Tapering Hysteria

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Tapering Hysteria

Postby Middle » Thu Jun 27, 2013 1:54 pm

Why does it seem so naive to me that there is any surprise to the markets reacting negatively to the end of QE? And a corollary to that question is why does the media suggest that the Fed is overly concerned with a market drop (note I said drop and not crash)?

I know for most on this site, it doesn't matter so much other than there might be triggers to following personal IPs.

I do not believe that the Fed policy is the only thing propping up the markets and I have been prepared for selling to occur whenever the tapering actually begins. I'm starting to feel like I want the Fed to begin tapering and get the short term reaction over with. I think if the Fed could communicate its willingness to taper, untaper, taper, stop, start again, taper, etc. then the market will not be so dependent on every word out of Bernanke's mouth and go back to fundamentals.

Maybe this is already happening, and what we're seeing is the beginning of the Fed's plan to cautiously move towards the exit door.

But is it naive of me to think that ending QE sooner rather than later is probably better provided we continue to see improving economic data?
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Re: Tapering Hysteria

Postby MN Finance » Thu Jun 27, 2013 7:57 pm

So the marekts are up simply because of the fed blowing into the wind? Seems thats a faulty premise. And if thats false then your conclusion the market falls when they stop is also false.
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Re: Tapering Hysteria

Postby z3r0c00l » Thu Jun 27, 2013 9:53 pm

The market will react to any reality in a largely unpredictable way. That is the nature of emergent, massively complex systems.

Ending QE is a complex issue, employment numbers and inflation are two major factors that have yet to send powerful signals that QE needs to stop soon. The fed is not really concerned with the markets, and one cannot presume that the markets have been propped up at all. Barely making progress over a decade would suggest that stocks are just trying to recover lost ground.
Last edited by z3r0c00l on Fri Jun 28, 2013 11:55 am, edited 1 time in total.
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Re: Tapering Hysteria

Postby staythecourse » Thu Jun 27, 2013 11:14 pm

I do not think it is tapering of QE that folks have a problem with it is the expectation that would be a sign of rising interest rates. That is why the markets likely went up 2 days back despite lower then expected GDP. Folks feel with an underwhelming GDP that the fed would not be interested in raising rates anytime soon.

I am only surprised how incompetent leading economists can be. The folks expecting interest rates to rise despite inflation prediction to be on par or lower then expected over the next several years makes it dubious why rates would "need" to be increased.

Rates increase either to treat inflation or to prevent inflation. It isn't that hard to figure out.

Good luck.
Last edited by staythecourse on Thu Jun 27, 2013 11:40 pm, edited 1 time in total.
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Re: Tapering Hysteria

Postby nedsaid » Thu Jun 27, 2013 11:36 pm

It is interesting that the bond market seems to be calming down. My bond funds have been up the last couple days. I think the hysteria has passed.
A fool and his money are good for business.
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Post hoc ergo propter hoc

Postby Epsilon Delta » Fri Jun 28, 2013 10:56 am

Stories that the market decline is because the fed broke wind are just stories. Nobody really knows why the market does anything, at least in the short term. Maybe it was the fed, maybe a trader ate a bad egg.
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Re: Tapering Hysteria

Postby Middle » Fri Jun 28, 2013 12:06 pm

staythecourse wrote:....that the fed would not be interested in raising rates anytime soon.



But now this is something else I'm wondering about. We're not even close to talking about the Fed raising the funds rates (aka ending ZIRP), are we? Prior to that, they need to taper off on Operation Twist and the $85b bond purchases/month. The treasury interest rates may rise as a result of that, but that is different than ZIRP.

Correct me if I'm wrong.
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Re: Tapering Hysteria

Postby EternalOptimist » Fri Jun 28, 2013 12:12 pm

Fear is a terrible thing :!:
"When nothing goes right....go left"
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Re: Tapering Hysteria

Postby z3r0c00l » Fri Jun 28, 2013 1:19 pm

Sadly, every single article we see is "dow down on news of..." or "shares up on news of..."

The best days are when stocks go down in the morning, and they post a dow down on news of greece... article. Then once stocks go up after lunch, that article is quietly dropped in favor of a new shares up on news of...
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Re: Tapering Hysteria

Postby Toons » Fri Jun 28, 2013 1:23 pm

Time to go for a walk,breathe deep :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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Re: Tapering Hysteria

Postby EternalOptimist » Fri Jun 28, 2013 3:42 pm

Unfortunately fear and tragedy sell. Evening news: house fire...murder....robbery...storm coming....dow down...etc etc. You can either ignore it or succumb to it.
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Re: Tapering Hysteria

Postby staythecourse » Fri Jun 28, 2013 9:02 pm

Middle wrote:
staythecourse wrote:....that the fed would not be interested in raising rates anytime soon.



But now this is something else I'm wondering about. We're not even close to talking about the Fed raising the funds rates (aka ending ZIRP), are we? Prior to that, they need to taper off on Operation Twist and the $85b bond purchases/month. The treasury interest rates may rise as a result of that, but that is different than ZIRP.

Correct me if I'm wrong.


My assumption is you are correct.

In my opinion, it is not the logic of the above that worries folks it is the pure emotion. Folks act like treasury rates weren't higher before OR interest rates weren't higher. Heck look at the yield of treasuries at the end of the high inflationary 1970's and tell me if you saw that happen now folks wouldn't be freaking out yet it led to the single greatest bull market in U.S. history. The answer that folks don't want to hear is NO ONE knows what will happen if fund rates go up or down or treasury rates go up or down. If it was etched in stone the effects it would actually take all the emotion out. It is uncertainty and folks HATE uncertainty.

Good luck.
...we all think we're above average investors just like we all think we're above average dressers... -Jack Bogle
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Re: Tapering Hysteria

Postby livesoft » Fri Jun 28, 2013 9:12 pm

What a great time to be investing! Folks who noticed the RBDs and acted on them already made 5% in about a week. It may even be time to cash in. Folks who froze didn't make as much money.

We haven't had this much fun since back in August 2011. Do folks remember what happened in early August 2011? Check out the forum threads from those days. I think everybody survived then and everybody will survive now. Man, it's hot around here.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Tapering Hysteria

Postby Professor Emeritus » Sat Jun 29, 2013 10:33 am

Toons wrote:Time to go for a walk,breathe deep :happy


I just came out from the electronic black hole that is Yellowstone National Park. I think Ill just go back .
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Re: Tapering Hysteria

Postby jimkinny » Sat Jun 29, 2013 2:05 pm

QE ending or tapering or maybe not, is important but what counts is how the economy does. I would not pay much attention to this stuff and would certainly not rely on my opinion as to the end results of QE2 becoming a vague memory.

Remember all of the economist and talking heads who were predicting run away inflation in 2009, 2010, 2011, 2012 and in 2013 due to QE1 and 2? Heh, heh.....I try not to listen to all of the people predicting the future, including myself.

QE may end sooner or later but what the outcome will be, none of knows.

Why not worry about the Chinese economy, or maybe the Euro zone, or maybe the EMs that seem to be doing not so well now? or better yet, worry about the unpredictable event that is going to drive the indexes down by 20% or more, sooner or maybe later.

I moved from OR to AR, and I am now back in the North West, 9 months later, so maybe like the Professor, I will just make better use of my time and go to the coast.

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