tag:blogger.com,1999:blog-6616959642391988608.post8034947692984573526..comments2024-03-28T00:18:25.641-07:00Comments on Calafia Beach Pundit: An emerging and important secular trendScott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comBlogger27125tag:blogger.com,1999:blog-6616959642391988608.post-69321543658782338552018-10-03T16:56:11.992-07:002018-10-03T16:56:11.992-07:00The Fed doesn't actually intercept or control ...The Fed doesn't actually intercept or control muni yields. But when the Fed funds rate drops to near-zero, all other short-term yields have to decline as well. The Fed funds rate and the Treasury yield curve form the backbone (or the reference point) for all yields. Arbitrage keeps things in line.Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-15935637274690506632018-10-03T15:41:30.280-07:002018-10-03T15:41:30.280-07:00Scott, thanks for the response...what had me scrat...Scott, thanks for the response...what had me scratching my head was that my money market at the time was Fidelity's jumbo muni money market paying 3.7% tax exempt...I didn't realize the FED could intercept the risk free returns from municipal bonds approaching maturity...I thought they controlled the fed fund rates only...boy was I wrong.Jimhttps://www.blogger.com/profile/06774701281961294976noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-69653522913046131132018-10-02T09:53:33.323-07:002018-10-02T09:53:33.323-07:00Re "Would QE have worked if the FED had not c...Re "Would QE have worked if the FED had not contemporaneously robbed savers and retirees of their risk-free interest and dividend payments"<br /><br />I sympathize with those whose cash savings earned very little if any interest during the Fed's QE program. But as I have argued, the Fed didn't arbitrarily reduce interest rates to near-zero. The Fed was following the market. The Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-11846801108288678952018-10-01T14:12:58.749-07:002018-10-01T14:12:58.749-07:00Would QE have worked if the FED had not contempora...Would QE have worked if the FED had not contemporaneously robbed savers and retirees of their risk-free interest and dividend payments...in May 2007 I had a tax-free jumbo muni money market account stop paying dividends all together...where did that money go? the answer "The Fed solved this problem by buying trillions of dollars of notes and bonds...,which they also announced would for the Jimhttps://www.blogger.com/profile/06774701281961294976noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-7233005136635183352018-09-30T15:08:13.136-07:002018-09-30T15:08:13.136-07:00Scott,
What's the mechanics behind chart #5 -...Scott,<br /><br />What's the mechanics behind chart #5 - How does M2 grow slower than GDP to get that line to fall? Does it imply an increasing capital spend with increasing productivity to drive GDP higher? Otherwise cash just coming out from bank accounts to buy equitues has no net impact on M2 or GDP? Or is there some link between debt levels and the ratio of M2 to GDP? <br /><br />Thanks Anonymoushttps://www.blogger.com/profile/02412908828645091524noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-12408299878806884362018-09-27T03:04:06.493-07:002018-09-27T03:04:06.493-07:00Benjamin, I totally agree with you that economics ...Benjamin, I totally agree with you that economics is a "dark science" if science at all. It's always amazed me at how a group of extremely well educated individuals can look at exactly the SAME data and ideate completely disparate conclusions!<br /><br />That said, for my money, Scott is the man.stevehttps://www.blogger.com/profile/07387986994469835875noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-88881713207550335932018-09-26T23:33:08.945-07:002018-09-26T23:33:08.945-07:00I admire Scott Grannis' blogging but...
Okay...I admire Scott Grannis' blogging but...<br /><br /> Okay into 2008 there was hellacious demand for safe assets, especially US Treasuries.<br /> <br />The Fed solved this shortage of safe assets by problem by...buying several trillion dollars of US Treasuries and taking them off the market. Huh?<br /><br /> And then the Fed gave to commercial banks reserves which were not intended to be lent Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-53917132795211729682018-09-26T15:58:19.043-07:002018-09-26T15:58:19.043-07:00Re: Re: "how can such high current money dem...Re: Re: "how can such high current money demand coexist with such high current consumer confidence?" The point of this post is that it very likely can't continue. Money demand is high, but it is declining, and will likely continue to decline for the foreseeable future, barring some unexpected and massive negative shock, of course.<br /><br />Scott: thanks for reply. I understood Christian S. Herzeca, Esq.https://www.blogger.com/profile/09913237226503475709noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-65029921056276042452018-09-26T15:07:59.313-07:002018-09-26T15:07:59.313-07:00Re "wouldn't it make sense that the Fed c...Re "wouldn't it make sense that the Fed continue to increase the IOER rate at a slower pace than the Fed Fund target rate? Then banks will have less and less of an incentive to leave excess reserves at the Fed -- thereby reducing the balance sheet."<br /><br />No. The reason the Fed will need to keep increasing the funds rate and the IOER rate is to keep banks from deciding that Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-33435798209403782082018-09-26T15:00:53.265-07:002018-09-26T15:00:53.265-07:00Re "Does this imply that foreign money demand...Re "Does this imply that foreign money demand is also decreasing, or just domestic? Is it possible foreign money demand would keep int/long term rates low while the fed raises ST rates?"<br /><br />I haven't really tried to pin down the impact of foreign money demand on our markets. It's important to note that money demand really only applies to assets that are generally safe, Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-86037922957769217212018-09-26T14:56:56.085-07:002018-09-26T14:56:56.085-07:00Re "If your forecast plays out as anticipated...Re "If your forecast plays out as anticipated, which asset classes should do best in this scenario?"<br /><br />I think equity prices will continue to rise, but certainly not as fast as they have in recent years. I would say that equity prices are moving into "fair value" territory. Not much low-hanging fruit out there. But still, if the economy grows at 3-4% it's going toScott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-34838711483993181902018-09-26T14:50:57.586-07:002018-09-26T14:50:57.586-07:00Re "How do u think higher rates affect the ho...Re "How do u think higher rates affect the housing market this time?"<br /><br />I had a post not too long ago that argued that the housing market was consolidating, not collapsing. With mortgage rates almost sure to increase further, and with incomes still increasing only modestly, I think housing prices are going to increase modestly at best. Affordability is becoming an issue. RisingScott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-72844658060632806272018-09-26T14:47:42.919-07:002018-09-26T14:47:42.919-07:00Re "Given rising interest rates and the stron...Re "Given rising interest rates and the strong dollar, what are your expectations for dollar denominated emerging market debt?" <br /><br />A few observations: 1) the dollar is strong, but not excessively strong. Not nearly as strong as when the last emerging market crisis happened in the early 2000s. 2) interest rates are rising, but in real terms they are still quite low. Way lower Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-48393201693487213442018-09-26T14:41:10.784-07:002018-09-26T14:41:10.784-07:00Re: "how can such high current money demand c...Re: "how can such high current money demand coexist with such high current consumer confidence?" The point of this post is that it very likely can't continue. Money demand is high, but it is declining, and will likely continue to decline for the foreseeable future, barring some unexpected and massive negative shock, of course.Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-68922440609624102132018-09-26T12:38:10.949-07:002018-09-26T12:38:10.949-07:00When the Fed writes the check by buying mortgage b...When the Fed writes the check by buying mortgage backed securities, the government sector owns interest bearing securities and the private sector owns Fed IOUs that earn nothing. So, each year, the Fed writes a check to the Treasury in the billions of dollars from the interest they earned on those bonds effectively taking that money out of the private sector. Then, when the Fed sells those Tom Nugenthttps://www.blogger.com/profile/11869275021755483909noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-558859971430518962018-09-26T10:38:55.682-07:002018-09-26T10:38:55.682-07:00This is brilliant. As part of this wouldn't i...This is brilliant. As part of this wouldn't it make sense that the Fed continue to increase the IOER rate at a slower pace than the Fed Fund target rate? Then banks will have less and less of an incentive to leave excess reserves at the Fed -- thereby reducing the balance sheet.Anonymoushttps://www.blogger.com/profile/04927184995394139864noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-46771141225563996552018-09-26T10:25:51.815-07:002018-09-26T10:25:51.815-07:00Scott, Thanks again for your excellent analysis.
D...Scott, Thanks again for your excellent analysis.<br />Does this imply that foreign money demand is also decreasing, or just domestic? Is it possible foreign money demand would keep int/long term rates low while the fed raises ST rates? minnesota nicehttps://www.blogger.com/profile/00727666702361173951noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-35539249741374303182018-09-26T08:33:30.461-07:002018-09-26T08:33:30.461-07:00Hi Scott,
Very interesting. If your forecast pla...Hi Scott,<br /><br />Very interesting. If your forecast plays out as anticipated, which asset classes should do best in this scenario?<br /><br />Unknownhttps://www.blogger.com/profile/06167236840205126508noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-11075377450027774312018-09-26T07:59:03.964-07:002018-09-26T07:59:03.964-07:00Let the good times roll.
A couple decades of ver...Let the good times roll.<br /><br /> A couple decades of very tight labor markets is the tonic that the American economy and democracy need.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-54054973452424544362018-09-26T04:12:18.976-07:002018-09-26T04:12:18.976-07:00Interesting Scott.
Since housing is the business...Interesting Scott. <br /><br />Since housing is the business cycle.....How do u think higher rates affect the housing market this time? It would seem like this time it's differnt cause we've been so low for so long ?Kmanhttps://www.blogger.com/profile/13486509536114426115noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-25474518251317755922018-09-26T04:07:14.473-07:002018-09-26T04:07:14.473-07:00This comment has been removed by a blog administrator.Epic Research Globalhttps://www.blogger.com/profile/09652221695280369163noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-51032744934150573882018-09-26T03:33:27.378-07:002018-09-26T03:33:27.378-07:00Chart #6 is what caught my attention. Consumer con...Chart #6 is what caught my attention. Consumer confidence has been on a one-way trip to the moon, and has now arrived there. History indicates that it won't stay at these levels for long.Jameshttps://www.blogger.com/profile/05404564044322857558noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-50912842036670419372018-09-25T20:37:03.135-07:002018-09-25T20:37:03.135-07:00Scott, you have been 100% right in presenting the ...Scott, you have been 100% right in presenting the monetary picture for years, now. Im amazed at how many people misunderstand QE and the entire risk aversion scenario you present so simply and logically. Rates are gonna rise, and so are stocks as long as we keep restoring the rule of law, and America's greatness. If socialists retake Congress, risk aversion will return, and animal spirits Johnny Bee Dawghttps://www.blogger.com/profile/06836875640973245734noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-61656019174343606392018-09-25T20:21:46.527-07:002018-09-25T20:21:46.527-07:00Scott - thanks for a timely and excellent explanat...Scott - thanks for a timely and excellent explanation of the current monetary situation. Given rising interest rates and the strong dollar, what are your expections for dollar denominated emerging market debt? If/when difficulties further develop in that market, what effect do believe that will have on the US economy? Any comments very much appreciated! Tom in Chicago<br /><br />Unknownhttps://www.blogger.com/profile/04067053299094535546noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-61685152267403603672018-09-25T19:46:54.486-07:002018-09-25T19:46:54.486-07:00how can such high current money demand coexist wit...how can such high current money demand coexist with such high current consumer confidence?Christian S. Herzeca, Esq.https://www.blogger.com/profile/09913237226503475709noreply@blogger.com