Markets in a tailspin

[NoStateofMind]

Will we see a 'bail in' here in the US? I'm not the best one to try and explain this but to my understanding it's when there's a negative interest rate by the central bank. This in turn causes your bank account to be 'docked' the percentage that's negative (say -.25%, I think Greece was at -1.5%). This means when your paycheck is deposited you will automatically lose that amount to the bank. Obviously the reaction to that will be people keeping money out of the bank. This is supposed to spur spending if I'm understanding this insane economic theory correctly.

The FED may not be able to increase rates due to China's devaluation as that would inspire even deeper cuts from them. If the FED stays put will China continue the bleeding? It seems like it's China who is controlling the market more so than the US.

But I know nothing.

 

[fskimospy]

Will we see a 'bail in' here in the US? I'm not the best one to try and explain this but to my understanding it's when there's a negative interest rate by the central bank. This in turn causes your bank account to be 'docked' the percentage that's negative (say -.25%, I think Greece was at -1.5%). This means when your paycheck is deposited you will automatically lose that amount to the bank. Obviously the reaction to that will be people keeping money out of the bank. This is supposed to spur spending if I'm understanding this insane economic theory correctly.

The FED may not be able to increase rates due to China's devaluation as that would inspire even deeper cuts from them. If the FED stays put will China continue the bleeding? It seems like it's China who is controlling the market more so than the US.

But I know nothing.

Negative interest rates apply to bank reserves, not your personal account.

 

[Subyman]

well. Interest rate hikes could make it so less people qualify for more money lowering prices OR/AND people leaving the stock markets put the money in real estate pushing prices up.

IMO, low markets would be more reason to keep interest rates low to stimulate investment. So as long as the markets don't head toward a complete collapse, then rates should stay reasonable.

 

[Darwin333]

well. Interest rate hikes could make it so less people qualify for more money lowering prices OR/AND people leaving the stock markets put the money in real estate pushing prices up.

Don't higher interest rates usually suppress housing prices? People don't really buy a house based on it's price, they buy based on the payment that they can afford. Every tick upwards of the interest rate raises the payment thus reducing the price of the house they can afford.

It's not like people are hoarding savings right now in this negative return interest rate versus inflation environment so they aren't paying cash. If I was currently looking for a large loan I would be getting it done before the rate increase for obvious reasons, not after.

 

[Kwatt]

Will we see a 'bail in' here in the US? I'm not the best one to try and explain this but to my understanding it's when there's a negative interest rate by the central bank. This in turn causes your bank account to be 'docked' the percentage that's negative (say -.25%, I think Greece was at -1.5%). This means when your paycheck is deposited you will automatically lose that amount to the bank. Obviously the reaction to that will be people keeping money out of the bank. This is supposed to spur spending if I'm understanding this insane economic theory correctly.

The FED may not be able to increase rates due to China's devaluation as that would inspire even deeper cuts from them. If the FED stays put will China continue the bleeding? It seems like it's China who is controlling the market more so than the US.

But I know nothing.

I don't think you will see negative personal savings rate in the US until currency is done away with. And there is a group trying/pushing for it. (maybe backed buy banks themselves)

Until currency is done away I don't think you will see it anywhere.


.

 

[Attic]

If they don't raise rates they are going to be screwed when the need the ability to lower rates. The markets are still over valued, so a sell off in that regard is healthy. The FED can still likely go ahead with a rate increase, though minimal of course. There is no real growth, yet the equity markets were priced historically high valuations.

For the above regards to a bail in. Our government does this everyday by inflating away your purchasing power to pay off their debt. Doesn't need to be voted on. When your $100 of money you worked for buys half the groceries it did 20 years ago, it also means the total government debt buys a lot less (is worth less) and can therefore be increased faster if inflation is higher. Government absolutely counts on this gimmick to erode citizens purchasing power faster than their earnings go up. Power shift of money to the government.

It's all good if government has an ability to know whats best.


I'd expect the same solution as always, which works ok for governments at the expense of the people. Moar debt! I'm in favor of this as long as it's purchasing power is largely given to the people instead of Wall Street and USGov.

Cliffs: Expect QE4 with a different delivery mechanism to previous QE's. Too many Americans are not spending enough, this needs to be remedied. The catch 22 is our consumption behavior which is required to be pushed higher to satiate our debt based economy, is not good for the environment.

 

[Darwin333]

You can argue that banks shouldn't be too big to fail but there are certain efficiencies of scale that come with having a multinational banking system and huge banks with their fingers in multiple pies. You can force banks in your particular country to be below some arbitrary maximum size, but if other countries don't follow your example, their banks end up having a competitive advantage.

Then why is the financial sector taking an increasing percentage of GDP at the same time that it should be more "efficient" than ever?

 

[Darwin333]

IMO, low markets would be more reason to keep interest rates low to stimulate investment. So as long as the markets don't head toward a complete collapse, then rates should stay reasonable.

And by "reasonable" you mean the lowest rates in the Federal Reserves history not the 2-5% norm?

 

[brianmanahan]

I found a small($600) 401K that made 1.5% in the past year. It was in some convervative fund handled by ADP (payroll processing).
Then they also were charging 3% service fees.

And now they want a 50 exit fee. Suspect it may be not enforceable.

A year ago the account was frozen when they switch investment systems so i could not pull it when I left the company.(US Tech)

Any advice appreciated

pay the 50$, roll it over into an IRA or your current 401k

1 less account to worry about is worth 50$

 

[Charmonium]

I found a small($600) 401K that made 1.5% in the past year. It was in some convervative fund handled by ADP (payroll processing).
Then they also were charging 3% service fees.

And now they want a 50 exit fee. Suspect it may be not enforceable.

A year ago the account was frozen when they switch investment systems so i could not pull it when I left the company.(US Tech)

Any advice appreciated

The $50 might be for backloaded fees although that seems excessive for such a small amount. I would still w/d it though. A 3% fee is also excessive. This the first thing you should look at in the future. Passively managed funds like those at Vanguard will often have a fee of 0.5% or less.

Then why is the financial sector taking an increasing percentage of GDP at the same time that it should be more "efficient" than ever?

I don't really understand the question. What do you mean by 'taking an increasing percentage of GDP'?

 

[Knowing]

I'm going to bed but the Asian markets are also correcting (Shanghai Composite down 8.45%, Nikkei down 4%). Our S&P500 eminis are down 2.79% (~54 points, the same as intraday Friday).

Looks like the economy, er, stock market is doing well. Liftoff soon, watch for that miserably small rate hike coming in June I mean September.

 

[Knowing]

Shanghai composite isn't going to go down anymore - it hit the limit. That's sure to be good for Euro Stoxx which were in freefall at close on Friday. Tomorrow should be interesting.

 

[DucatiMonster696]

https://www.youtube.com/watch?v=PCAFnCo6nyM

That's why the Iran deal is important for the U.S to bring Iran into the fold and maintain demand for the dollar internationally.

Kissinger flew over to Saudi Arabia in 1973 to get Aramco to sell exclusively in dollars in exchange for U.S. military protection, and by 1975 all OPEC nations followed suit and exclusively traded in the dollar. However anyone in the late 60s and early 70s remembered when OPEC wasn't exactly America's friend.

With the political split between US and Saudi Arabia that began over America's unwillingness to go to war and get rid of Assad, the US knows if the Iran deal falls apart, Saudi Arabia's willingness to go along with the petrodollar is not going to go on indefinitely, and OPEC will likely follow whatever direction the Saudis take, so the long term prospects of the status quo isn't good for the dollar.

If you believe that Iran gives a shit about helping the US (aka "The Great Satan") out economically you are crazier than the Ayatollah. They have zero incentive to move away from trading their oil for gold. A trade that started in 2012-13 and has continued since. In fact they even ditched the dollar for foreign trade transactions as of January 2015 in favor of other currencies. However they have been primarily using the Chinese Yuan and the Euro for the most part and have no reason to go back to the dollar.

 

[DucatiMonster696]

It's funny that you mentioned the recession of 1921 in support of liquidationism but neglected to mention the recession 8 years later where that philosophy had catastrophic consequences.

What you're writing looks an awful lot like Austrian economics. There is a reason why that school is mostly held in contempt; it lacks almost any empirical support.

Except for the fact that it's only primarily held in contempt by those who worship at the feet of Paul Krugman who has long ago abandoned any objectivity in favor of leaning hard left in every economic narrative he takes.

 

[fskimospy]

Except for the fact that it's only primarily held in contempt by those who worship at the feet of Paul Krugman who has long ago abandoned any objectivity in favor of leaning hard left in every economic narrative he takes.

Yeah and known super leftists like Milton Friedman, haha.

 

[Londo_Jowo]

I suspect today is going to be more bloodletting on the US markets, Shanghai Exchange lost 8.5% on Monday trading.

Yesterday I shifted the funds I have within my 401k from high risk to stable yesterday. Hopefully the transaction will go through before the stock market takes a big hit.

 

[Genx87]

Wish I had a huge pile of cash to buy on the way down.

 

[s0me0nesmind1]

As much as the markets going down sucks... It's times like this that make me glad I'm only in Index funds. Just have to ride out the storm for a bit.

 

[overst33r]

meh, i'll just keep investing %75 in stocks and %25 in bonds, and rebalance every year or so

wake me up in 15 years

+1

 

[Blackjack200]

Dow is down about 550 in early trading after opening down 900 points. Crazy to think we're still way above the market high in '08 before the collapse.

 

[Brainonska511]

Wish I had a huge pile of cash to buy on the way down.

Yep. Time to buy. I'm in it for the long haul anyway.

 

[mmntech]

The TSX is getting hammered. Plunged over 5% on opening this morning. It's rebounded a bit but seems to be averaging 4% in the negative. Oil dropping below $40 a barrel is really going to do some damage. Oil and gas employs a lot of people out west, both directly and indirectly.

I think the government expected the low dollar would drive exports. Which has happened to a degree, but nowhere near what was hoped. Export companies just aren't investing in either capital or jobs. The big downside is that a low dollar makes imports significantly more expensive.

Speaking of jobs, I see another round of downsizing on the horizon if this turns into a trend.

I agree that the markets are certainly over valued. Real world economic growth just hasn't matched up with rapid gains in stock prices.

 

[fskimospy]

The TSX is getting hammered. Plunged over 5% on opening this morning. It's rebounded a bit but seems to be averaging 4% in the negative. Oil dropping below $40 a barrel is really going to do some damage. Oil and gas employs a lot of people out west, both directly and indirectly.

I think the government expected the low dollar would drive exports. Which has happened to a degree, but nowhere near what was hoped. Export companies just aren't investing in either capital or jobs. The big downside is that a low dollar makes imports significantly more expensive.

Speaking of jobs, I see another round of downsizing on the horizon if this turns into a trend.

I agree that the markets are certainly over valued. Real world economic growth just hasn't matched up with rapid gains in stock prices.

What do you mean the low dollar? The dollar has hugely appreciated as compared to global currencies in recent years. It's way more valuable than it was a few years back.

 

[purbeast0]

wow just checked my roth ira and it's doen $7k from last time i checked a month ago. womp.

 

[Exterous]

The $50 might be for backloaded fees although that seems excessive for such a small amount.

A lot of providers are now charging exit fees. I just had to pay mine. Its attractive to companies because it allows them to (usually) charge lower fees for current employees by penalizing those who leave the company and want to take their money with them via an exit fee.

Wish I had a huge pile of cash to buy on the way down.

I got really lucky. My old 401k funds left the market on the 19th and, due to the archaic process that company uses, won't be back into the market with the new company until sometime today through Wednesday. I also had a large amount sitting in cash waiting to be invested in a taxable account but was waiting until the 401k funds moved so I could get my asset allocation straight.