*Investors Blog*

[SC Maintenance]

Fed believes it is time to lower the Prime.

Sorry to be a giant PITA, but Prime is the interest rate banks charge their best customers. Its not directly controlled by the fed. Its usually US10Y + 2-3%, depending on some other factors. Prime has already gone way down with the fall of the 10 year note.

The fed controls the fed funds rate, aka the fed overnight rate, which is really bad terminology also given its usually a 90 day note. Gotta love banker terminology

IMHO its debate able that fed funds has had a whole lot of affect on the real economy anyway. It might have at some times in the past because the only ones borrowing a that rate are the banks, except very few banks are borrowing from the fed. There flush with cash already.

But I digress.

 

[BrainThicknessVariation]

Sorry to be a giant PITA, but Prime is the interest rate banks charge their best customers. Its not directly controlled by the fed. Its usually US10Y + 2-3%, depending on some other factors. Prime has already gone way down with the fall of the 10 year note.

The fed controls the fed funds rate, aka the fed overnight rate, which is really bad terminology also given its usually a 90 day note. Gotta love banker terminology

IMHO its debate able that fed funds has had a whole lot of affect on the real economy anyway. It might have at some times in the past because the only ones borrowing a that rate are the banks, except very few banks are borrowing from the fed. There flush with cash already.

But I digress.

Indeed.

You're correct, the FF rate really just determines how much money the banks make. I went in to a branch the other day and the guy tried to sell me some C/D's because he noticed I had unused cash sitting there.

I asked him what spread they were making with mortgages and rates as high as they are. He chuckled. I doubt they get many customers that understand that basic concept.

If they're paying that much for C/D's and money market funds, you can be sure they're making a mint somewhere else...

 

[Dave Hess]

"Nearly one-fifth of Americans have ‘maxed out’ their credit cards as inflation and high interest rates push delinquencies to 3-year high"

Even the credit agencies are noticing:

"It’s no surprise that in this economic climate, one in which the cost of living is significantly higher relative to a decade ago, younger consumers are increasingly turning to credit products to bridge their financial needs,” Jason Laky, executive vice president and head of financial services at TransUnion, said in a press release for the report. “As long as inflation remains elevated and the cost of goods remains so as well, balances…are likely to continue to grow.”

Don’t forget about folks using Buy Now Pay Later apps like Affirm, Klarna, Afterpay, etc…. to buy groceries for their family.

Everything is sunshine and roses because the folks on TV says not to worry, everything is just fine….


https://finance.yahoo.com/news/stru...ay-necessities--even-groceries-214106284.html

https://nypost.com/2022/09/13/army-suggests-soldiers-fighting-inflation-go-on-food-stamps/

 

[BrainThicknessVariation]

Don’t forget about folks using Buy Now Pay Later apps like Affirm, Klarna, Afterpay, etc…. to buy groceries for their family.

I've always wondered about those. Has to be a catch if they're offering "zero interest" payment plans for the goods upfront. It must be baked into the price already, like in the case of Apple, the price is orders of magnitude more expensive that it actually costs to make, so if a few people are delinquent, no big deal.

Everything is sunshine and roses because the folks on TV says not to worry, everything is just fine….

Some of my friends lament (and have accepted) the fact that they will likely never own a home.

Sad.

 

[SC Maintenance]

Some of my friends lament (and have accepted) the fact that they will likely never own a home.

I don't think that is true. Nature abhors a vacuum and trendline reverts to the mean. The fact we dumped $12T in fiscal and monetary stimulus into the economy distorted things. It might take a while but the business cycle has not been defeated. Lengthened maybe.

 

[alarmguy]

I've always wondered about those. Has to be a catch if they're offering "zero interest" payment plans for the goods upfront. It must be baked into the price already, like in the case of Apple, the price is orders of magnitude more expensive that it actually costs to make, so if a few people are delinquent, no big deal.

Some of my friends lament (and have accepted) the fact that they will likely never own a home.

Sad.

https://www.affirm.com/how-it-works

Life has never been more easy in the USA, if your borrowing money then you are spending too much.

 

[BrainThicknessVariation]

I don't think that is true. Nature abhors a vacuum and trendline reverts to the mean. The fact we dumped $12T in fiscal and monetary stimulus into the economy distorted things. It might take a while but the business cycle has not been defeated. Lengthened maybe.

I'm not so sure about that this time around. USD can't be deflated to the levels needed to make housing affordable for younger generations. The global economy would implode worse than we've ever seen.

The entire system is predicated on inflating our way out of debt.

It will never stop.

 

[SC Maintenance]

I'm not so sure about that this time around. USD can't be deflated to the levels needed to make housing affordable for younger generations. The global economy would implode worse than we've ever seen.

The entire system is predicated on inflating our way out of debt.

It will never stop.

I don't predict the future - but I would give that low odds. Were at 330% global percentage of debt to GDP. No one wants to borrow more money. I would give higher odds to a deflationary bust - maybe in slow motion - starting who knows when.

However if you do believe that, look at the CCP currently - because there trying the reflation thing and its not working out for them. Or read the book "when money dies" which is about the weimer republic.

 

[BrainThicknessVariation]

I don't predict the future - but I would give that low odds. Were at 330% global percentage of debt to GDP. No one wants to borrow more money. I would give higher odds to a deflationary bust - maybe in slow motion - starting who knows when.

However if you do believe that, look at the CCP currently - because there trying the reflation thing and its not working out for them. Or read the book "when money dies" which is about the weimer republic.

Yes I agree over decades and centuries, something will give. I don't see it happening in my natural lifetime, anyway. They'll just re-inflate their way out, as well as the next Bubble. They call it Modern Monetary Theory (MMT), and students actually pay money to learn this nonsense.

The US frankly never even recovered from 2008.

There will certainly be another 2008. The only solution is to actually let the bank fails this time, and we know that will never happen.

 

[Dave Hess]

Stagnant wages - Not here. My payroll is up 25% in 4 years and national data says wage growth is outpacing inflation.

Cost of living increasing exponentially - Up? Yes! Exponentially? No.

Costs to raise a family (kids very very expensive) - sure, has always been expensive but this is not a separate item from inflation.

Housing very expensive - sure, definitely hitting those who don’t own and are overextended with rates up right now.

Credit card debt - Yup, definitely spiked after going down during CV-19

My problem with the above is I still don’t have a crystal ball to be able to predict where this is going or to what extent it’s going there and so I still rely on the 30,000 foot measures like GDP, jobs, etc. As rates come down and with wages up will there be a turning point where some of these start getting better before we hit some irreversible point of no return and recession. I just don’t know.

That’s good your payroll is up 25% in 4 years.

I’m sure your employees like the raises.

 

[PWMDMD]

That’s good your payroll is up 25% in 4 years.

I’m sure your employees like the raises.

That increase is also sector-specific. After CV-19, lots of people left health care due to burnout and wage growth, especially in dentistry, has been very high, but has recently leveled off. Now, not all of that increase is due to raises, part of that payroll increase is due to hiring a new associate, but that was a function of how busy we are and needing another dentist. We are having our best year ever and we are up about 15% this year with strong new patient flow. We don’t currently have anyone calling to cancel due to job loss. We don’t have very many people leaving to go with in-network offices or cheaper offices (there are always some no matter what is going on and as a peds dentists all of our patient eventually graduate to the a general dentist). Our collections are 99% and our AR is very healthy with most (75%) of AR being collected within 30 days.

Worcester is also a real slice of America and our patient base is made up of all socio-economic groups - from the impoverished to the very wealthy, but our “average” patient is squarely blue-collar middle-class. Now, Massachusetts may also be a bubble because I am personally not seeing the struggle that is being reported elsewhere in my life, my friends’ lives, or my patients’ lives.

 

[BrainThicknessVariation]

Now, Massachusetts may also be a bubble because I am personally not seeing the struggle that is being reported elsewhere in my life, my friends’ lives, or my patients’ lives.

You really think your patients are going to tell you they're underwater on their mortgage and their credit cards are maxed out?

 

[Pablo]

You really think your patients are going to tell you they're underwater on their mortgage and their credit cards are maxed out?

Especially with two hands in some orifice or another.

 

[alarmguy]

I'm not so sure about that this time around. USD can't be deflated to the levels needed to make housing affordable for younger generations. The global economy would implode worse than we've ever seen.

The entire system is predicated on inflating our way out of debt.

It will never stop.

The homeownership rate is pretty much unchanged for the last 60 years.. That rate is 66%
If we are going to make statements how housing needs to be made more affordable, it must be backed up with data as a statement like yours is void of facts. If they cant afford a house, your doing something wrong and need to make changes in their lives, its not up to my income from my hard work to make it happen.

If you really think about it, jsut the fact that is is virtually unchanged or better said averaged out over the last 60 years says a lot because young people do not get married at a young age like they used to, and many do not have interest in a home or even kids until later on in life and when they do have kids, they are having less of them.

When I purchased a home in the late 80s, those were much tougher times and people around me said the same thing you do today. Still I bought and I fixed it up and I paid at the time a good interest rate of 10.25% my brother who bought years before me was paying 15.5% rate.

I read this stuff and people in social media believe it, how hard life is. Social media controls their thoughts and if they dont wake up, the downfall of our society because life is so easy here it stupid simple. With that said, as the chart shows, not all young people fall victim to social media and they are buying up homes (with more luxuries than anytime in history) as fast as they can build them.

 

[BrainThicknessVariation]

The homeownership rate is pretty much unchanged for the last 60 years.. That rate is 66%
If we are going to make statements how housing needs to be made more affordable, it must be backed up with data as a statement like yours is void of facts. If they cant afford a house, your doing something wrong and need to make changes in their lives, its not up to my income from my hard work to make it happen.

If you really think about it, jsut the fact that is is virtually unchanged or better said averaged out over the last 60 years says a lot because young people do not get married at a young age like they used to, and many do not have interest in a home or even kids until later on in life and when they do have kids, they are having less of them.

When I purchased a home in the late 80s, those were much tougher times and people around me said the same thing you do today. Still I bought and I fixed it up and I paid at the time a good interest rate of 10.25% my brother who bought years before me was paying 15.5% rate.

I read this stuff and people in social media believe it, ho hard life is. Social media controls their thoughts and if they dont wake up, the downfall of our society because life is so easy here it stupid simple.

The Homeownership Rate is just the proportion of households that are owner-occupied. It is calculated by dividing the number of owner-occupied housholds by the total number of occupied housing units.

If there are 10 homes owned in all of America, and 6 of them are owner occupied, the "Homeownership Rate" would be 60%...

In fact, housing affordability is actually at or near record lows.

 

[alarmguy]

...

Worcester is also a real slice of America and our patient base is made up of all socio-economic groups - from the impoverished to the very wealthy, but our “average” patient is squarely blue-collar middle-class. Now, Massachusetts may also be a bubble because I am personally not seeing the struggle that is being reported elsewhere in my life, my friends’ lives, or my patients’ lives.

Your not in a bubble, its the same here in the Carolina's. We are posting in here to people convinced life is tough and bad in the USA and nothing cold be further from the truth and the facts, like the chart I posted above show that. Ohhhhh ... we know so well the dentists here on the coast are booked both small and huge practices. Same goes for doctors. Its unbelievable how busy they all are, many of our doctors and dentists are from the northeast. I happened to have grown up and lived most my life on Long Island and I think all my doctors are from there and another one or two from up north someplace.

 

[BrainThicknessVariation]

Your not in a bubble, its the same here in the Carolina's. We are posting in here to people convinced life is tough and bad in the USA and nothing cold be further from the truth and the facts, like the chart I posted above show that. Ohhhhh ... we know so well the dentists here on the coast are booked both small and huge practices. Same goes for doctors. Its unbelievable how busy the all area, many of our doctors and dentists are from the northeast. I happened to have grown up and lived most my life on Long Island and I think all my doctors are from there and another one or two from up north someplace.

Number of people with rotting teeth/ailing health is the new inverse unemployment rate? Which is at 7-year highs*? Interesting.

*not including Covid

 

[alarmguy]

The Homeownership Rate is just the proportion of households that are owner-occupied. It is calculated by dividing the number of owner-occupied housholds by the total number of occupied housing units.

It does not indicate what you think it does. If there are 10 homes owned in all of America, and 6 of them are owner occupied, the "Homeownership Rate" would be 60%...

In fact, housing affordability is actually at or near record lows.


View attachment 237071

Propaganda above, because the same amount of people are buying homes and it does matter because it shows you over the last 5 decades the average is the same.. either way, even with your thinking, why does something have to be done? If you want a house, work hard and buy one, dont expect government (taxpayers) to buy one for you. If houses weren't in demand, prices would go down. Paying under 300k for a house is easy, brand new, all the luxuries you can ask for that needs no improvement or buy an older one.

That chart means nothing, ups and downs throughout the decade, peaks and valleys. To give you an idea. Here is monthly data.
Not that it matters because it's up to the individual to buy a home, not me help them.

Source - https://cdn.nar.realtor/sites/defau...24-housing-affordability-index-2024-08-09.pdf

Ps, I am sure you must be aware that the world was shut down for two years in 2020 and costs rose until production picked up again. A world health event not seen in modern times. What is great about a free market is supply and demand typically will at some point counter the other. Meaning, catching up to the world virus shut down is getting close and we should be there in the next two years.
I see it in the building around here, they cant build them fast enough and when they do, they sell so fast they cant get the new streets in fast enough.

 

[Astro14]

Folks - this is pages and pages of tangential economic quibbling.

The thread is about investing.

Those who haven’t posted about investing, but have chosen to continue this debate will be taking a break.

They are free to start their own thread.

 

[alarmguy]

Folks - this is pages and pages of tangential economic quibbling.

The thread is about investing.

Those who haven’t posted about investing, but have chosen to continue this debate will be taking a break.

They are free to start their own thread.

Thanks for the reminder sometimes you forget what thread you are posting in. Feel free to delete my posts because I like this investing thread.