How Can Powell's Own Words Be So Twisted And Manipulated To Create A False Narrative?

sams1985 | Nov 30, 2022 | 781 posts since 2022

I posted this on the CD deals summary thread but again, i just cant fathom how his words can be so twisted and manipulated to create a narrative certain people want to push so badly. He also said the slowing hikes does not mean pivoting- and that there's a long way to go. The funds rate will end up higher than they previously thought. Does the rest of it just get ignored or brushed aside? Yields tank and markets roar. I just dont get it. Do CD rates rise and fall on puffery and speculation now rather than the actual Funds rate which has been the historical norm forever?

At this rate, if the PCE comes in softer than expected the narrative will be that inflation is defeated once and for all.

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Answers

lou | Nov 30, 2022 | 1,004 posts since 2010

The stock market acting like a fan girl at a rock concert is probably good for us savers. it gives the Fed less reason to cut rates anytime soon.

lou | Nov 30, 2022 | 1,004 posts since 2010

We didn't learn anything today that we didn't know yesterday. 50 basis points in Dec and more 25 basis point increases next year. Is there such a thing as paying too much attention to market hype and news? I think the real purpose is to drive people crazy until they lose all of their money.

sams1985 | Nov 30, 2022 | 781 posts since 2022

Like you've been saying many many times on this site- when the funds rate hits 4.5- 4.75% in January i just can't fathom a scenario where long term CD's wont be at or above that rate.

fred_b | Nov 30, 2022 | 172 posts since 2022

I'm pretty shocked. Not just at the huge market rally, but at the big drop in treasury rates. I wouldn't be surprised if CD rates come down (hopefully just temporarily). I didn't anticipate this and I've passed on a few good deals because I was confident that higher CD rates were on the way. I hope I'm still right eventually. Treasury rates may even continue to fall until we get to the next Fed meeting.

sams1985 | Nov 30, 2022 | 781 posts since 2022

From Ken's liquid bank account rate summary: "From the November 2006 bank deals summary, the highest 5-year CD yield was 5.82% (at Melrose Credit Union). The highest at a bank was 5.75% (at E-LOAN)."

This was when the FFR was 5.25%. The general consensus is we' will get there sometime in early 2023. If that happens, savings account rates are going to be well over 5%. How can CD rates be below savings account rates??

lou | Dec 2, 2022 | 1,004 posts since 2010

I just spent an hour with a fine tooth comb scrutinizing the Oct PCE report. I can honestly say this is not a good report, in fact it is quite alarming.

The headline number for PCE and Core PCE did moderate some because non-durable consumer goods prices are falling. However, the all-important services component which makes up half of the index is still very troublesome. It rose .4% month to month and 7.2% over the preceding 12 months. This is a very bad number. After increasing the Fed Fund Rate by 400 basis points, the Fed has made no progress at all in taming inflation in this category. The reason is because the labor market is still very tight with job vacancies at an all-time high. Wages are going up at an unsustainable clip putting great deal of upward pressure on services inflation. I have no idea why the market thinks this is a good report. What it shows is that inflation has become imbedded in our economy and it is going to be very difficult to root it out.

For all intents and purposes, the Fed should do 75 basis points in Dec and continue with similar size increases until this number comes down. I will be amazed if the Fed decides we are close to peak rates with the numbers that were released today. It should be interesting to see what they do.

sams1985 | Dec 1, 2022 | 781 posts since 2022

Another good take:

https://realmoney.thestreet.com/investing/stocks/i-guess-i-didn-t-hear-the-same-powell-speech-that-other-traders-did-16109909?puc=yahoo&cm_ven=YAHOO

NFO | Dec 1, 2022 | 66 posts since 2022

Agree. The markets collectively don't seem to want to listen to or believe Powell or the other Fed governors. It's amazing how nearer-term rates can be pushed lower when there's at least another point of FFR increases clearly in sight. Part of the near-term problem is people jumping on mediocre brokered CD offerings, particularly on the longer end. Eventually, that 5 year 4.5% (or lower) brokered won't be very attractive.

Listedguru | Dec 1, 2022 | 63 posts since 2022

So are you thinking 5 year cd rates are going higher from here? I am hoping they are but am becoming less convinced of that with each passing day and data point. Probably 100 more bps of hiking to go but will that translate into higher 5 year cd rates or is the top in? Jobs report out tomorrow is another data point that should be interesting. Hopefully it's a strong report with a strong wage component. I guess we'll see.

sams1985 | Dec 1, 2022 | 781 posts since 2022

Im optimistic but i really dont know..either way we need to come up with some kind of comprehensive emergency backup fixed income strategy plan moving forward for those of us who missed the peak and are still liquid. Going to do some brainstorming, would love some feedback from others.

NFO | Dec 1, 2022 | 66 posts since 2022

History says the short end will drag the longer end with it. 5yr non-calls are just over 4% right now. A couple of weeks ago, I bought one at 4.9%. Did something fundamentally change? Nope.

Expecting 6% is probably too much, but I think the 5yr returns to that 5% level, and then some.

Fussybob | Dec 1, 2022 | 16 posts since 2022

I hope that all the speculation for higher 5 year CDs in the next few months materializes!

I'm usually a very unlucky person. My 401K lump sum will show up in my checking account tomorrow. My plan was to by a lot of long term CDs and Treasury Notes in the 4-5% range. I bought a few 10 year notes 2 weeks ago for 4.125% today's 10 year yield is 3.5%, big, quick drop. I also bought some 7 year notes 7 days ago at 3.875%, today's rate is 3.6%. If you look at the the November trend plot of long term CD/Treasury yields it is descending. Why should these yields reverse course and go up? I don't think the Banks and FIs need the cash. I live in a area of about 60K people, less than 1% of the homes are for sale. My local banks are offering 5 year CDs rates less than 0.25%, yes that is a quarter of a percent. They told me that they have so much cash inflow to savings accounts that they don't need to acquire any additional cash from offering CDs at high rates to fund loans. I hope that I'm wrong but I feel rates have peaked........

CDmanFL | Dec 1, 2022 | 286 posts since 2019

Like you, I am hoping they are going higher but I’m not so optimistic. Some folks on here criticize me for saying that but I’m just sharing my thoughts (and not giving advice). Sadly, the peak has passed in my opinion.

sams1985 | Dec 1, 2022 | 781 posts since 2022

Regardless of whether the peak has passed or not, there's still ample time and opportunity for us to come up with a comprehensive plan moving forward. Still many options available.

Listedguru | Dec 1, 2022 | 63 posts since 2022

I too am working on my plan. Going to see what happens with the Jobs #'s tomorrow morning. At this point I'm looking at some direct CD's but for the decent yielding ones I would have to open up new accounts. Does anyone have any experience with any of the following for CD's?
Bread Financial, CFG, Merrick Bank, Crescent Bank, Sallie Mae Bank? I'm starting to think 4.5ish for 5 years isn't that bad all things considered? I just don't want to wait and have the CD rates start going down and miss out.

John19 | Dec 1, 2022 | 395 posts since 2022

Sallie Mae direct 5 year CD rate is one to watch. If they drop it, I'll worry. They had more 4.9% 3 year brokered CDs available today. But you have to get 4% in the two years after they mature to equal the 4.55% 5 year direct rate.

sams1985 | Dec 2, 2022 | 781 posts since 2022

I moved all my liquid savings to Fidelity under the (now false) impression that brokered CD's always carried a higher return. Now the funds are all there and it's going to be a bit of a hassle opening new accounts etc. if that's what needs to be done.

On Fidelity there's a 5 year non-callable Celtic bank CD paying 4.15 but it's well below current direct CD offerings. Synchrony bank's 5 year non-callable CD has fallen to 3.9 on Fidelity. Another bad sign. Again, oddly enough theyre offering 4.3 direct. What happened to brokered CD/s? Are people just snatching up anything so there's no incentive ???

lou | Dec 2, 2022 | 1,004 posts since 2010

I know this is small comfort for many here but the data today is not going to stop Powell from raising rates another 100 basis points. The PCE is still clicking along at 5%, nowhere near the 2% the Fed wants. One thing Powell said yesterday is that the PCE has been going sideways for the last year and today's number didn't change the trajectory. I don't think this changes the peak rate the Fed is trying to achieve. Right now the most important number is wage growth. Currently, it's still too high for Powell's liking. Anyway, I can understand if people don't want to wait since the markets are intent on doing its own thing regardless of what Powell says.

sams1985 | Dec 2, 2022 | 781 posts since 2022

At this point might as well wait for the .5 hike in December and see how CD rates react? What's another 2 weeks...In the meantime, time to start coming up with Plan B strategy.

Kirkland | Dec 2, 2022 | 374 posts since 2014

Sams, if your desperate to buy now, there is now a 6 year non-callable brokered Celtic for 4.5%, settlement date 12/19, but again this could be another Celtic mistake (and it could get voided), since they are also offering a 5 year for only 4.15%.
The 4.5% 6 year non-callable is CUSIP: 15118RB22

sams1985 | Dec 2, 2022 | 781 posts since 2022

Not available on Fidelity and very likely a mistake if i had to guess.

Fussybob | Dec 2, 2022 | 16 posts since 2022

A big thanks for the Sallie Mae heads-up!!!!!!

I just opened a CD account with them for the 5 year CD at 4.55%!!!!

I very happy with getting 4-5% from here on out with 5 year CDs.

Listedguru | Dec 2, 2022 | 63 posts since 2022

Fussybob,

Were you able to open the CD account with Sallie Mae all online? Did you happen to open a savings account with them too? Do they run a credit check (would need to unfreeze credit if so). Also can you w/d the interest monthly? We you able to lock in the 4.55% rate and have ample time to fund it?

Sorry for all the questions but this one is on my short list:)

Fussybob | Dec 2, 2022 | 16 posts since 2022

Yes I only opened a CD account, no savings account. When you apply online you link them to your bank account, you log on to your bank account at that time, state the amount that you want to invest, they use that as the confirmation. I have no idea if they run a credit check, you can call them. Yes you can withdraw the interest, weekly, monthly, quarterly, etc. the only small downside of this withdrawal is that you must submit the request paperwork by mail, not online. There was a section if you wanted to fund the CD later. I didn’t look at that. From the summary at the end of the process it looks like I locked in 4.55%

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