Jamie Dimon: Higher rates are coming
- ReformedSpender
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Jamie Dimon: Higher rates are coming
JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon says the U.S. should be prepared to deal with higher interest rates, including the benchmark 10-year bond yield at 5% or higher. “I think rates should be 4 percent today,” Jamie said Saturday at the Aspen Institute’s 25th Annual Summer Celebration Gala. “You better be prepared to deal with rates 5 percent or higher - it’s a higher probability than most people think.”
https://www.bloomberg.com/news/articles ... ce=twitter
Does anyone think the equity market is prepared?
https://www.bloomberg.com/news/articles ... ce=twitter
Does anyone think the equity market is prepared?
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.
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Re: Jamie Dimon: Higher rates are coming
How would the equity market prepare itself?
Re: Jamie Dimon: Higher rates are coming
All markets are aware of all public knowledge and have built anticipation of expected changes into prices. The idea that someone who doesn't have genuine insider knowledge can be "better prepared" for future events than the entire market as a whole is ludicrous. If you want to look deeper into this concept, read Malkiel's classic book, "A Random Walk Down Wall Street."
Re: Jamie Dimon: Higher rates are coming
In 2013 Jamie Dimon bet $5 billion that rates were going to 3%. (They didn't.) So he clearly has no clue what rates are going to do. Why are you even listening to him? He's been wrong for years about rates. You think he's suddenly going to be right now?ReformedSpender wrote: ↑Mon Aug 06, 2018 8:10 am JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon says the U.S. should be prepared to deal with higher interest rates, including the benchmark 10-year bond yield at 5% or higher. “I think rates should be 4 percent today,” Jamie said Saturday at the Aspen Institute’s 25th Annual Summer Celebration Gala. “You better be prepared to deal with rates 5 percent or higher - it’s a higher probability than most people think.”
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Re: Jamie Dimon: Higher rates are coming
He may or may not be right about the level of future interest rates. That's the point. His proclamation provides no new information.
After one has played a vast quantity of notes and more notes, it is simplicity that emerges as the crowning reward of art. Chopin
Re: Jamie Dimon: Higher rates are coming
Jan 1, 1956 10year Treasury yield: 2.90%
Jan 1, 1960 10year Treasury yield: 4.72%
http://www.multpl.com/10-year-treasury- ... le/by-year
How did the stock market do over that period? ... It grew 11% annualized
If interest rates are going up, it could be a sign of improving economic growth and demand for capital to be put to work.
Jan 1, 1960 10year Treasury yield: 4.72%
http://www.multpl.com/10-year-treasury- ... le/by-year
How did the stock market do over that period? ... It grew 11% annualized
If interest rates are going up, it could be a sign of improving economic growth and demand for capital to be put to work.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
- TomatoTomahto
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Re: Jamie Dimon: Higher rates are coming
Some posters on this web site like to claim that Elon Musk is a huckster and snake oil salesman. Jamie Dimon.
I get the FI part but not the RE part of FIRE.
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Re: Jamie Dimon: Higher rates are coming
Both can of course be true.TomatoTomahto wrote: ↑Mon Aug 06, 2018 10:26 am Some posters on this web site like to claim that Elon Musk is a huckster and snake oil salesman. Jamie Dimon.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
Re: Jamie Dimon: Higher rates are coming
Jamie Dimon is the CEO of a major bank and would love for higher rates to come.
Re: Jamie Dimon: Higher rates are coming
And this is supported by...sluggish wage growth? Yes, higher rates are coming, but maybe not as soon as he thinks. He may be a superstar investment banker, but he talks way too much.
Global stocks, US bonds, and time.
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Re: Jamie Dimon: Higher rates are coming
The market will decide where interest would go. 5% interest rate? what mortage rate would be? 7%. What a disaster. who would even consider investing in stock market? Investor would just buy CD and live on interest payment. Of course, the big banks are the beneficiary. They can always make money on rate difference. I could see another QE and interest cut because the next recession is close.
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Re: Jamie Dimon: Higher rates are coming
WhiteMaxima wrote: ↑Mon Aug 06, 2018 1:03 pm The market will decide where interest would go. 5% interest rate? what mortage rate would be? 7%. What a disaster. who would even consider investing in stock market? Investor would just buy CD and live on interest payment. Of course, the big banks are the beneficiary. They can always make money on rate difference. I could see another QE and interest cut because the next recession is close. For interest to be 4%, the inflation rate should match this like 4%.
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What's your view on Treasuries?
Hey there fellow Bogleheads!
Jamie Dimon was in a recent bloomberg article https://www.bloomberg.com/news/articles ... -5-warning in which he says that we should be looking out for treasury rates of 5% or higher. The whole article has a negative tone but I don't see it as a bad thing, I would love to have a 10 year treasury yielding 5-7%.
I understand that there is reinvestment risk, inflation risk, and that tying up your money for so long can be cumbersome, (and you'll get better returns on the stock market) but at the end of the ten years you would have received 70% of the treasury's face value (assuming a 7% yield).
For discussion purposes, at what yield would you be content with putting all your eggs into one basket? 7%, 10%, 15% or higher? Or would you stick to a bond / stock allocation based on age?
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J.M
Jamie Dimon was in a recent bloomberg article https://www.bloomberg.com/news/articles ... -5-warning in which he says that we should be looking out for treasury rates of 5% or higher. The whole article has a negative tone but I don't see it as a bad thing, I would love to have a 10 year treasury yielding 5-7%.
I understand that there is reinvestment risk, inflation risk, and that tying up your money for so long can be cumbersome, (and you'll get better returns on the stock market) but at the end of the ten years you would have received 70% of the treasury's face value (assuming a 7% yield).
For discussion purposes, at what yield would you be content with putting all your eggs into one basket? 7%, 10%, 15% or higher? Or would you stick to a bond / stock allocation based on age?
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J.M
Re: Jamie Dimon: Higher rates are coming
stryfer2999, Welcome! I moved your post into the on-going discussion.
Re: Jamie Dimon: Higher rates are coming
I hope he’s right.
That would be just fine with me.
That would be just fine with me.
Re: Jamie Dimon: Higher rates are coming
Depends on inflation - 7% would seem great now but back in the Carter days ..stryfer2999 wrote: ↑Mon Aug 06, 2018 2:43 pm Hey there fellow Bogleheads!
For discussion purposes, at what yield would you be content with putting all your eggs into one basket? 7%, 10%, 15% or higher? Or would you stick to a bond / stock allocation based on age?
J.M
" both inflation and short-term interest rates reached 18 percent in February and March 1980."
https://en.wikipedia.org/wiki/Presidenc ... er#Economy
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Re: What's your view on Treasuries?
if the FDIC insured CD yield is 5% and forecast equity return is just 4 to 5%, who is going to invest in equity? I believed Chase Bank forecast 4 to 5% return in the next decade and now saying interest should be 4% now or even higher. I can't see it from the same source. I do see short term interest go to 3.0 to 3.5%, but not 4% and higher.stryfer2999 wrote: ↑Mon Aug 06, 2018 2:43 pm Hey there fellow Bogleheads!
Jamie Dimon was in a recent bloomberg article https://www.bloomberg.com/news/articles ... -5-warning in which he says that we should be looking out for treasury rates of 5% or higher. The whole article has a negative tone but I don't see it as a bad thing, I would love to have a 10 year treasury yielding 5-7%.
I understand that there is reinvestment risk, inflation risk, and that tying up your money for so long can be cumbersome, (and you'll get better returns on the stock market) but at the end of the ten years you would have received 70% of the treasury's face value (assuming a 7% yield).
For discussion purposes, at what yield would you be content with putting all your eggs into one basket? 7%, 10%, 15% or higher? Or would you stick to a bond / stock allocation based on age?
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J.M
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Re: Jamie Dimon: Higher rates are coming
“Those who have knowledge don’t predict, and those who predict don’t have knowledge” - Lao Tzu
“It is very hard to predict, especially the future.” - Old Danish Proverb, but attributed to Niels Bohr
"Nobody knows Nuthin" - Jack Bogle
"Only predict what or when, but never both." - An economist
“It is very hard to predict, especially the future.” - Old Danish Proverb, but attributed to Niels Bohr
"Nobody knows Nuthin" - Jack Bogle
"Only predict what or when, but never both." - An economist
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
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Re: Jamie Dimon: Higher rates are coming
It looks like Jamie wants people to put their money into bank deposit. We know that put saving in bank is a losing game. Can't beat inflation. Does Jamie suggest future inflation is 4 or even 5%. If could but necessary.
Re: Jamie Dimon: Higher rates are coming
In the year 2000, mortgage rates hit 8%. Fed continued raising rates through '99 because umemployment rates were hitting a low 3% and stock market were returning 20%. Tech stocks were going crazy. People were buying houses even at 8% mortgage rates. Bank CDs were yielding 4% to 4.5% for 1 year and longer duration even more. I-Bonds were yielding 3.5% and 3%. Everything was doing well. Until the Tech stock crash, then rates started falling.WhiteMaxima wrote: ↑Mon Aug 06, 2018 1:03 pm The market will decide where interest would go. 5% interest rate? what mortage rate would be? 7%. What a disaster. who would even consider investing in stock market? Investor would just buy CD and live on interest payment. Of course, the big banks are the beneficiary. They can always make money on rate difference. I could see another QE and interest cut because the next recession is close.
In short, it's a cycle. If the unemployment continues to be lower, and economy is over heating, then Fed has to raise rates to control inflation. What else tool do they have? Rates could hit 5%, possibly. Then the next recession cycle will begin. Bonds would be attractive again.
Re: Jamie Dimon: Higher rates are coming
Duplicate deleted.
Re: Jamie Dimon: Higher rates are coming
There was a time when I used to read and listen to people like Jamie Dimon with trepidation. Now I think I really understand the meaning of "Nobody knows nothing".
I would have told you myself about 5%. Its coming - definitely - you can bet your house on it, until well.. it doesn't come and something else does. And I can blame that something and say if it weren't for that something - 5% was a sure shot. Everything is assured until it is not.
Japan(period of stagnation) can happen to USA until it does not. Conventional wisdom makes most sense until it does not.
I would have told you myself about 5%. Its coming - definitely - you can bet your house on it, until well.. it doesn't come and something else does. And I can blame that something and say if it weren't for that something - 5% was a sure shot. Everything is assured until it is not.
Japan(period of stagnation) can happen to USA until it does not. Conventional wisdom makes most sense until it does not.
"Never underestimate the ability of a bad situation to get worse...rapidly." Ninegrams
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Re: Jamie Dimon: Higher rates are coming
It's not exactly like Jamie Dimon is right all of the time. Remember the London Whale debacle?
https://www.newyorker.com/news/john-cas ... le-scandal
Take his comments as an interesting bit to think about then move on to things that are more important.
https://www.newyorker.com/news/john-cas ... le-scandal
Take his comments as an interesting bit to think about then move on to things that are more important.
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Re: Jamie Dimon: Higher rates are coming
Higher rate could come but everything has to be repriced. Eps leveraged assect or company with heavy debt. Either way.
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Re: Jamie Dimon: Higher rates are coming
This sort of reminds me of 2009, when Warren Buffett warned that inflation was coming due to all the stimulus. Even for the brightest minds, these things can be difficult to predict. What are us mere mortals to do?
“The greatest shortcoming of the human race is our inability to understand the exponential function.” - Albert Allen Bartlett
Re: Jamie Dimon: Higher rates are coming
Good
"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: Jamie Dimon: Higher rates are coming
I would like to see higher rates as well. Every time the 10-year treasury yield drops back below 3% I am disappointed. Would like to see it comfortably above 3.
Where the tides of fortune take us, no man can know.
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Re: Jamie Dimon: Higher rates are coming
Agree but the full story of the QE stimulus is not yet written yet. Clearly IMO it was necessary at the time to avoid a wider catastrophe. But we won't know its ultimate result until QE is fully unwound and the FED's balance sheet is much smaller than now. The degree of monetary stimulus applied in QE, the amount of interest rate suppression, and the amount of stimulus as a backstop for risk assets, was larger by far than any in history. It helped the stock market. Investors got rich even as the main street economy struggled. Unwinding such a massive amount of stimulus has never before been done as Dimon pointed out. Can equity/real estate markets handle rising interest rates, rising mortgage rates, rising debt service payments, and increased inflation? We'll see in the long run, but where it will end up is not IMO accurately predictable beforehand.stormbringer wrote:
This sort of reminds me of 2009, when Warren Buffett warned that inflation was coming due to all the stimulus. Even for the brightest minds, these things can be difficult to predict. What are us mere mortals to do?
Garland Whizzer
Re: Jamie Dimon: Higher rates are coming
Higher 'real' interest rates might be nice, higher rates that are actually a negative real rate are problematic.Engineer250 wrote: ↑Wed Aug 08, 2018 9:17 amI would like to see higher rates as well. Every time the 10-year treasury yield drops back below 3% I am disappointed. Would like to see it comfortably above 3.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Re: Jamie Dimon: Higher rates are coming
I agree. But anecdotally it feels like inflation is picking up faster than CDs/savings rates/treasury rates. I am too tired/lazy to look up rather my "feeling" has any connection with reality. But nonetheless, it's a concern. That inflation is going to pick up regardless, so I would kind of like treasury yields to catch up.JoMoney wrote: ↑Wed Aug 08, 2018 5:55 pmHigher 'real' interest rates might be nice, higher rates that are actually a negative real rate are problematic.Engineer250 wrote: ↑Wed Aug 08, 2018 9:17 amI would like to see higher rates as well. Every time the 10-year treasury yield drops back below 3% I am disappointed. Would like to see it comfortably above 3.
Where the tides of fortune take us, no man can know.
Re: Jamie Dimon: Higher rates are coming
5% 10-year rate would indeed imply a 7% 30-year mortgage rate (https://4.bp.blogspot.com/-gWj_3ofKdhk/ ... ug2018.PNG)WhiteMaxima wrote: ↑Mon Aug 06, 2018 1:03 pm The market will decide where interest would go. 5% interest rate? what mortage rate would be? 7%. What a disaster. who would even consider investing in stock market? Investor would just buy CD and live on interest payment. Of course, the big banks are the beneficiary. They can always make money on rate difference. I could see another QE and interest cut because the next recession is close.
Q: Who would even consider investing in the stock market?
A: Everyone. Why would you change anything?
Banks are making money on the rate difference. They borrow at near zero (from deposit accounts), and lend at LIBOR plus spread.
I don't carry a signature because people are easily offended.
Re: Jamie Dimon: Higher rates are coming
I’m like Buffet — interest rates play no factor in my investing decisions.
Re: Jamie Dimon: Higher rates are coming
From the mouth of an empty suit all manner of pronouncements will always come.
Re: Jamie Dimon: Higher rates are coming
Year over year Inflation has been increasing faster than 5-year and 10-year Treasury yields the last few months, but 5-year and 10-year breakeven inflation rates have actually decreased a bit lately, and still aren't much above 2%, so market expectations for future inflation seem muted compared to year over year inflation in recent months.Engineer250 wrote: ↑Wed Aug 08, 2018 9:23 pm I agree. But anecdotally it feels like inflation is picking up faster than CDs/savings rates/treasury rates. I am too tired/lazy to look up rather my "feeling" has any connection with reality. But nonetheless, it's a concern. That inflation is going to pick up regardless, so I would kind of like treasury yields to catch up.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: Jamie Dimon: Higher rates are coming
Thanks for actually doing the math. I guess this is one of those where all we can do is watch and see what happens. As an accumulator in relatively early years, I just worry about inflation. It feels like the last 10 years I've been saving could get made worthless by rampant inflation. But I suppose worrying doesn't do anything.Kevin M wrote: ↑Thu Aug 09, 2018 2:21 pmYear over year Inflation has been increasing faster than 5-year and 10-year Treasury yields the last few months, but 5-year and 10-year breakeven inflation rates have actually decreased a bit lately, and still aren't much above 2%, so market expectations for future inflation seem muted compared to year over year inflation in recent months.Engineer250 wrote: ↑Wed Aug 08, 2018 9:23 pm I agree. But anecdotally it feels like inflation is picking up faster than CDs/savings rates/treasury rates. I am too tired/lazy to look up rather my "feeling" has any connection with reality. But nonetheless, it's a concern. That inflation is going to pick up regardless, so I would kind of like treasury yields to catch up.
Kevin
Where the tides of fortune take us, no man can know.
Re: Jamie Dimon: Higher rates are coming
If you're really worried about inflation, consider TIPS and I Bonds.Engineer250 wrote: ↑Fri Aug 10, 2018 1:22 pm Thanks for actually doing the math. I guess this is one of those where all we can do is watch and see what happens. As an accumulator in relatively early years, I just worry about inflation. It feels like the last 10 years I've been saving could get made worthless by rampant inflation. But I suppose worrying doesn't do anything.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
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Re: Jamie Dimon: Higher rates are coming
Aren't I-Bonds currently returning negative real returns when you factor in taxes?
“The greatest shortcoming of the human race is our inability to understand the exponential function.” - Albert Allen Bartlett
Re: Jamie Dimon: Higher rates are coming
Yes but it is a known (& relatively slight) loss. With nominal bonds and stocks you could lose 10% a year, just to inflation. You'll never lose 10% a year to inflation even after taxes with TIPS.Stormbringer wrote: ↑Sat Aug 11, 2018 6:12 amAren't I-Bonds currently returning negative real returns when you factor in taxes?
Re: Jamie Dimon: Higher rates are coming
With inflation running now at 3%, unemployment under 4% and the FY18 federal budget deficit running 21% higher than the same 10 months a year ago, 3% on the 10-year Treasury seems well more than a bit behind the curve. 3% on the 13-week T-bill and 4% on the 10-year doesn't sound remarkable in the least bit nor does 3.X% on t-bills and 5% on the 10-year.
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Re: Jamie Dimon: Higher rates are coming
+1Engineer250 wrote: ↑Wed Aug 08, 2018 9:17 amI would like to see higher rates as well. Every time the 10-year treasury yield drops back below 3% I am disappointed. Would like to see it comfortably above 3.
Agreed.
Re: Jamie Dimon: Higher rates are coming
Could be, but we're getting negative real returns even before taxes on other safe, relatively short-term nominal fixed-income, and we've been getting negative nominal returns on fixed income with more term risk, so even more negative real returns even before taxes.Stormbringer wrote: ↑Sat Aug 11, 2018 6:12 amAren't I-Bonds currently returning negative real returns when you factor in taxes?
I'm not promoting I Bonds, just saying that they are a reasonable alternative for relatively small amounts of money, depending on portfolio size of course, for someone who's worried about inflation.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Jamie Dimon: Higher rates are coming
You can choose to tax-defer I-BondsStormbringer wrote: ↑Sat Aug 11, 2018 6:12 amAren't I-Bonds currently returning negative real returns when you factor in taxes?
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