211–220 of 698 posts
Earlier quoted context omitted.
One drives the other.
I thought that the liquidity was driven by the money multiplier and the Fed's quantitative easing. If the fed set the interest rate at 10% but put in 20 trillion dollars into the economy there'd be bubbles everywhere.
Long term demographics shifting older and growth shifting lower has driven interest rates down since as long as most of the posters here have been alive. We have hit an inflection point where interest rates are being raised as a tool to fight generational highs in inflation. This is the usual tool the central banks use in such a scenario. The resulting slowdown in markets and economy is the usual result. How smooth t…
This has been puzzling me so far. Tech hiring is hot as ever even with a few notable companies doing hiring freezes to various degrees. Can't help but feel like the market has to cool at some point.
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…
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…
I motice that you left out real estate from your analysis. RE is interesting because it's both an asset as well as something you can use. So if there's general inflation, it's got both upward pressure (because it's an alternative to rent from a consumer standpoint) and downward pressure (because bonds are an alternative to RE from an investment standpoint).
How safe do you feel that a piece of paper saying that plot of land is yours will hold up when there's a raging mob threatening politicians to do something about homelessness/housing prices/AirBnB/Asset managers holding all the properties?
The political risk in the West is at Emerging Markets levels. We've seen G7 nations de-bank their citizens extra-judicially, seize assets and remove licenses, remove freedom of movement, create an entire second-class of citizenship, lock up people for committing no crimes. This is normal. No one is protesting. The media agrees as does Hollywood.
If I had anything beyond my one property in which I reside I'd actually be pretty scared. This stuff happens in Emerging Markets all the time: the government tells anyone with more than one property to pick one to keep. All foreign property owners have their property forfeit or taxed to the point where they are forced to sell.
These actions are not out of the realm of possibility in the West any more, especially with the current leaders. There will be no tears shed for the poor landlords and property owners who can only keep their principal residence.
> 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…
So for non-finance-experts, what should we be doing with our money? Investing in what? Keeping in the bank? It sounds from your comment like there is _nothing_ that won't be devalued, even gold. Is real estate worthwhile? (Note: I am in the EU not US.)
You’re not going to outplay market trends, and if you’re young/middle aged then it doesn’t matter any way.
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…
> 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…
How could there be a whole generation of CEOs who never saw a recession? Are there 13-year-old CEOs?
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…
This sounds a bit like doom and gloom. While I don't disagree, it is important to look at AMZN after the dot com bubble burst. Traders fled, but people who believed in the company did very well.
You are being very optimistic to assume your pick is the one to not only survive but thrive.
Earlier quoted context omitted.
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 explains 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…
Although I wouldn't go as far as to say we are in stagflation, it seems like the current environment wouldn't be an optimal place to use the rule. Ultimately I think the Fed took a view and have stuck with that, for better or for worse, and they are valuing consistency over diverging economic models.