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While this make sense, I must put my skeptical-of-all-economics hat on when I see this: > People can see this easily in the case of bonds, whose value is norm
by adrianratnapala 8y ago
While this make sense, I must put my skeptical-of-all-economics hat on when I see this:
> People can see this easily in the case of bonds, whose value is normally affected only by interest rates. In [other cases], other very important variables are almost always at work, and that means the effect of interest rate changes is usually obscured.
In the case of bonds, it is just a mathematical identity, since the the interest rate can be nothing other than a relation between the face value and current price.
In all the non-tautological cases, Buffet admits that the effect is "obscured". Which is to say that it is just another reasonable sounding humanities-theory that is difficult to check empirically.
- vivekd 8y agoIs it really difficult to check empirically? It seems to be as simple as finding the number of investors and the amounts invested and checking that historically against the interest rate while controlling for things like population and GDP (or some other measure for disposable income available to be invested) I guess it might be difficult to get numbers on how many people are playing the stock market and by how much, but you might be able to get that data from individual brokerages or looking at the number of brokerages and hedge-funds and checking their publicly filed financial reports.
- hueving 8y agoThe interest rate set by the government is not the interest rate on the 2/5/10/30 US government issued bonds.