Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

How This Ends

avc.com

Post reply on HN
Print view View original

661–670 of 698 posts

Re: How This Ends

#661

Post by fny »

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-...

I think 10% happening is not that unrealistic. If oil prices return to 2008 levels ($150 a barrel) that's effectively another 36% inflation. If natural gas prices in the US converge with European prices, you have another 400% increase in the cards.

The fed will have a choice: hike rates to slow demand (10%) *OR* keep rates highish and allow financing for more supply to come online (5%). Who the hell is going to finance new gas exploration at 10%?

Re: How This Ends

#662

Post by fny »

noduerme wrote: post #623
rcpt wrote: post #617

Earlier quoted context omitted.

For young people betting on the far future looks just as crazy as GME calls

Yeah, I get that. And that's natural. But if a huge population swell is accustomed to treating the market as a get-rich-quick casino, the market stops serving its purpose and I guess we're in for a really bad series of shocks.

We've already reached this point. Hence Tesla $1T and shitcoin et al...

You're watching the unwind.

Re: How This Ends

#663

Post by sounds »

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…

One of the reasons the Fed keeps factors like servicing the government's debt at "arm's length" is because the debt figures are a political football.

The Fed wants to maintain a balanced, non-partisan position, as much as possible.

Re: How This Ends

#664

Post by fny »

mixedbit wrote: post #631
fny wrote: post #290

Earlier quoted context omitted.

I actually don't have a good answer for this. Not financial advice. Talk to a fiduciary. The problem with inflation is that you need to protect yourself before the fact, and at this point, it's difficult to read to what extend the fed will respond with rate hikes and how much inflation we get going forward. In my personal view, it would be stupid to hike to 10% since that will also cut off the needed supply response:…

Very low interest rates and high asset prices indicate that 2020s can be another lost decade for investing that follows the great decade of 2010s. 2000s was also a lost decade, and unfortunate thing about it was that even if you managed to time the bear market perfectly and entered at the very low in 2002, the decade would still be lost to you, because the market in 2009 was below 2002 lows.

While many do not believe it's true, timing the market is possible and its a skill. *Find good active managers that have a track record of positive returns and low losses.*

While they did not beat the index in the last decade, I'm fairly certain they will going forward or more importantly minimize the drawdowns.

Re: How This Ends

#665

Post by lazide »

PaulDavisThe1st wrote: post #561
lazide wrote: post #544

Earlier quoted context omitted.

All of the effects you name are only happening because of inflated values driven by cheap money. Literally every, single, one of them.

Sorry, I find this ridiculous. The boomers heading into retirement situation is a reflection of 40-50 years of economic policy and has no connection with recent "cheap money". Actual investment in single family and apartment housing is almost entirely tied to its low risk/return ratio compared with (the perception of a lack of) other options for investment at this time. The money sloshing around for investment is as…

The ‘cheap money’ issue isn’t a short term one. It’s been steadily dropping with only minor hiccups since the mid 80’s - about 40 years ago. The last time the US had a inflation hit, at that time due to the Oil crisis.

Mostly to keep juicing the economy, which has steadily been needing it more and more to grow/less responsive to stimulus.

Folks I know who have done the AirBnB route were often getting mortgages and buying properties to let out, using the short term cash flows to pay the (low interest rate) mortgage.

Which makes sense as an investment, because the mortgage was cheap (cheap money) compared to current cash flows.

It has become more and more pervasive, until it stopped being able to make money due to saturation. Younger folks traveling around during Covid using AirBNBs helped (they were trying to avoid lockdowns and ‘dirtier’ hotels), but not sure how it is going to play out now.

Anyone who had a 30 year mortgage they got then is going to do pretty fine though as long as they have cash flow.

Re: How This Ends

#666

Post by lazide »

deanmoriarty wrote: post #645
rcpt wrote: post #622

Earlier quoted context omitted.

> an excess of jobs and money And speculation. Bay Area has the highest price to rent ratios in the US. Rent really hasn't changed that much since 2020 and if the betting stops it'd make sense to go back to 2020 prices (which is like a 50% "crash" in parts of the Bay)

I would so much welcome a 50% crash but I’m afraid we’ll never ever see it in the Bay Area. There are just too many people, job or not, in a very strong financial position. I’m sitting on $600k+ cash for a down payment and if I see townhouses correcting I’ll snatch one up immediately. And I am a very small fish compared to the wealth that’s around. My personal bet is that the Bay Area will just stay at 0% growth unti…

Possible, we’ll see.

A lot of speculators also bought assuming increasing property values, so if it’s flat for 5 years or whatever, then that’s going to nuke their gains. Meanwhile they’re paying out real cash every month.

Re: How This Ends

#667

Post by fny »

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…

Oh, I'm also going to add that bear markets typically have a lot of brutal rallies. We had one in march as part of the rotation from tech into value stocks. We're probably about to witness a second.

Bear markets typically have several short covering rallies of large magnitude on the way down. Use these rallies to unwind your portfolio. Use the dips to buy hard assets and stocks with high yield that can withstand inflation (honestly everyone's margins are probably screwed). Make sure you leave some portion of your portfolio to hedge. Never overstay your welcome. Risk management is key.

Re: How This Ends

#668

Post by WalterBright »

cyberlurker wrote: post #651
WalterBright wrote: post #363

Earlier quoted context omitted.

The Federal Reserve Bank system was supposed to prevent busts. We've had some pretty big ones recently - 2000, 2008, 2022. Let's face it. The FRB cannot stop busts. The real reason for the FRB is so the federal government can inflate the currency.

They aren’t expected to always prevent busts. Boom and busts are expected.

Um, that was the sales pitch to establish the FRB.

Re: How This Ends

#669

Post by boppo1 »

at-fates-hands wrote: post #610
boppo1 wrote: post #584

Earlier quoted context omitted.

I sure hope so because I'm out here reading Stroustrup and CLRS to start a career at 30. But it really seems like there's a glut of tech companies with investment capital paying people 300k to make apps for stuff that's trivial. Juicero tier stuff, all over the place. I worry it will collapse and SWE is gonna be your run of the mill 45k job from then on.

>> But it really seems like there's a glut of tech companies with investment capital paying people 300k to make apps for stuff that's trivial. I work for one of the largest health care companies in the world. In the US, there are only three or four major health care companies and they're all massive. My company has repeatedly said its too big to move as fast as smaller startups who are coming in and disrupting one ni…

If I have no involvement or experience in Health Care, how do I identify a niche where such a product will be helpful?

Re: How This Ends

#670

Post by MR4D »

scarab92 wrote: post #491
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.

That's only true if investors think the 10% rates are permanent. Future interest rates are a time series not a single value, and I suspect most will use a lower rate in later years reflecting some mean reversion.

A 10% rate on a 30-year treasury, is for all intents, permanent.

Think of it this way - a person buys a 30-year bond yielding 10%. Then, for the next 30 years, no matter what happens to interest rates or prices, they will earn a 10% return on their original bond purchase, risk free.

Remember also that 30 years is approximately your adult working life, so a really long time that people tend to think of a “permanent”.

Is it truly permanent? No, but for purposes of discussion and financial planning, it’s close enough.

Post reply on HN