The Fed, the Market and Oil

[Scout26]

Well, we're at a new 52 week low.  The Fed ratcheted up rates 25 basis points to 2.5%.  Which along with the China uncertainty is starting to drag the economy.  (the FAANG stocks being caught being a Big Brotherly doesn't help either.)

Oil is down to around $45/bbl for West Texes and $54/bbl for Brent.  So despite the recent holiday travel rise at the pump, it's going to be below $2 once the holiday(s) are over.

I think Trump was right, the Fed needed to skip this rise, and wait a quarter, they are putting the brakes on an economy that isn't overheating...

[Ben]

IMO, the FAANGs have been way, way, way overpriced. They need a correction badly. However the way even many managed index-style funds are set up, you correct the FAANGs, and then you drag everybody else down too, because all the managers make these stocks a big percentage of their portfolios.

[brimic]

Shorting faangs seems to be a good strategy lately- they go up 1-2% for a day, then lose 2-3%...

[charby]

Rates need to raise, just jerk the bandage off. I wish it was a whole percentage point, yes it would suck but other prices would start to fall, like homes and vehicles.

[K Frame]

"However the way even many managed index-style funds are set up, you correct the FAANGs, and then you drag everybody else down too...."

Yeah, that's the entire purpose of an index fund -- to match the performance of that particular index... and yeah, that includes gains AND losses.

And the only way to really do that with an index is to closely match the composition of that index.

There are contrarian index funds, but from what I can tell they're few and far between because in general contrarian investing is a bigger crap shoot. Its seems that more people are doing their contrarian investing these days with ETFs.

[Ben]

Rates need to raise, just jerk the bandage off. I wish it was a whole percentage point, yes it would suck but other prices would start to fall, like homes and vehicles.

Yup. I wish they would have just started this incremental stuff slowly five years ago, or else not dropped them to ridiculous levels in the first place. I think it definitely would help stabilize home prices and reduce the negative effects of real estate crashes.

I also reiterate that Ma and Pa Kettle should be able to get 4% out of a T-bill or long term CD. It would definitely help keep people stable in their retirement years. Plus for people worried about drawing retirement savings with market corrections like we're seeing now, if you're diversified, you've then got that Tbill or other "savings" type vehicle that you can draw from while the market gets back to normal, so you're not drawing on your stocks at their reduced value.

[K Frame]

"I also reiterate that Ma and Pa Kettle should be able to get 4% out of a T-bill or long term CD."

They don't call them certificates of depreciation for nothing.

I'm of the firm opinion that CDs should really be only for excess money that you're parking and don't really need, because when it comes right down to it, you will never earn money, in the form of actual purchasing power vs inflation, with a CD.

[Scout26]

Rates need to raise, just jerk the bandage off. I wish it was a whole percentage point, yes it would suck but other prices would start to fall, like homes and vehicles.

I get it that you want to buy some land cheap.  Yet, falling home and other prices would be a depression and much, much worse then then slowly rising prices. 

[charby]

I get it that you want to buy some land cheap.  Yet, falling home and other prices would be a depression and much, much worse then then slowly rising prices. 

If the current prices for Midwest farm ground are high enough that you can't make a 30 year note payment on the ground from what you produce, it needs to come down. Depression is going to happen, doesn't matter if feds tweak interest rates or not.

I'm predicting a serious Ag crisis in the next three years, might be worse than the one in the early 80s since less people control more land.