Fed and the market

[LPTiger 5,166]

The fed says no more rate hikes and 3 potential cuts in 24.... and the market jumps.   Amazing how much influence the fed has.

[SaltyTiger 7,812]

Been a roller coaster with what the fed does past several months. Really is amazing.

[homersapien 11,379]

14 hours ago, SaltyTiger said:

Been a roller coaster with what the fed does past several months. Really is amazing.

I seems to have worked.

But food prices remain high.  It will be interesting to see if they ever decline, which is what free market theory would predict.  If not, wages will need to keep increasing before people recognize economic success.

[SaltyTiger 7,812]

3 minutes ago, homersapien said:

I seems to have worked.

But food prices remain high.  It will be interesting to see if they ever decline, which is what free market theory would predict.  If not, wages will need to keep increasing before people recognize economic success.

Other than perimeter items never knew much about grocery pricing. Ridiculous what some things are costing that we paid little attention to in the past. Also the cost of eating out. My mind has not graduated from the Meat & 3 lunch or fast food meal for 5 or 6 bucks.

[AU9377 4,935]

22 hours ago, LPTiger said:

The fed says no more rate hikes and 3 potential cuts in 24.... and the market jumps.   Amazing how much influence the fed has.

And you know why.....  In large part because money needs a landing spot.  Higher interest rates impact investment decisions. The Fed has the ability to affect the housing market and every industry that relies on financing, which means almost all business development and commercial enterprises. 

We have been riding that bubble for so long now that people ignore the role that the Fed has in keeping it inflated.  When and If it pops is anybody's guess.

[AU9377 4,935]

56 minutes ago, SaltyTiger said:

Other than perimeter items never knew much about grocery pricing. Ridiculous what some things are costing that we paid little attention to in the past. Also the cost of eating out. My mind has not graduated from the Meat & 3 lunch or fast food meal for 5 or 6 bucks.

The interesting part of food price increases, in my opinion, is separating the actual inflationary pricing from the advantageous price increases companies are implementing.  The cost of beef is a prime example, pardon the pun. 

[homersapien 11,379]

22 hours ago, AU9377 said:

The interesting part of food price increases, in my opinion, is separating the actual inflationary pricing from the advantageous price increases companies are implementing.  The cost of beef is a prime example, pardon the pun. 

The food industry is highly consolidated in many - if not most - segments, and pricing is highly "collaborative". 

I've seen it from the inside.

Edited December 15, 2023 by homersapien

[SaltyTiger 7,812]

7 hours ago, AU9377 said:

The interesting part of food price increases, in my opinion, is separating the actual inflationary pricing from the advantageous price increases companies are implementing.  The cost of beef is a prime example, pardon the pun. 

Not so much the beef the price as something like  A1 steak sauce or Moore’s marinade that astounds me. Mrs Salty says most things are like that. 

[auburnatl1 4,935]

The biggest mistake the Fed made was their traditional approach to fighting inflation. Interest rates had been so low for so long and then throw in a pandemic - not a traditional situation. Ie mortgage rates exploded -> housing prices exploded -> actually made inflation in many ways worse for  consumers. IMO fed mishandled communication, timing, and degree of rate hikes

Edited December 19, 2023 by auburnatl1

[Cardin Drake 1,829]

Interest rates were only low for so long because the Fed bought 10 trillion dollars worth of treasuries.  Setting the overnight fed funds rate has a limited impact on the market.  Buying treasuries on the other hand completely distorts the market and has a large effect on interest rates.  But it does allow the rich to get richer quickly.   Now we are in the ugly situation where we can have deficits causing inflation or artificially low interest rates and a falling dollar causing inflation.  And not a fiscally conservative politician anywhere in sight.

[icanthearyou 4,463]

On 12/14/2023 at 12:38 PM, AU9377 said:

In large part because money needs a landing spot.

This is a very important consideration.  However, you have to combine that information with the fact that we are now a financialized rather than production based economy.  The fed is somewhat limited because,,, they do not determine where the flow is going.

Since we are financialized, more money goes into speculation rather than increasing production.  Consequently, we get asset inflation.  Asset inflation without increased production leads to inflation in all goods.

[AU9377 4,935]

3 hours ago, icanthearyou said:

This is a very important consideration.  However, you have to combine that information with the fact that we are now a financialized rather than production based economy.  The fed is somewhat limited because,,, they do not determine where the flow is going.

Since we are financialized, more money goes into speculation rather than increasing production.  Consequently, we get asset inflation.  Asset inflation without increased production leads to inflation in all goods.

Those considerations, in my opinion, give the Fed greater influence than they have had at any time in our past.  The financial sector's ability to rely on the Fed to provide the funding needed to generate profits has transformed the banking industry.

[AU9377 4,935]

5 hours ago, auburnatl1 said:

The biggest mistake the Fed made was their traditional approach to fighting inflation. Interest rates had been so low for so long and then throw in a pandemic - not a traditional situation. Ie mortgage rates exploded -> housing prices exploded -> actually made inflation in many ways worse for  consumers. IMO fed mishandled communication, timing, and degree of rate hikes

I would argue that the causes of inflation actually pre-date that.  The economy was growing at a steady rate when Trump became President.  The first thing out of the gate was a slashing of the corporate tax rates, which poured gasoline on an already hot economy.  The impact of those types of decisions usually take time to manifest.  Then throw in everything you mentioned above and it is really not surprising how things unfolded.  The housing bubble will likely burst at some point due to the number of defaults that are inevitable with the debt that many are carrying.

[icanthearyou 4,463]

13 hours ago, AU9377 said:

Those considerations, in my opinion, give the Fed greater influence than they have had at any time in our past.  The financial sector's ability to rely on the Fed to provide the funding needed to generate profits has transformed the banking industry.

The Fed and,,, Wall St.  It's the nature of financialization.