Spider Tribune (Weekend Edition) 08/22/2021
It looks like we might be starting another bumpy week on Monday! Besides earnings coming out for many companies through out the week we'll be starting off with existing home sales data being released Monday, Tuesday will have new home data coming out, Wednesday is Durable goods, Thursday kicks off the symposium for the Federal Reserve that goes into Saturday. Here's the schedule so you know when and what it's happening along with what earnings are due for the day.
10 a.m. Existing home sales
10 a.m. New home sales
8:30 a.m. Durable goods
8:30 a.m. Jobless claims & 2nd Quarter GDP
8:30 a.m. Personal income and spending & Advanced good Trades
10 a.m. Consumer spending & inflation index
Tapering rumor causing trouble,but what does it mean?
Tired of people saying the federal reserve is thinking about tapering or better yet, repeating what they read and for some strange reason not explaining what it could possibly mean in their posts? Makes me wonder why that is, anywho lets break it down but first you need to understand QUANTITATIVE EASING and what it means here.
The Federal Reserve & Quantitative Easing(QE)
The Federal Reserve is our nations central bank, which is in charge of note issuing = printing and issuing currency notes (money) as well as regulating the country's currency. Even simpler, it makes sure it mantains people confidence in the nations currency and that its supply is adjusted to the current demand of the economy plus many many other things.
QE means that the Federal Reserve to buy a predetermined amount of government bonds each month in order to help the economy's liquidity until the goals for maximum employment and price stability has been met.
Because these bonds are being bought interest rates go down because more banks have more cash in their accounts, which they can hold, lend out to consumers or companies, or use to buy other assets, as well as be able to loan more money and make more loans for people to borrow. The more loans a bank can do then less interest there is, but the less loans a bank can do the more the interest goes up. The way of looking at INTEREST is basically how much it cost to borrow money, so a low interest would mean its cheap to borrow money and makes more people willing to borrow money. The more people willing to borrow money and use it to invest in the stock market, hire more employees and spend more of it the more it helps stimulate the economy.
Now that you have the information to understand what QE is, i can now explain TAPERING. The best way of looking at it is tapering is the first step to completely stopping QE, so now that our economy is getting better than it was beginning of COVID with more people working and the rate of recovery is a bit faster than predicted its necessary to begin the process of stopping QE because as it is inflation is happening and continuing to stimulate an economy after it's started to get normal with "easy money" it can lead to out-of-control inflation, the stock market prices being driven up and an overheated economy which is a cycle of inflation going up so wages go up whch then in turn makes inflation go up and then wages go up and so on. Anyways what TAPERING here means that say for example the predeetermined amount of bonds the Federal Reserve was buyng a month each month is $120 billion once the tapering begins it'll start slowly buying less and less like $100 billion a month then $80 billion so on until it reaches whatever amount they are trying to reach. In theory this is what it means but in reality it hasnt really been done succesfully completely because of taper tantrum, which i'll cover in another "Spider Tribune". QE makes interest rates go down so by that logic tapering will make interest rates climb but not necessarily in a rapid manner.
What Does the Week Hold?
How the market goes will depend on how each day goes, Monday-Wednesday will probably be straight forward so if the data that comes out is good news then we'll most likely be seeing green, if the data that comes out is bad news then the markt will be red but our main concern should be Thursday and Friday.
In my opinion it's not the data that comes out will affect us but what is said at the symposium. Let me specify, if the federal reserve comes out saying that the tapering will begin very soon and a bit faster than what was first led to believe than we will have a very rocky market Thursday & Friday. People will start panic selling. At this point if the entire week comes out with positive news, it will still get easily over shadowed by tapering fears.
Just like a few weeks ago i predicted red for one of the weeks and started selling as much as i could as soon as i broke even/hit a gain. It wasnt out of panic though, i saw an oppurtunity so i stock piled as much buying power as i could to make sure i was ready for the red days to buy many things on sale. It ended up working out pretty well for me. It's not advice im giving and telling people to do the same but i think i rather get ready and sell at break even and not make money than risk holding and lose a lot of money.
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