Stock Market/Investing/Fin Planning Catch-All

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I wonder if the Fed just ntervened in Treasury market. Yield went from 4,573 to 4,997 very quicjckly,
 
heelslegup said:
I wonder if the Fed just ntervened in Treasury market. Yield went from 4,573 to 4,997 very quicjckly,
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Why would the Fed want to make that move? And the Fed tries not to be noticeable in its interventions.

This is the necessary result of a trade war being conducted by a government buying trillions per year.
 
superrific said:
Jim Cramer is too qualified per your accurate second sentence. A better analogy would be Ron Paul.
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The chair position is just a mouthpiece - just one of 12 votes on the FOMC. Firing Powell, even if he agreed to step aside for Jim Cramer or Ron Paul, wouldn’t change interest rates.
 
Calheel said:
The chair position is just a mouthpiece - just one of 12 votes on the FOMC. Firing Powell, even if he agreed to step aside for Jim Cramer or Ron Paul, wouldn’t change interest rates.
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That is not my understanding of how it works. While it's true that he's just one vote, usually his opinion carries the day. It's like the relationship between a CEO and a board of directors. Technically the latter has the authority but it typically defers to the CEO unless there are tensions.

I was told this by the chair of the Fed Reserve Bank of NY, the so-called #2 official at the Fed. It was a while ago, but I see no reason to think it's changed.
 
superrific said:
That is not my understanding of how it works. While it's true that he's just one vote, usually his opinion carries the day. It's like the relationship between a CEO and a board of directors. Technically the latter has the authority but it typically defers to the CEO unless there are tensions.

I was told this by the chair of the Fed Reserve Bank of NY, the so-called #2 official at the Fed. It was a while ago, but I see no reason to think it's changed.
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I'm quite sure that dynamic would not be at play if Ron Paul were the new Chair.
 
lawtig02 said:
Books will be written about this. We made it through four of the most challenging years in modern history -- in which a recession was all but guaranteed -- with not just no recession but remarkable GDP growth, low unemployment, and inflation coming back to relatively normal levels. Biden handed Trump one of the strongest economies in recent memory. And now, less than 90 days in, we're teetering on the edge of a deep recession, if not a depression, having squandered not just four years of hard work, but basically 80 years of global economic hegemony. The guy who bags my groceries at Harris Teeter wouldn't have been able to fuck things up this quickly.
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Clearly, your Harris Teeter bagger isn't a self-proclaimed "stable genius."
 
superrific said:
That is not my understanding of how it works. While it's true that he's just one vote, usually his opinion carries the day. It's like the relationship between a CEO and a board of directors. Technically the latter has the authority but it typically defers to the CEO unless there are tensions.

I was told this by the chair of the Fed Reserve Bank of NY, the so-called #2 official at the Fed. It was a while ago, but I see no reason to think it's changed.
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That’s correct
 
Calheel said:
I'm quite sure that dynamic would not be at play if Ron Paul were the new Chair.
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I see your point now. Obviously Ron Paul was a joke. Even Trump wouldn't do that.

But yes, if a clown gets appointed, he might not carry much sway. On the other hand, two things:

1) the people who lead Fed Reserve banks are almost by definition cautious, not boat-rockers.
2) there could be a fear that, if the new chair was being ignored, Trump might try to take the whole institution under the Executive Branch and remove everyone from the Open Markets committee.

Anyway, it does not appear to be an actual concern right now, though one supposes that could change.
 
heelinhell said:
I'm down 3% from my yearly high back on 2/25... but I have had 40% in cash paying 4% to offset my widow and orphan stock losses .

I have been an investor for 40 years and this is the first time I've been completely perplexed as to what to do...

go all cash ?
bottom fish to pick up bargains ?
do nothing ?

I think I will follow the advice of the great Merle Haggard and just stay here and drink

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Compared to this years peak, wow.

I was up 12% in Feb. I'm down 8% as of yesterday.

I'm scared to look today.
 
ChapelHillSooner said:
I panic sold my puts yesterday. Crying.
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I thought I remembered you posting that you had sold a few early on that covered your costs on the whole batch? If so, it was a free trade (and a smart move on your part). Anything you made on the puts you sold yesterday was gravy. I might be misremembering, but if I'm not it was a pretty good trade, esp. for someone who doesn't mess with options very much...
 
superrific said:
I don't understand this "someone is dumping bonds" narrative. Maybe I'm missing something, but the spike in treasury yields is exactly what economic theory predicts must happen. Has business and financial journalism decided that economics is no longer a prerequisite for those jobs? Here's standard economic theory:

1. trade deficits and capital surpluses are two sides to the same coin. They are literally indistinguishable. When we buy goods from China, they end up with dollars. If they sell their dollars, it plunges the US currency and that's not what China wants. So China uses the dollars to buy US debt (it's sort of like America collectively buys shit from China with installment payments). And that's good, because we have a lot of debt to sell! In fact, there's really no way we would sell our debt without China's involvement.

2. A persistent story in economics -- one that has been fuzzed up a bit in the last two decades but has not been altered in its basics, I don't think -- is that budget deficits create trade deficits. Again, it can't work differently: what is China going to do with all those dollars? It will either sell them, weakening our currency (in which case we will have even more trouble attracting foreign capital, because our yields have to be higher to be competitive), or invest them in treasuries.

3. So the House/Senate this week seem to have agreed on a budget framework that would increase the US debt by a lot. Thus, we are increasing our financing needs by a considerable amount (in part because Trump and the GOP are trying to reduce the financing provided by taxing rich people). But where is that going to come from?

4. The problem is that our trade deficit with China is going to drop close to zero for a little while. That's because trade between the two countries will drop to zero. Normally, the way the trade deficit would close to zero would be dollar depreciation. And that would come from the decreased supply of US debt to purchase. So the process will find an equilibrium.

But today trade is dropping because Trump has more or less decided to make it illegal. That's not supposed to happen in the standard story. So if China no longer has dollars because it's no longer running a trade surplus, they won't buy Treasuries.

In other words, the US government created a $2T financing hole from the increased debt, at the same time it's cutting off our main buyer of debt. The price of that debt has to increase. It just does.

5. So what I see is economics telling us what will happen inevitably. I mean, maybe there's dumping but this isn't a market reacting out of spite. This is a market acting exactly as one would expect.

6. By the way, usually what happens when the government tries to make something happen that doesn't organically happen, the economy adjusts to make it possible. Huge budget deficits and no trade deficits just isn't a feasible combination at our current production levels. The way it can happen is if the US economy enters a deep recession, so that's likely what would happen. US spending has to fall dramatically to make it work.

Note that some of the drop in spending will come from increased savings. Again, somebody has to finance those deficits. If the world isn't going to, Americans will. That's why rates are rising -- Americans don't want to, and they will keep rising until Americans prefer the return from the bond to immediate consumption. All along, money that Americans invest in Treasuries is money that isn't invested in the actual economy. Hence, recession. And recession means lower tax revenues, which means higher deficits, which means . . .

7. This exact process is how Argentina's economy died in the 1950s. One of the more pernicious effects of this economic policy is a decline in private sector investment. Again, it's necessary. So infrastructure crumbles, innovation locates elsewhere, long-term growth stalls. To finance the increasing deficits, the government turns to asset sales (a DOGE specialty), which makes the long-term revenue situation worse.
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I am just spitballing here but my understanding was that it is concerning that the rates on US debt is increasing at the same time stocks are declining as the expectation is that those exiting equities would be moving to safety and they don’t see US debt as safe.

I could be way off…
 
hedge said:
I thought I remembered you posting that you had sold a few early on that covered your costs on the whole batch? If so, it was a free trade (and a smart move on your part). Anything you made on the puts you sold yesterday was gravy. I might be misremembering, but if I'm not it was a pretty good trade, esp. for someone who doesn't mess with options very much...
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I did. I started with $5k and ended with $24k then lost another $2k and decided I don’t want in the business of trying to predict what Trump is going to do.

I am still bearish right now and still have my 401k in safety but I think Trump is about to cave on China and present it as a win.

Also I think super might be right. While it was a ride, I don’t think it has been good for my health. I would wake up several times at night checking my phone and that got much worse after a single tweet from Trump made me lose $17k. I also had a constant feeling of adrenaline. Don’t want to cause myself a heart attack.

I was recently diagnosed with hyperactive thyroid (negative for graves) and I wonder if that is somehow related. Or my feeling of adrenaline is actually that.

I had that condition briefly about 10 years ago, went on meds, then I went hypoactive, then it cleared up. Weird.
 
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Can't complain about that. I just plugged it into a compound interest calculator, it would take you 17 years to turn $5K into $22K making 10% per year...
 
I don't know how many puts you had, but if you're ever in that position again, a good idea is to have stair-step sell orders already in on, say, one lots. Say you bought 10 puts at $2, go ahead and put sell orders in for one of the puts at, say, $4, another at $6, another at $8, etc. You can choose your own levels of course, but the idea is to have the orders already in and then if the market moves your way you clip all those coupons on the way up and avoid a massive event like Trump's announcement of a pause on tariffs that wipes out your gains before you can get in and sell. But it sounds like you did alright anyway...
 
That's probably the main reason some people get fucked with options, they're looking for the grand slam (like my cherry picking example the other day) instead of collecting on some singles, doubles and triples. As you learned, an options position can turn very quickly, both in your favor and against you...
 
I do wonder if buying deep in the money puts is a better plan. You aren’t going to get huge returns but probably aren’t going to lose it all. But if I did that it would be after
hedge said:
I don't know how many puts you had, but if you're ever in that position again, a good idea is to have stair-step sell orders already in on, say, one lots. Say you bought 10 puts at $2, go ahead and put sell orders in for one of the puts at, say, $4, another at $6, another at $8, etc. You can choose your own levels of course, but the idea is to have the orders already in and then if the market moves your way you clip all those coupons on the way up and avoid a massive event like Trump's announcement of a pause on tariffs that wipes out your gains before you can get in and sell. But it sounds like you did alright anyway...
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Man I wish I had done that. I just didn’t see a 10% jump in the matter of minutes happening.

Not that this means anything but if you look at largest one day percentage gains for S&P this Wednesday’s was was tied for #8. The others ahead were all either firing the Great Depression or the Great Recession.
 
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