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How This Ends

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Re: How This Ends

#191

Post by TekMol »

fny wrote: post #24

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…

    there is a risk free alternative to stocks
How is holding a bond risk free? It is a promise to give you a certain amount of money at a certain time in the future.

The value of that money depends on how scarce it is.

The government constantly raises and lowers that scarcity at will.

Sometimes the government decides to double the supply in just a few years:

https://fred.stlouisfed.org/series/BOGMBASE

So it seems highly risky to me.

Re: How This Ends

#192

Post by jwilber »

mym1990 wrote: post #128
Spooky23 wrote: post #99

Earlier quoted context omitted.

Agreed. Unfortunately, we’ve inherited the mess that our parents and grandparents left for us.

Pointing fingers isn't going to help with anything, whether its your parents or your next door neighbor. At some point we just need to take ownership and work towards a better future, but accountability seems to be pretty rare these days(whether its your issue or not).

“Don’t point fingers at us boomers!”

One sentence later: “None of you young folks have accountability.”

Re: How This Ends

#193

Post by hotpotamus »

izacus wrote: post #167
hotpotamus wrote: post #108

Earlier quoted context omitted.

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.

That's nice, but was does your personal *feeling* have to do with actual productivity across the economy?

I'm just one data point. Where do we aggregate such data to show knowledge worker productivity? I'd be curious to look at it.

Re: How This Ends

#194

Post by djbusby »

nemo44x wrote: post #159
tempsy wrote: post #78

Earlier quoted context omitted.

Target shocked investors because not only did they suffer from rising costs due to inflation that they are currently subsidizing by not meaningfully raising prices but because they reported rising inventory in discretionary spending categories as consumers pull back likely due to higher prices they are facing nearly everywhere. This has more to due to impact of inflation and less so just a function of a dividend and…

Credit card debt is extremely high right now and subprime loan defaults are rising fast. In essence, a lot of people are tapped out.

Credit Card report https://www.newyorkfed.org/microeconomics/hhdc

New all time high

Re: How This Ends

#195

Post by 55555 »

tempsy wrote: post #68

The shock from the Target and Walmart earnings that caused the single largest drop since the 80s for both companies was not just the pain of inflation that is adding to their costs but also from rising inventories because consumers seem to be already sacrificing discretionary purchases. Will be interesting to see if discretionary spend continues to meaningfully drop and whether we will actually start seeing price cut…

I can't speak for Walmart and Target, but the COVID supply chain disruptions caused my business and likely many others to over-invest in inventory because it takes longer to restock, and the inventory will sell at slimmer margins because I paid 2X+ the normal shipping rate to get it to the destination country. Many businesses are sitting on large amounts of inventory that can barely be sold at a profit. Now discretionary income is dropping, meaning demand and price points will fall. We have too much landed inventory we paid too much for and less people spending less to buy it. It's not pretty.

Re: How This Ends

#196

Post by nostrademons »

mym1990 wrote: post #121
FollowingTheDao wrote: post #77

Earlier quoted context omitted.

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.

The Taylor rule gives the math behind it, but the layman's explanation is that as long as rates are lower than inflation, you turn a profit by borrowing money and buying a basket of assets, since their price will rise alongside inflation. This incentivizes people to borrow more money, which increases the money supply, which further exacerbates inflation.

This is the first term 'p' in the Taylor rule, which corrects the nominal interest rate that the Fed sets into a real interest rate that accounts for inflation.

Re: How This Ends

#197

Post by datalopers »

riku_iki wrote: post #173
datalopers wrote: post #161

Earlier quoted context omitted.

Cool, I’ll let YC’s entire portfolio know there’s plenty of jobs at the big tech cos.

You are switching topics. The point is that there will be plenty of funds inflow to support housing market.

Would you like to place a wager? I bet that the median home price in tech-centric metro areas (seattle, sf/bay, la, nyc) will decline by 10% or more in July 2023 versus July 2022.

Re: How This Ends

#198

Post by nostrademons »

Forgeties79 wrote: post #67
freediver wrote: post #31

Earlier quoted context omitted.

> 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.

If inflation somehow keeps rocking at 8.5% for a decade straight we have a much bigger problem on our hands than the relative yield of a treasury bond. Technically anything is possible…but I’m willing to risk saying that won’t happen.

https://en.wikipedia.org/wiki/Appeal_to_consequences

I'd say that yes, we have a much bigger problem on our hands than the relative yield of a treasury bond.

Re: How This Ends

#199

Post by drdec »

ryanSrich wrote: post #157
fny wrote: post #24

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…

How does inflation slow if rates aren’t hiked? Isn’t the only means of combating inflation raising rates?

Just because raising rates is the tool of choice for central banks to fight inflation doesn't mean it is the only thing that affects inflation.

E.g. if supply chains were restored and suddenly there was a lot more product to purchase that would cause prices to fall.

Re: How This Ends

#200

Post by OrvalWintermute »

ryanSrich wrote: post #157
fny wrote: post #24

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…

How does inflation slow if rates aren’t hiked? Isn’t the only means of combating inflation raising rates?

Some rates are already rising.

My HCOL region is seeing a big change in the RE market as Mortgage interest rates hit >5%

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