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M
morganist
Quote from Landis82:
Not true on ALL points.
You seem to discount the FACT that there is a tremendous amount of overcapacity out there right now in the economy. Inventories are extremely LOW. Any kind of "uptick" in consumer demand will cause quite a big rebound in the Economy.
As to your last point, Corporations don't have to pay off their long term debt unless it makes economic sense to do so. With rates being so low, there really is no incentive for them to do anything OTHER than roll-over their debt . . . not pay it off.
surely low stock levels means you are running out or things to sell. so what could you sell when consumer consumption rises.
also companies will take advantage of low debt and pay as much off as they can now while it is cheap so when the rate rises again it will be less damaging for them.
M
morganist
Quote from morganist:
surely low stock levels means you are running out or things to sell. so what could you sell when consumer consumption rises.
also companies will take advantage of low debt and pay as much off as they can now while it is cheap so when the rate rises again it will be less damaging for them.
Wrong.
Corporations will NOT pay down long-term debt with interest rates at current low levels. It does not make any sense for them to do so because the money can be put into capital projects that have much higher rates of return, or they can buy back their stock ( if they are publicly traded ) and increase their earnings per share, and/or increase their dividend to shareholders.
If the credit markets are stable and liquid, and rates are LOW, Corporations will no doubt "roll" their debt from upcoming maturities out . . . into the future.
Think Exxon-Mobile is looking to pay down debt at current interest rates, given the kind of cash flow that they generate?
Of course not.
Quote from Landis82:
Did you not read the part where the Fed upped its growth forecast looking for the Economy to only "shrink" between 1-1.5% as opposed to their previous forecast of 1.3-2.0%
Are you not aware that the unemployment rate lags an economic recovery?
Everyone knows that.
This is more like creative writing than news you can base your trades on:
"Consumer spending appeared to have stabilized since the start of the year, sales and starts of new homes were flattening out, and the recent declines in capital spending did not look as severe as those that had occurred around the turn of the year," it said.
"Moreover, it seemed likely that economic activity was in the process of levelling out, and the considerable improvements in financial markets over recent months were likely to lend further support to aggregate demand."
In summary nothing we did not know in June and nothing that would point at the end of recession.
M
morganist
Quote from Landis82:
Wrong.
Corporations will NOT pay down long-term debt with interest rates at current low levels. It does not make any sense for them to do so because the money can be put into capital projects that have much higher rates of return, or they can buy back their stock ( if they are publicly traded ) and increase their earnings per share, and/or increase their dividend to shareholders.
If the credit markets are stable and liquid, and rates are LOW, Corporations will no doubt "roll" their debt from upcoming maturities out . . . into the future.
the credit market cannot be liquid when the rates is low it is contradictory to economic logic lower interest rates means less investment even if the individual is saving the banks are not passing on to the corporations. that is why they call it a credit crunch people cannot get credit.
M
morganist
Quote from Landis82:
Wrong.
Corporations will NOT pay down long-term debt with interest rates at current low levels. It does not make any sense for them to do so because the money can be put into capital projects that have much higher rates of return, or they can buy back their stock ( if they are publicly traded ) and increase their earnings per share, and/or increase their dividend to shareholders.
If the credit markets are stable and liquid, and rates are LOW, Corporations will no doubt "roll" their debt from upcoming maturities out . . . into the future.
Think Exxon-Mobile is looking to pay down debt at current interest rates, given the kind of cash flow that they generate?
Of course not.
other companies are not like exon mobile they are not making money in this climate. exon mobile is in the position that they are in a finite commodity with little competition, and probably a cartel.
Quote from mrstocker:
In summary nothing we did not know in June and nothing that would point at the end of recession.
True.
But it's totally pointless to even try and trade the stock market off of these "summaries". As we all know, the market discounts economic recoveries, and will be much higher even as unemployment numbers continue to deteriorate/stagnate.
That having been said, the interesting part of the FOMC notes was the Fed's sensitivity towards inflation - - - noting that they were already preparing themselves when it comes time to "take the punch bowl away".
Looking at their recent balance sheet stats from last week, it does in fact appear that they have been purchasing more Treasuries and improving the quality of assets on its balance sheet.