Having fun on CNBC Halftime Report today
- Rick Ferri
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Having fun on CNBC Halftime Report today
I was a guest on the CNBC Halftime Report today. We talked about why a Fed rate hike isn't such a bad thing.
Here is the 5 minute video link: Embracing Rising Rates
Rick Ferri
Here is the 5 minute video link: Embracing Rising Rates
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
Re: Having fun on CNBC Halftime Report today
Thanks.
Thank you Rick for the link. Fun to watch, fun to listen.
Thank you Rick for the link. Fun to watch, fun to listen.
~ Member of the Active Retired Force since 2014 ~
Re: Having fun on CNBC Halftime Report today
Good interview Rick. I never understood what all the fuss is about moving rates from 0% to 0.25%, it would still be incredibly low.
Re: Having fun on CNBC Halftime Report today
What about the fact that a further strengthening dollar (which we would expect from a rate increase while the rest of the world is decreasing rates) hurts US exports?
Kalo
Kalo
"When people say they have a high risk tolerance, what they really mean is that they are willing to make a lot of money." -- Ben Stein/Phil DeMuth - The Little Book of Bullet Proof Investing.
- Rick Ferri
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Re: Having fun on CNBC Halftime Report today
Could be. It could also be that domestic demand increases more and overshadows a small drop in foreign exports.Kalo wrote:What about the fact that a further strengthening dollar (which we would expect from a rate increase while the rest of the world is decreasing rates) hurts US exports?
Kalo
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
Re: Having fun on CNBC Halftime Report today
Thanx for the link !!!
Retired CSRS on 12/19/2012 @ age 57 w/39 years |
Good Bye Tension, Hello Pension !!!
Re: Having fun on CNBC Halftime Report today
Thanks for the reply, Rick. It does seem like there is often a plus/minus effect to these things. On the international side, I can see the strengthening dollar helping international companies that sell to the US consumer, but also taking a toll on my un-hedged international equity holdings. I don't really worry much about that though because I expect the dollar to eventually weaken again.Rick Ferri wrote:Could be. It could also be that domestic demand increases more and overshadows a small drop in foreign exports.Kalo wrote:What about the fact that a further strengthening dollar (which we would expect from a rate increase while the rest of the world is decreasing rates) hurts US exports?
Kalo
Rick Ferri
Kalo
"When people say they have a high risk tolerance, what they really mean is that they are willing to make a lot of money." -- Ben Stein/Phil DeMuth - The Little Book of Bullet Proof Investing.
Re: Having fun on CNBC Halftime Report today
An opposing view -
In a nutshell, there is little to be gained by raising rates now, but there is the potential for large loss. Similar arguments for raising rates were given for Japan in 2000 and the European Central Bank and Sweden in 2011. None of those rate raises turned out well.
Link -http://www.telegraph.co.uk/finance/econ ... weden.html
BobK
Link -http://www.ft.com/cms/s/2/f664a7e0-4978 ... z3jguha4fkA reasonable assessment of current conditions suggest that raising rates in the near future would be a serious error that would threaten all three of the Fed’s major objectives — price stability, full employment and financial stability.
Like most major central banks the Fed has put its price stability objective into practice by adopting a 2 per cent inflation target. The biggest risk is that inflation will be lower than this — a risk that would be exacerbated by tightening policy. More than half the components of the consumer price index have declined in the past six months — the first time this has happened in more than a decade. CPI inflation, which excludes volatile energy and food prices and difficult-to-measure housing, is less than 1 per cent. ...
Tightening policy will adversely affect employment levels because higher interest rates make holding on to cash more attractive than investing it. Higher interest rates will also increase the value of the dollar, making US producers less competitive and pressuring the economies of our trading partners. ...
There may have been a financial stability case for raising rates six or nine months ago, as low interest rates were encouraging investors to take more risks and businesses to borrow money and engage in financial engineering. At the time, I believed that the economic costs of a rate increase exceeded the financial stability benefits, but there were grounds for concern. That debate is now moot. With credit becoming more expensive, the outlook for the Chinese economy clouded at best, emerging markets submerging, the US stock market in a correction, widespread concerns about liquidity, and expected volatility having increased at a near-record rate, markets are themselves dampening any euphoria or overconfidence. The Fed does not have to do the job. At this moment of fragility, raising rates risks tipping some part of the financial system into crisis, with unpredictable and dangerous results.
In a nutshell, there is little to be gained by raising rates now, but there is the potential for large loss. Similar arguments for raising rates were given for Japan in 2000 and the European Central Bank and Sweden in 2011. None of those rate raises turned out well.
Link -http://www.telegraph.co.uk/finance/econ ... weden.html
BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). |
The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
Re: Having fun on CNBC Halftime Report today
So, I don't think financial advisers are worth it in general, but Rick Ferri is probably worth it in general. That being said, I really don't think being a money manager or financial adviser makes you qualified to talk about macroeconomic policy. CNBC may think otherwise, but what do they know?
"Don't trust everything you read on the Internet"- Abraham Lincoln
Re: Having fun on CNBC Halftime Report today
Rick, I agree with your call on Intermediate-Term Bonds. I stayed with them despite advice from two sources to the contrary. Unlike a lot of investors who fled to short term bonds or even cash, I did not leave a lot of interest payments on the table.
I also think the Fed should gradually start raising short term rates. My gosh, isn't seven years of low emergency rates enough? Haven't we bailed out the big banks enough? We have seen a large transfer of wealth from savers to the banks. It is time to stop that. If the Fed over time raised rates by 2% or so, short term rates would still be low.
I also think the Fed should gradually start raising short term rates. My gosh, isn't seven years of low emergency rates enough? Haven't we bailed out the big banks enough? We have seen a large transfer of wealth from savers to the banks. It is time to stop that. If the Fed over time raised rates by 2% or so, short term rates would still be low.
A fool and his money are good for business.
- Rick Ferri
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Re: Having fun on CNBC Halftime Report today
Do you think we should leave the conversation to our elected officials?I really don't think being a money manager or financial adviser makes you qualified to talk about macroeconomic policy.
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
Re: Having fun on CNBC Halftime Report today
+1...Rick Ferri wrote:Do you think we should leave the conversation to our elected officials?I really don't think being a money manager or financial adviser makes you qualified to talk about macroeconomic policy.
Rick Ferri
leaving it to elected officials.... -100
Good job Rick....
I enjoyed watching the interview on TV..
Don
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Re: Having fun on CNBC Halftime Report today
Heck, I'm not even sure it's wise to leave it up to the Fed. I wonder what the rate would be if allowed to fluctuate based on market forces, if it would even be possible to calculate such a measure.
Re: Having fun on CNBC Halftime Report today
This is the Loanable Funds Market idea. Namely, that the interest rate is determined by market forces by the amount of money available to lend in the economy in relation to the demand for borrowing. It is an inadequate explanation because the level of income is not fixed, and changes in income affect the supply and demand for funds. Therefore, loanable funds does not determine the interest rate. It only specifies a relationship between interest rates and income, i.e. the IS curve of the IS-LM model.fortyofforty wrote:Heck, I'm not even sure it's wise to leave it up to the Fed. I wonder what the rate would be if allowed to fluctuate based on market forces, if it would even be possible to calculate such a measure.
Monetary policy determines where we are on the IS curve. The Fed sets short-term interest rates whether it wants to or not. Even a laissez faire monetary policy has to set a target level for the monetary base. That means that short-term interest rates are always a function of a monetary policy choice.
How would we know if the Fed is setting short-term rates that are too low? In that case the economy would be overheating and inflation would be accelerating. Do you see today a US economy where inflation is accelerating?
See the following article.
Why are interest rates so low?
Link - http://www.brookings.edu/blogs/ben-bern ... tes-so-lowA confused criticism often heard is that the Fed is somehow distorting financial markets and investment decisions by keeping interest rates “artificially low.” Contrary to what sometimes seems to be alleged, the Fed cannot somehow withdraw and leave interest rates to be determined by “the markets.” The Fed’s actions determine the money supply and thus short-term interest rates; it has no choice but to set the short-term interest rate somewhere. So where should that be? The best strategy for the Fed I can think of is to set rates at a level consistent with the healthy operation of the economy over the medium term, that is, at the (today, low) equilibrium rate. There is absolutely nothing artificial about that! Of course, it’s legitimate to argue about where the equilibrium rate actually is at a given time, a debate that Fed policymakers engage in at their every meeting. But that doesn’t seem to be the source of the criticism.
The state of the economy, not the Fed, is the ultimate determinant of the sustainable level of real returns. This helps explain why real interest rates are low throughout the industrialized world, not just in the United States.
BobK
In finance risk is defined as uncertainty that is consequential (nontrivial). |
The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.
Re: Having fun on CNBC Halftime Report today
What's financial costs are there to the Federal Gov. to keep rates at current levels? I don't believe they're still buying bonds like they did in QE efforts. Other than running the risk of higher inflation, what's the financial cost to the taxpayer of keeping rates unchanged?
- Allocationist
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Re: Having fun on CNBC Halftime Report today
Excellent. Thank you!
Re: Having fun on CNBC Halftime Report today
Nice...Rick Ferri wrote:Do you think we should leave the conversation to our elected officials?I really don't think being a money manager or financial adviser makes you qualified to talk about macroeconomic policy.
Rick Ferri
BTW - I've been wondering for months: What's the connection to the Blue Angels (your avatar)?
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
- Mel Lindauer
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Re: Having fun on CNBC Halftime Report today
I'm not Rick, but I can tell you that Rick was a Marine Corps fighter pilot.David Jay wrote:Nice...Rick Ferri wrote:Do you think we should leave the conversation to our elected officials?I really don't think being a money manager or financial adviser makes you qualified to talk about macroeconomic policy.
Rick Ferri
BTW - I've been wondering for months: What's the connection to the Blue Angels (your avatar)?
Best Regards - Mel |
|
Semper Fi
Re: Having fun on CNBC Halftime Report today
The Marines fly F/A-18s, so that works...
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Re: Having fun on CNBC Halftime Report today
There is none, and in fact low rates save taxpayers money because the treasury pays less interest on its debt. In the absence of rising inflation, there is no reason for the Fed to raise rates.Flashes1 wrote:What's financial costs are there to the Federal Gov. to keep rates at current levels? I don't believe they're still buying bonds like they did in QE efforts. Other than running the risk of higher inflation, what's the financial cost to the taxpayer of keeping rates unchanged?