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For Tomorrow --- Pause or No Pause?
- Thread starter MacroEvent
- Start date
Here is what I said on this topic on 9-3-05
09-03-05 09:20 PM
Look at a ten year chart of the ten year bond. It is in a raging bull market. (Prices up - yields down)
Next year the ten year could range between 2 3/4 and 3 3/4 % if we only go into a mild recession. Who knows where we will be if we get ourselves into a steep recession.
What brings on the steep recession? The underfunding of pension plans.
Virtually all companies with Defined Benefit plans are, or will be, underwater due to actuarial assumptions of 7-8% returns -- they are only getting 3-5%.
Corporate earnings are going in the tank next year due to 'unexpected funding requirements' (this is the phrase many CFOs will be using when they announce 'one time' charges to earnings).
Expect deep earnings hits and bad markets as a result.
The interest rate market has a way of looking out way into the future -- The ten year is telling us "things are not looking good!
The fed is done!
Here is a news release I just saw today
"The board of Colorado's Public Employees' Retirement Association voted
Friday to keep expectations for investment returns and inflation at
the same level, 8.5% and about 3.8%, respectively, in accordance with
the recommendation of Buck Consultants' David Slishinsky, who advised
the board. According to the Rocky Mountain News, the decision was
made over the objections of two trustees who had sought to lower those
key financial projections to what they thought were more realistic
levels. The public pension plan, with nearly 370,000 active,
inactive, and retired members, is the main retirement vehicle for
state workers, most Colorado teachers, and many other government
employees. At year-end 2004, it had an unfunded liability of some
$12.8 billion."
Don't think Greenie does not know about this pending tic toc.
09-03-05 09:20 PM
Look at a ten year chart of the ten year bond. It is in a raging bull market. (Prices up - yields down)
Next year the ten year could range between 2 3/4 and 3 3/4 % if we only go into a mild recession. Who knows where we will be if we get ourselves into a steep recession.
What brings on the steep recession? The underfunding of pension plans.
Virtually all companies with Defined Benefit plans are, or will be, underwater due to actuarial assumptions of 7-8% returns -- they are only getting 3-5%.
Corporate earnings are going in the tank next year due to 'unexpected funding requirements' (this is the phrase many CFOs will be using when they announce 'one time' charges to earnings).
Expect deep earnings hits and bad markets as a result.
The interest rate market has a way of looking out way into the future -- The ten year is telling us "things are not looking good!
The fed is done!
Here is a news release I just saw today
"The board of Colorado's Public Employees' Retirement Association voted
Friday to keep expectations for investment returns and inflation at
the same level, 8.5% and about 3.8%, respectively, in accordance with
the recommendation of Buck Consultants' David Slishinsky, who advised
the board. According to the Rocky Mountain News, the decision was
made over the objections of two trustees who had sought to lower those
key financial projections to what they thought were more realistic
levels. The public pension plan, with nearly 370,000 active,
inactive, and retired members, is the main retirement vehicle for
state workers, most Colorado teachers, and many other government
employees. At year-end 2004, it had an unfunded liability of some
$12.8 billion."
Don't think Greenie does not know about this pending tic toc.
From The Kin -
"Even if the yield curve inverts ".....
This is the classic definition of inflation and recession.
I don't think the yield curve inverts - instead, I think it starts to spread as many of the very large fed traders unwind their very profitable bond spread positions (short short term/long long term bonds).
Greenie doesn't give a damn about the ten year rate - instead, he cares about inflation. Only this time RAISING interest rates is not the right move.
Interest rates have to stay low so the FED can accommodate Corporate "needs" when they start to show next year.
"Even if the yield curve inverts ".....
This is the classic definition of inflation and recession.
I don't think the yield curve inverts - instead, I think it starts to spread as many of the very large fed traders unwind their very profitable bond spread positions (short short term/long long term bonds).
Greenie doesn't give a damn about the ten year rate - instead, he cares about inflation. Only this time RAISING interest rates is not the right move.
Interest rates have to stay low so the FED can accommodate Corporate "needs" when they start to show next year.
all i know, is that all the fed verbiage in their rate announcement tomorrow would never be enough to satisfy everyone as to why they paused if they did --- it would make some wonder why they REALLY paused.
Quote from MacroEvent:
all i know, is that all the fed verbiage in their rate announcement tomorrow would never be enough to satisfy everyone as to why they paused if they did --- it would make some wonder why they REALLY paused.
You are absolutely right!
This might be another reason form them to do the unexpected. It would make for some VERY Volatile markets (both stock and bonds)