*Investors Blog*

I’ve gone from ordering a Whopper combo with large fries / large soda and apple pie……now I can only afford a Whopper Jr with small fries / small soda no apple pie due to inflation.

The guy on TV eating steak and lobster with the finest wines.
 
JeffKeryk said:
Only if he has predictions too... Otherwise they are just opinion, right?
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There not predictions - its forecasting. I know some professional forecasters / analysts. They can handicap something, but thats it. Its like the weatherman saying 60% chance of rain, but you get no rain. The conditions were favorable - but nothing is guaranteed.
 
Can you help a noobie out here with some questions:
SC Maintenance said:
Janet is running the show, if your paying attention. Everything is timed so the treasury can sell their bonds.
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So the treasury needs more money now, because it will have a harder time doing this after the election, because interest rates are predicted to go higher, or lower?
SC Maintenance said:
Powell is holding on with his fingertips, hoping he can get to November 5th without something blowing up.

After that - well someone will need to hold Powell's beer.
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So Powell might go crazy with interest rates after the election or will he not be able to control anything?
 
SC Maintenance said:
There not predictions - its forecasting. I know some professional forecasters / analysts. They can handicap something, but thats it. Its like the weatherman saying 60% chance of rain, but you get no rain. The conditions were favorable - but nothing is guaranteed.
Click to expand...
My career was in Predictive Analytics. You can get the numbers; the real question is what do they mean? What can you glean from them?
 
Owen Lucas said:
Can you help a noobie out here with some questions:

So the treasury needs more money now, because it will have a harder time doing this after the election, because interest rates are predicted to go higher, or lower?

So Powell might go crazy with interest rates after the election or will he not be able to control anything?
Click to expand...
Well I can try. There are a lot of moving parts and it involves the plumbing of the financial system - so ask specific questions otherwise this will turn into a novel.

The fed doesn't want to be in the spotlight. If things blow up in an election year then various candidates are going to blame the fed. 99% of people think the fed is part of the government. And while we all know there not really independent like they say, they don't want people to realize there a private bank.

So the fed is supposed to fight inflation, which they did by removing liquidity. But at the same time Janet (the treasury) was issuing monster amounts of new debt to cover our ever growing deficits, and also draining the treasury general account (the governments checking account) from its normal $700B to virtually zero. The net affect is that all the tightening the fed did, was offset by the liquidity provided by the treasury - net affect about zero.

But they also need to keep the bond market working. So when the 10 year started ramping up towards 5% last summer unexpectedly because Janet was trying to sell more bonds than she had willing buyers of, due to the huge deficit, they had a problem that the fed needed to fix.

So they found a pathetic excuse to unwind the reverse repo program (a $2T program intended to keep liquidity out of the system, and it was full of mostly your and my money market funds). So when they unwound that, the treasury had $2T of new buyers. If you want to confirm I am telling a truth - go look at average treasury funding. During a normal quarter since time immemorable the treasury sells about 10-15% bills (1 year or less) and the rest in notes and bonds (2+ years). During the last couple quarters its been 35-40% bills - to mop up this liquidity Powell created.

So, they have managed to hold it together this long. Q2 is usually pretty mundane in these things because all the tax revenue coming in tends to mean they have to sell less debt. So that gets them half way through summer, then its a couple months until November 5th.

After November 6th, I have no idea what Powell will do. He likely doesn't know either. However he will have a lot more options, because if something blows up at that point he won't have anyone of import trying to blame him. Someone will have lost and have no coverage. The other person will be trying to fund an even bigger deficit, and the last person they will want to irk is a fed chair with 2 years left on his term at age 70 and knowing he won't be nominated again anyway. He will hold all the cards.
 
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SC Maintenance said:
Well I can try. There are a lot of moving parts and it involves the plumbing of the financial system - so ask specific questions otherwise this will turn into a novel.

The fed doesn't want to be in the spotlight. If things blow up in an election year then various candidates are going to blame the fed. 99% of people think the fed is part of the government. And while we all know there not really independent like they say, they don't want people to realize there a private bank.

So the fed is supposed to fight inflation, which they did by removing liquidity. But at the same time Janet (the treasury) was issuing monster amounts of new debt to cover our ever growing deficits, and also draining the treasury general account (the governments checking account) from its normal $700B to virtually zero. The net affect is that all the tightening the fed did, was offset by the liquidity provided by the treasury - net affect about zero.

But they also need to keep the bond market working. So when the 10 year started ramping up towards 5% last summer unexpectedly because Janet was trying to sell more bonds than she had willing buyers of, due to the huge deficit, they had a problem that the fed needed to fix.

So they found a pathetic excuse to unwind the reverse repo program (a $2T program intended to keep liquidity out of the system, and it was full of mostly your and my money market funds). So when they unwound that, the treasury had $2T of new buyers. If you want to confirm I am telling a truth - go look at average treasury funding. During a normal quarter since time immemorable the treasury sells about 10-15% bills (1 year or less) and the rest in notes and bonds (2+ years). During the last couple quarters its been 35-40% bills - to mop up this liquidity Powell created.

So, they have managed to hold it together this long. Q2 is usually pretty mundane in these things because all the tax revenue coming in tends to mean they have to sell less debt. So that gets them half way through summer, then its a couple months until November 5th.

After November 6th, I have no idea what Powell will do. He likely doesn't know either. However he will have a lot more options, because if something blows up at that point he won't have anyone of import trying to blame him. Someone will have lost and have no coverage. The other person will be trying to fund an even bigger deficit, and the last person they will want to irk is a fed chair with 2 years left on his term at age 70 and knowing he won't be nominated again anyway. He will hold all the cards.
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I appreciate your thorough response, I come here to see what the big brains are doing and occasionally learn something, so thank you.

Wow, so the Treasury is fighting the Fed, a battle of the ages with massive reverberations if things go wrong. At this point, how can it not? The can has been kicked down the road so much that the only way out is printing money and when that isn't possible the Janet runs around the treasury picking coins out of the couch and under the mattress.

If Janet's guy doesn't get re-elected then they can blame team red.

If team blue wins, then how do they fix this mess?

So what's the worst case scenario, some kind of financial reset?
 
I checked my 401K accounts yesterday. Finally making up the prior losses.

In now 69 and retired now 3 years. Have not withdrawn a penny from them yet. Have enough in cash and my SS check.
Will most likely wait until the mandatory date for withdraws. Still have to figure that one out. Need to see if they can just transfer one
amount per year, because I think there is a fee involved, because I don't want a fee every month.

Any advise on how that works is welcome.
 
Owen Lucas said:
Wow, so the Treasury is fighting the Fed
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No, I wouldn't say that. The treasury is funding the debt that congress has decided to create. That's there job, they have no choice. However the net result is Janet is in charge, because the fed can't let the govt. not pay their bills, the currency would collapse.

Who is to say they fed doesn't want it anyway. The fed needs to give the illusion of fighting inflation, when they know themselves that their tools to do so are blunt instruments at best, and liquidity is better for the banks anyway. They would much rather have inflation over another Lehman Brothers.

The fed must keep the bond market functioning. Remember through the GFC and the pandemic the largest buyer of treasury debt was the fed itself - most of what's on its bloated balance sheet is govt. bonds.

Powell was first nominated by #45, then again by #46. Presidents nominate fed chairman's they are told to nominate - is my guess. The bankers have always been in control. Remember Janet was fed chairperson before Powell, nominated by #44. Powell was an investment banker before he was on the fed (and is reportedly worth $100M). So its a cozy group to say the least.

Neither wants to be responsible for what happens in an election. They like their cozy little arrangement that survives whomever is in office - so they stay out of the spotlight.

edit - I will add to this. Yes inflation peaked at 9%, but its about 19% total since the money printing started - so about 5% a year, and were now at 3.9%. So all this wailing and nashing of teeth resulted in 1% decrease in inflation. A lot of it was transitory after all.
 
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Jdeere562 said:
I checked my 401K accounts yesterday. Finally making up the prior losses.

In now 69 and retired now 3 years. Have not withdrawn a penny from them yet. Have enough in cash and my SS check.
Will most likely wait until the mandatory date for withdraws. Still have to figure that one out. Need to see if they can just transfer one
amount per year, because I think there is a fee involved, because I don't want a fee every month.

Any advise on how that works is welcome.
Click to expand...
Definitely not my area of expertise - but I assume you have read all of this: https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs

Possibly the "fee" our seeing is tax withholding? I can't imagine charging a fee for taking RMD's - unless maybe a small convenience fee.

You may be able to roll your RMD to a roth IRA - lots of rules so check with someone who does this sort of thing. You would likely need to pay the income tax on the withdrawal before it goes into the roth, but future gains would be tax free.
 
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