Stock market is negatively correlated with overall well-being.
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My theory is that the gambler subclass is getting restless, and is starting to pull out. Whether this results in a stampede or not remains to be seen.
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that could hurt the present resident as we know it still quite a shock though
Sorry, it’s very unlikely. Credit card rewards rates are marketing tools that have nothing to do with interest rates.
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Pretty much. Part of the economic cycle of American capitalism works as follows: higher wages/employment => more spending money for workers => higher inflation => The Fed tightening up money supply by making it harder to borrow => higher interest rates => bonds becoming more attractive than stocks to investors on a risk/reward basis => stock market goes down.
This is speculators and algorithms in the market reacting to all of the above, plus concerns that higher wages and/or headcounts will mean lower profits for some public companies.
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Counterpoint: as credit card interest rates go up, competition increases between credit card issuers for the increasingly lucrative business, thus marketing budgets increase.
The Fed will only raise the prime rate by a small number of basis points at a time, which means consumer debt rates will go up just enough to cause pain for balance holders but not enough to require a major hike in cash-back rewards for marketing purposes. Also, after all the consolidation there isn’t enough competition in that sector for any marketing measure that would seriously impact the bottom line.
This is the American credit card industry, so don’t get your hopes up is what I’m saying. The whole ecosystem is rigged against the consumer:
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Mr Jones has been around a long time, he’s going to break his hip one of these days.
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His entire pitch for president, for 8 years, was That Black Man Shouldn’t Have That Job, I Should.
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Wow, that’s quite the spiral there.
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It is. When unemployment is high the Fed usually takes the opposite approach, which leads to more investment in equities.
It’s been a workable approach by central banks since the Great Depression, but it becomes less effective when a society has higher inequality, a shrinking middle class, and regulations so loose and/or captured that bad actors and greedpigs flood into all areas of the market (U-S-A! U-S-A!). High automation and outsourcing are other factors that throw it out of wack. It also doesn’t work so well in a post-scarcity society where interest rates shouldn’t matter.
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Some claim that higher interest rates would have prevented the instantiation of mortgage backed securities fuckery. But cat’s out of the bag now, chumps!
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Yes. Great for savers, not so good for investors. Since the latter are the priority for the neoliberal consensus I doubt we’ll see savings-account rates go above 2.5% anytime soon, but this is a real (and cyclically inevitable) move away from ZIRP, mirroring similar rate hikes from other central banks.
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Agreed. This is hardly unexpected, given the cyclical nature of the market. I’ve followed my father’s advice for the 27 years I’ve been invested in the stock market: “leave it alone and stop worrying; we could all die tomorrow, right?”
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uh, better interest rates for savers, yes. Don’t buy any bonds unless you plan to hold them 'til they mature. You will have to sell them at a “loss” in the near (for some unknown value of “near”) future, because interest rates are going nowhere but up for a while (bond prices will go down as interest rates go up). Junk bonds are no longer called “junk bonds”, but the vast majority out there are, and the rising price of money (interest rates) will soon show how extensive the rot is.
a good place to start:
Shakespeare’s advice is most sound at this juncture – “Neither a borrower nor a lender be…” especially a naive lender at this moment.
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Thanks, Obama.
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Not so sure, borrowing cheap money for a long term good investment like real estate that will be relatively inflation proof is not the worst idea. Even if it’s overpriced in the current market long term it can still be a great investment as long as you don’t have negative cashflow on it.
Just last weekend I was talking with a friend deeply invested in equities. I said “I’d be cashing out right now”, but he was determined to wait for a clear market signal that the boom was over. I didn’t say timing the equities market is a fools errand. How many guys like him are waiting with their fingers on the “sell” trigger?
Yeah. I think people get overexuberant when the market is high and rack up debt. But then it corrects and they’re fucked. Or double fucked if they lose their job. The market is designed to correct itself like this. If we are lucky, it adjusts gently, as in within a few percent. If we are really being screwoffs, then it crashes. My hunch is that this time, the adjustment will be rather gentle, judging by p/e ratios. There is over valuation, but not nearly as bad as 2008 or 2000.
Greatly looking forward to how Trump spins this. He took all credit for the last year. He’d have to take credit for this crash, too, right? Oh, my mistake, it was Schumer, Pelosi, and the obstructionists Dems who are responsible, no doubt.
Sadly, I’m uncertain as to how the GOP tax plan which caused this can also prevent this.
I would think this is not “some inevitable market correction.” There just might be a causal relationship between pouring a trillion+ dollars into an already recovering market and inflation.
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