131–140 of 698 posts
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People who bought houses will be fine, since they secured low interest loans, and will hesitate to sell because won't get good interest on next loan. This will cause low supply -> high prices -> people who didn't buy are very screwed: they will face high prices together with high interest.
You’re forgetting about the overpaid tech workers who are soon to be laid off, possibly underwater on their mortgages, and decide it’s time to downsize.
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This is the truth. What people do not understand is that interest rates will have to rise above inflation for in inflation to slow down. I assume the FED is trying to figure out how much inflation is caused by the money supply and how much is caused by supply chain issues. But too me this means even more trouble because they are waiting when there was obvious asset inflation well before the supply chain issues. IMHO,…
Can you explain why interest rates will HAVE to rise above inflation for it to slow down? CPI is already slowing down, although we have some very limited data points currently. A lot of inflation is driven by expectation, and raising interest rates is a way to tame those expectations for consumers, but I don't think the rates have to arbitrarily go above inflation to tamper it.
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> that bond yields would never normalize. Now that they have, there is a risk free alternative to stocks. Treasury bond yields are 3%, inflation is 8.5%, so in real terms you are guaranteed to lose 5.5% annually if you hold bonds. Or basically instead of risk-free gain you are holding gain-free risk.
You are comparing treasury rates a bond will pay out over the next 10 years with inflation over the last year. This is apples and oranges.
I think people who expect we're going to go back to pre-pandemic supply chains are vastly underestimating the difficulty of bringing a complex system like the economy up from a cold start. In my experience with complex systems that are much less complex than the economy (merely a few hundred million lines of code), it can't be done. You have to incrementally build a new system and then cut over parts of old system as their replacements start to function better than the old degraded experience.
This'll likely take a decade or two. Expect it to be a good decade for startups as changing relative prices make new business models viable against soaring existing prices. It's going to be very bad for consumers and for incumbents, though.
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Is WFH actually more productive? I've heard conflicting reports, but haven't seen any data.
I was very productive over 2 years working from home. I actually managed to complete a few home construction projects while answering a few slack questions from my phone once in awhile.
Really you’re just saying the quiet part out loud ;)
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This is the truth. What people do not understand is that interest rates will have to rise above inflation for in inflation to slow down. I assume the FED is trying to figure out how much inflation is caused by the money supply and how much is caused by supply chain issues. But too me this means even more trouble because they are waiting when there was obvious asset inflation well before the supply chain issues. IMHO,…
Can you explain why interest rates will HAVE to rise above inflation for it to slow down? CPI is already slowing down, although we have some very limited data points currently. A lot of inflation is driven by expectation, and raising interest rates is a way to tame those expectations for consumers, but I don't think the rates have to arbitrarily go above inflation to tamper it.
https://www.investopedia.com/terms/t/taylorsrule.asp
r = p + 0.5y + 0.5(p - 2) + 2
Where:
r = nominal fed funds rate p = the rate of inflation y = the percent deviation between current real GDP and the long-term linear trend in GDP
As I said, the FED is betting that inflation is being caused by supply chain issues alone. This is obviously not true. It will get worse, so much worse, because the FED is in fact acting too slowly.
https://www.chicagobooth.edu/review/what-makes-it-hard-contr...
"interest rates sharply, and keep them high for several years, even if that causes a painful recession, as it did in the early 1980s in the United States, United Kingdom, and much of Europe. How much pain, and how deep of a dip, does it take to stop inflation and to keep inflation in check? The well-respected Taylor rule (named after my Hoover Institution colleague John B. Taylor) recommends that interest rates rise one-and-a-half times as much as inflation. So if inflation rises from 2 percent to 5 percent, interest rates should rise by 4.5 percentage points. Add a baseline of 2 percent for the inflation target and 1 percent for the long-run real rate of interest, and the rule recommends a central-bank rate of 7.5 percent. If inflation accelerates further before central banks act, reining it in could require the 15 percent interest rates of the early 1980s."
> I would be planning to ride this thing out for at least eighteen months or more. I'm betting more like three to five years. I was talking to a friend (another old guy, like me, but really rich, unlike me). We've both been through at least two recessions (big, nasty ones, with teeth and claws). We realized that there's an entire generation of folks; many running companies, that have never seen a real bear market. It…
I'm going to explain what has happened so far. What happens next entirely depends on how inflation continues and the feds reaction. 1. We had zero percent interest rates. This causes the value of assets with cash flows out into the future (think speculative tech, Tesla) to accelerate. 2. We had massive herding in megacap tech. These valuations are high in part because for a decade you would not have beat the index wi…
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Reality is the public couldn’t handle the facts. When scientists in the U.K. started talking about herd immunity - the only way out of a pandemic - people went nuts and they quickly had to stop using the term and start reassuring more than informing. Average pandemic is about four years, not much has changed. They just had to keep people going at the time.
> the public couldn’t handle the facts That sounds a lot like saying "I'm smarter than you, so I'm going to lie to you, but trust me, it's for your own good".
Getting really annoying to have to keep track of macro events affecting my life year after year instead of just being able to live a normal peaceful life.
Monkeypox is just getting started. Hang in there. https://www.washingtonpost.com/politics/2022/05/22/biden-mon...
Supposedly, we're better at tracing now, if it really blows up we're better prepared than ever before.
I agree we are working through an asset bubble in tech and housing - P/E's went quite a ways above the historical line, as did housing prices. But think about the chip shortage (automotive, consumer electronics) - raising interest rates does not "fix" supply and make prices lower. Think about oil & gas markets. Think about labor shortages. When supply is broken, it's not only a monetary policy problem. Most of these…