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How This Ends

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Re: How This Ends

#531

Post by HFguy »

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.

I've been at top HFs the last 15 years, I do this for a living, and I have no idea what the guy is talking about either.

Re: How This Ends

#532

Post by zarzavat »

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…

Inflation is still going up because there’s a war between Ukraine and Russia. This has caused food and energy prices to skyrocket. The Fed can raise rates to 69% but it’s still not going to cause (say) the grain in Odessa to make its way to people’s stomachs.

Is a certain amount of rate increase justified? Yes, you don’t want an inflation spiral to develop. Beyond that, we are going to have to live with a certain amount of inflation until the situation in Eastern Europe normalizes and the supply chains normalize after COVID. And the interest rates should be kept on the lower side so that companies can still finance solutions to this mess.

Re: How This Ends

#533

Post by D_Alex »

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…

>a risk free alternative to stocks

I'm pretty sure Russia disagrees, and it remains to be seen how China and other foreign holders of US treasuries will look at US (and other foreign) bonds in the future.

Re: How This Ends

#534

Post by greedo »

karpierz wrote: post #381
nostrademons wrote: post #338

Earlier quoted context omitted.

I would've agreed with you until about 5 years ago. The reason I disagree with you now is because technology and methods of war-fighting have changed. Emerging defense technologies like drones, lasers, robots, micro-scale manufacturing, and self-driving vehicles - along with the latest generation of existing weaponry like MANPADS and anti-tank missiles - all preference the defender. They allow a group of relatively u…

> Emerging defense technologies like drones, lasers, robots, micro-scale manufacturing, and self-driving vehicles - along with the latest generation of existing weaponry like MANPADS and anti-tank missiles - all preference the defender. > They allow a group of relatively untrained and loosely organized defenders who know the terrain well to deploy extremely effective resistance against an attacker, as long as it's at…

Russia isn't struggling because of conscripts and untrained soldiers. Ukraine has conscription, and many of its TDF troops are relatively untrained. Russia is struggling because of a military philosophy that has lead to leadership failures from the officer level up to Putin himself. In addition to endemic corruption, the Russians also failed to remember things like rasputitsa, the principal of "economy of force", the importance of unit cohesion, of command centrality, of the 3:1 rule of thumb.

In other words, Russia created a military that was bad at being a military.

The only good thing that will come of this conflict is a revitalization in the study of military arts.

Re: How This Ends

#535

Post by PaulDavisThe1st »

BigBubbleButt wrote: post #529
PaulDavisThe1st wrote: post #526

Earlier quoted context omitted.

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.

I'm certainly not going to argue about such a simplistic model of human economic behavior.

Re: How This Ends

#536

Post by SV_BubbleTime »

idiotsecant wrote: post #433
polynomial wrote: post #379

Earlier quoted context omitted.

99 weeks out?? :::jaw on floor:::

Don't worry, it's just the default value in the ordering system for 'we have no idea, probably never'

This is true. I have a ton of parts all with 52 week leads. It’s BS.

But… I’ve found that 52 means “Ok, no idea but it will come” and 99 means “lol yea dude, we’ll let you know but you should make other plans”.

Re: How This Ends

#537

Post by wombat-man »

ajsnigrutin wrote: post #448
wonderwonder wrote: post #432

Earlier quoted context omitted.

Not sure you are correct here. Ukraine war is in Europe, America's sphere of influence and features America's traditional enemy. America was involved in Afghanistan and Iraq which you claimed no one cared about. Russia and Ukraine produce a significant portion of the worlds food, energy and fertilizer supply. The current situations are caused by politicians but politicians from dozens of countries. Politicians chose…

> Ukraine war is in Europe so what... A country has a minority, minority wants to separate, the main country won't let them, and fights happen between the main country and the minority, a big player steps in and destroys the main country to "save the minority" (and gain whatever their geopolitical interest was). Kosovo, ukraine, same shit, different players. > The current situations are caused by politicians but poli…

>so what... A country has a minority, minority wants to separate, the main country won't let them, and fights happen between the main country and the minority, a big player steps in and destroys the main country to "save the minority" (and gain whatever their geopolitical interest was). Kosovo, ukraine, same shit, different players.

This... almost works for the crimea situation years ago but Russia is now just attempting a full scale takeover of the country. I can tell Ukraine isn't into it because of how much they're fighting back.

Re: How This Ends

#538

Post by chii »

zarzavat wrote: post #525
credit_guy wrote: post #512

Earlier quoted context omitted.

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.

> If for example they raise the rates enough that debt servicing starts to become a real issue

then they would've realized they hiked too much. That's why the current Fed hikes are conservative - a lot of people are claiming that they are late, and should've done it earlier, but i think they are doing it right. Slow and steady, and be conservative.

Re: How This Ends

#539

Post by pas »

nl wrote: post #520
fny wrote: post #470

Earlier quoted context omitted.

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-...

OP probably meant corporate bonds? (otherwise I also think it's just wildly unrealistic)

Re: How This Ends

#540

Post by Zenbit_UX »

Forgeties79 wrote: post #317
riku_iki wrote: post #101

Earlier quoted context omitted.

People who bought houses will be fine, since they secured low interest loans, and will hesitate to sell because won't get good interest on next loan. This will cause low supply -> high prices -> people who didn't buy are very screwed: they will face high prices together with high interest.

Totally anecdotal, but I know a couple who are renting out their house they highly and renting a place to live because the interest rate they secured (2.75%) means renters paid their mortgage and then some (about 40% on top), so they basically make like $200/mo to live somewhere else as renters pay for their home.

This doesn't make sense or you are omitting key information.

If a homeowner rents their place for more than it costs them in mortgage + property taxes and makes $200 on top, that's fine and quite a nice deal. However you're suggesting they're also subsidizing their own rental and +$200.

That only makes sense if they're renting well below their means or in a different market entirely while their home is in an ultra prime location. If not the renter of their home should simply have rented out the place the owners are living at a substantial discount.

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