Hope everyone had a great Christmas!
Appreciate all the input on this thread, even to those who had minimal cerebral input. But it’s all good because the New Year is upon us and it’s an election year to boot!!!
Here is some information from some research I’ve been compiling since 2008. Wall street journal, financial meetings, mainstream media buffs and so on.
!0/19/14 Feds cease 3rd round of QE3 but promised to raise interest rates by end 2015 ( a sign the economy was still sucking)
Despite the $3.5 trillion worth of asset purchases since 2007 and the historic Federal Funds Rate of 0% the economy had yet to recover long enough to warrant a rate increase. Key words “long enough”.
Dec 16th as promised in 2014 the rate increase takes effect 0.25%. Main stream media blitz proclaims a new dawning and an end to easy money essentially saving the nation from another Great depression. This rate hike comes at a time despite the government reported a 2.0% inflation rate. Immediate response of the Dow Jones, a drop in 367 points in the days following the teeny tiny rate increase.
Effective funds rate since 1982 (rate at which banks trade funds)
I believe it was mentioned that not much would happen due to the stock pile of money the banks are sitting on as well as the general overall spending of Americans has slowed even with the interest rates at 0% (why keep money in the bank with no return). My thoughts are one of the reasons the interest rates were raised slightly is because the spending habits of Americans has slowed which coincides with the above numbers that I took off one of my graphs. Since the markets are no longer self regulating and next year is an election year, do you guys think that the money presses will be fired up again to keep up with all the hype of better times to come made by the candidates. What are your thoughts of this rate hike right before an election year?
I would guess more people now days are invested in stocks simply for a return or just because they really have no choice. Stocks are normally left to those who understand what’s going on in the market. So as a vehicle to avoid the tax man a person’s money is herded into pension plans and 401K and a variety of other mechanisms. I guess corporations benefit nicely from this because it drives up the price of their stock but generally much of the public has little to no clue what their money is doing and placing complete confidence in someone else and hoping for the best.
Shifting gears a little, I was just reading in money market magazine how much assets the federal Reserve has been buying up since the 2008 collapse.
2008 nearly 1 trillion QE1 begins
2011 2.4 trillion QE2 begins
2012 2.8 trillion QE3 begins
2015 4.5 trillion
I guess we can make our future market conclusions based on what the Feds are buying up and the correlations between the S&P, Dow and NASDAQ.