What's Your Negative Interest Rate Talk with Your Clients Look Like?

And I will say this Tyler, I will double down my bet of a beer over the rates being hiked in 2 years. They want to hand the election to Hillary (while Jeb and the other RINO's block small government messages), there's absolutely NO WAY the FED will raise rates in 2016 during an election year. They will say they will hold off by 2017 after "hinting" at it left and right throughout 2016.

You give me two years from today...I'm in on this bet. Rates are going up sooner than you think. It's going to be an inch, not a foot, but it will still help our business...
 
Ray I got you on this bet too! The beer may be warm by the time it reaches ya in the mail!

Here's the narrative, they are acting all hawk-like on raising rates, just posturing so they don't give away the fact that the FED has no independence, they can't raise rates, they just painted themselves in the corner.
The only effectiveness they have to push the market is with "rumors"..
 
This in turn would mean that, all else equal, the forward PE multiple would rise to just shy of 30x, and/or that Energy prices as a group would have to tumble over 50% from current levels!

Of course, if and when energy prices are cut in half, this would also have devastating consequences on the rest of the S&P, and all other asset classes, and almost assuredly force the Fed to not only forget all about hiking rates, but promptly engage in QE4.

http://www.zerohedge.com/news/2015-01-30/it-begins-energy-giant-chevron-suspends-stock-buyback-blames-cash-flow-squeeze

The only problem is that one can't have a world in which both QE4 is priced in (as equities are doing), as well as pricing in the 2015 Fed rate hike (as oil is doing), and is one of the main drivers of the USD strength.

One has to give, and it has to give soon.


Great article that shows Chevron now stopping the stock buy-back program, which all bluechips engaged heavily in. It's part of the FED QE, give cheap money away, corporations take said money, purchase shares elevating price market and economy, FED shuts off spigot....cash flow is drained!
Chevron is a good indicator of corporate cash flow, like Caterpillar is the best indicator for global growth and production...
 
This in turn would mean that, all else equal, the forward PE multiple would rise to just shy of 30x, and/or that Energy prices as a group would have to tumble over 50% from current levels!

Of course, if and when energy prices are cut in half, this would also have devastating consequences on the rest of the S&P, and all other asset classes, and almost assuredly force the Fed to not only forget all about hiking rates, but promptly engage in QE4.

It Begins: Energy Giant Chevron Suspends Stock Buyback, Blames "Cash Flow Squeeze" | Zero Hedge

The only problem is that one can't have a world in which both QE4 is priced in (as equities are doing), as well as pricing in the 2015 Fed rate hike (as oil is doing), and is one of the main drivers of the USD strength.

One has to give, and it has to give soon.


Great article that shows Chevron now stopping the stock buy-back program, which all bluechips engaged heavily in. It's part of the FED QE, give cheap money away, corporations take said money, purchase shares elevating price market and economy, FED shuts off spigot....cash flow is drained!
Chevron is a good indicator of corporate cash flow, like Caterpillar is the best indicator for global growth and production...

You just highlighted a big problem.

Too many corporations can't think of anything better to do with cash than boost stock prices. There is very little capital investment compared to the amount of stock buybacks. Also, I would argue that stock buybacks are generally not a good thing. Corporations are rarely better investors than the average person. They end up buying high and selling low.
 
Betting on the Fed to act one way or another in 12 months or two years from now is a fool's game.

Deflationary concerns have some merit. A look at Japan's economy over the past 30 years certainly provides a different perspective from the rah-rah jingoism found in most financialtainment outlets.

The discussion we are having with our clients includes consideration of deflation, how to build in a hedge against deflation and setting client expectations to manage the upset that will occur in times of market corrections.

We don't know what events are headed our way or to what extent they will impact markets. We do know there will be radical changes i.e. Black Monday, Internet Bubble, Mortgage Backed Securities.
 
Goldman Asks If Negative Rates Are Coming To The US

You know when you see the Squid talking about this openly...it's coming.

While looking at data provided by Eurostat reveals a picture of positive European growth and vibrance, what central banks on the ground are saying is something totally different. And indeed, after yesterday's surprising move by Sweden's Riskbank, there are now at least four central banks, and numerous countries in Europe, that are toiling under NIRP: Sweden (-0.1%), Denmark (-0.75%), the Eurozone (-0.2%) and, of course, Switzerland (-0.75%). Japan, oddly enough, has so far resisted the temptation to join Europe in an all out NIRP-fest, however with the amount of bonds the BOJ is monetizing, which is just about 100% of net JGB issuance, NIRP would be a secondary tool in the BOJ's arsenal especially since Japanese bonds drift in and out of negative interest rate territory on a whim. But what bout the US?

http://www.zerohedge.com/news/2015-02-13/goldman-asks-if-negative-rates-are-coming-us
 
Dude. Did you not even read all of the article you posted??

Of course Goldman talks about it. It is their job to bring up hypotheticals in the market and give their opinion on them.

And if you bothered to read their opinion:

Would the Fed adopt negative interest rates?

We think it is unlikely that the Fed would want to implement negative interest rates in the US. Most importantly, Fed officials have continued to suggest that rate hikes are likely to start in mid-2015, and pushing interest rates into negative territory would of course be moving away from rather than toward rate hikes. (OUR FORECAST FOR THE FIRST HIKE REMAINS SEPTEMBER 2015.) However unexpected negative shocks could always occur.


It is the job of an analyst to analyze hypothetical scenarios. And their analyst is that it isnt going to happen.

I suggest you read your articles more carefully... your article basically agreed with what I have been saying.

That beer is sure going to taste good in the fall... hopefully the fall seasonals will be in by then! :1wink:


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And Robert Shiller (who has his own Index named after him by S&P) is calling a bond price bubble and expects yields to return to historical averages over the next few years...

Shiller warns bond investors: Beware of
 
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