4 ms·
Interest rates. The unprecedented, ~10 year sugar high of near-zero (or in some cases, below zero) interest rates is finally ending, and there's a massive defla
by timr 9y ago
Interest rates. The unprecedented, ~10 year sugar high of near-zero (or in some cases, below zero) interest rates is finally ending, and there's a massive deflation of non-monetary assets underway, across the global economy.
If you only follow the bay area tech industry, you'd be excused for believing that this bubble isn't structural -- that it's just the inevitable consequence of the maturing role of the internet and technology in our daily lives. But assets everywhere are inflated in value. From Tesla shares to vacation homes to startup stock to blockchain tulips, the global pool of money has been desperately chasing speculative returns for years, and that process is finally beginning to unwind.
- ransom1538 8y agoSure. But. Where do you put the money? Gold? Silver? Or bank accounts? Macys? Maybe oil is the future?
- frockington 8y agoShort - mid term bonds aren't very correlated with increasing interest rates. I normally loathe gold/silver but commodities tend to do well in a rising rate environment.
- deleted 8y ago[deleted]
- 45h34jh53k4j 8y agoBitcoin.
- deepnotderp 8y ago> Issue caused by centralized monetary policy. > Suggests decentralized alternative. > Gets downvoted into oblivion Look crypto isn't perfect, and it's highly volatile, so maybe putting all your life savings into bitcoin isn't the best idea, but knee jerk reactions like this don't help with substantive discussion.
- lkrubner 8y agoThere have been dozens of substantive debates on Hacker News in recent weeks, regarding Bitcoin. And the smart people say it’s a scam. And we can’t have this debate in every single thread. At this point, it seems reasonable to simply downvote the people who are saying unreasonable things.
- sjg007 8y agobitcoin seems stable at $8k.. why is that?
- timr 8y agoThe good thing about rising interest rates is that you have a lot of "safe" options -- bonds, CDs, savings accounts, etc. Rates are rising across the board. Stocks are in for a rough ride, but if you're into a diversified market for the long term, probably as good as ever.
- sjg007 8y agobitcoin.
- aero142 8y agoAnyone have an idea what happens to home prices as rates rise. Prices going down is a simple answer but with people leveraged to the hilt to buy expensive single family homes, it seems more complicated. Underwater mortgages get complicated quickly as we saw in 2008.
- charlesdm 8y agoWhat will happen? Defaults, prices drop, some investors come bottom fishing for deals, the cycle repeats once again.
- timr 8y agoMy answer is always this: if you live in it, it isn't an investment. Stop worrying about price appreciation, and focus on cost/benefit. It doesn't matter how underwater your mortgage is unless you need to sell out of it. If you don't think you're going to live somewhere for 10+ years, or if it's more expensive to buy then rent on your preferred timescale, then don't get a mortgage.
- georgeecollins 8y agoMarkets will get sticky as people are reluctant to sell for a loss and fewer people can buy as interest rates go up. In markets like LA, NY, SF the high end will still probably be propped up by foreign "investors".
- troydavis 8y agoWe’re missing 3 ingredients from 2008: adjustable-rate mortgages, high risk mortgages (0 down, interest-only, no doc, etc.), and unemployment. Most mortgages written in the last 5 years - that is, the ones which might be underwater - are fixed rate and have meaningful down payments. Even if unemployment rises[1], as long as homeowners still have the same monthly payments, and have a meaningful down payment, they’d stay in their homes as long as possible. In cities where appreciation has been strong, I think the likely outcome is a small (5-15%) decline over a few years, then flat appreciation (ie, a decline in real dollars) for a few more years, and relatively few sales because most folks would stay rather than sell while underwater. This may decrease geographic mobility. Basically, when rates rise closer to historical norms, 5 years of appreciation is already priced in and anyone who doesn’t need to move doesn’t move. As with most assets, don’t put yourself in a position where you absolutely need to sell. [1] If mortgage rates go up significantly, employment is still probably relatively low or the Federal Reserve would loosen its monetary policy and that would affect the mortgage market. I’m ignoring the wildcard case where the Fed’s monetary policy moves no longer have any impact.
- moorhosj 8y agoI also think this has an impact on inflated asset/stock prices: The total number of U.S. exchange-listed companies peaked near 8,800 in 1997 and has since sunk to 4,900 as of year-end 2012, according to data furnished by Strategas Group. https://finance.yahoo.com/blogs/michael-santoli/the-stock-market-is--shrinking---despite-record-high-indexes-171141756.html https://finance.yahoo.com/blogs/michael-santoli/the-stock-ma...
- georgeecollins 8y agoI agree but I do believe cash generating assets (or cash flow generating) will be hit less hard.
- sjg007 8y agoIt's not inflated... just no buyers at the valuation they want. They can sell at a lower price.. Same as a developer building a house. The might list at $500k but they could still sell at $400k and not lose money.