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Old 04-24-2018, 06:55 PM   #126
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Re: BFI Macro and Events Thread

Higher rates is old news. What the market will be wary about is lack of robust growth, given we been at/under 5% unemployment for years now.

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Old 04-24-2018, 10:23 PM   #127
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Re: BFI Macro and Events Thread

Having a choice between 2.5% risk free short term and 2.5% with high risk matters. This is a new thing, not seen for 9 years, and it doesn't become an "old thing" just because you say it is. There's an actual choice to be made that will amplify downside volatility now. It would have happened sooner if not for Trump tax.

All of the action we're seeing is driven by rates, including today. Rates cause rising debt costs as well for companies, hurting the bottom line.

Growth is just fine. Earnings are beating. Forward P/Es are wonderful and would be a cause for higher if rates were at early 2017 levels.
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Old 04-25-2018, 01:17 AM   #128
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Re: BFI Macro and Events Thread

2.5% + inflation expectations + earnings growth expectations = something. I cannot, for the life of me, remember the equation.

Even the most anemic growth can overcome these massively burdensome 2.5% treasury rates that everyone is panicking about. Buy! Buy!! Buy!!! We* grew (and the stock market blossomed) under 10%+ rates.

(I'm still bearish, if that helps you understand whether I am being sarcastic or not)

*not you, I mean the U.S. of ****ing A.
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Old 04-25-2018, 03:58 AM   #129
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Re: BFI Macro and Events Thread

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Having a choice between 2.5% risk free short term and 2.5% with high risk matters. This is a new thing, not seen for 9 years, and it doesn't become an "old thing" just because you say it is. There's an actual choice to be made that will amplify downside volatility now. It would have happened sooner if not for Trump tax.

All of the action we're seeing is driven by rates, including today. Rates cause rising debt costs as well for companies, hurting the bottom line.

Growth is just fine. Earnings are beating. Forward P/Es are wonderful and would be a cause for higher if rates were at early 2017 levels.
I get this. The market (now) gets this. I mentioned this 4 months ago when we were at the tip of the tail of the Trump euphoria, while you were blaming one of the dozen weekly CNBC articles for the market's selloff.

When talking about markets, we must look for future changes in perception/sentiment/expectation. The market has already internalized higher rates in these last few months. The market ran up in 2017 because Trump's policies was expected to deliver strong growth. Growth may be fine today, but it may not be at the level the market perceived, and furthermore, the expectation in growth will only be revised down the longer we stay at 4% unemployment.

And while those graphs looked nice, there's nothing vastly surprising about the short end (2yr and shorter) of the yield curve. That's a function of the well anticipated Fed policy.

And before I get quoted out of context on a future date, I'm not saying markets are going to tank. I'm saying that in contrast to the linear rise of 2017, there will be more uncertainty with the new information and stimuli the market will be forced to construe.
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Old 04-25-2018, 06:18 AM   #130
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Re: BFI Macro and Events Thread

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I get this. The market (now) gets this. I mentioned this 4 months ago when we were at the tip of the tail of the Trump euphoria, while you were blaming one of the dozen weekly CNBC articles for the market's selloff.
What the **** are you talking about? When the first crash happened in Janauary I was literally watching bond ticks all day to decide what to do on SPY. I was way ahead of all the cucks here on that. And yes, CNBC headlines mattered too. I mean, things would literally dive half a percent on volume as a headline hit. These aren't opinions that those things were affecting the market.
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When talking about markets, we must look for future changes in perception/sentiment/expectation. The market has already internalized higher rates in these last few months.
You're not thinking about this clearly. It doesn't matter what the market "internalizes", whatever the **** that means. This isn't some news that gets discounted or the market grows tired or that it's taken into its expectations. It is an actual choice now - be in bonds or be in stocks - that was not a meaningful choice this time last year. This doesn't diminish or go away and get internalized. More people escape to bonds more often now when things get rough, because they have rational reasons to. Both big and small money.
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The market ran up in 2017 because Trump's policies was expected to deliver strong growth. Growth may be fine today, but it may not be at the level the market perceived, and furthermore, the expectation in growth will only be revised down the longer we stay at 4% unemployment.
You're not thinking about this rationally. 3% is a key level. Almost touching it is what sent the market crashing this week. Strong growth is what is keeping it up. You think it's a coincidence that the market always loses its mind as 3% is approached? You can watch and compare the bond and market inflection points, it's a very robust correlation.
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And while those graphs looked nice, there's nothing vastly surprising about the short end (2yr and shorter) of the yield curve. That's a function of the well anticipated Fed policy.
It doesn't have to be surprising. It doesn't matter if it's anticipated. Bonds aren't news that gets priced is. They're an actual, permanent change in real time decisions that people make about yield.

Market dips in early 2017 due to some news. You'd like to get out but where do you put it? Dividends pay more (2% or so) than the short and medium risk free rate. QE is still ongoing. So you figure you just hold and wait and see - nothing else makes much sense.

Market dips in early 2018 on some news. You'd like to get out but where do you put it? Dividends now pay less than the short and medium risk free rate. Why wouldn't you move some money to the risk free rate, protect your capital a little while still earning a nice yield?

Those decisions are what drive increased volatility. There's a stock superior yield producing safe haven to flock to now that didn't exist 8 months ago. Sure you'll still be in stock, but you're far more prone to taking some off the table now.

Quote:
And before I get quoted out of context on a future date, I'm not saying markets are going to tank. I'm saying that in contrast to the linear rise of 2017, there will be more uncertainty with the new information and stimuli the market will be forced to construe.
Why is there more uncertainty? Because growth isn't as strong as hoped? I'm not seeing it. If rates were where they were in 2016 we'd still be buying up because it's a black and white yield decision with lower rates, and earnings are beating headline and the economy is still strong and forward P/Es are just fine to keep buying stocks without a yield alternative.
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Old 04-25-2018, 12:07 PM   #131
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Re: BFI Macro and Events Thread

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Originally Posted by :::grimReaper::: View Post
Higher rates is old news. What the market will be wary about is lack of robust growth, given we been at/under 5% unemployment for years now.

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It is old news but it also a changing narrative. People were in love with the tax cuts and earnings are demonstrating why. Its not that rates rising is new, its that now its staring investors in the face whereas it was more in the background before. Investors are seeing and perhaps starting to feel a headwind whereas before they were in tax heaven and the rest was chatter

IMO
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Old 04-25-2018, 12:35 PM   #132
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Re: BFI Macro and Events Thread

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Originally Posted by :::grimReaper::: View Post

When talking about markets, we must look for future changes in perception/sentiment/expectation. The market has already internalized higher rates in these last few months. The market ran up in 2017 because Trump's policies was expected to deliver strong growth. Growth may be fine today, but it may not be at the level the market perceived, and furthermore, the expectation in growth will only be revised down the longer we stay at 4% unemployment.

And while those graphs looked nice, there's nothing vastly surprising about the short end (2yr and shorter) of the yield curve. That's a function of the well anticipated Fed policy.

And before I get quoted out of context on a future date, I'm not saying markets are going to tank. I'm saying that in contrast to the linear rise of 2017, there will be more uncertainty with the new information and stimuli the market will be forced to construe.
I think this is largely correct although the market has shown in short to medium term periods they can overreact to policy that is well telegraphed. You knew the fed was raising rates, government was issuing more debt yet all the sudden everyone is talking about it because the 10 year went over an arbitrary round number. Let's look at rates globally and you tell me there won't be demand for US yield going forward. Not to mention you have a massive amount of wealth globally from the Boomers that will have to move over from equities into fixed income. Especially if growth wanes, I just don't see how the long end is going significantly higher.
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Old 04-25-2018, 12:47 PM   #133
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Re: BFI Macro and Events Thread

Can you imagine the narrative if rates weren't rising/still at historic lows?
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Old 04-25-2018, 05:11 PM   #134
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Re: BFI Macro and Events Thread

Everybody raised really interesting points, which am finding super helpful, so thanks


It always did seem a bit weird of an explanation that the drastic drop in the market would be because of the rising 10yr treasury yield. As if like, everything was cool at 2.6%, but 2.7% was suddenly some sort of tipping point Especially since ya, in the past rates may have been higher, and didn't the market continue to rise?




Did see some articles mention that it was troublesome to see the shorter-term rates rising so quickly - and it looks like the RSI on the 1M timeline for the DJIA had hit 90 at the beginning of February for the first time in ages, so it seemed like maybe the pullback might have been more of the market maybe overheating or something like that?


It does seem though like if what maybe just have started off as a normal correction maybe got lots of people taking pause - guess a guaranteed 3% must for sure look good to retirees and possibly lots of other people as well, in light of some of the other stuff that may be weighing on the market, like the high valuations, and stuff like that?

So while the Dow hasn't yet dropped below the 200 day moving average, it seems to be having trouble moving above the 100 day moving average as well?




Guess if the Dow stays stuck between the two moving averages, it may be due for a rebound higher sometime soon? It's interesting that the market didn't reward JP Morgan and IBM for having strong earnings in Q1, but they appear to be rewarding FB right now - and possibly MSFT and AMZN too on Thursday? Moving forward, wonder if the market will continue to reward strong earnings of some companies and not others?


It seems like there's so much to be hopeful and worried about with regards to the market - have been feeling both FUD and FOMO all at the same time at times! Guess will have to wait and see if people are hopeful enough for the Dow to push past 25,000, or fearful enough for it to drop below 23,500?

Something have been seeing a couple of things about but not a ton, is how the strengthening Euro is weakening the US dollar - so apparently that's been causing the price of oil to rise, which has been causing inflation to rise? But maybe there may be enough supply to offset the rise? Although is Trump supposedly considering maybe pulling out of the Iran deal that Obama put together, possibly in May? So, maybe something to keep an eye on ... or maybe not? haha, who knows








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Old 04-26-2018, 10:17 PM   #135
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Re: BFI Macro and Events Thread

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I was way ahead of all the cucks here on that.
Too bad your post history doesn't support this.

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You're not thinking about this clearly. It doesn't matter what the market "internalizes", whatever the **** that means. This isn't some news that gets discounted or the market grows tired or that it's taken into its expectations.
It's not something that can easily be quantified, nor do I care whether you understand what I meant or not. I did my best to describe it.


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Market dips in early 2017 due to some news. You'd like to get out but where do you put it? Dividends pay more (2% or so) than the short and medium risk free rate. QE is still ongoing. So you figure you just hold and wait and see - nothing else makes much sense.

Market dips in early 2018 on some news. You'd like to get out but where do you put it? Dividends now pay less than the short and medium risk free rate. Why wouldn't you move some money to the risk free rate, protect your capital a little while still earning a nice yield?

Why is there more uncertainty? Because growth isn't as strong as hoped? I'm not seeing it. If rates were where they were in 2016 we'd still be buying up because it's a black and white yield decision with lower rates, and earnings are beating headline and the economy is still strong and forward P/Es are just fine to keep buying stocks without a yield alternative.
The dividend doesn't matter nearly as much as perception/forecast of growth and expected volatility.
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Old 04-27-2018, 05:34 PM   #136
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Re: BFI Macro and Events Thread

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More likely scenario is that Trump builds an economic sanctions coalition like he did against Qatar (with the Saudis, Egyptians, Jordanians) and North Korea (with China(!), Japan).

What the media won't report is that North Korea is essentially capitulating to all of Trump's demands due to the severity of the economic sanctions coalition, which would've caused North Korea to run out of foreign currency within the year, even though it's painfully obvious to people that are paying attention to the trade deals and sanctions being made.

I expect Trump to do similar to Iran now that Tillerson is out.
'Lo and behold: https://www.msn.com/en-us/news/world...D=ansmsnnews11

Capitulation while allowing Kim to save face. Presumably the Nobel Peace Prize will be awarded to Kim Jong Un, and the backroom deals made by Trump and Xi will be ignored by the western media, even though the South Korean and Japanese media reported on the topic fairly extensively. But no, people are shocked, SHOCKED that the South Korean politicians are crediting Trump.

Maybe I chose the wrong career. Perhaps I should've been like Kissinger and started a political consulting firm in the age of Trump.
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Old 04-30-2018, 02:00 PM   #137
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Re: BFI Macro and Events Thread

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Tooth I think the entire thesis is based on the return to power of an Iran post Saddam. While Saddam was around and Iran and Iraq existed with that dynamic, neither of them could really break out. But Iran now is essentially unchallenged regionally. So much like Trump with China, how much more powerful do you want to let Iran get before you deal with something you will undoubtedly have to face one day or the other (for sure if you are Israel, and therefor most likely with help if you time this now before another democratic president). For Israel these next 2-3 years are their best window to help themselves.
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I'm just not seeing it. How to make money from your view without losing your shirt if you're wrong? Long oil?
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Yeah that's viable. Israel did have a hope for Iran to implode based on the misery of its own citizens. And we did see that unrest a few months back. Really strong economic sanctions and some sort of sponsored coup is out of the playbook too.
Like I said, money to be made here. I crushed it so far but don't think we've seen the best of it.
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Old 05-04-2018, 09:02 AM   #138
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Re: BFI Macro and Events Thread

So what did you trade for oil long?

Interesting results of the US-China trade meeting. The positions look intractable...the world's biggest thief/criminal enterprise/agreement breaker/nationalist dictatorship doesn't want to budge much on its behavior, so it looks like Trump will have to force them. Which means pain for all involved. But perhaps not until after the midterms. It does make trade deals with other countries more likely to go through.

According the head of global analysis at Merrill Lynch, European nations and many others are happy to form a coalition against China and have been aiding Trump behind the scenes.
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Old 05-08-2018, 04:14 PM   #139
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Re: BFI Macro and Events Thread

Yeah oil and oil derived plays. Have made my money for the summer. Just gonna relax for a bit.
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Old 05-09-2018, 03:39 AM   #140
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Re: BFI Macro and Events Thread

I'm asking this here because the politics forum was a dumpster fire last time I went there: What is Trump trying to get by reneging on the Iran deal? We unfroze some giant amount of money of theirs and lifted sanctions against them in exchange for their drastically reducing uranium and plutonium enrichment (for like 15 years) and allowing inspections of all their sites (in perpetuity). Correct me if I'm wrong on any of that. Trump wants to reapply sanctions, at the cost of re-enabling their nuclear program, with the idea of doing what? Making a new deal that looks like what? I don't understand what he wants from them. What does Iran have to do to get these new sanctions lifted?
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Old 05-09-2018, 07:40 AM   #141
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Re: BFI Macro and Events Thread

He doesn't like that the restrictions expire eventually and he wants more inspections. Ultimately, he either actually believes he can make a "better deal" or he just doesn't want to be diplomatic with an enemy because that's "weak" in his mind. It seems rather dumb. What, Iran is just going to agree to be under international control forever? I mean, cmon. A broad spectrum around the world favors the deal from right-wing weirdo Boris Johnson, to Merkel/Macron, to Russia/China. Trump seems to just be clicking buttons here with an eye on how this affects his image at home among people who don't understand foreign policy beyond "We USA. We TOUGH. DURRRRRP." That's what happens when you hire people like John Bolton, who has never met a foreigner he didn't hate. Just my opinion.
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Old 05-09-2018, 09:44 AM   #142
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Re: BFI Macro and Events Thread

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I'm asking this here because the politics forum was a dumpster fire last time I went there: What is Trump trying to get by reneging on the Iran deal? We unfroze some giant amount of money of theirs and lifted sanctions against them in exchange for their drastically reducing uranium and plutonium enrichment (for like 15 years) and allowing inspections of all their sites (in perpetuity). Correct me if I'm wrong on any of that. Trump wants to reapply sanctions, at the cost of re-enabling their nuclear program, with the idea of doing what? Making a new deal that looks like what? I don't understand what he wants from them. What does Iran have to do to get these new sanctions lifted?
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He doesn't like that the restrictions expire eventually and he wants more inspections. Ultimately, he either actually believes he can make a "better deal" or he just doesn't want to be diplomatic with an enemy because that's "weak" in his mind. It seems rather dumb. What, Iran is just going to agree to be under international control forever? I mean, cmon. A broad spectrum around the world favors the deal from right-wing weirdo Boris Johnson, to Merkel/Macron, to Russia/China. Trump seems to just be clicking buttons here with an eye on how this affects his image at home among people who don't understand foreign policy beyond "We USA. We TOUGH. DURRRRRP." That's what happens when you hire people like John Bolton, who has never met a foreigner he didn't hate. Just my opinion.
Doesn't matter since none of it tells you anything about business, finance or investing. This is the BFI subforum. If you think you will get a better discussion in BFI about politics, you are incorrect.
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Old 05-09-2018, 09:55 AM   #143
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Re: BFI Macro and Events Thread

Disagree...these are tradable events we're talking about and having a clear-eyed understanding of them is helpful when trade points come up. Look at the Russia stuff for example. Buy the dip multiple times if you read that as fake news. Or the China trade stuff that impacted the markets in a big way recently. Sell the rip on the (correct) belief that Trump has conviction about China and isn't political pandering, so the trade headlines would worsen when it was a hot button issue.

As for Iran, my answer is I don't know enough to say what the answer is. A few competing points:

- On the one side you have a near-consensus among experts that the deal is worth keeping. Experts are right about stuff like this maybe 30% of the time.

- Against this you have Israel, who are the foremost intelligence experts in the region, whose peace and survival actually depends on the right answer, being strongly in favor of Trump's action. Israel to me weighs more than all the experts.

- Also against this, you also have the plain text of the agreement (seriously, read it), which makes it easy for Iran to continue their activities, just not at the few mentioned facilities. Who knows if they have others? A large amount of notice is needed to inspect anything else. Treaty makers also have more faith in treaties than is justified, and inspectors usually think they're better than they are.

- Also against this, you have experts being hilariously wrong time and time again

I don't know what the answer is. As far as trading goes, the Iran situation seems over. Oil's response seems overblown given that plenty will still keep trading with Iran.

Last edited by ToothSayer; 05-09-2018 at 10:00 AM.
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Old 05-09-2018, 10:56 AM   #144
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Re: BFI Macro and Events Thread

When they say its not about the oil, its definitely about the oil. Aramco is a trillion dollar company. The biggest IPO ever is in the pipeline. Oil humor... anyways - https://www.cnbc.com/2018/05/08/leav...il-expert.html
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Old 05-10-2018, 09:04 AM   #145
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Re: BFI Macro and Events Thread

CPI just came in 0.1% below expectations across the board - a nice shot in the arm to continue yesterday's relief rally. USD off nearly a percent very quickly.
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Old 05-10-2018, 09:35 AM   #146
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Re: BFI Macro and Events Thread

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Disagree...these are tradable events
They can be, but the question was about whether what was done was a smart or dumb thing. THAT is irrelevant.
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Old 05-11-2018, 06:33 PM   #147
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Re: BFI Macro and Events Thread

The U.S. Yield Curve Is the Flattest Since August 2007
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The Treasury yield curve from 5 to 30 years flattened Thursday to the lowest level since August 2007, as a combination of weaker-than-expected U.S. inflation and solid demand for a record bond auction bolstered investor confidence in owning long-dated securities.

The spread narrowed by more than 4 basis points, the most since February, dropping through a previous intraday low from April to 27.7 basis points. The gap between 2- and 10-year Treasuries also shrank in a bull flattening move.

....
Investors and Federal Reserve officials alike have been on guard for the curve flattening toward inversion, which has historically preceded recessions. Yet bond traders are still pricing in more than two additional quarter-point rate hikes by year-end, betting policy makers will stick to their tightening path.
It is interesting to me that the boomers retiring has a record number of people receiving social security checks. Deficit spending by the Federal government has a lot to do with paying social security benefits (it should be noted that April had a record surplus). Those benefits have COLA adjustments based on the CPI. So paying out social security benefits to me is clearly a burden on the federal government. It is also a fact that increases in economic growth mean federal government revenue increases which make it easier to finance social security. However, higher economic growth brings about inflationary pressure which leads to higher SS payments. So it looks like a prescription for a lower standard living, but could be convinced otherwise.
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Old 05-11-2018, 07:09 PM   #148
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Re: BFI Macro and Events Thread

Just to add to the above:

U.S. records largest-ever monthly budget surplus in April as individual tax receipts boom
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What happened: Tax receipts poured in during April, when tax returns and certain taxpayers’ quarterly estimated payments are due. Individual receipts climbed by $66 billion over last April, something the Congressional Budget Office has attributed to stronger-than-expected income growth in 2017, as well as “larger-than-anticipated payments for economic activity in 2018.”

Spending rose in April as well, climbing 8% thanks to higher payments on Social Security and interest on the public debt.

Big picture: While the surplus helped the government’s coffers for the month, the longer-term trend is going the other way. The Treasury said the budget deficit for the fiscal year to date is running ahead of the year-ago period, at $385 billion compared to $344 billion. That rising tide of red ink jibes with higher deficits estimated by the CBO, which forecasts a shortfall of $804 billion for the current fiscal year, and even higher deficits later, spurred on by the tax-code overhaul passed late last year.
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Old 06-13-2018, 10:46 PM   #149
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Re: BFI Macro and Events Thread

Thoughts the inflation #'s being highest in 6 years?

Would think the fed will want to keep raising aggressively to fight inflation but don't they have to be careful not to stifle growth? If inflation is accelerating that fast because of robust economic growth then won't that create a rather tight balancing act for the fed?

I know people have been saying this stuff for awhile but it seems like inflation is going to get harder to control during this cycle.
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Old 09-30-2018, 09:16 PM   #150
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