News

Fed Raises Interest Rates – Now What?

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interest rates federal reserve

This post was published in 2015. The Federal Reserve Raised interest rates today! It’s HISTORIC! It’s the FIRST ONE IN NEARLY A DECADE! WHAT HAPPENS NOW!?!?!  AGGGGHHHHH!!!! No Real Changes From Interest Rate Increases As we’ve discussed a bit before, there really isn’t as much big news in today’s announcement as you might think. First of all, this has been the most expected interest rate hike in history, so there is no one out there making rash decisions. In fact, there might have been more trouble if the Fed had not raised interest rates since that would have actually been surprising. In other words, the stock market, the bond market, and every market in between was already planning for, and pricing in today’s interest rate increase. This is why the stock market basically kept going the way it was already going before the meeting’s results were announced. Increases In Consumer Loans? Theoretically, an increase in the target interest rate from the Feds should raise the cost of consumer borrowing as well. However, a lot of credit products these days have minimum interest rates, and many products are still going to be at that minimum rate. For example, a credit card …

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Stocks Freak Out, You Shouldn’t

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The stock market is down big again. What is going on? Two weeks ago it was the Federal Reserve and interest rates, last week was something. Now it’s… well… A big drop in Biotech stocks comes after the least sympathetic man in all creation bought the rights to a decades old drug and then raised the price more than 5000%, then went on television to defend the increase. You remember that old Simpsons episode where they show Richard Nixon in a debate with Kennedy looking like Satan. Yeah. I was just like that. Having attracted enough attention that politicians smell air time, Congressional Democrats now want to subpoena Valeant Pharmaceuticals (VRX), which although unrelated, has recently pushed the same business model of acquiring the rights to old drugs and then driving up the prices. Biotech stocks are down across the board. Oh, plus the uncertainty around the Fed and interest rates is still a thing. Oh, and China too. Market News and Reality Here is where you can start to see the cracks in the idea that the stock market always rationally follows current new events. First, Democrats do not control Congress. Republicans do, and they do not cooperate with …

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Fed Does Not Raise Rates Market Confused

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So, this is interesting. The Federal Reserve did not raise interest rates at its September (2015) meeting. This is not surprising, per se. There were numerous international banks and organizations, plus tons of U.S. economists who worried that an increase would be too soon for a fragile economy. Here is where it gets weird. The stock market LOVES to plunge in reaction to a rate increase. Sure, it only lasts a day or two, but there’s nothing quite as fulfilling to a stock market index as dropping 200 or 300 points whenever the Fed raises interest rates. The catch is that Wall Street actually secretly loves interest rate hikes. A Federal Reserve increasing interest rates is the equivalent of a stern father taking away our credit card for our own good. The market throws a temper tantrum, of course, but it’s better for everyone in the long term. If the Fed raises interest rates, then there won’t be an inflation boogeyman. Based on all the pundits and analysts out there, it sure seems like the stock market was expecting a rate increase and all ready to throw its fit and wring its hand, probably just until the weekend, but still. …

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Stock Market Down On Jobs

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The Dow Jones Industrial Average is down about 300 points right now because of a good jobs report. As the main character in one of my daughter’s shows says, “What the huh?” Jobs Good, Rates Rise? No one thing seems to move the stock market more regularly than the jobs report. As always, this new report is actually about last month. After all, it takes some time to collect and calculate the data. What makes this particular jobs report so important is its timing. The Federal Reserve Board is scheduled to meet in September. The Fed has expressed a willingness, if not a desire, to raise interest rates this year if the economy is doing well enough. Everything looked pretty good for a rate increase in September, but then the whole China market blowup thing happened and with it, the U.S. stock market took a hit, and the idea of a rate hike got a little more iffy. But, with a good jobs report, the rate hike is back on the table… maybe. You see, the jobs report was good, but not good enough to make this a no brainer. Jobs were created, but well below the 200,000 that would be …

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Stock Market See-Saw

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Yesterday, I wrote about how the stock market plunge in China and the subsequent drop in the U.S. markets was not something anyone other than short-term investors should be worried about. Typically, I wouldn’t write another article about the stock market again right away, because I believe that most people would be better off watching the markets less, rather than more. But, I couldn’t resist today. Yesterday, there was an article that included the word “Bearmageddon” suggesting that a bear market of armageddon-like proportions was in the offing after the U.S. markets closed down six-days in a row. Other articles couldn’t stop pointing out thing like the biggest drop ever, or the longest-streak of down days since whenever, and so on. Today, the markets closed up. The stories today are about the “biggest gain in almost 4 years.” Talk about whiplash. The reality is that the U.S. stock market trades, in the long-term, based upon the fundamentals of the United States’ economy. While it is true that the issues in other countries, like China, can inform potential issues in the U.S. economy, it is important to remember that those issues must be American issues, not Chinese issues. The truth is …

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China and the Stock Market

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China! Aggghhhh! Everyone panic. (And China panic again…) The Chinese stock marketing is crashing, and it’s making everyone nervous. As always, long-term investors with diversified portfolios need do nothing other than sit back and watch. I, for one, like following along the headlines. You know, the ones that swing violently from doom, to fine, and back again. What Is Happening In China? Once upon a time, China was a communist country without much of an economy to speak of. Then, the government decided it wanted to be a big world economy, and in China, what the government wants, the government gets. The Chinese government devoted billions and billions of dollars to building up new cities filled with factories, and then spent even more money subsidizing those endeavors until, everything was made in China. With a new power economy, China also decided to get the other “regular” economy things like banks, lending and even a stock market. Fast forward a few years, and the Chinese stock market has been roaring along. Then, earlier this summer, the Chinese stock market started to drop. The government stepped in and put a stop to it. Unfortunately, real stock markets eventually end up doing what they want …

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Bad News, Politics and Investing

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Here it comes… THE SKY IS FALLING! THE SKY IS FALLING! A presidential campaign is officially coming, and unofficially already in full swing. With it comes political ads, ads that make it sound certain that we are doomed, we will be doomed, or we must fix the doom. Are things really that bad? Is Washington really ruining the economy? The answer, as always, is no. Politics and Investing Do Not Mix The reality of America is that everyone, in both parties, wants the same thing: a stronger, better, bullet-proof economy. The only difference is in the ideas on how to get there. Even tougher to follow is that there is not definitive proof that ANY of the political ideas out there do what their followers think they will. Republicans think cutting taxes puts more money in the hands of businesses and consumers which boosts the economy. Democrats think government spending puts more money in the hands of business, while improving society, thereby improving the economy. Who is right? They both are. And, they are both wrong. The key to a strong economy isn’t really political at all. It is cyclical. Go back over the years and you can prove anything …

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Windows 10 and Microsoft’s Earnings

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I don’t usually do a lot of analysis of company moves. I just don’t have the time, and often don’t have the insight. But, as a freelance technology writer, I spend a lot of time looking at technology and technology companies. Microsoft is rolling out its new operating system called Windows 10, and it has some interesting marketing and PR behind it. Free Windows 10 Upgrade The first interesting thing about Windows 10 is that it is free. Well…. kind of… and sort of. If you already own Windows 7  or Windows 8, Microsoft will allow you to upgrade to Windows 10 for free, for up to one year. That is, you have one year from now to upgrade to Windows 10 and get it for free. Free? How does this make sense for a publicly traded, profit motivated company? The first thing to understand is that most customers don’t actually upgrade their operating system when new operating systems come out. For retail customers (that is, people who have their own computers that they use and set up themselves) the process of upgrading an operating system is complicated, and unnecessary. After all, if your computer works now, why bother doing …

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Tech Earnings and Stock Market Moves

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The U.S. stock market is composed of thousands of stocks. Of course, when it comes to moving the overall market, some stocks matter more than others. The biggest stocks, those in the S&P 500, and those in the Fortune 500, have some of the biggest impacts on the overall stock indexes. However, in most cases, the news that comes out of those companies is relatively expected. The exception to this rule are the technology companies. Unlike, say oil companies, or big manufacturing companies, it isn’t always easy to use the economic information surrounding them to accurately predict what will happen, especially when it comes to earnings reports. And, with those same companies forgoing the usual “guidance” that other companies provide, what happens in tech company earnings can be a true market moving surprise. This week saw a negative report from industry titan IBM. IBM is not only a household name technology company, but it is also the second highest weighted component in the Dow Jones Industrial Average, commonly referred to as The Dow. The company itself is down over 5 percent so far today, and the Dow is down over 1 percent, or more than 150 points. (Also dragging on …

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States Still Not Recovered Jobs Lost In Recession

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A researcher published some data showing how the individual states are doing recovering jobs lost during the recession. The highlight is that 15 states have not recovered all of the jobs lost during the recession. The interesting part is what that might mean. (Note: this is from total nonfarm employment and counts both part-time and full-time jobs) The 15 states that still haven’t recovered all the jobs lost during the recession are: Alabama Arizona Connecticut Illinois Maine Mississippi Missouri Nevada New Jersey New Mexico Ohio Rhode Island West Virginia Wisconsin Wyoming If your life is all about politics, I’m sure you’re rushing to count Democrats and Republicans as a way to “prove” that your side is the best side. Sorry, but that shows little understanding of economics. But, if you insist, there are more Republican governors than Democrat governors on the list. Of course, to be fair, a lot of those states are the so-called purple ones. A more realistic analysis shows some obvious ones. Nevada and Arizona were the poster children of over-heated housing markets that collapsed, so it’s natural, they are one the list. On the other hand, Florida was hit pretty hard by the housing bubble but is not …

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