On or before 30 June 2007 the FED's discount rate will: (1) Be at or above 6.00% (a 0.75% increase) (2) Be at or below 4.50% (a 0.75% decrease) (3) Never (before 30June07) be closer to either 6 or 4.5% than to the current 5.25% I understand that it is possible none of the above is correct. - For example rate could go to 4.75% and none of the above applies. (1) & (2) are responses for people with "guts." - Rest of you select (3). I want there to be a good chance "gutless wonders" can be wrong too. Please Register or Log in to view the hidden image! - I.e. Hard choice for all. - Poll is really just to encourage expression of views.) In any case tell why you think as you do for your vote. I will vote soon and tell why, but many who have read my economic post can guess correctly how I will vote. Part of the reason behind my vote has not been posted in forum before and is related to the late, great Milton Friedman's economic views.
OK ten hours have passed since poll opened and 17 have looked but none voted. That is fine with me as would rather have one thoughtful post than 25 votes. I will now vote and tell new reason why I fear FED is losing control of interest rates, which it normally controls to modulated the US economy. Increasing rates to curb inflation and decreasing rates to stimulate economy (or unfortunately perhaps at times before elections to help party in power) But first a few words of prase for Milton Friedman (as he deserves them and they relate to the new reason why US dollar is in trouble): When he was not so well know part of economics gospel for at least a couple of decades was the "Phillips Curve," which basically stated the governments could lower unemployment but at the cost of higher inflation. Everyone, me included, believed this was one of the few "laws" of the "Dismal Science." (Economics). Milton convincingly proved it wrong. In fact, I would generalize and note that economics is so complex that no binary variable laws exist in it and we were all fools to think the Philips curve was true. His most well know contribution to economics was the "Chicago" or "Monetarist" school or POV, which comes as close as any to being a binary variable "law" - If government issue more money, then to some degree inflation will follow. (The "new reason" for my vote on the thread is related to this.) I now conclude this modest tribute by noting this advisor to several Presidents was a probably an "old fashioned Republican" (but may have been a Libertarian - I do not know) who believe very deeply that the government should not interfere in the private sector or peoples lives unless it was clearly necessary. (Keep government small and efficient, not use it as a way to hand out taxpayer’s money to friends as the "new Republicans" do.) In fact, in his later years, he was a proponent of legalizing Marriwana, but I bet he never used it. Now for one (but not the only reason) "Milton Friedman reason" for my "6% vote." There are by far more US dollars out side of the US than circulate inside the US, especially in the "credit card age" Even only Russian citizens hold more than US citizens do. Criminals the world over have a great store of dollars and many are in countries like Brazil where the local currency has a history of instability. (I even have a few thousand in a fire resistant box despite knowing and watching them lose value and interest opportunity.) As the central banks are now beginning to do (ease out of dollars) so will the ordinary person and criminals. I.e. these "ex-US" dollars are coming home to roost. The FED can not control this influx of dollars. It will help US exports while it lasts but the FED will need to soak up this influx of dollars, for reasons that Milton Friedman clearly explained. - It does not mater who places more dollars into circulation - the increase of circulating dollars is inflationary. So in addition to needing to pay higher interest on US bonds to foreign central banks to persuade them to continue to hold dollars in their reserves, The FED also will be forced to further raise interest some to soak up the returning dollars (increase domestic saving). I expect that initially the FED will be successful in this effort to control inflation (Bernanke strongly believes controlling inflation is the main objective) but the high cost of borrow these higher rates imply will crush US investments (along with the already very evident fact that it is better to build your new facility out side of US.) Years of miss-management, extreme under GWB, have taken the US economy beyond the "point of stability" - Dollar will crash and even double digit interest rates will eventually fail to attract the dollars needed to finance US deficits. If wealth had not been increasingly concentrated in the hands of the few, then the deficits would automatically drop as "times get tough" and imports fall, but thanks mainly to GWB and the Republican control of Congress for more than a decade, wealth is now quite concentrated and those that have it will still be important German cars and French wines etc. while average "Joe American" has lost his job and finds it hard to put even potatoes on the table if he keeps the bank from taking his over mortgaged house. The housing slump will accelerate, so Joe should let the bank have it now before its value drops more.
Hmm, people have been making dire predictions about the US economy for ages and ages .....and mostly none of them have come true. "The sky is falling, the Sky is falliing!" Baron Max
I'm just wondering how all of this will effect people's investments in CD's. They must be hoping for inflation to level off.
Yes they are, or at least expecting that inflation will be at a lower rate than the interest the CD is paying so they have some gain in purchasing power. The interest rate on the CD is easily known, so the decision to buy or not a CD turns on your projection for inflation. In some general sense the ratio of circulating money (all forms, including credit) to "items to buy" (total of goods & services) increases, inflation increases. This is why inflation normally follows wars as the makers of bombs etc get paid but do not add to the supply of "items to buy." For a historic example, in WWII the US had a strong campaign to sell "war bonds." It was made a "patriotic duty" to buy some, if one could, "for the war effort." - "Do your part to win the war" the public was told. The real objective of war bonds was to control (or at least delay) inflation by keeping the ratio of "circulating money" to "items to buy" more constant. Thus, the question about inflation trends can be replaced, reasonably accurately, by two others. How will the "circulating money" and how will the "items to buy" change? In the past the FED could control the circulating money to make it reflect the increase in "items to buy" (work force and productivity gains) - Raising interest rates, decreases the credit component of "circulating money" more rapidly than it changes quantity of "items to buy," but does also at least reduce the latter's rate of increase as more modern plants are not built when the cost of the money to do so increases. Etc. As central banks are beginning to ease out of dollars and US deficits (some "built in" like social security and medical cost for retiring baby boomers and other like cost of foolish wars) continue to grow, the FED is forced to raise interest rates, (to attract foreign loans). This TENDS to reduce "circulating money" and more slowly the "items to buy." I.e. normally reducing or even reversing inflation as it has historically. I said "TENDS" because these are not "normal times" - for the first time in modern history central banks are becoming net sellers of dollars. (Soon as dollars continue to loss purchasing power wrt other currencies, dollars will be "coming out of mattresses" also, and there are many more dollars there than in circulation. - For several decades, the US has enjoyed getting 100 cents of value for less than one cent of production cost by exporting green paper called dollars. Those days are gone. I.e. again not "normal times.") I will call this global influx of old dollars from both central banks and mattresses, global "de-dollarization." (Iran selling oil for Euros, fall of the house of Saudi, etc. will also drop dollar's value and accelerate global de-dollarization.) De-dollarization is not all bad. It will moderate the contraction of the US economy caused by increasing interest rates. I.e. expand exports as "mattresses dollars" return to US to buy goods and services. (Holders will soon realize it is better to spend them now, before they lose more purchasing power.) Thus, US workers will be paid more to produce an increase in exports and this TENDS to increase "circulating money," at least in the short term while de-dollarization is in progress. Also, note that some part of the expanding exports will be taken from the items available for domestic consumption. Thus, one can be confident that the domestic "items to buy" will decrease when the FED is forced to raise interest rates by falling confidence in the dollar. Falling domestic "items to buy" combined with de-dollarization's relatively short tem increase in domestic "circulating money" is a sure recipe for near term inflation, if the FED does not greatly increase interest rates to "soak up" the returning "mattresses dollars" as well as met the US's deficit finance requirements. (Keep central banks from "dumping dollars" in a run on the dollar instead of just "easing them out" of their reserves in an orderly fashion.) Thus, I am quite confident that either FED's interest rate is going to reach "double digits" or inflation will easily be "double digits" (one or the other, if not both, in three years or less). SUMMARY: Buy CD only of short term (one year) or none at all.
If you haven't noticed, this is more of a geek/nerd site than a business genius site. Just take a look at the threads in the Business Forum...
Thanks. Yes, I know that, but it gives me a change to go on record with predictions. More than 18 months before US invaded Iraq, I sent letters to NYT and Emails to CNN explaining that Iraq was an artificial nation composed of three hostile tribes who normally marry their second cousins to make extended family clans. (British Foreign Office set it up that way to facilitate control.) I stated that it was very improbable that Saddam had WMDs and that foreign intervention would only result in instability splitting Iraq into three tribal regions (Mass migrations, much like in India when the British left). Everything I predicted, except for the induction of a civil war in Turkey MORE THAN A YEAR BEFORE THE INVASION has either come to pass or now is believed by many. I still expect that within two years of the creation of Kurdistan, there will be civil war in Turkey as the southern part, where Kurds dominate, tries to escape the current discrimination by becoming part of Kurdistan. (There are about 20,000 Kurds in in SE Syria, but I expect that is too few for open revolt and integration with the new Kurdistan) Unfortunately, there is no way I can prove any of this true, but when interest rates are "double digit" and the world is entering into the worst depression in its history, you and other will have to put up with me saying "I warned you years ago." I have personally already profited by my foresight. - I bought ADRs more than three years ago. Their dollar value goes up as the dollar declines even if the underlying stock does not, so it is a cheap, effective way to protect against the collapsing dollar, but of course the companies I own (mainly early stage drugs developers* and generic drug distributors) all sell their products to buyers who will eat potatoes, if they have to in a depression, to keep buying the drugs they need to stay alive. Some of my US "retirement plan assets" I could not get out of US rapidly for tax reason (all have large capital gains as held for decades) are still in dollars. All but about 20% are now in US inflation indexed bonds. Your must accept lower interest rates and take a hit with the rise of interest rates**, but my objective is to at least keep half of this asset's purchasing power, come what may, not make more money. - (I have more than enough already.) ------------------------------------------ * Probably half will go no where or even fail, but some will do very well. For example, RNAI, which I bought heavily into two years ago as it is a whole new approach to genetic diseases (won this year's Noble prize) at less than $3 and it is now $13 and KOSP has more than doubled in last month. I like early stage developers despite the high risk as it is great fun and education for me to learn about the “magic bullets” they are developing. Physics was great source of excitement when I was getting my Ph.D. but now “biotechnology” is what turns me on intellectually. The internet lets me listen in to live medical meetings presentations, even in my Brazilian living room! - Fantastic new world. My biggest single holding (NOW ABOUT $230,000) IS AN EXCEPTION. I own Indian bank ICICI whose ticker symbol is IBN - It was my first ADR - I mainly stick to English speaking countries as I carefull read their reports. I have nothing in China or Russia - I'm scared they could confiscate in the name of "the People." Russia is essencially doing this now in the energy field. I am now building my position in an Australian drug developer, which I will not yet name as I plan to still buy more. They are an ADR, have exciting new broad-spectrum, anti-viral drug delivered without pills or needle injections directly into the vagina by simple disposable applicator just prior to sex. It is so good, US NIH is funding all development costs and will fund clinical tests, as it is a cheap means for poor women to protect themselves, especially in very male dominated societies. They now also control 100% of another company that has a patent lock on an entire new technology with many applications beyond medicine! Not yet even Nasdaq listed! - I heard live their first US presentation by accident - few in US know of them yet although they have been on Australian public radio (which you can hear on the internet also.). **Not thought by most to be a good investment now - and I like that. (most people are usually wrong if there is any money to be made.)
I agree with you on the Iraq situation. A better forum than this for you would be: elitetrader.com You could repost your prediction there... I don't think many people care here about stocks, maybe 3....
thanks for the site. I spent five minutes there but did not join. It seems to be mainly for day traders, option traders, chartests etc and that holds little interest for me. I like to try to understand big trends that nothing can stop (such as baby boomers switching from great savers to consumers of their savings and needing more medical help etc.) and then form by my own view, via deeper fundamental research into companies, that are still not widely recognized but should benefit from these trends and hold long term. The site seems to be dying as all of the 6 or so chat rooms I looked at had "recent posts" years old. Also I have wide range of interest here - not mainly financial. You are correct that few here understand finance deeply. I do enjoy quadraphonics and there was one other person a few months ago, who has master's degree and worked in the industry - he corrected me a couple times. I hope he is lurking so will mention one error I made which he caught: I noted the fact that the saving rate in US has turned negative and linked that fact only to the fact the averager real salary has been going down. In fact the baby boomers switch to consumers of saving from their peak saving years is more important and I had not stopped to think of that before he helped me see the truth.
I think you meant Forums. No, the site is pretty active, it has the biggest traffic among similar sites (like trade2win.com). The very best feautre is the Search function, you can look up very interesting/important info there. Also there are a few people who post their trades in real time and you can copy them if you felel inclined to do so. One interesting discussion recently that might interest you is about the real estate industry, if it bottomed or not. They have good arguments on both sides. I think the US economy has a very bleak future. The auto industry can not compete with the Asians, the Russians are buying up the steelindustry, globalization is killing the white collar workforce, and illegal immigration is cutting down on the blue collar wages. America stopped being a producing country, it is basicly a service economy. Not to mention peak oil and the need for conquering wars, it eventually will break the system...
I went to www.elitetrader.com - perhaps that is wrong? On home page is a section about brokers, which one can expand to list many with asssociated commets by site members. Neither C. Schwab, nor TD AmTrade which I use were in the long list. I also looked for KingTrade, where I was thinking of opening a lower trade cost account. (My trading activity is up recently to about one trade per week as I now hold more than 40 stocks.) I use Morningstar to follow news about them (and 50 others I am constantly considering buying)* for free and have not traded via Schwab for more than a year, but am keeping that account open for some of its resources. I will probably not fund a low cost broker as I am feel more secure with the big well-established guys. With my trading patterns, $10/ trade is no problem. ------------------------- * Morningstar lets you set up "portfolios" with up to 50 stocks in each and sends daily E-mail news, if any, about each. I have two, one called "owned" and the other "possible buys" which stays at the 50 limit, but a few are dropped and replaced weekly. (I spend much of Sundays on this and listen to a lot of prior week's talks/presentation while doing so.) I put any orders I want in Sunday eve and forget about them, usually until next Sunday except for brief visits a few times during the week to see if anything has happed. - Exact opposite of a "day trader."
No, you were at the right place. The newest posts are listed on the right side. But if you click on Forums (top middle) you get 34 different Forums, like Stock, Futures, Wall street news,Hooking up, Hardware, Chit chat,etc. There are 1 common chatroom with usually 10-15 people during the trading day and 1-3 private rooms. I like the website's set up better than this one. I think your interest is in the first 4 forums. I have a few things about stocks but I will post it separatelly...
Thanks again. This second visit made me understood that not being a member I see the oldest post first and only looked at the "chat" section. I will look around a little more and probably join up. Are you active there? If yes, where?
