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Here We Go–Plenty of Tension

Just 20 minutes until the 75 basis point rate hike–we all know that will occur. What we don’t know is how Powell will parse his words at the press conference.

I am guessing they will refrain from sounding dovish–the data, while occasionally softer than expected, remain strong–in particular employment. I am looking for market disappointment with a strong downdraft in the next day or two–but honestly who really knows.

Of course I am ‘standing down’ from market activity–nothing I could do will alleviate potential pain–I have had decent gains the last week which could evaporate soon–what is one to do?

40 thoughts on “Here We Go–Plenty of Tension”

  1. FOMC TODAY ~ forget the DOVISH pre-conference statement of analyzing the future effects of cumulative tightening & lag effects…the HAWK came out of his nest and said more future rate hikes coming, terminal rate would be higher than originally thought, and length of higher rates is unknown…..
    DOW DOWN 505

  2. A revealing point was made when one reporter told JP that the market was now up ( when it was down)- he got very hawkish with several points in his reply.
    So, they aren’t turning into doves for awhile.
    >> 932 point swing in the DOW, ending down 505

    1. Gary I noticed that exact timing and market was down hard afterwords, i looked for a bargain to add but all my stuff was still up?

  3. Bloomberg analyst just said that the markets are looking for anything from Powell that sounds dovish

    1. windy–guess the markets got it—I am relieved. I didn’t think they would cave in any respect–so much for my guess.

      1. Powell just said something very insightful. Paraphrasing: If the Fed over tightens, the have tool (rates) to revive and stimulate the economy, however if they do not tighten enough, they do not have any other option, other than to go back to tightening.

        1. The media pre hypes a false narrative and tries to read a false narrative into their public statement. Only to find The Chairman never has wavered off their path they have stated consistently.

          1. Gridbird. Agree, and Powell stuck the landing. He educated the publics and tamed the media, for now.

          2. Grid–my instinct was just what occurred–although they faked me out with the statement–not that one could do anything with whatever occurred. You are right they are now being consistent–didn’t think economic data warranted any sort of ‘pause’.

          3. Gridbird, as you know, media is about attracting viewers, selling ads, and helping those who buy ads- financial services companies. Bad news day after day lowers ratings and lowers ad revenues. As for Powell, he has consistently increased interest rates that have made huge banks hugely more profitable as there net interest margin increases substantially increasing profits by huge amounts. The Bank of America CEO could barely contain his glee when interest rates went up last time. Unfortunately, investors in the bond market and preferred stocks, many investors have seen their investment decline substantially. Many of those investors were pushed into the market due to the ultra low savings rates offered by huge banks when Powell flooded the market with cash so banks did not have to pay savers more than .000001 % (still the rate at many large banks) Since a large part of inflation is due to housing, and a lot of the housing market has been due to home flippers and speculators according to a recent article, why has Powell not insisted on greater down payments by these speculators when speculating? Answer: It does not benefit Powell’s main benefactors — the big banks that want higher interest rates by creating the environment that increases inflation and thus results in huge profits to the big banks. Thankfully, my bank preferred stocks with a rate above seven percent have done ok and pay their dividends promptly.

            1. Follow, I really dont have an answer, I just kind of played the hand I was dealt. Historically speaking the Fed Funds rate even now is not historically high. And history has shown a longer US bond has historically paid more than inflation. And we arent even there yet. Seems like a convergence of various societal and govt issues have converged to get us where we are now. A year from now, is anybodies guess. But hey we are now getting 40 bps fixed on an IBond. I will buy the 6.89% in January and if they slap a fixed one handle on the May cycle, I will get another gift and buy 10k more!

              1. Grid: Thanks for your input. Much appreciated. Hoping one day I bonds would expand their investment maximum to 50K or higher since it seems the 10K limit plus tax refund has been used as the maximum amount for a long time.
                Perhaps an annual inflation correction since the last change should be considered since it would help lots of small investors by promoting a safe, high paying alternative to the .000001 at Chase, BofA, and Wells Fargo.

              2. Grid:

                Most of my new investments are going into the floaters….especially those that are “live”.

                3 month LIBOR hit 4.5% yesterday and its rise seems unstoppable for now.

                SLMBP is a very interesting idea with the recent huge 38% jump in the quarterly dividend for December.

                Here is what SLM recently paid in preferred dividends on the 2.5M shares outstanding of SLMBP:

                1Q – $1.2M
                2Q – $1.76M
                3Q – $2.51M
                4Q – will be $3.276M
                1Q 2023 – would be $3.875M based on 11/2/22 3MO LIB of 4.5%.

                We’ll see how long they will continue to take this pain before they say enough is enough. They have ample cash on the balance sheet ($4.8B) to tender for this preferred at a price well below its $251M balance sheet value.

                But the near $16M annual run rate in dividends will start to hit EPS/share significantly (nearly $.02/quarter).

                SLM was able to retire 1.5M shares of this preferred at $45/share with a tender offer done back in October 2020, so they have a history here. But they will have to pay up this time if they try it again!

                SLM really should be buying SLMBP back in the open market at current prices of around $57.

                1. Rob, I have a full position in it. I bought all of them with exception of a 100 shares a few days ago in mid $56 range, a bit over $57 and have collected one divi. Im the eternal pessimist granted and know nothing. But my opinion is SLM wont be looking to buy these back. While its heading to 10% plus for me, its very relative cheap capital for them now, being the percentage is off par to them. They took advantage of real low rates to announce tender. Plus I cant remember fully, but I think since they unloaded the crap part of their company and created Navient, I dont think they needed as much regulatory capital, and killed 2 birds with one stone on that tender.

                  1. Grid:

                    I’d rather SLM didn’t try another tender. We might be getting an 11% yield on this thing in 2023 based on $57 current price.

                    I’ll collect that and truly make my way to the beach.

                    Up, up, and away!

                    1. Rob, near term things are good. But down the road a decision will need to be made, or not. Looking at chart below, anytime 2/10 went negative one was eventually rewarded for going long over staying short.
                      I know a few here have lamented about not going all in long in early 80s on 13% 30 year. Well besides being too young or poor, the many probably now deceased being it was 40 plus years ago cant speak, but they didnt because the short end was even higher. That allusion of easy short end money became a financial cancer because they were rerolling into lower and lower yields while the 13% er just kept increasing capital gains year after year.
                      Since I am clueless, I have my bets spread all across the income spectrum. And besides, this time could be different….or still way too early, thus the reason I do what I do….Today it was a 2035 bond, January it will be some more lowly IBonds!

            2. ftm-
              Is setting down payments for speculators even within his purview ? I doubt it.
              He flooded the market to benefit banks? Seems to be a pretty narrow reason- and how does he benefit? Without getting into politics- just finance/FOMC and his job.

              1. Gary: Thanks for your comments. Per the federal reserve website: The Federal reserve influences money and credit conditions in the economy. They supervise and regulate bank and other financial institutions to ensure safety and soundness of bank. They maintain the stability of the financial system.
                Along with the Office of the Comptroller of the Currency, they dictate to banks the risk involved in a banks loan portfolio. Investor owned real estate that is a substantial factor in the lack of supply for first time buyers and the increasing prices of other home prices can be substantially affected by the Federal Reserve policies if they so choose.
                How does Powell gain by making billions by raising interest rates for large banks? A look back at former federal reserve chiefs shows how money is made once Powell leaves. Bernanke charges $200,000 to $400,000 as a speaking fee. Greenspan in 2006 received the second highest book advance of 8.5 million and gets a minimum of 40,000 per speech (less than Bernanke I suppose due to age of Greenspan in his 90s_ Bernanke and Greenspan can also serve on boards of directors and make large sums for limited work. Powell’s actions making the large banks billions and costing taxpayers billions will be rewarded by making him and his family rich beyond 99.9 percent of Americans. Powell’s low ball interest rates allowed banks and big corporations to sell low interest rate bonds and preferred stocks last year to investors starved for yield since the banks had so much money that investors have been crucified and banks and big corporations have saved fortunes on interest payments for many years.

          4. Its not just pre-market hype and non-existent pivots….its relentless push back by mass media monotony against anything resembling common sense, historical norms and a return to Fed Fund Rates Normalcy.

    2. “‘Cumulative tightening’ and ‘lagged impact’ suggest that this will be the last 75 bp hike and in December the move will most likely be 50 bp – BMO

    3. Bloomberg or what I now refer to as the Trotsky Times has mentioned the hallucinatory signals only they are seeing of a Fed Pivot over 400 times in the last month and that’s just their morning show Surveillance and a few of their supposed journalists. They are not only a classic example of media manipulation and tainted journalism. They have become a totally discredited news organization like Yahoo Finance, MSNBC and half a dozen others.

  4. https://www.bloomberg.com/live/us

    I often turn it on for free.. it only lasts a while before it begs for a subscription but better then nothing to have some reactions. I don’t have cable tv but I can listen while I work.

    Not sure what the market is going to do/react. I just keep steadily buying.

    1. If you have or can purchase a Samsung smart TV you can get Bloombergs live channel for free, along with approx. 500 other channels of movies, various other entertainment including almost every major news channel including other financial channels. All you need is internet service. Has to be one of the best bargins out there for free.

      1. No, all you need is UNLIMITED DATA internet service…. I know it’s hard to believe, but all these streaming services that rely on the high speed internet are still not available around here, not with unlimited data…..I’m sure when they are, I’ll be acting like a Neanderthal attempting to get answers to questions that most will wonder who’d be asking such an ignorant question in this day and age. And yet I live within 50 miles of https://epb.com/campaigns/brand/?gclid=EAIaIQobChMIh9b-0beQ-wIVhAfnCh26qQqlEAAYASAAEgI2X_D_BwE – “The World’s Fastest Internet Delivered with World-Class Customer Service.”
        Go figure….

        1. 2WR – I live 300 yards from the main “backbone” line that runs through silicon valley. From my roof, I can see rows of massive data centers hooked into that line. The office park between me and the data centers has three different high speed services.

          But, in my residential neighborhood, we can only get DSL from the phone company. It supposedly has unlimited data, but it is not fast enough to really matter.

          I sometimes work at an office in the office park and I can see the roof of my house out the window. I have been tempted to set up a point-to-point wireless link from their building to my house, but I am not sure they would be amused…

          1. Frustrating isn’t it, P? I didn’t even mention that for me, Charter’s Spectrum is less than 4 miles away. And they’ve received Fed money to expand their network in rural areas like ours??? Oh, and they’ve also decided they’ll use that money elsewhere, not to extend out to our growing little community…. We’ve got one house that’s using Starlink RV, but they’re not satisfied enough to recommend it and whatever the next level up on Starlink is, is nowhere in the works yet…. Hughesnet is providing our lightning fast 25 mb promised internet but data limit = 30GB

            1. You need to see if the Mrs. will buy you a 4 mile ethernet cable for Christmas off QVC 2WR ;o)

              Do you have decent cell service out there? You can tether to that and unlimited data plans are generally affordable.

              1. Good one, Scott! Although I’ve not experimented with that others here have and results are mixed at best…. For example, all AT&T offers is their “Fixed Wireless Internet,” which doesn’t promise any speeds faster than Hughesnet so that’s out at least in my eyes…. Verizon’s the other strong signal here but nobody’s been telling me they’re thrilled with whatever it is they offer…. I hear T-Mobile’s coming on strong but they’re still not the strongest around here……. And to think I came to TN 15 years ago from a 39sq mile island in the Caribbean with an active volcano and only a 4500 population by the time we left and to this day, they still have better internet service than we do…..

                1. I don’t have any special plan or hardware from Verizon but I can tether my laptop to my phone and use the phone’s data plan so that might get you around the data limitation. You would be speed limited by the phone of course, but in a pinch that would get you through if the market was melting down while Hughes Net is in a sunspot or something. Just wanted to make sure you knew that since you are a premier member here and we can’t afford to have you offline!

                  And at least you can take some solace in the fact that while you may have worse internet than on a tropical island now, you have a better football team to cheer for!

                2. 2WR, Scott is spot on re tethering. I’m sure he would also share that tethering adds a significant level of security; especially valuable when using a laptop in airports or hotels.

                  Also versatile as you can send/receive larger data files, like contracts, from virtually any location with cell service such as cruising down some remote freeway at 72 mph.

                  1. A – OK, I have a confession to make… All I get when I look around for cell providers regarding home internet is frustrated. Whether tethering is an option companies like Verizon don’t want to offer I don’t know but when I stick my address into their little website link to check availability for home internet I get, “Verizon Home Internet services are not currently available at your address, but you can be among the first to know if they become available.” That message hasn’t changed in years…. And how much do I love cell phone service providers in general???? Well mine is a Tracfone because the only thing the wireless service providers really seem to be in general is physical cell phone salesmen who perhaps, if you’re lucky, offer cell service as a sideline. Yeah, I know – send me off for display in a museum of natural history, old world mammals section…

                    1. 2WR, AFAIK you can use any modern cell phone for internet access via “tethering.” You have to go into the setup section of your phone and turn that option on. An alternative is to spend $50 and buy a dedicated “hotspot.” Walmart sells them off the shelf. A hotspot connects to the same cell network that phones use, but will only get you internet access.

                      All of these are less reliable than wired connections like DSL IMO, and should serve as backups only. I would NOT use one of these as the primary internet connection. And yes, I use a $50 hotspot sometimes when traveling and/or at the beach trading desk.

                    2. I tether from my cell phone all the time when I am away from home/office. Much more secure, and with an unlimited data plan, not expensive. There are a lot of places where it is the only internet available. I wouldn’t want it as my primary internet though.

                      We have all of our phones on T-mobile. We have been pretty happy with them. We got a great rate plan a lot of years ago – $10/month per line with unlimited everything and good international coverage/rates. I even get a VOIP landline for free. We have the whole family on the plan (wife, kids, their spouses, some of the grandkids) – I think we are up to something like 15 lines.

                      T-mobile calls periodically wanting me to “upgrade” to a “better” plan, but when I ask them to point out what is better than what I have, they look at my plan and can’t find anything but a higher price.

                      One of my sons set up a page where everyone in the family can put in expenses they pay for someone else (phone, car insurance, etc.) and it calculates who should pay how much to whom, so its easy to “share” services.

                    3. I’m such a simpleton when it comes to this cell phone stuff that you’re confusing me, Private….. If what I’d be looking for is a way to do highspeed internet on my laptop home computer via dumping Hughesnet and its 25MBS and 30GB monthly limit, then is there a relevance to my problemo regarding tethering from a cell phone all the time when you’re away from home/office? For all I know, it could be relevant and I’m just not seeing it, but I’m not interested in living my life on my phone… My eyes wouldn’t be able to take it… I need a reliable alternative for home internet so I can find out what the hell Hulu or even Netflix is and if they could be something I’d be interested in….

                      All this reminds me of coming back to the States after living in the Caribbean for 12 years…. Our kids laughed at us because we didn’t even know how to use a credit card at the pump to pump gas… lol

                    4. Sorry, 2WR, I got off on a tangent commenting about using a tethered cell phone away from home. It would be a poor substitute for a regular internet connection.

                      I don’t do any financial transactions on my cell phone, and I do very little internet interaction. Too hard to see/manage (for me). I use my laptop for almost everything, so a fast, unlimited connection is my goal too.

                      I saw some ads that T-mobile is offering wireless home internet up to 100mbs. Might be worth a look. I am going to have one of my guys check it out. I don’t understand how it would be faster than a cell phone connection (same network, it appears), but I don’t know.

          2. Dreading the trip down Private, need to see my sister before the holidays.
            The traffic from GG bridge south is sucky. 5 to 6 hour round trip. Always glad to get back to the north bay. Last weekend 4 to 5 hour to see my daughter over by the 280 split to livermore. The traffic in the bay area is terrible.
            Whats that song? we paved it over and made a parking lot ?

        2. my company switched from ATT to Comcast once the fiber cable was installed. Fast yes, but I can’t count the number of 1hr to 1/2 day outages we have had.
          At least with ATT I could take the backup phone and plug it into the terminal box in the closet and get customer calls. Now that’s pre-historic but it worked. Now I started handing out my personal cell # to my best customers to contact me.

          1. My son who lives just a few blocks from me was on comcast and had the same horrible experience. You can’t even get someone on the phone for a problem. all their support options required him to file a ticket online or by text (hard to file a ticket about your internet service online when your internet service is down).

            He then switched to comcast business, which costs a bit more, but his experience has been very good. They apparently run it as a completely separate business. Few outages, a live person answers the support line.

            We actually looked at setting up a point to point wireless from my house to his so I could piggyback on his connection, but there is a two story school that blocks line of sight…

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