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There's been a grand fiscal policy experiment over the last 12 years unlike anytime before. It has resulted in every asset class losing price discovery mechanis

by sub7 7y ago

There's been a grand fiscal policy experiment over the last 12 years unlike anytime before. It has resulted in every asset class losing price discovery mechanisms and basically becoming untethered from fundamentals. Nobody knows how this will end, or when. Could be months, could be decades.

core-questions 7y ago
Relax and enjoy the MMT, friend. Worked for the Romans! https://static1.squarespace.com/static/5386693ce4b05d183bf2dd16/t/53aca2bce4b0dcbdb88aad86/1403822780199/Malchow_QuantitativeEasingofRome.pdf https://static1.squarespace.com/static/5386693ce4b05d183bf2d...
- xchaotic 7y ago
  Worked for hundreds of years, right?
  - sub7 7y ago
    Worked for half a century, then slow decline.
totalZero 7y ago
I agree with your comment about the fiscal policy experiment, but not with your stated timeline of 12 years. QE was a smart way out of the crisis, but we didn't tighten as we ought've when the economy got up to speed about five years ago. I think of QE as the choke on a carbureted engine; once you get things heated up, you should lean out the mixture. Meanwhile, Bernanke is still out here talking about QE as a forever tool for the Fed. Fundamentals try to explain and predict valuations; they don't dictate them. Only supply and demand, within the constraints of the market, can control valuations. And to be pedantic, price discovery is faster and tighter today than ever before, and that's part of the reason we have so many lively derivatives markets. The problem, as you aptly point out, is that this price does not fit any model that is blind to the rates component of equity demand. The word "untethered" is totally appropriate for what's happening in the market; there's a disconnect between price action and corporate earnings growth because there's demand for equities in general when everything else yields almost nothing.
- sub7 7y ago
  They tried to tighten 5 years ago - the market tanked and they immediately reversed. This is for infinity, can only result in external/internal war.

by sub7 7y ago

core-questions 7y ago

Relax and enjoy the MMT, friend. Worked for the Romans! https://static1.squarespace.com/static/5386693ce4b05d183bf2dd16/t/53aca2bce4b0dcbdb88aad86/1403822780199/Malchow_QuantitativeEasingofRome.pdf https://static1.squarespace.com/static/5386693ce4b05d183bf2d...

xchaotic 7y ago
Worked for hundreds of years, right?
- sub7 7y ago
  Worked for half a century, then slow decline.

totalZero 7y ago

I agree with your comment about the fiscal policy experiment, but not with your stated timeline of 12 years. QE was a smart way out of the crisis, but we didn't tighten as we ought've when the economy got up to speed about five years ago. I think of QE as the choke on a carbureted engine; once you get things heated up, you should lean out the mixture. Meanwhile, Bernanke is still out here talking about QE as a forever tool for the Fed. Fundamentals try to explain and predict valuations; they don't dictate them. Only supply and demand, within the constraints of the market, can control valuations. And to be pedantic, price discovery is faster and tighter today than ever before, and that's part of the reason we have so many lively derivatives markets. The problem, as you aptly point out, is that this price does not fit any model that is blind to the rates component of equity demand. The word "untethered" is totally appropriate for what's happening in the market; there's a disconnect between price action and corporate earnings growth because there's demand for equities in general when everything else yields almost nothing.

sub7 7y ago
They tried to tighten 5 years ago - the market tanked and they immediately reversed. This is for infinity, can only result in external/internal war.