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How This Ends

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Re: How This Ends

#511

Post by lazide »

thatfrenchguy wrote: post #492
lazide wrote: post #458

Earlier quoted context omitted.

Real estate is going to be gutted - increasing mortgage rates (already have been happening) will decimate qualified buyers. Decreasing prices will further decimate those willing to Hail Mary with cash offers hoping to get something after years of frustration.

It'll make housing even more expensive in 10 years as builders will be decimated like in 2008, we won't build housing for half a decade, and a new generation will look for housing while boomers sit on their 80% vacant 4bd houses they paid 1/5 of the current market price for.

In another 10 years most of the boomers will be dead.

Re: How This Ends

#512

Post by credit_guy »

fny wrote: post #467
credit_guy wrote: post #446

Earlier quoted context omitted.

> If they hike the rates too much then debt servicing would be costly. The Fed doesn't care about the cost of servicing the debt. That's the US Treasury's job. By law, the Fed has the dual mandate to keep both inflation and unemployment low. That's it. Nothing to do with the cost of servicing the Government debt. If the interest on the Government debt becomes too high, nobody will point the finger at the Fed. If howe…

I don't buy this argument. There are good arguments to the contrary which Jerome can bring up and has at previous hearings. Say demand quiets but the price of inelastic goods (gas and food) continues to skyrocket due to greater demand from developing nations who demand more resources to have a better standard of living. How will hiking to 10% fix anything? Sure you'll kill demand, but you'll also kill financing suppl…

You are not actually responding to my argument. I was arguing that the Fed does not care about the cost of servicing the Government debt. I wasn't arguing about how much the Fed will hike. They will stop hiking when they consider fit, but the interest on the Government debt will not be one of the factors they'll include in their decision.

Re: How This Ends

#513

Post by robocat »

chmod600 wrote: post #126
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…

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).

Here’s an interesting analysis of shortage: https://constructionphysics.substack.com/p/is-there-a-housin...

I like the comment: “I think one of the problems in this discussion is that the word ‘shortage’ doesn't have a clear meaning. If gas is $6 a gallon, should we say there is a shortage of gas? If I get stuck in traffic on the way to work, can I say there is a shortage of roads? If I have to park 4 blocks away from my apartment, is there a shortage of parking?”

And a one-sided view on why your home is not an investment: https://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terri...

Re: How This Ends

#514

Post by nuclearnice3 »

SnowHill9902 wrote: post #47
fddhjjj wrote: post #35

Earlier quoted context omitted.

Very clearly explained recent history. Thank you. > Then in December, the megacaps we're squeezed further until the S&P 500 had a negative return relative to price! What does this mean? What is negative return relative to price ?

OP can clarify what they meant but I understand it as: sum return_i/yield_i - price < 0

I don't follow your equation.

https://ycharts.com/indicators/sp_500_monthly_return

Yours is unweighted, but return of the S&P in Dec 2021 4.36% The dividend yield about 1.37% The price ~4600.

4.36/1.37 - 4600 indeed very less than zero.

The relationship means nothing to me.

I must be getting this all wrong.

Re: How This Ends

#515

Post by seanmcdirmid »

natly wrote: post #71

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.

The problem is that we vote for people who give us what we want for the short term at the cost of stability over the long term.

Re: How This Ends

#516

Post by TameAntelope »

Sometimes it's terrifying to think that nobody knows what will happen next, other times it's comforting.

After reading this, I am comforted. Anyone predicting any particular outcome is not someone worth listening to.

Re: How This Ends

#517

Post by humanrebar »

fny wrote: post #431
soared wrote: post #216

Earlier quoted context omitted.

Unless you’re retiring in the next 10 years, or planning on purchasing a house in the next few years, then just make your emergency fund a little bigger and hold on to your job. Follow your normal financial planning. You’re not going to outplay market trends, and if you’re young/middle aged then it doesn’t matter any way.

Yes it does. If you invested near the dot com peak or the japan peak, you still haven't made your money back. This notion of passive investing that has been pounded into peoples heads for years is complete bullshit and has only worked because there was always someone else ready to pay more for the same asset and because rates were perpetually held low. Some points to consider: (1) You have fewer millennials than baby…

> You have fewer millennials than baby boomers, as the baby boomers cash out from their vanguard accounts, who makes up for the difference?

The Boomers are using or investing that cash, though. Sooner or later anyway. And that cash would flow to the current owners of the things they are patronizing.

It's not like they're investing in dry ice and then throwing it in the ocean.

Re: How This Ends

#518

Post by SnowHill9902 »

nuclearnice3 wrote: post #514
SnowHill9902 wrote: post #47

Earlier quoted context omitted.

OP can clarify what they meant but I understand it as: sum return_i/yield_i - price < 0

I don't follow your equation. https://ycharts.com/indicators/sp_500_monthly_return Yours is unweighted, but return of the S&P in Dec 2021 4.36% The dividend yield about 1.37% The price ~4600. 4.36/1.37 - 4600 indeed very less than zero. The relationship means nothing to me. I must be getting this all wrong.

It’s the sum over all periods into the future.

Re: How This Ends

#519

Post by hbosch »

TameAntelope wrote: post #516

Sometimes it's terrifying to think that nobody knows what will happen next, other times it's comforting. After reading this, I am comforted. Anyone predicting any particular outcome is not someone worth listening to.

The race to be right is run by people who are mainly, usually, wrong.

Re: How This Ends

#520

Post by nl »

fny wrote: post #470
cup_of_joe wrote: post #440

Earlier quoted context omitted.

"If inflation continues and the fed becomes aggressive with hiking, all assets are dead." This sounds incredibly short-term-oriented and alarmist. Dead is a word to describe the end of something's existence. Market turbulence is not a novel occurrence, nor are unsustainably inflated economies driven by cheap money and speculation.

At 10% rates I think the fair value of the S&P becomes something like 2000 assuming the same earnings. High yield rates would moon and tons of bankruptcies would ensue. Consider how heavily pensions and retirement accounts are concentrated in stocks. The ramifications of reaching a point like that would be devastating, so yes, I think dead is not alarmist but appropriate.

US 10 year bond rates are 3.1%.

The one time in history they have gone beyond 10% it took 2 years to go from 7.32% in Sep 1977 to reach 10% in October 1979, and then peak at 15% in 1981.

It's not impossible bonds will reach 10% again. But it seems unlikely, and it seems safe to think it would take 3+ years to get there.

https://www.macrotrends.net/2016/10-year-treasury-bond-rate-...

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