Fed may increase rates by mid year.

Discussion in 'Markets & Economies' started by sammysilver, Mar 18, 2015.

  1. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    Just in, same old, same old.

    The New York Times | BREAKING NEWS ALERT
    NYTimes.com | Unsubscribe
    BREAKING NEWS Wednesday, March 18, 2015 2:09 PM EDT
    Fed Signals It May Increase Interest Rates by Midyear
    The Federal Reserve signaled Wednesday that it would consider raising its benchmark interest rate at its June meeting, the first increase since the Great Recession, but the central bank emphasized that it might still delay the decision until later this year.
    The Fed's announcement, in a statement issued after a two-day meeting of its policy-making committee, moved the central bank to the verge of ending a period of more than six years in which it has held short-term interest rates near zero.
    The march toward higher rates reflects both the Fed's optimism that the economy no longer needs quite as much help from the central bank, and a sense of fatigue about its long-running campaign to encourage faster economic growth.
    READ MORE
    http://www.nytimes.com/2015/03/19/b...-rates-fomc-meeting.html?emc=edit_na_20150318
     
  2. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    This also explains the small spike in PMs at the moment. Surprised the AUD went up though.
     
  3. SilverTabbyCat

    SilverTabbyCat New Member

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    You know, I was wondering...
     
  4. robmetal

    robmetal New Member

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    will the precious metals price go down when this will happen?
     
  5. tenchi

    tenchi New Member

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    it'll go up.
     
  6. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    No, but it may not necelery go up either. Some money from the stock market may go back into bonds, but the small differential in the rates will not initially be enough to steer people from stocks towards metals. Fiat is on a merry-go-round and needs to keep moving, whereas metals are a park bench. The choice depends on where investors are most comfortable.
     
  7. phrenzy

    phrenzy In Memoriam - July 2017 Silver Stacker

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    Its supposed to but the USD was supposed to rise and the US stock markets and gold (taking silver with it) were all suppressed to fall on a result indicating that a rate rise was likely coming, which is what this says and that didn't happen, in fact the opposite happened, so who knows?

    I don't think anyone was expecting an actual rate rise today, just looking for an indication about what was going to come up in the next few months and this is pretty clear. And yet here we are, the markets doing the extract opposite of what they were supposed to do.

    Maybe something else happened that I don't know about but this was supposed to be the big news of the day (big news of the month really).
     
  8. ryan71

    ryan71 Member

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    Right......
     
  9. sterling-nz

    sterling-nz Well-Known Member

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    I would be interested to read why you think it will go up.
    I am of the opinion it will send metals DOWN.
    This will be due to increased return in mainstream allocations.
    Metals generate 0% return if you buy and hold, so money in a bank returning .25% is going to look far better than metals to many.
    Thoughts?
     
  10. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    At the moment it is all hypothetical, nothing has changed. It's same old, same old. Should there be a marked shift in interest rates, it will be stocks crashing not bonds being more attractive that will drive people towards metals.
     
  11. sterling-nz

    sterling-nz Well-Known Member

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    Your are right nothing has yet changed.
    And i would say that even seasoned investors (like me) are not completely sure how this coming small interest rate increase will react with markets and commodities.
    I will go out on a limb and say that rate rise will NOT cause a rise in metal prices, and i will also say it will have a negative impact on prices and push them down.
    Edit: I didnt think this time last year we would have $40 oil either, so thats exactly why im guessing and not telling you for certain JMHO.
    Also we opted out of the markets last year as we said we would when it hit 17500 and our money was in the positive so apart from a play account with few thou $$ in it we aint got any real skin in the game at the moment:)
     
  12. raven

    raven Well-Known Member Silver Stacker

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    better start hangin' on then !
    the race is picking up pace.
     
  13. Pirocco

    Pirocco Well-Known Member

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    0% return is the goal of many. "Preserve". Saving is what it is: storing value. It's not "investing".
    Own control is also a goal of many. Not depending on fiat devaluation. Sure about an amount asset rather than an electronic or paperbased figure.
    An intrest rate of 0.25% on a start amount of $1000:
    Year $
    1 1002.5
    2 1005.01
    3 1007.52
    4 1010.04
    5 1012.56
    6 1015.09
    7 1017.63
    8 1020.18
    9 1022.73
    10 1025.28
    After a decade, you have $25 dollar added to your $1000.
    Far better than zero?
    Heh!

    What is the current US situation?
    http://research.stlouisfed.org/fred2/data/M2.txt
    Notice the rate at which longer term savings rose in recent years:
    (trillion)
    1990 3.1
    1995 3.5
    2000 4.6
    2005 6.3
    2010 8.4
    2015 11.6
    That's all future purchasing power, and an increased interest rate is intended to make people save even more instead of spend now, at the cost of the debtclub. In order to avoid the latter (in terms of purchasing power), the price level of the products that are bought with debt should increase (hence a central bank goal of a stable inflation of not more than 2% but also as close as possible to it.
    So, the strategy of the central planning thief is to make savers waste their savings along temporary increased prices (stocks, gold, ...). If that doesn't work out in their desired degree, then the intrest rate pivot won't be increased, at least not in other terms than peanuts like 0.25%.
    Thinking, the central planning thieves' way.
     
  14. Phiber

    Phiber Active Member Silver Stacker

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    You got it all figured out, as always.
     
  15. sterling-nz

    sterling-nz Well-Known Member

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    Unfortunately i had to stop reading after you used $1000 as a starting point.
    We are talking about big boys and girl here, not mum and dad or my little brother.
    Try working that formula with a starting point of $1000000000 and keep recycling that week after week and then you will see how that .25% is going to attract money.
    Just my thoughts of course.
    But when we talk about "the economy" we have to talk about the big players that make the economy, not mum and dad that work for it:)
    Now days $1000000000 is not a number for a country, many individual people have many times this amount of money.
    I would struggle to list 1/100 of fund managers around the world that also have many multiples of this on their balance sheets to play with.
    Just because people struggle to put these numbers into reality (as they are to big for them to comprehend) does not remove the fact that many thousand of people play with these numbers daily/weekly/ and yearly even.
    Small numbers can make a HUGE difference when you have enough of them .
    I may be wrong and then thats my problem, but i am going to play my hand as though interest rates rise will LOWER METALS.
     
  16. Midnight Man

    Midnight Man Member Silver Stacker

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    But surely, whether you start with $1, $1000 or eleventy bazillion dollars, an interest rate of 0.25% means you're losing purchasing power, irrespective of whatever numbers come out of the calculation? On that basis, I'd think the "big boys and girls" won't be sticking their cash in places that attract 0.25%, they're looking for, and often finding vehicles with a better return rate than that?
     
  17. Pirocco

    Pirocco Well-Known Member

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    The starting amount does not make a difference since a rate is expressed in % not in some absolute value.
    What you name "the economy", references a total money, regardless how it is distributed over (current) owners.
    An intrest rate is what it is: a figure expressed as a %.
    So your big boys / girls comment is just irrelevant.
    To illustrate along another figure: a trillion dollar and a 0.25% intrest rate 'grows' like this:
    Year Amount
    1 1002500000000
    2 1005006250000
    3 1007518765625
    4 1010037562539.06
    5 1012562656445.41
    6 1015094063086.52
    7 1017631798244.24
    8 1020175877739.85
    9 1022726317434.2
    10 1025283133227.79
    After a decade, you just have 25 billion more on that 1000 billion you started with.
    That's, after a decade, 2,5% more.
    Just like with the first $1000 example.
    One may wonder how much other / general prices will have risen over that decade.
    2015 a bread costing $4
    2025 a bread costing $4.1
    Realistic?
     
  18. robmetal

    robmetal New Member

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    we are all investors here... the fed increasing the interest rate is a good thing for those wanting their portofolio to doversify it even further and ultimately to blossom!

    im happy
     
  19. Pirocco

    Pirocco Well-Known Member

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    It was the central bank in the first place that forced (using some legal privileges) the interest rate down, remember?
     
  20. sterling-nz

    sterling-nz Well-Known Member

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    We made the right choice with our money it would appear at the moment.
    17500 was our golden number.
     

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