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How This Ends

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Re: How This Ends

#521

Post by dustingetz »

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…

hey, reduced income inequality at least! (all that wealth is fake zombie wealth anyway right?)

Re: How This Ends

#522

Post by PaulDavisThe1st »

lazide wrote: post #510
PaulDavisThe1st wrote: post #487

Earlier quoted context omitted.

But the effective, on-the-ground housing shortage is going to continue to keep demand for housing extremely high in almost all areas with reasonable economic options or amenity migration destinations.

The only reason there is a housing shortage is because there is an excess of jobs and money in that place. Which is changing. Houses in sunnyvale went from 750k-1m and impossible to find one for sale to 350k (yes really!) and on the market for years around ‘08.

> "an excess of jobs and money in that place"

Nope. For one thing, there's the largest generation of the 20th century at peak retirement, cashing out of family houses that have gained huge amounts of value, and looking to move to amenity-rich locations.

For another thing, the investment industry, short of other options, has started buying houses to rent them (short or long term), squeezing supply and driving up prices in many markets.

For another thing, short term rentals (AirBnb, VRBO etc.) have had profound impacts on the availability of property in heavily visited areas (in fact, it's not so much absolute visitation rates, but vists-per-resident that characterizes this).

Other factors too. That doesn't mean the market can't crash, but it will be something very different from what happened in 2008.

Re: How This Ends

#523

Post by dustingetz »

vintagedave wrote: post #171
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…

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.)

invest in your education and personal development if you are young. start a startup. invest in your career. have children and invest in them. this is all real economic growth; money number is fake right now. if you are old and need financial security, invest your time in learning about future relevant sectors like energy, climate, bio. commodities. toilet paper. trash bags.

Re: How This Ends

#524

Post by kortilla »

lazide wrote: post #511
thatfrenchguy wrote: post #492

Earlier quoted context omitted.

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.

That’s not how life expectancy works.

Re: How This Ends

#525

Post by zarzavat »

credit_guy wrote: post #512
fny wrote: post #467

Earlier quoted context omitted.

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.

They definitely care about second-order effects. If for example they raise the rates enough that debt servicing starts to become a real issue and this leads to higher taxes and spending cuts, then that is an extra economic headwind which they must consider.

They don’t care about the debt figure per se but they do care about the economic implications of that debt, and how other entities are likely to react to it.

Re: How This Ends

#526

Post by PaulDavisThe1st »

BigBubbleButt wrote: post #500
PaulDavisThe1st wrote: post #483

Earlier quoted context omitted.

Lots of assumption buried in your comment/worldview about what's actually causing inflation. Is it actually just a slow accretion of growing costs for resources, distribution? Is it companies deciding that now would be a great time to increase prices "because inflation" and thus get ahead of the nascent wage growth that was threatening to take off post-pandemic? Clearly it's a mixture of the two but the implications…

Honestly, that's really not that important for what I was saying, because we're talking about the Fed. The Federal Reserve can choose to fight inflation or it can choose to inflate assets, and that lies on a spectrum. The "why" of inflation isn't nearly as important as the severity of it. If inflation is at 10% you're not going to debate it before doing something about it - that just allows the situation to fester in…

The Fed can't do much at all to stop corporate-controlled price increases. Increasing interest rates makes it more expensive to borrow money, but that has little impact on a company choosing to bump its retail prices by 25%.

M2 is only relevant to a point. The increase in the money supply does not, in and of itself, cause any change in prices at all. Individuals and corporations have to make explicit decisions to respond to what they can see of the M2 effect, and none of these decisions are a law of nature. Rents don't have to go up just because M2 grew. Landlords sense that they can, and then they choose to do so. They could choose not to do so, too, but they don't because we're taught that this would be irrational, or something.

Re: How This Ends

#527

Post by eric_cc »

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…

>If you invested near the dot com peak

If you went all-in.. had no money in before and never invested after. Sure..

Re: How This Ends

#528

Post by eric_cc »

pm90 wrote: post #437
ajsnigrutin wrote: post #427

Earlier quoted context omitted.

Covid is over, the excess deaths are low, or even zero. War in ukraine would be a nothingburger if americans were involved (like noone cares about yemen, syria, now somalia, and noone cared about afghanistan, iraq, and even serbia). Most of the current problems that we have are caused by the politicians directly, and not by covid/war/whatever, and sadly, they're the first that will have to go, if we want to return to…

Literally nothing in this comment is true.

Source?

Re: How This Ends

#529

Post by BigBubbleButt »

PaulDavisThe1st wrote: post #526
BigBubbleButt wrote: post #500

Earlier quoted context omitted.

Honestly, that's really not that important for what I was saying, because we're talking about the Fed. The Federal Reserve can choose to fight inflation or it can choose to inflate assets, and that lies on a spectrum. The "why" of inflation isn't nearly as important as the severity of it. If inflation is at 10% you're not going to debate it before doing something about it - that just allows the situation to fester in…

The Fed can't do much at all to stop corporate-controlled price increases. Increasing interest rates makes it more expensive to borrow money, but that has little impact on a company choosing to bump its retail prices by 25%. M2 is only relevant to a point. The increase in the money supply does not, in and of itself, cause any change in prices at all. Individuals and corporations have to make explicit decisions to res…

> Individuals and corporations have to make explicit decisions to respond to what they can see of the M2 effect, and none of these decisions are a law of nature.

The law is called supply and demand. If there are more dollars and the same amount of resources, the value of a dollar goes down.

Let's just agree to disagree. Cheers.

Re: How This Ends

#530

Post by HFguy »

Vaslo wrote: post #104
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…

While your points are very solid, the first point may be overweighted. I can see why some naive in stocks may weight lower on lower rates, i can tell you as someone in corp finance we never adjusted our risk rates (weighted average cost of capital) below 12% (which is what they have been 5-7 years ago. These types of downturns are modeled in. Yes there are some cowboys that aggressively drop these rates, but it’s ver…

What? Rates matter. A lot. If you are in some corp fin job and you discount projects at 12%...fine. But saying they don't matter for equity valuations doesn't make sense. The evidence, not just lately, but throughout the last 100 years is overwhelmingly that they matter.
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