The Market

I agree. I would like to see rates stay low into the first of the new year to keep buyer demand strong. A raise in rates will lower buyer's buying power and hurt demand. If you are looking to refi while rates are low I wouldn't risk it and I would lock in these low rates now.

Probably not bad advice, one thing's for absolute certain is rates are NOT retreating from here.

Just so.

But the low rates have already produced lots of unusual effects like, . . . driving investors into the stock market because of near-zero interest in bonds, . . . and then leading corporations to borrow money not to invest in additional capital spending to actually increase capacity or efficiency, but to buy-back their own shares to make the per-share data look better and keep the stock owners happy.

This is why the Federal reserve wants to raise rates sooner rather than later. The concern is that if the economy were to slow down the Fed would have little ability to turn things around. With interest rates already near zero, they couldn't be lowered to encourage borrowing/spending as they have historically. But the fear is that if they do raise rates too soon it may contribute to the cause or seriousness of the slowdown

It's a serious quandary. It's also a place the Country and its Central Bank have never been before.

Damn Saudi's, they really are determined to kill the US shale producers. A curse on all their women and a pox upon their camels. Oil is finally getting back to a respectable level and they are going to raise output. Keeping their market share or whatever my ass.
https://www.cnbc.com/id/102753796


Oil slips as Saudis stand by to raise production

"Oil prices on Friday gave up gains made earlier this week after the world's top crude exporter Saudi Arabia said it stood ready to raise output to new record highs, potentially adding to a global supply glut.

A stronger U.S. currency against the euro also weighed on the dollar-denominated oil market after the International Monetary Fund pulled out of stalled debt talks with Greece.

Saudi Arabia said it was in talks with Indian buyers to supply additional crude, meaning the Middle Eastern exporter could top its record of 10.3 million barrels per day produced in May..."

DonDiego might enjoy this article...

https://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/11666355/Bond-crash-across-the-world-as-deflation-trade-goes-horribly-wrong.html

It suggests we are in a 'bond market bubble' that may unwind quickly with unknown results. I'm sure the Fed will take it slow and steady with any money supply contraction....but then there's the herd reaction that often feeds on itself.

It's just a good thing that we solved the problem of trillions of dollars of bond based credit default swaps and derivative abuses. That could really magnify 'capitulation' in the bond market.

From alanleroy's referenced article :
"As Stephen King from HSBC wrote in a poignant report - "The World Economy's Titanic Problem"- we have used up almost all our fiscal and monetary ammunition, and may face the next global economic downturn with no lifeboats whenever it comes."

DonDiego cannot say that he enjoys an article prophesying a worldwide economic collapse. But he is consciously preparing to ride it out as best he can. He sold a bit more of his stock market holdings this morning.

And in any case Appalachian residents are likely to be less affected immediately than, say, residents of Philadelphia suburbs.

Well perhaps 'enjoy' was the wrong word. "Find interesting" is probably more accurate, especially since it concurs with much of DonDiego's earlier musings on the topic yet still brings many more tidbits to the table...Such as:

The bad timing of Europe's recent QE
Bond Market Paper Losses approaching 1.2 Trillion in 3 months.
PIMCO Total Bond Fund reducing US holdings to 8% from 24% in May.
Eurozone M1 growing by 16% in 6 months
The possibility of a world-wide margin call on dollar debtors once the US tightening begins

There must be some good ways to make money based on the way the market has mispriced risk on much of this debt. I imagine a few more Caesars like reorganizations for companies that are overleveraged and can't continue operations in a tighter money environment. Maybe some put options on companies with high debt levels, large near term bond maturities and a clear inability to make those payments. The Caesars Bankruptcy was predicable. I bet others are too.

Of course one should never lose sight of the reason this tightening of the money supply is expected...that the world wide economy is finally gaining traction and after all this easing we will have too many dollars chasing too few goods....So one could also expect certain companies to thrive in a higher demand/moderate inflation environment. Companies with pricing power. Companies that are not interest rate sensitive. Companies with strong balance sheets.