Investing Strategies. What is your move?

[PimTac]

So I know very little about banks - so someone needs to help me out here.

Banks borrow short, to lend long. However when the yield curve is inverted thats a money loser. Also, deposits are fleeing for T-bills given rates so they have no reserves to make new loans. Hence I totally understand the downgrade.

However the Fed. Res. is responsible for ensuring the soundness of the banking system. Since the yield curve inversion is there doing there the ones "causing" the downgrades. There also the ones blowing up the Federal deficit with higher government debt payments. I realize both root causes of those things originate at the government, but this is a discussion of monetary policy not fiscal policy.

So is this the current "there is no issue in Subprime" moment, or what am I missing?

I don’t have the knowledge to answer your question in detail but this is the result when you are forced to raise rates and raise them quickly. Had the Fed started to raise rates slowly years ago this situation would be minimized.

The other part of this is that banking alternatives such as online banks are gaining popularity. Brick and mortar banks have been pushing fees onto consumers and they don’t like it. Why pay to have your own money in such an institution when cheaper alternatives are out there with the same safety nets? It’s a transition from a hard cash society to a digital one and the banks are not adapting.

 

[PandaBear]

I don’t have the knowledge to answer your question in detail but this is the result when you are forced to raise rates and raise them quickly. Had the Fed started to raise rates slowly years ago this situation would be minimized.

The other part of this is that banking alternatives such as online banks are gaining popularity. Brick and mortar banks have been pushing fees onto consumers and they don’t like it. Why pay to have your own money in such an institution when cheaper alternatives are out there with the same safety nets? It’s a transition from a hard cash society to a digital one and the banks are not adapting.

I think the banks are adapting for sure. I have seen a lot of branches closing in the last decade and many people no longer go to ATM to get cash for small cash only purchases.

When mom and pop starts using Venmo and Paypal for small transactions (i.e. music lessons, baby sitting, etc), you know the days of digital is here. The newer banks no longer try to build branches, just online only, and many starts doing businesses way out of state. We are now having CDs in banks in midwest because they have better rates.

 

[alarmguy]

Homebuilder sentiment drops sharply, as mortgage rates surge over 7% …….​

Homebuilder sentiment drops sharply, as mortgage rates surge over 7%

A recent jump in mortgage rates has taken the steam out of recent gains in homebuilder sentiment.

www.cnbc.com

I think it's a good thing, mortgage rates getting back to historical averages. Still recovering from Covid and will continue to do so for 2024.
Thing is with Real Estate in the USA being we are such a large country, its region specific. I do see some signs of more expensive homes by new builders having price cuts but modest homes (still very nice) they cant build fast enough. That is backed up by the article, regarding labor shortages. Gotta stop government spending and overheating this economy. (How many people know that so fat this year the interest alone on the national debt SO FAR is 572 billion dollars this year.) Too many people employed so sparse workers is my feeling.

All I know is we are tickled pink *LOL* Sold existing home last Nov 2022, closed on new home 2023. Small mortgage at 5.85%
Feel like a hero now. I still remember family members telling me I should try to get concessions from the builder even though we already were doing great with 20k off and 5k in closing costs.

I am MUCH more experienced with real estate said no way am I doing that. Actually shocked me that they thought to give advice. *LOL*

That holds true even today Aug 2024. You cant buy a home in the new division of this community for what we paid anymore, plus the buyers have significantly higher mortgage rates and less included features (options) yet, they sell (go to contract) as fast as they are released for sale. They just finished the closings on an entire street next to us, and just started pouring foundations on the next street. while they finish up one smaller remaining street. Its amazing and a pretty cool feeling ...

The whole point of this once again (I know) long post of mine. I read the Homebuilder sentiment a little differently than many. I know the housing market is NOT going to crash but I can see the frustrations in home builders trying to keep up with massive profits because they cant build them fast enough and they have to trim down options, meaning snuggle to include very, very profitable extras.

 

[Dave Hess]

Homebuilder sentiment drops sharply, as mortgage rates surge over 7% …….​

Homebuilder sentiment drops sharply, as mortgage rates surge over 7%

A recent jump in mortgage rates has taken the steam out of recent gains in homebuilder sentiment.

www.cnbc.com

Yep, a mortgage calculator will give lots of potential home buyers the blues.

 

[Bill7]

I've been 100% cash in a money market earning 5.4% for several months, enjoying the safety and waiting for the fear of missing out (FOMO) bounce to end. Looks like it's ended. Growth stocks are beginning to go on sale at discount prices, but I think we're in the early innings of what could be another 2008. Just my humble opinion.

 

[JHZR2]

Gotta stop government spending and overheating this economy. (How many people know that so fat this year the interest alone on the national debt SO FAR is 572 billion dollars this year.) Too many people employed so sparse workers is my feeling.

That interest cost needs to sink in for a while for people…

 

[Bill7]

Yep, a mortgage calculator will give lots of potential home buyers the blues.

There are economic storm clouds on the horizon. Time to stay safe and avoid losing everything.

 

[PimTac]

Federal Reserve officials expressed concern at their most recent meeting about the pace of inflation and said more rate hikes could be necessary in the future unless conditions change, minutes released Wednesday from the session indicated…….

Fed officials see 'upside risks' to inflation possibly leading to more rate hikes, minutes show

The Federal Reserve on Wednesday released minutes from its July 25-26 policy meeting.

www.cnbc.com

 

[Dave Hess]

I've been 100% cash in a money market earning 5.4% for several months, enjoying the safety and waiting for the fear of missing out (FOMO) bounce to end. Looks like it's ended. Growth stocks are beginning to go on sale at discount prices, but I think we're in the early innings of what could be another 2008. Just my humble opinion.

You‘re 100% correct for watching your weather radar for storm clouds.

 

[Dave Hess]

Federal Reserve officials expressed concern at their most recent meeting about the pace of inflation and said more rate hikes could be necessary in the future unless conditions change, minutes released Wednesday from the session indicated…….

Fed officials see 'upside risks' to inflation possibly leading to more rate hikes, minutes show

The Federal Reserve on Wednesday released minutes from its July 25-26 policy meeting.

www.cnbc.com

Last 2 rate hikes should have been 75 bps.

Stop the Narcan….. Start the cyanide flowing.

 

[Pablo]

Last 2 rate hikes should have been 75 bps.

Stop the Narcan….. Start to cyanide flowing.

Why?

In detail.

 

[Dave Hess]

Near zero interest rates for waaaay too long. trillions and trillions and trillions of cash pumped into artificial economy created lots of problems, dysfunction and distortions. The chickens are coming home to roost.

High rates = High CD rates, everyone benefits from this. LOL


*** Full Disclosure ***
I benefited from all the manipulation and malfeasance.

 

[Pablo]

Rates are now too high. Economic growth got stifled starting in June

 

[doitmyself]

Look at the bright side................

 

[Bill7]

You‘re 100% correct for watching your weather radar for storm clouds.

These aren't just storm clouds, it's a once in a century storm coming.

 

[Dave Hess]

Bill7,

Late 2019 there was someone here on BITOG I had sent him a PM message about the yield inversion, lots problems in the banking industry here in the USA, daily Fed bank repos that surpassed $100B , crazy amount of debt bubbles and Warren Buffett had $130B cash on the sidelines.

Long haul big rig truckers crisscrossing the nation were reporting an economic slowdown. When truckers report an economic slowdown….... 100% as guaranteed as the sun will rise tomorrow morning we are headed for a recession. This kind of stuff not taught in the classrooms at fancy Ivy League business schools, long haul truckers talk about it at Flying J.

The warning lights on my dashboard went from flashing Amber to flashing RED….. and I went to 90% cash. Covid hit in 2020, markets tanked and I simply DCA back in.

Very similar things are happening again in 2023 but everything is now much worse. Buffett currently has $150B cash on the sidelines.



I still sometimes send a PM to a few people on here but I get the feeling like they are too complacent and not acknowledging the warning signs….. very similar to ICU nurses and alarm fatigue. The lights and alarms are on but the nurses simply acknowledge the warning and silence all alarms while the patient keeps down trending.

.

 

[JavierH19]

Michael burry just put up 1.6 billion in shorts against spy, yeah we're in trouble now. All indices slumped today again, aftermarket hours also unoptimistic.

 

[JeffKeryk]

Well, last year and earlier this year everyone and his brother were shouting, "Recession!"
Well, inflation has been on the decline, pretty rapidly, and unemployment is low.
This is the definition of a soft landing.

IMO, some posters seem to live in the short term; I am built for the long term.
There are business and economic cycles. My portfolio is geared for the long term and is doing just fine. I hope your's is too.

 

[PimTac]

Well, last year and earlier this year everyone and his brother were shouting, "Recession!"
Well, inflation has been on the decline, pretty rapidly, and unemployment is low.
This is the definition of a soft landing.

IMO, some posters seem to live in the short term; I am built for the long term.
There are business and economic cycles. My portfolio is geared for the long term and is doing just fine. I hope your's is too.

I remember in the mid 2000’s telling people that housing was becoming a bubble. Lots of them questioned that thinking. Around 2007 the Las Vegas market started to go down. They were one of the huge bubbles at the time. People said it was localized to Las Vegas and we were still safe. Then it started to spread and people said Seattle was safe because the economy was going full blast here. By 2008 it was apparent that no market was immune.

We sold our home in 2008, just as everything started to collapse. We dropped our price 20% and got a buyer. Then came the WAMU failure.


Nothing wrong with having a positive mindset but it also helps to watch for signs that things are about to change.

 

[Pablo]

Nothing wrong with having a positive mindset but it also helps to watch for signs that things are about to change.

What exactly are the signs?