Have We Hit The Top?

[mattee2264]

Another consideration is that if it is small companies that bear the brunt of the adjustment to higher rates then will that just reinforce the preference of investors for big companies (and Big Tech in particular) and result in even higher multiples for such stocks? 

[Gregmal]

3 minutes ago, mattee2264 said:

Another consideration is that if it is small companies that bear the brunt of the adjustment to higher rates then will that just reinforce the preference of investors for big companies (and Big Tech in particular) and result in even higher multiples for such stocks? 

I’ve really come around to the idea that the biggest tech companies may eventually just be viewed as adequate for most investors given their ability to fend off inflation. They won’t grow much most likely, but they’re all clear inflation + names. Compare that to any bond 3-5 years or more out and it’s not crazy to see why people prefer high quality equity even at valuations that some portions of the market doesn’t understand. I mean shit I’ve been harping on Costco forever. So far, for two decades now, the market hasn’t really cared that some value investors don’t understand 25-35x.

[brobro777]

Boy these interest rates sure are high. My credit is 820+ and Chase is offering me 7.16% for car loans. 7% plus! And 30 year fixed mortgages are almost 8%! This has to come down a little at some point, no? 

[Gamecock-YT]

forget what article I was reading that mentioned that all the corporate loans that companies took out in pre-covid/covid at 2-3%, they can put the cash in money markets accounts and capture the spread. Basically don't have any issues until the loan comes up for renewal. So early days still. 

[TwoCitiesCapital]

2 minutes ago, Gamecock-YT said:

forget what article I was reading that mentioned that all the corporate loans that companies took out in pre-covid/covid at 2-3%, they can put the cash in money markets accounts and capture the spread. Basically don't have any issues until the loan comes up for renewal. So early days still. 

 

That's assuming the cash wasn't used for share repurchases 15-20% ago, refinancing prior loans, or used to actually invest/grow the business. 

 

I'm going to assume very few companies issued tons of debt and then just sat on it for 2-3 years paying a small amount of interest waiting for rates to rise and have it to collect the spread today. 

 

Some companies carry higher cash balances naturally. It's those companies that benefit from the rates the most. 

 

Some companies make gobs of cash. They benefit too, but less so. Investors aren't giving those companies 25-30x multiples to sit on 5% t-bills. These companies probably use the gobs of cash for buybacks or acquisitions instead of continuing to compound the benefit of higher rates, but they get paid a little while they wait. 

 

Everyone else? Probably not a large beneficiary of higher rates at this time. Over time, higher rates COULD benefit savers and potentially flow through to spending - but it'll be 1-3 years of pain before that occurs because most savers weren't sitting in cash but we're invested in the mania that was 0% rates and Pelotons/Rivian's/GameStop/crypto/etc that was all been severely punished. 

[thepupil]

16 minutes ago, TwoCitiesCapital said:

 

Everyone else? Probably not a large beneficiary of higher rates at this time. Over time, higher rates COULD benefit savers and potentially flow through to spending - but it'll be 1-3 years of pain before that occurs because most savers weren't sitting in cash but we're invested in the mania that was 0% rates and Pelotons/Rivian's/GameStop/crypto/etc that was all been severely punished. 

 

where is the data to support this? 

 

total household net worth wrt stocks mirrors the indices. there's in aggregate huge net worth and cash balances in those measures. my own anecdotal evidence of mass affluent people is they just own indices/cash/bonds/primary residence. 

 

i'd wager the people "severely punished" by peloton/rivian/gamestop/crypto is a very small minority of people. 

 

 

Edited October 9, 2023 by thepupil

[TwoCitiesCapital]

6 minutes ago, thepupil said:

 

where is the data to support this? 

 

total household net worth wrt stocks mirrors the indices. there's in aggregate huge net worth and cash balances in those measures. my own anecdotal evidence of mass affluent people is they just own indices/cash/bonds/primary residence. 

 

i'd wager the people "severely punished" by peloton/rivian/gamestop/crypto is a very small minority of people. 

 

 

 

Most stocks and bonds are down over that period. Isn't limited the ones I named. It wouldn't have been the mania that it was if MOST people weren't participating by buying something and most of those somethings today are significantly off their 2021 highs. 

 

Point is very few people were sitting on loads of cash, and still hold it, to benefit from the higher rates. 

Edited October 9, 2023 by TwoCitiesCapital

[thepupil]

6 minutes ago, TwoCitiesCapital said:

 

Most stocks and bonds are down over that period. Isn't limited the ones I named. It wouldn't have been the mania that it was if MOST people weren't participating by buying something and most of those somethings today are significantly off their 2021 highs. 

 

Point is very few people were sitting on loads of cash, and still hold it, to benefit from the higher rates. 

 

 The Vanguard Balanced Index (60 / 40) is down 11% from its peak. The total stock market is -10%. total world stock market is -11%. on a 3 yr basis balanced portfolio is up 3.5% /yr, 5 yr 5.7%/yr, 10 yr, 7.3%/yr. 

 

what losses are you talking about? 

 

there's a whole lot of deposits,cash, US govvy securities, etc in the $112 trillion of financial assets owned by US housholds. 

 

 

 

 

 

[TwoCitiesCapital]

34 minutes ago, thepupil said:

 

 The Vanguard Balanced Index (60 / 40) is down 11% from its peak. The total stock market is -10%. total world stock market is -11%. on a 3 yr basis balanced portfolio is up 3.5% /yr, 5 yr 5.7%/yr, 10 yr, 7.3%/yr. 

 

what losses are you talking about? 

 

there's a whole lot of deposits,cash, US govvy securities, etc in the $112 trillion of financial assets owned by US housholds. 

 

 

 

 

 

What losses am I talking about? Exactly the ones you listed. Made worse by the fact that cumulative inflation has been like 10-15% over that time making nominal losses even worse. 

 

People bought stocks/bonds/commodities/whatever in 2021 and 2022 and are currently in loss status on most of it. They weren't sitting in cash. They're not benefitting from higher rates until the reinvested income from current investments offsets those prior losses on the reset higher.

 

Even at 5-6% rates, we're a long climb out of that hole nominally (and even longer on inflation adjusted basis).  

 

Money markets/and treasuries? Cool. Basically every Treasury bond thats ever been issued is in an unrealized loss status at the moment.  Doesn't count as benefitting quite yet. 

 

Money market assets? Sure. Those are doing well. But a good portion of those are in retirement accounts that aren't going to circulate for the multiplier effect on the economy and the remainder is so small in proportion to what is owed on cars, houses, revolving credit, durable goods orders, etc as to make little to no difference. So yes, consumers might be benefitting from higher rates on like 2% of their total net worth, but everything else is hurting against that at the moment 

 

Is this really debatable? 

[TwoCitiesCapital]

Another way to think about this - 

 

Interest rates go to 100% tomorrow. You can double your money every year. But that means all current assets are gonna lose ~99% of their value in comparison. How long does it take you to come out ahead and "benefit" from 100% interest rates. 

 

Probably year sometime in year 6-7 pending inflation. Also depends on what happens to your job in that environment, if you need to tap those savings that are now down 99%, and how much additional you can contribute. But in a vacuum - 7 years to come out ahead doubling your money every year. 

[thepupil]

8 minutes ago, TwoCitiesCapital said:

What losses am I talking about? Exactly the ones you listed. Made worse by the fact that cumulative inflation has been like 10-15% over that time making nominal losses even worse. 

 

People bought stocks/bonds/commodities/whatever in 2021 and 2022 and are currently in loss status on most of it. They weren't sitting in cash. They're not benefitting from higher rates until the reinvested income from current investments offsets those prior losses on the reset higher.

 

Even at 5-6% rates, we're a long climb out of that hole nominally (and even longer on inflation adjusted basis).  

 

Money markets/and treasuries? Cool. Basically every Treasury bond thats ever been issued is in an unrealized loss status at the moment.  Doesn't count as benefitting quite yet. 

 

Money market assets? Sure. Those are doing well. But a good portion of those are in retirement accounts that aren't going to circulate for the multiplier effect on the economy and the remainder is so small in proportion to what is owed on cars, houses, revolving credit, durable goods orders, etc as to make little to no difference. So yes, consumers might be benefitting from higher rates on like 2% of their total net worth, but everything else is hurting against that at the moment 

 

Is this really debatable? 

 

the 10% losses if you bought the entirety of your nut on the tippy top DAY of markets make you conclude this? 

 

I think you need to distinguish between a prediction (which may become true) and what is true today. 

 

I think it's quite debateable. I think the majority of mass affluent people who already own their home (like the top 25% of americans who drive a huge portion of spending) have never felt wealthier and investment incomes (divvies and interest) at all time highs and balances within 5-10% of nominal peak. this is both borne out in the aggregate FRED type data and my own personal anecdata. more middle class folks who own home are feeling okay until they have to buy their next car at 9%. 

 

I like bonds just like you, but I don't understand some of the statements you are making. incomes at ATH, Net worth very close to ATH's. shit may get worse (in fact I think it will) but looking at the data, I struggle to see what you're seeing. I think US households in aggregate are gorging on interest income with locked in borrowings from yesteryear. 

 

Until you need to buy a finance a new house/car, it's a bit of a gravy train, no? 

 

 

Edited October 9, 2023 by thepupil

[TwoCitiesCapital]

44 minutes ago, thepupil said:

 

the 10% losses if you bought the entirety of your nut on the tippy top DAY of markets make you conclude this? 

 

I think you need to distinguish between a prediction (which may become true) and what is true today. 

 

I think it's quite debateable. I think the majority of mass affluent people who already own their home (like the top 25% of americans who drive a huge portion of spending) have never felt wealthier and investment incomes (divvies and interest) at all time highs and balances within 5-10% of nominal peak. this is both borne out in the aggregate FRED type data and my own personal anecdata.

 

I like bonds just like you, but I don't understand some of the statements you are making. incomes at ATH, Net worth very close to ATH's. shit may get worse (in fact I think it will) but looking at the data, I struggle to see what you're seeing. I think US households in aggregate are gorging on interest income with locked in borrowings from yesteryear. 

 

Until you need to buy a finance a new house/car, it's a bit of a gravy train, no? 

 

 

 

That's all true nominally, but not true in "real" terms. 

 

Real incomes have been eroding, on average, since 2021 (and only grew in 2020 due to transfer payments). I'm making the most nominally I ever have. In real terms it's less than what I made in 2018. I'm in the top 5% of incomes in this country, with no kids, and even I can feel that pinch over time. 

 

Wealth might be at nominal highs, but was higher in real terms in 2019/2020. Also, that's on paper too. A 10% dip in 2024 would erase much of the current bounce just like the 2022 dip did. 

 

Homeowners? They are doing well on a relative basis - but even many of them are suffering with rising costs of carry.  Despite refinancing my condo in 2021 for 2.75% and saving ~$500/month, my total carry on my condo hasn't reduced much from those levels.  Taxes have gone up, the insurance has gone up, HOAs have gone up, and my monthly utilities are up. I got that $500/benefit for 12-18 months and now I'm basically back to here I started at in 2021. On a real basis I'm "winning" because I'm basically up 0% while inflation has been higher than that, but I no longer have a nominal benefit from the refinance and that will continue to get worse as costs continue to rise. 

 

Sure - on paper my net worth is up due to rising condo values. But I can't tap that to pay any of these higher living expenses. With a HELOC, high rates become  a cash drain. Selling? Lose a chunk to closing costs and can only afford something way smaller/less nice due to higher rates on mortgages. So what is that "gain" in net worth reflective of ? Nothing. It essentially basically exists solely on paper and cannot be translated to an improved quality of life. It's reflective of 'not losing more' like renters have - not an actual improvement of my absolute position. 

 

Point is, inflation is what caused rates to go to these levels this quickly. Considering the impact of that inflation, very few people are better off today than versus 2-3 years. If we stay at a place where rates significantly exceed inflation for 3-5 years, we might get to the point where rates will be beneficial. Over time compounding at higher rates that exceed inflation will offset the losses from prior assets invested @ negative real rates, but it takes time and we've only just gotten there in the last few months. I don't think we're going to to stay there for the # of years required to make people whole on the upfront damage. 

 

Edited October 9, 2023 by TwoCitiesCapital

[thepupil]

12 minutes ago, TwoCitiesCapital said:

 

That's all true nominally, but not true in "real" terms. 

 

Real incomes have been eroding, on average, since 2021 (and only grew in 2020 due to transfer payments). I'm making the most nominally I ever have. In real terms it's less than what I made in 2018. I'm in the top 5% of incomes in this country, with no kids, and even I can feel that pinch over time. 

 

Wealth might be at nominal highs, but was higher in real terms in 2019/2020. Also, that's on paper too. A 10% dip in 2024 would erase much of the current bounce just like the 2022 dip did. 

 

Homeowners? They are doing well on a relative basis - but even many of them are suffering with rising costs of carry.  Despite refinancing my condo in 2021 for 2.75% and saving ~$500/month, my total carry on my condo hasn't reduced much from those levels.  Taxes have gone up, the insurance has gone up, HOAs have gone up, and my monthly utilities are up. I got that $500/benefit for 12-18 months and now I'm basically back to here I started 2021 at in real terms of the real cost of carry. 

 

Sure - on paper my net worth is up due to rising condo values. But I can't tap that to pay any of these higher living expenses. With a HELOC, high rates become  a cash drain. Selling? Lose a chunk to closing costs and can only afford something way smaller/less nice due to higher rates on mortgages. So what is that "gain" in net worth reflective of ? Nothing. It essentially basically exists solely on paper and cannot be translated to an improved quality of life. It's reflective of 'not losing more' like renters have - not an actual improvement of my absolute position. 

 

Point is, inflation is what caused rates to go to these levels this quickly. Considering the impact of that inflation, very few people are better off today than versus 2-3 years. If we stay at a place where rates significantly exceed inflation for 3-5 years, we might get to the point where rates will be beneficial. Over time compounding at higher rates that exceed inflation will offset the losses from prior assets invested @ negative real rates, but it takes time and we've only just gotten there in the last few months. I don't think we're going to to stay there for the # of years required to make people whole on the upfront damage. 

 

 

I struggle to think of one example in my admittedly small circle of folks of this being the case. Honestly, don't know anyone who would describe what's occured thus far  as damage. 

 

maybe that's my bubble talking, but to me it's like we have much higher risk free returns (real and nominal) with almost no damage, whchi feels like a free lunch. There is no free lunch of course. 

 

 

people lie on social media, but this graph is closer to my personal experience and those around me than your characterization of "very few" being better off today than a few years ago. To me it's going to take years of malaise to unwind the glorious and ongoing boom in household wealth that's occured over last few years. 

 

 

 

 

Edited October 9, 2023 by thepupil

[TwoCitiesCapital]

17 minutes ago, thepupil said:

 

I struggle to think of one example in my admittedly small circle of folks of this being the case. Honestly, don't know anyone who would describe what's occured thus far  as damage. 

 

maybe that's my bubble talking, but to me it's like we have much higher risk free returns (real and nominal) with almost no damage, whchi feels like a free lunch. There is no free lunch of course. 

 

 

people lie on social media, but this graph is closer to my personal experience and those around me than your characterization of "very few" being better off today than a few years ago. To me it's going to take years of malaise to unwind the glorious and ongoing boom in household wealth that's occured over last few years. 

 

 

 

 

 

Losses in fixed income markets exceeds that of the 2008 global financial crisis. 

 

Real incomes, on average, are less than what they were 3-5 years ago? 

 

Real returns on nearly everyone's investment assets (savings accounts, retirement accounts, pensions, taxable stocks/bonds) are exceptionally negative. 

 

How is that 'no damage'? 

 

Rates are attractive on a forward looking basis, yes! I've been screaming that as nauseum in other threads.

 

But it's going to take a long time for new monies invested at those rates to offset the damage to everything that was invested before those rates came to be. And it was the inflation/raising of rates that did most of that damage. 

 

As far as your twitter poll? 

 

There is NO way the average person's net worth is up 2.5x - even nominally - over the last 4 years. Your chart off household net worth doesn't support it either reflecting a ~40% rise from 2019 levels - much of which is attributed to housing which can't be tapped to improve quality of life. Maybe Twitter isn't lying - but if they're not then that just paints a bleaker picture for everyone who didn't answer you poll as we know what the average was. 

 

 

Edited October 9, 2023 by TwoCitiesCapital

[thepupil]

Yea, obviously out much greater weight on the FRED data than my own poll, just saying that’s what it feels like. 

[Gregmal]

I don’t really have a useful and comparative situation but amongst those I know that do, wages are 25-40% higher from 2019. Especially if it’s blue collar. Especially if it’s an entrepreneurial position. People I know in sales made multiples of their normal wages in 20/21 which then dropped in 2022 but still like with the stimulus payments, still gave them way more than they woulda had straight lining the precovid average. 
 

Net worth? Most people have majority in their house. Say you had a normal $500k home precovid with 20% equity…your home equity today is probably 3x that.

 

So I just don’t get all this gloom. A couple years of stagnancy or modest negatives? Ok, so what. It’s not always linear. I don’t really see that as a problem or even something that’s indicative of anything bad. We ve had plenty of periods where things digest or consolidate. Even if your investments aren’t killing it, you’re still earning a wage and saving and paying down principal. 

Edited October 9, 2023 by Gregmal

[TwoCitiesCapital]

2 minutes ago, Gregmal said:

I don’t really have a useful and comparative situation but amongst those I know that do, wages are 25-40% higher from 2019. Especially if it’s blue collar. Especially if it’s an entrepreneurial position. People I know in sales made multiples of their normal wages in 20/21 which then dropped in 2022 but still like with the stimulus payments, still gave them way more than they woulda had straight lining the precovid average. 
 

Net worth? Most people have majority in their house. Say you had a normal $500k home precovid with 20% equity…your home equity today is probably 3x that.

 

So I just don’t get all this gloom. A couple years of stagnancy or modest negatives? Ok, so what. It’s not always linear. I don’t really see that as a problem or even something that’s indicative of anything bad. We ve had plenty of periods where things digest or consolidate. Even if your investments aren’t killing it, you’re still earning a wage and saving and paying down principal. 

 

It's not doom and gloom. It's factual. 

 

Aggregate statistics suggest that the average/median person's in this society are worse off financially than they were 3-years ago. 

 

I'm willing to bet the damage didn't stop @ the median and willing to extend the statement to 'most' people. 

 

I'm not saying the economy is going into a depression. There is no 'doom and gloom's prognostication above. It's simply recognizing what was/is true - most people are worse off today than 3-years ago.

 

Higher rates/inflation HASN'T been stimulative and most people have been hurt by them

 

/\/\ the only point I was making in response to Gamecocks post. 

[Gregmal]

I just have a hard time finding an actual metric that really portrays this though because the definition of “better off” is varying. Do you own a house. If yes, the answer will likely be vastly different than if you don’t. How old are you? Older, you’re probably way better off than if you’re younger. Over 3 years though, for most people, it just seems incredibly hard NOT to be substantially better off considering 1) more years of wages accumulating(even if not exactly the same in real terms), 2) mortgage and debt pay down, 3) closer to the retirement finish line and subsequent 401ks/pensions/whatever most have building up with tax advantage contribution and company match. 
 

From the ages 20-50 or so it should actually be incredibly difficult not to achieve positive annual net worth growth mainly because of the low base starting point, forced savings, company match, and then kicker if the investment vehicles do well. By this measure one would be way better off, especially after 3 years.
 

We actually just had this sort of thing at an HOA meeting and the whiny residents complained about a 4% due increase. I then pointed out the dues are rising for the same reasons your home is, and asked if anyone thinks 4% due increase is a fair trade for (just an example) 4% home appreciation….lot of those grumps then felt stupid because obviously the home value is six figures and the monthly dues are 3. Which leads back to the “better off” thing. Are we really not better off just because the same brand of chips is $2 a bag more and our insurance went up $500 annually? Or say the home went up 30% in 2021, went down 5% in 2022, and is flat in 23 but the $350 monthly dues in 2020 are now $500? Maybe taxes went up 15% too…We really getting pinched there? Like come on. 

[rohitc99]

7 minutes ago, Gregmal said:

I just have a hard time finding an actual metric that really portrays this though because the definition of “better off” is varying. Do you own a house. If yes, the answer will likely be vastly different than if you don’t. How old are you? Older, you’re probably way better off than if you’re younger. Over 3 years though, for most people, it just seems incredibly hard NOT to be substantially better off considering 1) more years of wages accumulating(even if not exactly the same in real terms), 2) mortgage and debt pay down, 3) closer to the retirement finish line and subsequent 401ks/pensions/whatever most have building up with tax advantage contribution and company match. 
 

From the ages 20-50 or so it should actually be incredibly difficult not to achieve positive annual net worth growth mainly because of the low base starting point, forced savings, company match, and then kicker if the investment vehicles do well. By this measure one would be way better off, especially after 3 years.
 

We actually just had this sort of thing at an HOA meeting and the whiny residents complained about a 4% due increase. I then pointed out the dues are rising for the same reasons your home is, and asked if anyone thinks 4% due increase is a fair trade for (just an example) 4% home appreciation….lot of those grumps then felt stupid because obviously the home value is six figures and the monthly dues are 3. Which leads back to the “better off” thing. Are we really not better off just because the same brand of chips is $2 a bag more and our insurance went up $500 annually? Or say the home went up 30% in 2021, went down 5% in 2022, and is flat in 23 but the $350 monthly dues in 2020 are now $500? Maybe taxes went up 15% too…We really getting pinched there? Like come on. 

but then where's the fun if you can't complain and whine  even if you are better off by objective measure ? 

 

I think morgen housel's recent podcast covers some of this paradox. we can be better off ourselves, but dont feel good if the elon musks or jeff bezos of the world have 100s of billions

[Dinar]

2 hours ago, thepupil said:

 

I struggle to think of one example in my admittedly small circle of folks of this being the case. Honestly, don't know anyone who would describe what's occured thus far  as damage. 

 

maybe that's my bubble talking, but to me it's like we have much higher risk free returns (real and nominal) with almost no damage, whchi feels like a free lunch. There is no free lunch of course. 

 

 

people lie on social media, but this graph is closer to my personal experience and those around me than your characterization of "very few" being better off today than a few years ago. To me it's going to take years of malaise to unwind the glorious and ongoing boom in household wealth that's occured over last few years. 

 

 

 

 

Wow, you got some pretty impressive friends.  None of my friends have seen net worth 2.5x since 12/31/2019.  Hell, I do not think anybody's net worth doubled since then.  Most people cluster around 1.5x or below.

[thepupil]

2 hours ago, Dinar said:

Wow, you got some pretty impressive friends.  None of my friends have seen net worth 2.5x since 12/31/2019.  Hell, I do not think anybody's net worth doubled since then.  Most people cluster around 1.5x or below.

 

I don't think its about impressive friends so much as where folks are in life. Mostly friends with HENRY's who bought their homes in 2018-2020. I mean my own home equity has gone from $30K ish to $600K ish ($200K starting if I asusme 20% equity instead of 2%). If I only had that and not much  savings/stocks (like lots of americans), it'd be 3x, and i live in a lagging housing market, a covid loser. 

 

If I look at one of the first results for "household nw adjusted for inflation" I get this September 2023 article that shows the metric to be pretty much at all time high, just a hair off peak and above trend. like if housholds have 98% of peak NW but can now earn 2.5% real risk free, I struggle to conclude that they are worse off, collectively, on income side unemployment is 3.8%, about best its ever been...

https://www.advisorperspectives.com/dshort/updates/2023/09/08/household-net-worth-q2-2023

 

again, I expect things to get worse, but it seems like everything is prety awesome right now and virtually no damage has occurred. along with just seeing much better than previously relative value in fixed income, it's why i'm more defensively positioned than in past, because it's just been so damn good. feels like housing prices should  come down, maybe stocks should go down, but they haven't really overall (as measured by cap weighted indices). 

Edited October 10, 2023 by thepupil

[UK]

6 hours ago, TwoCitiesCapital said:

Higher rates/inflation HASN'T been stimulative and most people have been hurt by them

 

I will not argue otherwise:). But for all the fear of what would happen, when rates went up so fast so much after such long of crazy low period, so far real economic damage seems incredibly low and the fear of it seems almost disappeared in the main asset markets, after big initial scare last year. Large companies (snp500) paying less interest than receiving (and this will continue for a while) and majority of homeowners having locked their mortgage interest very low for very long, I think maybe explains a lot of this resilience, since these two are the main assets?  Also, sure higher rates is not stimulative for many other reasons, especially for asset prices, but in real economy, somebody's interest costs is someone's interests gain, so partly it is only some kind of redistribution? But I am really surprised myself how well everything going in real economy and in market, despite this 'epic' rate increase and bondageddon. And even in countries without long fixed term mortgages, so far nothing really bad is happening, and in a few places, where housing did went lower more noticeably (Sweden, maybe Australia) it is stabilising or going up again, while rates are sill high. And the only large and obviously bad place in terms of all this is China, which paradoxically keeps lowering already low rates:). So I am really perplexed bu all this, but maybe it is just what a normal environment looks like? Meaning more or less normal rates, without anything bad happening. Like also, didn't we had dotcom with something like 4-6 per cent rates? Go figure:)

 

Edited October 10, 2023 by UK

[UK]

https://www.bloomberg.com/news/videos/2023-10-09/fed-s-logan-yields-may-mean-less-need-to-raise-rates-video

 

Blink blink?

[mattee2264]

Yup. The slightest hint of dovishness from the Fed and global markets rise around 1%. 

[mattee2264]

Household net worth clearly is way higher than pre-COVID. The stock market and the housing market are a lot higher even allowing for the 10% or so decline from all time highs. And with TINA I don't think individuals hold bonds to the extent they used to and its mostly leveraged financial institutions who took the hit. 

 

But wealth effects are pretty pathetic when it comes to stimulating consumption. The stock market has increased severalfold since the depths of the GFC and before the pandemic giveaways GDP growth was pretty anaemic. 

 

And it is ironic really that just as ZIRP had a redistributive effect benefiting middle/upper classes by increasing asset prices the normalization of ZIRP is mostly hurting the poor who are reliant on credit cards, are seeing their rents skyrocket as landlords try to cover higher mortgages while its now even harder to get on the housing ladder as banks are tightening lending standards and mortgage rates on new mortgages are sky high. And of course at the same time they are no longer getting their stimulus checks and the cost of everything that matters to them (food, shelter, energy etc) continues to be a lot higher than pre-pandemic and going higher.