22 replies to this topic

[xe2dy]

Hmm. there seems to be a consensus here. Higher rates = higher stocks.

First of all rates may not be rising because of good economy or inflation. Simply supply and demand. US government keeps printing huge amount of supply. They even print bonds to cover interest payments on the outstanding bonds. And the demand is lagging. The foreign central banks, the biggest buyers of US debt lately, are cutting back. Nothing to do with the economy or GDP or inflation or whatever. They simply had enough of supply and don't want to buy any more of these toggle bonds.

As for the how it may affect things. Lets look at this from a different point of view.

Forget the housing slowdown and cutback in cashout refinancings. Though housing problems will get even worse with higher rates, and cash out refis weere huge fuel for consumer spending. Forget all that.

What about LBO's and debt financed stock buybacks ? Weren't they the big driver of the stock market ?

Stocks arleady pretty pricey, and LBO's start making even less sense with higher rates on debt. There are as of now about 200 bil in buyout deals that have already been announced but are yet to find financing. How does lower amount of deals affect earnings of banks and brokers ? How does it effect the premiums peoiple are paying for the "next takeover play" ?

What about new debt coming to the market, will that slow down too, as companies have either refinanced at lower rates already, or would delay new issues due to higher rates ?

What about CDO's issuance ? It seems to be slowing down too. according to multiple articles, there have been 500 bil in CDO's issued last year. And that slowed dow to close to nothing last month.

You think all that doesn't affect earnings at least among brokers ? Or the tighter lending standards and higher rates don't affect general liquidity ?

What about all the 10 to 1 leveraged hedgefunds. 1% move on rates can wipe em out, becuase they are playing with razor thin margin.

Or what about those existing CDO's that pension funds, insurance companies and others have been buying last few years. The best of that stuff isn't getting a bid of 90 cents on the dollar, thats why the Ohia Ag started lawsuit against Moody's. Do you think they are itching to buy more of that stuff ? And if the loan underwriters can't unload them the loans... credit crunch ?

Will that not affect banks and brokers earnings too ?

Rates will affect a lot of things other then just plain obvious stuff.

Yes of course there may be higher demand for stocks, but.... there will be overall much lower liquidity and that lower liquidity will effect everything.Keep in mind the supply has been pretty heavy too. There has been record 138 bil in IPO's this year already. And the pipeline is still bulging with KKr and alike. And China just doesn't run out of companies to IPO on the US market.

Great post IMO, ogm

[da_cheif]

Are you comparing the same thing,Chief?.....Gas was 25 cents a gallon.....A cup of coffe and a donut was only a quater at the coffe shop.....A phone call was a dime at the phone booth.....A house in California was $150K.....Now that same house goes for over a million.....Sharply higher rates will increase inflation.....This market will try to keep up with inflation by going up.....But the net gain is negative.(Factoring inflation).....

ya and if u was making 20k a year u were rich.....now 50 to 100k is norm

[ogm]

Are you comparing the same thing,Chief?.....Gas was 25 cents a gallon.....A cup of coffe and a donut was only a quater at the coffe shop.....A phone call was a dime at the phone booth.....A house in California was $150K.....Now that same house goes for over a million.....Sharply higher rates will increase inflation.....This market will try to keep up with inflation by going up.....But the net gain is negative.(Factoring inflation).....

ya and if u was making 20k a year u were rich.....now 50 to 100k is norm

What country do you live in ?

Average salary is 35k. Still plenty of 20k salaries around. Try living on that with Gas 3 bucks.

[da_cheif]

Are you comparing the same thing,Chief?.....Gas was 25 cents a gallon.....A cup of coffe and a donut was only a quater at the coffe shop.....A phone call was a dime at the phone booth.....A house in California was $150K.....Now that same house goes for over a million.....Sharply higher rates will increase inflation.....This market will try to keep up with inflation by going up.....But the net gain is negative.(Factoring inflation).....

ya and if u was making 20k a year u were rich.....now 50 to 100k is norm

What country do you live in ?

Average salary is 35k. Still plenty of 20k salaries around. Try living on that with Gas 3 bucks.

>
Average salary is 35k. Still plenty of 20k salaries around. Try living on that with Gas 3 bucks.<.....yup....da average joe is spending all his time in a soup line.....lmao......at the outback....no wonder i cant get a table.......snort

[denleo]

Average Joe has credit cards, second and third mortgages and bankraptcies every 7 years. US treasury is paying for that by printing money (creating credit) and they will do so just because nobody wants economic collapse while they have power. They just delay it. THE ONLY ECONOMIC DIFFERENCE BETWEEN US AND OTHER COUNTRIES IS CREDIT!!!! Take credit cards away and Da_Chief will be the only one at outback. I will give you an example of Russia (I grew up there). It is a growing but still struggling economy. But what you see there is paid off. No credit. You give them same mortgages, same credit cards and tell them that it is OK to file bankraptcy every decade and there will be no difference between US and Russian economies. Their government (just like most governments) simply can't imagine printing money, which is based on nothing. Denleo

[n83]

Are you comparing the same thing,Chief?.....Gas was 25 cents a gallon.....A cup of coffe and a donut was only a quater at the coffe shop.....A phone call was a dime at the phone booth.....A house in California was $150K.....Now that same house goes for over a million.....Sharply higher rates will increase inflation.....This market will try to keep up with inflation by going up.....But the net gain is negative.(Factoring inflation).....

ya and if u was making 20k a year u were rich.....now 50 to 100k is norm

What country do you live in ?

Average salary is 35k. Still plenty of 20k salaries around. Try living on that with Gas 3 bucks.

>
Average salary is 35k. Still plenty of 20k salaries around. Try living on that with Gas 3 bucks.<.....yup....da average joe is spending all his time in a soup line.....lmao......at the outback....no wonder i cant get a table.......snort

still talking about the Outback as the norm of restaurants-he he

this is good..

"We've had rates go very low, and after 2003, stocks rocked. (up). Now we are getting higher rates, and stocks will go up too.

Amazing. I guess rates have nothing to do with stocks. Stocks go up regardless. "

HA HA

anyway nothing to do with the stock market only blah blah

DISCLOSURE: LONG (now and then rest cash) (in case decide to bash a supposed 'bear'-gg)

Edited by n83, 07 July 2007 - 07:48 PM.

[ogm]

Average Joe has credit cards, second and third mortgages and bankraptcies every 7 years. US treasury is paying for that by printing money (creating credit) and they will do so just because nobody wants economic collapse while they have power. They just delay it.

THE ONLY ECONOMIC DIFFERENCE BETWEEN US AND OTHER COUNTRIES IS CREDIT!!!!

Take credit cards away and Da_Chief will be the only one at outback.

I will give you an example of Russia (I grew up there). It is a growing but still struggling economy. But what you see there is paid off. No credit. You give them same mortgages, same credit cards and tell them that it is OK to file bankraptcy every decade and there will be no difference between US and Russian economies. Their government (just like most governments) simply can't imagine printing money, which is based on nothing.

Denleo

You know what the scariest part is ? The US banks are now giving mortgages in Russia too Of course in Russia no one has any intention of ever paying off mortgages and credit cards. They buy something on a credit card for 200 bucks, and then sell it around the corner from the store on the street for 100 bucks. Cash out refinancing

Extending credit in Russia will come to haunt back some other day I guess.
On top of that credit availability in China, India and the rest of the suspect countries has also exploded. At the same time there are no efficient systems in place to even track credit history. No databases, no SSN or similar, nothing. Talk about Subprime. This will all come to roost later.

Edited by ogm, 07 July 2007 - 08:07 PM.

[da_cheif]

bla bla bla......been hearing all dat crap from bears like u guyz for the last 40 years......duznt mean ********.........clewless...snort

[traderpaul]

That is exactly my point.....A guy making 100K has the purchasing power of 20K.....Chief, back in the 80's we were a nation of manufacturing.....Stero, TV, computers, washing machines, cars, airplanes, cameras...etc.....Now how many of those on the list still made in the USA?.....The job we have are all in the service sector.....They are paid much less than the manufacture sector.....Those in the sevice sectors do not want to pay high wages.....They replaces older workers with younger workers and replace full time workers with part time workers so the payroll is kept to a minumim.....No, you will not get that information from the press or the news but it is happening out there.....Higher interest rate is good for the market?.....Then the sky is green and the grass is blue.....

[da_cheif]

That is exactly my point.....A guy making 100K has the purchasing power of 20K.....Chief, back in the 80's we were a nation of manufacturing.....Stero, TV, computers, washing machines, cars, airplanes, cameras...etc.....Now how many of those on the list still made in the USA?.....The job we have are all in the service sector.....They are paid much less than the manufacture sector.....Those in the sevice sectors do not want to pay high wages.....They replaces older workers with younger workers and replace full time workers with part time workers so the payroll is kept to a minumim.....No, you will not get that information from the press or the news but it is happening out there.....Higher interest rate is good for the market?.....Then the sky is green and the grass is blue.....

its the strong economy that causes the rising rate....or havent u figured that out yet......service jobs must be paying hugely.......there are more 50k suvs on the road then ever before.......ur whole rant is something ive seen and heard for the last 50 years.....