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What if your entire worldview was just because of near-zero interest rates?

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Re: What if your entire worldview was just because of near-zero interest rates?

#121

Post by ChuckNorris89 »

ericpauley wrote: post #87
015a wrote: post #47

Earlier quoted context omitted.

The iShares S&P 500 ETF has returned about 11.6% annualized over the past ten years. Their Ex-US ETF: 2.8%. Point being: the third variable no one ever takes into account when considering Buffett's advice: "just invest in broad market indexes" literally only works in the US, and only has worked historically . It's not a coincidence that the US is the youngest developed economy on the planet. In other words: How high…

The US is at least as old as the concept of a contemporary “developed economy”, so it doesn’t seem like this part of the argument holds.

Sure, but if you compare to EU companies, their stock growth had been pitifull in comparison.

Everyone invests in US stocks/ETFs/companies if they want to see good returns.

Re: What if your entire worldview was just because of near-zero interest rates?

#122

Post by IncRnd »

Animats wrote: post #113
benjaminwootton wrote: post #106

I definetly think a lot of the startup world view is just a function of low rates. Startups could run for decades with $billions in losses and only a passing focus on eventual profits. All of those losses flowed into the bank accounts of big tech (via AWS credits, Google and Facebook Ads). All of the high salaries, employee expectations and leverage in tech startups and big tech derive from that spigot of cheap money…

> I definitely think a lot of the startup world view is just a function of low rates. Startups could run for decades with $billions in losses and only a passing focus on eventual profits. Yes. Buying growth at a loss is so over. A stock is worth the present value of future dividends.

> A stock is worth the present value of future dividends.

Not every stock pays dividends. A stock's worth is determined by supply and demand in a market or directly between the seller and the prospective purchaser.

Re: What if your entire worldview was just because of near-zero interest rates?

#123

Post by jocaal »

ihatepython wrote: post #102
lettergram wrote: post #88

Earlier quoted context omitted.

Lol “forces the feds hand” Congress, in part because of the fed, doesn’t have the ability to regulate it. This is why Andrew Jackson originally dismantled the second bank of the United States (the irony of him being on the $20 federal reserve note is painful). The way the fed really works is that those closest to the supply of money get a higher valued dollar. During the pandemic the fed was straight up letting certa…

The Fed is one of the most misunderstood institutions. Basically, everything you have said is completely wrong, which makes difficult to write a reply, because where to start? In short, the original design of the Fed was correct, where each branch was independent and could set their own interest rate, and they purchased commercial paper to stimulate the economy. This changed during WWII, where the government mandated…

I may not know everything about how they operate, but I have seen how qualified their leadership is. The fed is usually run by a bunch of phd's so I have come to trust it a bit more than other government institutions.

Re: What if your entire worldview was just because of near-zero interest rates?

#124

Post by spaceman_2020 »

miguelazo wrote: post #109
benjaminwootton wrote: post #106

I definetly think a lot of the startup world view is just a function of low rates. Startups could run for decades with $billions in losses and only a passing focus on eventual profits. All of those losses flowed into the bank accounts of big tech (via AWS credits, Google and Facebook Ads). All of the high salaries, employee expectations and leverage in tech startups and big tech derive from that spigot of cheap money…

It has skewed the labor market to an insane degree. So much talent went into idiotic pursuits, and away from anything that had to do with public service.

My wife's uncles is one of the top doctors in his field in the country, and was the head of department in the country's top medical university.

He makes less money than me, even though I'm 35 years younger and my "skills" include some basic coding, some marketing, and some understanding of social media. Whereas this man has spent nearly 50 years in the medical field and has treated multiple presidents.

None of the startups I've consulted for are profitable. Most, by all means, will never be profitable.

Meanwhile, my maid, who works harder in a day than I do in a week, makes 1/50th of my annual income.

All that free money has seriously misaligned societies incentives. Enrollment in the medical field is falling drastically because no one wants to work years to make less money than some 24 year old with two years of coding experience.

I'll be okay with a pay cut if it means a more equitable, more fair society.

Re: What if your entire worldview was just because of near-zero interest rates?

#125

Post by howinteresting »

ChuckNorris89 wrote: post #121
ericpauley wrote: post #87

Earlier quoted context omitted.

The US is at least as old as the concept of a contemporary “developed economy”, so it doesn’t seem like this part of the argument holds.

Sure, but if you compare to EU companies, their stock growth had been pitifull in comparison. Everyone invests in US stocks/ETFs/companies if they want to see good returns.

Isn't the EU lagging due to post-GFC austerity?

Re: What if your entire worldview was just because of near-zero interest rates?

#126

Post by t0suj4 »

neilwilson wrote: post #98

Given that putting interest rates up is an artificial intervention into the market for money, what if your worldview is based around allowing financial institutions to extract rent by taxing people for setting up home? Why is setting the price of money artificially - which gives free government money to financial institutions - better than the alternative: setting the base price of labour by guaranteeing people a job…

From my parents' experience guaranteeing people a job will only result in people idling at job site because there is no work to do instead of people idling at home or possibly studying for a job they want to do.

Giving artificial jobs don't differ much from giving people artificially valued money.

Re: What if your entire worldview was just because of near-zero interest rates?

#127

Post by benjaminwootton »

jongjong wrote: post #119

I've been saying this for the last 5 years. People don't realize how powerful the 'money printer' is. All the money which exists in the system was created out of nothing and injected into the economy through a few specific channels (mostly as credit backed by debt). IMO, everything in modern society is influenced in some way by interest rates; even culture and morality. Money printing can distort the market pricing m…

I agree with your thesis that genuine value creation will become more important.

I think this is a more exciting market to operate in as opposed to one where we simply need to raise and spend cash as quickly as possible.

Re: What if your entire worldview was just because of near-zero interest rates?

#128

Post by spaceman_2020 »

neilv wrote: post #48

> It became the new normal, and the generation that entered Wall St. during this time is now disoriented, for they “do not know a world without cheap money.” [...] Whenever people are humbled by the melting away of things they took for granted, now that’s a topic worth exploring. I'm trying to figure out parallels and implications for tech jobs. Where in tech jobs will be first to decide they need to "rediscover the…

I feel that a lot of startups would never be possible in a low interest rate environment. If you were trying to start Uber today and told investors that you'll lose money on every ride for fifteen years straight, and that you will burn through $35 billion without showing a profit, you will likely be laughed out the building.

Re: What if your entire worldview was just because of near-zero interest rates?

#129

Post by RayVR »

moose_man wrote: post #118
RayVR wrote: post #117

I just can’t take this person seriously. Clearly written by a non-expert and the questions/ideas are, as a result, well-trodden ground without anything original to add. Take this representative quote “It’s Jerome Powell’s world: never before have I seen markets move so erratically in response to a once-boring Jackson Hole conference. Actually, the first time I ever heard of this event was this year since some acquain…

He's right in one sense, that the implications of Fed policy for the last decade are truly astounding, but I'm not sure he actually understands why he is right.

It’s a discussion that’s been had countless times and written about almost as often.

maybe I’m gatekeeping a bit but I also think the amount the average person understands about share buybacks and their relationship to ceo compensation packages, interest rates, and corporate tax law is lacking and this person has not improved that situation and probably hurt it through their own ignorance.

That’s just one of many issues with the article.

Re: What if your entire worldview was just because of near-zero interest rates?

#130

Post by benjaminwootton »

RayVR wrote: post #117

I just can’t take this person seriously. Clearly written by a non-expert and the questions/ideas are, as a result, well-trodden ground without anything original to add. Take this representative quote “It’s Jerome Powell’s world: never before have I seen markets move so erratically in response to a once-boring Jackson Hole conference. Actually, the first time I ever heard of this event was this year since some acquain…

As someone semi familiar with this stuff, it is fairly notable how rates are moving markets right now.

Say the payroll number misses consensus by 5%, meaning there’s a fraction of a percent less chance of a 0.75% rise in rates vs 0.5%. The stock market then rallies by 2% or a few hundred $billion in market cap.

Surely that isn’t a healthy market when changes in fractional rate expectations create so much volatility.

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