A speculative investment is when an investor hopes to profit from a rapid change in the value of an asset, often one thatâs considered non-productive. Many speculative investments are short-term, and they can be made in markets such as foreign currencies, collectives, fine art, and margin trading of stocks. Typically, speculative investments are high-risk positions […]
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Thereâs certainly a chicken/egg problem when it comes to interest rate news. Is it the Fedâs decisions that move rates? Or do market forces move rates, thus forcing the Fed to react? The answer is somewhere in between. If inflation and economic growth were always positive, low, and stable, the Fed would never lift a finger, but they are compelled to act when stability is threatened. Since March 2020, the Fed has acted quite a bit. They maintained rate-friendly policies for almost 2 years and then got precipitously unfriendly early in 2022. âUnfriendly,â in this case, refers to hiking the Fed Funds Rate and buying fewer bonds on the open market. The combined effect was one of the sharpest rate spikes in history. Now after more than a year of unfriendliness, the Fed is finally thinking about leveling off and seeing how things play out without too many more rate hikes. Theyâve already decreased the pace from 0.75% per meeting to 0.25%. This isnât a random decision on the part of the Fed. It comes in response to shifts in inflation data as well as other signs that their unfriendly policies are having an effect on the economy. The latest sign is the banking drama that has been in the news this week. It began with Silicon Valley Bank last week but spiraled into a bigger problem with the closure of Signature bank over the weekend. Many people have never heard of these institutions, but they now represent the 2nd and 3rd largest bank failure in US history.
Retirement is a milestone that many people look forward to with great anticipation. While the freedom of having more time to spend with loved ones, pursue hobbies, or travel is certainly something to be celebrated, it is also important to plan, save, and invest so this future can be a reality. It’s never too late […]
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Mortgage rates are ideally determined only once per day, several hours into the business day. This gives mortgage lenders time to observe a baseline for trading levels in the bonds determine what they can charge. But those bonds trade all day and if things deteriorate enough, lenders can change rates in the middle of the day. Today was one of those days. The key considerations for bonds/rates at the moment are the fears and risks surrounding the global banking system. High profile bank failures prompt investors to ask “who’s next?” A downward sentiment spiral ensues and, left unchecked, can wreak havoc on financial markets. Regulators and other bankers have learned lessons from past examples of these sorts of panic spirals. They acted quickly. The Swiss National Bank provided a lifeline for troubled Credit Suisse and several domestic banks pledged to backstop First Republic’s deposits earlier today. It was the latter, specifically, that led a reversal in financial markets. Stocks and bond yields moved higher in unison. Higher bond yields mean higher interest rates. The average lender is back in line with Tuesday’s levels, or close to them. That means 30yr fixed rates are moving back into the upper 6% territory for top tier scenarios. If contagion fears continue to subside, there’s more room for rates to rise. If contagion fears flare up again, there’s also some room for rates to move down. The headline cycle will determine what our adventure looks like between now and next week’s Fed announcement on Wednesday afternoon.
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Mortgage rates drop to the 5% range for the first time since September CNBC
This Ultra-High-Yield Stock Is Cutting Its Dividend Again. Here’s A … The Motley Fool
The Ides of March⦠And college basketball time. Here in Kentucky (men #6 in the East, Louisville womenâs team #5) I overheard someone on the phone. âYesterday I saw a woman in Walmart with March Madness teeth. She was down to her final four.â March Madness is in full swing, whether it is hoops or bonds. Or bank stocks. Is this really a fundamental structural plunging of the United Statesâ financial system? Doubtful. Moodyâs came out with a warning about downgrading certain banks in the United States. It is not 2008. How much of this is psychology? Tweeting causing a run on deposits? Banks everywhere are looking at their liabilities (deposits, since they owe their depositors money) and assets (the money lent out using their depositorâs money, or securities owned. âLending long and borrowing shortâ works when banks can pay very little on their deposits (like checking accounts earning 0 percent) and take that money and earn 4 or 6 percent on securities. But when the deposit base becomes unstable, and a bank has to liquidate those securities at 80 or 90 cents on the dollar, it becomes a problem fast. (Much more below.) Todayâs podcast can be found here and this week is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology, and other services in the mortgage industry and in banking. Todayâs has an interview with Bank of England Mortgageâs Quinton Harris on the art and science of forecasting the housing, mortgage, and bond markets.