon. That is your/our choice. I don't like it either.

duke - we can go back and forth about the dynamics of GDP, etc; however the truth remains there is NO WAY IN HELL any business model that promises 8%+ gains on a compounded, permanent basis is not a FRAUD. sure it may deliver for a bunch of years (much like madeoff did); however this is simple math. IT WILL NEVER DELIVER ON A LONG ENOUGH TIME HORIZON AND EVERY PENSION FUND OUT THERE WILL DETONATE. EVERY ONE OF THEM, SIMPLE MATH.

[KJ Duke]

duke - we can go back and forth about the dynamics of GDP, etc; however the truth remains there is NO WAY IN HELL any business model that promises 8%+ gains on a compounded, permanent basis is not a FRAUD. sure it may deliver for a bunch of years (much like madeoff did); however this is simple math. IT WILL NEVER DELIVER ON A LONG ENOUGH TIME HORIZON AND EVERY PENSION FUND OUT THERE WILL DETONATE. EVERY ONE OF THEM, SIMPLE MATH.

If an investment advisor is promising returns, that is fraud. But over the long-term equities have generated compound rates of growth in that range, so it's not fraudulent as an "expectation", with the usual caveats and disclosures (there are no guarantee of returns).

Pension administrators must have built-in return assumptions to determine contribution rates ... do some use return assumptions that are too high for a low-rate environment? No doubt, and there is obvious incentive (lower contribution rates = higher apparent profits) to do so. Will every one detonate? Well, maybe eventually if our currency turns Zimbabwean or North America earth gets wiped out by a meteor or nuclear event, but short of that it won't be every one.

But yours points are well-taken, the phony accounting in government budgets won't make problems go away by pretending they don't exist and continuing on the same unsustainable path while distracting voters with emotionally-charged BS.

[Gekko]

But over the long-term equities have generated compound rates of growth in that range

Duke - We both KNOW those days are over.