# Fed Meeting on 16th Dec



## newfoundlander61 (Feb 6, 2011)

If this month is the date they finally increase the rate is there likely to be a market pullback and then it takes off upward in the new year. Or will the markets not really do much of anything as it has been talked about so much in the media and most investors think it will be adjusted upward mind by only .25%


----------



## My Own Advisor (Sep 24, 2012)

My guess is they finally raise rates by 25 basis points. Things tank leading into Christmas.


----------



## Janus (Oct 23, 2013)

Who knows. Probably a rate raise. Though the fed is oddly reactive to markets, even though their mandate has nothing to do with the stock market.


----------



## The_Tosser (Oct 20, 2015)

I linked this two weeks ago in another thread.

Looks like we're hovering around 80% likelihood. 

http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

I figure one and done at most, for a while. I don't see why they're even talking about it since the inflation boogey-man is no-where in sight. 

I agree with Janus. I think it's possible they're going to get a little spooked by this market turmoil lately - one would almost think this was by design  

They would look like fools raising it and then getting caught with their pants down if things continue to deteriorate.


----------



## vi123 (Oct 29, 2015)

My prediction:

The uncertainty caused by the start of the rate-raising cycle will disappear as soon as the Fed announces this first raise. Yellen will go out of her way to reassure markets that the cycle will be slow and data-driven.

I see us climbing the famous 'wall of worry' over the next few months as investors start a healthy rotation from bonds to stocks. Could be a quick 10% jump in US stocks. 

Honestly, with all the doom and gloom going around right now its the absolute best time to invest.


----------



## sags (May 15, 2010)

If it is data driven, as the Fed has been suggesting...........there shouldn't be a rate increase. All of the data points are terrible.

But, the Fed is boxed in a corner on promises and market speculation and may raise the rate anyways, while promising profusely that this will be the only increase.

The last time we were in this kind of situation, Alan Greenspan raised interest rates .25% for 17 straight meetings.

I doubt that will happen this time..........."one and done" does indeed seem to be the popular phrase these days.

Peter Schiff with some excellent commentary on both the ways it could go.

http://www.cnbc.com/2015/11/17/fed-rate-hike-or-not-im-bullish-on-gold-commentary.html


----------



## fatcat (Nov 11, 2009)

i am 50/50 on this too
i don't think they should raise but may feel boxed in
i also think the market is currently pricing the raise in and even if we see selling, it will be reversed
there is just as good a chance that a raise will be seen a vote of confidence for recovery and the markets will like it


----------



## sags (May 15, 2010)

Reminds me of a bunch of turkeys standing around the yard.

They know Christmas and New Years are coming........and can see the "the truck" coming down the lane.

All eyes are on the big turkeys. Do they look "confident" they won't get picked this time,.... or are they getting ready to bolt and run ?


----------



## tygrus (Mar 13, 2012)

I think the market wobbles for a few days after the hike, then rallies out the end of the year. It always rallies the end of the year or the first week or two in January when all th traders are on leave. But then Q1-2016, the SHTF when the data indicates major slowdown/recession.


----------



## james4beach (Nov 15, 2012)

The rate "increase" is nowhere as big a deal as they make it out to be, for two reasons

1. It's not even a 25 basis point increase. The overnight Fed funds rate is actually 0.14% right now. The "target" rate currently is 0-0.25% -- NOT zero -- so you can see why they set the actual rate approximately mid way. They will be raising the *target* to 0.25%, which means that the interest rate is only increasing by 0.25 - 0.14 = 0.11%. So you must keep in mind *this is only an 11 basis point rate increase, NOT a 25 basis point increase.* It's actually a tiny increase in rates.

This point has been missed by everyone in the media, apparently.

2. I seriously doubt they will raise it again. Compared to an 11 basis point hike this week, the next one would require a full 25 basis point hike. I doubt it will ever happen. Junk bonds are crashing and credit markets are already in big trouble, and the Fed would be blamed very heavily if they raised rates during that kind of turmoil.

As I've said for a long time ... US and Canadian rates are basically going to be stuck at zero. Which is why I comfortably buy GICs.


----------



## tygrus (Mar 13, 2012)

The hike isn't about the point increase, the hike is simply a message everybody is looking for "is this economy for real?" or not.

I vote, its not, and everybody secretly knows that. 8 years later and 4 trillion in stimulus along with zero rates and all we can get is measly 2% GDP, which is actually about 1.5% after revisions. And now we are on the 7-10 year recession cycle again. 200 countries are in economic slow downs or outright recessions. I can't imagine that just one (the USA) can dodge that while the rest of the world falls in.


----------



## james4beach (Nov 15, 2012)

The economy is one thing, stock market is a different matter.

Analysts have said for many years that the US stock market is heavily driven by the size of the Fed balance sheet. Even BMO had a nice report showing the incredible S&P 500 correlation with the Fed balance sheet.

It's no secret that it's a Fed-driven stock market. It's the primary reason I have avoided stocks since 2009, despite the big gains.


----------



## OnlyMyOpinion (Sep 1, 2013)

james4beach said:


> As I've said for a long time ... US and Canadian rates are basically going to be stuck at zero. Which is why I comfortably buy GICs.


But CPI is not stuck at zero, so at best a 2 to 3% GIC rate is maintaining purchasing power but not providing any positive investment return. 
_... 2016, ERS predicts food-at-home (supermarket) prices to rise 2.0 to 3.0 percent—a rate of inflation that remains in line with the historical average._
http://www.ers.usda.gov/data-products/food-price-outlook/summary-findings.aspx


----------



## tygrus (Mar 13, 2012)

If the BOC goes negative, then the GIC market will be booming, because you can take 0.5% money from the bank and invest it guaranteed for 3%. If 2.5% return is good enough for GDP, it is probably good enough for the average joe regardless what CPI does.

If the market starts retracing back to 2009 levels, what is the fed going to do? QE4? Can the US really handle another few tril on the balance sheets?


----------



## james4beach (Nov 15, 2012)

That's true, there is some inflation. Though I'm surprised how much people in these forums worry about inflation.

Between the threats of inflation vs deflation to your investments, I think there's much more evidence that you should be worrying about deflation. All commodities -- not just oil -- are crashing outright. Junk bonds are deflating and credit in general appears poised to deflate too. At the same time, the Chinese economy is rapidly slowing.

Worrying about some price inflation on groceries might be missing the bigger picture that deflation is the primary threat right now. And stocks only make sense if you're a believer that inflation is the bigger threat.


----------



## james4beach (Nov 15, 2012)

tygrus said:


> If the BOC goes negative, then the GIC market will be booming, because you can take 0.5% money from the bank and invest it guaranteed for 3%.


Not really. Just like bond prices, GIC prices will rise (and yields will drop) if the BoC cuts rates.

This is why I want to buy some more 5 year GICs now. I think the rates may go down with the BoC's new insanity.


----------



## The_Tosser (Oct 20, 2015)

james4beach said:


> Though I'm surprised how much people in these forums worry about inflation.


Yep, it's a total non-starter. It's the boogey-man under your bed. You keep lookin' but he just isn't there.


----------



## The_Tosser (Oct 20, 2015)

tygrus said:


> The hike isn't about the point increase, the hike is simply a message everybody is looking for "is this economy for real?" or not.
> 
> I vote, its not, and everybody secretly knows that. 8 years later and 4 trillion in stimulus along with zero rates and all we can get is measly 2% GDP, which is actually about 1.5% after revisions. And now we are on the 7-10 year recession cycle again. 200 countries are in economic slow downs or outright recessions. I can't imagine that just one (the USA) can dodge that while the rest of the world falls in.


+ 1

My fav is the underlined parts.


----------



## james4beach (Nov 15, 2012)

The_Tosser said:


> Yep, it's a total non-starter. It's the boogey-man under your bed. You keep lookin' but he just isn't there.


And I know why people worry so much about it. It's because the media, which specifically represents the interest of the financial industry, keeps pushing people to worry about inflation -- this is the psychology that encourages people to pour money into the bank's products such as mutual funds. It's what spurs stock trading activity that brokerages collect fees from.

Expectation of inflation are what spurs many investment and risk taking activities, and what generate profits for the middlemen. This is fundamentally why the central banks exist... to keep expectations going for ongoing, mild inflation.

When you walk into a bank, you'll see marketing material that tries to convince you that GIC returns are not enough to achieve a comfortable retirement. They are always trying to scare retail investors into thinking inflation is the greatest threat.


----------



## tygrus (Mar 13, 2012)

Well energy is in the dumpster so your gas and electric are lower than usual, plus this winter is warmer. Gasoline is 85 cents down from a buck twenty. You can buy clothes and food imported from 3rd world nations, although healthy food is more expensive. Mortgage rates are sub 3%. All the basics of life show no signs of inflation.

However, they are signs in the greater economy. Try hiring a tradesman or buying a new truck. Fortunately these are discretionary.


----------



## fatcat (Nov 11, 2009)

OnlyMyOpinion said:


> But CPI is not stuck at zero, so at best a 2 to 3% GIC rate is maintaining purchasing power but not providing any positive investment return.
> _... 2016, ERS predicts food-at-home (supermarket) prices to rise 2.0 to 3.0 percent—a rate of inflation that remains in line with the historical average._
> http://www.ers.usda.gov/data-products/food-price-outlook/summary-findings.aspx


right +1 ... james, you measure the value of your gic against the fed rate when as omo points out, you should be measuring it against inflation which despite the official numbers i am seeing everywhere ... we really are on the edge of stagflation

and yeah, forget the actual numbers, the fed raise is mainly symbolic but oh what a symbol it is (or can be)


----------



## HaroldCrump (Jun 10, 2009)

james4beach said:


> 1. It's not even a 25 basis point increase. The overnight Fed funds rate is actually 0.14% right now. The "target" rate currently is 0-0.25% -- NOT zero -- so you can see why they set the actual rate approximately mid way. They will be raising the *target* to 0.25%, which means that the interest rate is only increasing by 0.25 - 0.14 = 0.11%. So you must keep in mind *this is only an 11 basis point rate increase, NOT a 25 basis point increase.* It's actually a tiny increase in rates


No, James4B, it is about the market's _future expectations_.
The precise range may not matter as much as what it does to the expectations i.e. the futures curve, the yield curve etc.
That is what drives mortgage rates, LBO rates, and the borrowing by large corporations (that borrow money to backback shares, increase dividends, and other financial engineering).

The other thing that even a 11 bps hike would do is further appreciate the USD$ vis-a-vis E/M currencies.
There is already a flight of capital underway from the E/M to the US, which started in Jan 2015 once tapering was complete.
This will exacerbate the capital flight further.
Which has further knock-on effects, as you can imagine.

How big of a deal this is, only time will tell.


----------



## CPA Candidate (Dec 15, 2013)

With the dollar being crushed, there is inflation coming for imported goods that we really emerge in 2016. 

Oct 2014 to Oct 2015 overall inflation was 1.0%, but excluding energy it is 2.1%. Food inflation is 4%. 

With carbon taxes coming or already imposed, the mitigating effect of energy will dissipate and we'll really be put through the meat grinder.


----------



## HaroldCrump (Jun 10, 2009)

^ right, and that is the main reason for depreciating one's currency i.e. import inflation.
The Bank of Canada has been actively pursuing a devaluationary policy towards the loonie, including the latest comments by Gov. Poloz re. negative interest rates.


----------



## OnlyMyOpinion (Sep 1, 2013)

CPA Candidate said:


> ... we'll really be put through the meat grinder.


Well.....we're cheaper than ground beef these days :biggrin:


----------



## lost in space (Aug 31, 2015)

CPA Candidate said:


> With the dollar being crushed, there is inflation coming for imported goods that we really emerge in 2016.
> 
> Oct 2014 to Oct 2015 overall inflation was 1.0%, but excluding energy it is 2.1%. Food inflation is 4%.
> 
> With carbon taxes coming or already imposed, the mitigating effect of energy will dissipate and we'll really be put through the meat grinder.


That has been my point exactly, the way the goverment will deal with the massive debt binge will be to inflate it away. Talking to my family (i don't live in Canada) they all complain about inflation, mostly food. 

Any thoughts on Garth's contention that interest rates will "normalize"?

I see interest rising but no where the levels he's talking about


----------



## lonewolf (Jun 12, 2012)

james4beach said:


> And I know why people worry so much about it. It's because the media, which specifically represents the interest of the financial industry, keeps pushing people to worry about inflation -- this is the psychology that encourages people to pour money into the bank's products such as mutual funds. It's what spurs stock trading activity that brokerages collect fees from.
> 
> Expectation of inflation are what spurs many investment and risk taking activities, and what generate profits for the middlemen. This is fundamentally why the central banks exist... to keep expectations going for ongoing, mild inflation.
> 
> ...


----------



## dogcom (May 23, 2009)

Raising rates means QE has to come from somewhere to support the increased deficits or they are throwing in the towel and trying to back out letting the system collapse under the cover of explosive world events.


----------



## james4beach (Nov 15, 2012)

The Fed might raise once (today) or twice max, but with credit markets in turmoil and possible contagion, they really can't raise. They're screwed.

When the next crisis hits -- which could be imminent due to junk debt & China slowdown -- the Fed is powerless to do anything. In 2007-2008 they reduced interest rates from 5.25% down to 0%.


----------



## HaroldCrump (Jun 10, 2009)

and...it's done...25 bps "hike"....


----------



## pwm (Jan 19, 2012)

And the markets went up.


----------



## gibor365 (Apr 1, 2011)

pwm said:


> And the markets went up.


Yeap, i didn't expect big drop, but didn't expect 1.5% up either


----------



## james4beach (Nov 15, 2012)

This is options expiration week as well as a Fed meeting. Probably the worst possible time to make a trade!

I wouldn't draw any conclusions from market action


----------



## tygrus (Mar 13, 2012)

What a bunch of economic gobbledygook and half speak. They have no idea whats is going on in the economy. 

I think they just did it so they have something to do when the recession hits. Like someone said, every country that has tried to raise rates since 2009 has had to give it all back and then some.


----------



## gibor365 (Apr 1, 2011)

> They have no idea whats is going on in the economy.


 Do you really think so?! i think they have better idea than you or me


----------



## dogcom (May 23, 2009)

I think they know and didn't want to raise rates but had no choice in order to keep the confidence so they can continue their ponzi scheme. Now I am sure they will tag us along as long as possible and then raise again if they are able to keep the scheme alive. It will require a lot more media propaganda, fudging of numbers, moving the goal posts, back door QE and constant manipulation in all markets.


----------



## cainvest (May 1, 2013)

dogcom said:


> It will require a lot more media propaganda, fudging of numbers, moving the goal posts, back door QE and constant manipulation in all markets.


So what you're saying is .... business as usual in the stock market.


----------



## sags (May 15, 2010)

Maybe the Fed raised rates because they were tired of years of Peter Schiff contending they couldn't raise them 

More like total capitulation by the Fed in recognition that trillions of dollars have been spent and achieved nothing but inflating asset bubbles.

Fed policy has certainly helped the Obama presidency, and taken the wind out of the Republican anti-debt sails.

They not only don't talk about the debt anymore, but promise major increases in military spending. So much for debt ceilings and such.


----------



## My Own Advisor (Sep 24, 2012)

#thebrokenclockwins 

Finally


----------



## The_Tosser (Oct 20, 2015)

sags said:


> Maybe the Fed raised rates because they were tired of years of Peter Schiff contending they couldn't raise them





My Own Advisor said:


> #thebrokenclockwins
> 
> Finally



lmao


----------



## GoldStone (Mar 6, 2011)

pwm said:


> And the markets went up.


Are you surprised?

*A Straightforward Guide to What Stocks Do When Interest Rates Rise*

=================

The Federal Reserve raised interests rates today. It was the first time in almost a decade. 

What's this mean for stocks? Well, let's think it through. 

Higher interest rates makes bonds more attractive. That's bad for stocks. 

But the Fed is raising rates because the economy is strong. That's good for stocks. 

Higher rates could mean higher inflation is anticipated. That's bad for stocks. 

But higher inflation could increase revenue growth. That's good for stocks. 

Higher rates could curtail lending. That's bad for stocks. 

But less lending reduces the odds of a credit crisis. That's good for stocks. 

Higher rates could hurt leveraged companies. That's bad for stocks. 

But higher rates increase the interest income for companies with lots of cash. That's good for stocks. 

Higher interest rates mean the Fed is taking away the punchbowl. That's bad for stocks. 

But higher rates mean the Fed has room to cut interest rates when it needs to. That's good for stocks. 

So, who knows. 

=================

Amen!


----------



## lonewolf (Jun 12, 2012)

Emotions cause action. Even the thinking of the fed can be bent by the mood of the masses. The titanic is sinking yet the mood is so out of touch with reality rates went up. This represents highly charged positive mood seen near market tops.


----------



## andrewf (Mar 1, 2010)

GoldStone said:


> Are you surprised?
> 
> *A Straightforward Guide to What Stocks Do When Interest Rates Rise*
> 
> ...


Well put. People are far too confident that simple causal relationships are at work in the day to day movements of the stock market. It's akin to when the newspaper, in passing, explains why the Canadian dollar rose or fell on a given date ("the loonie fell by 0.23 cents today on weaker than expected export data"). It's pure BS to think you can boil down day to day movements in such simple terms. The only time it works is when there are big discontinuities caused by new information. Such as the decline in the US stock markets after they reopened following 9/11.


----------



## Skynet2029 (Dec 18, 2015)

*Global*

Hi,

I am new to this forum, thanks for having me. I'm invested with Edgepoint Global and they went down today by about -8.97%. Mawer Global went up and YTD is doing fantastic, and a global index like VXC was uneventful after the fed rate hike.

Can someone explain why EDG100 tanked?

I'm looking at possibly Mawer Canadian and Mawer Global (or just their MAW104 balanced fund) or indexing via VXC (Global) and VCN (Canada) on a 70/30 split.

I'm anticipating Edgepoint will regain their losses and make a comeback, and perhaps I would stick around with them. I won't knee-jerk react just yet.

Thanks for any feedback.


----------



## GoldStone (Mar 6, 2011)

Skynet2029 said:


> Hi,
> 
> I am new to this forum, thanks for having me. I'm invested with Edgepoint Global and they went down today by about -8.97%. Mawer Global went up and YTD is doing fantastic, and a global index like VXC was uneventful after the fed rate hike.
> 
> ...


http://www.edgepointwealth.com/en/Portfolios/EdgePointGlobalPortfolio#tab=5

Looking at the past years, the fund made year-end distributions around Dec 16 - 18. I bet this is what happened today. Your should receive the distribution as cash, or more fund units. Overall value of your investment will remain roughly the same.


----------



## Janus (Oct 23, 2013)

Skynet2029 said:


> Hi,
> 
> I am new to this forum, thanks for having me. I'm invested with Edgepoint Global and they went down today by about -8.97%. Mawer Global went up and YTD is doing fantastic, and a global index like VXC was uneventful after the fed rate hike.
> 
> ...


Have you been happy as a client of theirs? They seem like a good shop.


----------



## Skynet2029 (Dec 18, 2015)

Janus said:


> Have you been happy as a client of theirs? They seem like a good shop.


Yes, so far it has been good.

Thanks for the answer GoldStone. It was a distribution!


----------



## The_Tosser (Oct 20, 2015)

sags said:


> Maybe the Fed raised rates because they were tired of years of Peter Schiff contending they couldn't raise them


lol this should give a few people a chuckle.

https://www.youtube.com/watch?v=hLe9iyBy01o

I think this is called Schiff being 'owned', yet again.

This guy has some funny content on Peter the con artist.


----------



## dogcom (May 23, 2009)

So far we are seeing why the Fed should not have raised rates and what the expected outcome would be. The Fed is the market or a big part of it and unless they keep finding ways to manipulate all markets we are in trouble. Raising rates has made the job that much more difficult and they know that but had to raise so people would continue to believe their BS.


----------

