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I feel like I understand a bit about the current monetary policy (US and some of the world) vs the debt market. I was puzzled by the Fed's interest rate 0 unti

I feel like I understand a bit about the current monetary policy (US and some of the world) vs the debt market. I was puzzled by the Fed's interest rate 0 until 2023 - until I realized that the LIBOR to SOFR transition had been pushed, in part, to 2023 (https://www.reuters.com/article/usa-fed-libor-idUSL1N2IG12W https://www.reuters.com/article/usa-fed-libor-idUSL1N2IG12W). Chances that it finishes out in 2023 is slim, but it's something. Stocks are not a replacement for bonds...and bonds with <1% (https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/i...) aren't even a good investment anymore, pushing this stock bubble higher. The people tripling down on long-term trades like Tesla for retirement are idiots banking on the good times going on for decades. Remember 2000s when there was a media push for "Generation Equity" - WIRED frontpage? Yeah, that was the same thinking. There isn't enough money in the world or GDP for a generation to cover a 100Trillion debt market once it matures (which would be 100T+rate the purchased bonds bear). If you want to do short selling or short-term trading, that's great, but these are these infantile investors that are going to see their investments wiped out in a correction.

beezle 6y ago
I think it is important to grok that what people today consider 'investing' is what most not that many years ago considered 'highly speculative trading.'
tomp 6y ago
> There isn't enough money in the world or GDP for a generation to cover a 100Trillion debt market once it matures (which would be 100T+rate the purchased bonds bear). Not sure you're making a good case against equities here (unless I misunderstand)... if the world cannot produce GDP to cover $100T of debt, there's only one realistic solution: inflation. In case of inflation, equities make a good investment (as they represent real value, not nominal value such as debit).
- Supermancho 6y ago
  Inflation has already taken hold in some areas of the markets, eg commodities and consumer goods (https://fred.stlouisfed.org/series/CPIAUCSL https://fred.stlouisfed.org/series/CPIAUCSL). That's why the world govt/banks (as if the govt's understand much of this) have enacted deflationary forces of 0% interest rates and bonds of sub 1% and it will fall until the bond market drops out and starts the cascade of defaults. That just manages to slow the current debt bubble and until the debt defaults start, inflation doesn't shrink it. The equity prices have never changed into an increase in consumer liquidity (people are still getting paid the same) while the purchasing power of the dollar has been halved since 2010. Eventually the equities will default or mature (depending on structure) and who has the cash to cover that? Institutions will continue to become insolvent as they are unable to collect on debt, to pay back debt. It's possible (like in Venezuela) the biggest and baddest will survive to remove a couple zeros and declare "the big reset" making it all reasonable again.
  - dash2 6y ago
    Now I'm confused. 0% interest rates should be inflationary, not deflationary, no? "Inflation doesn't shrink debt?" Surely it does. Equities will default or mature - erm, equities don't do either? To convince the reader you really know what's going on, it would help to be precise with your language.
    - deleted 6y ago
      [deleted]
    - Supermancho 6y ago
      > "Inflation doesn't shrink debt?" Surely it does. I don't see it that way, because it isn't working that way. The reduced interest rate has not resulted in additional lending, but in additional asset acquisition, mostly more debt (deflationary). This is mostly due to nobody borrowing and the uncertainty leading to people using money to pay down debts, (deflationary). Inflation can makes debt more manageable, but that's if you can get ahold of the liquidity. The liquidity doesn't exist and the printing of money via bonds, doesnt make the problem better because the dollars you get from the fed are at the price of more debt. The presence of inflation today doesn't equal reduced debt today. > Equities will default or mature The vast majority of the market overvaluation is in companies with massive leverage (investment in a type of financial debt - either bonds and mortgages) or are banks that have nothing but that to carry their share price. The modern equity prices are basically tied to the load of debt they have acquired. If you don't see things this way, that's fine. That's what it all looks like to me.

beezle 6y ago

I think it is important to grok that what people today consider 'investing' is what most not that many years ago considered 'highly speculative trading.'

tomp 6y ago

> There isn't enough money in the world or GDP for a generation to cover a 100Trillion debt market once it matures (which would be 100T+rate the purchased bonds bear). Not sure you're making a good case against equities here (unless I misunderstand)... if the world cannot produce GDP to cover $100T of debt, there's only one realistic solution: inflation. In case of inflation, equities make a good investment (as they represent real value, not nominal value such as debit).

Supermancho 6y ago
Inflation has already taken hold in some areas of the markets, eg commodities and consumer goods (https://fred.stlouisfed.org/series/CPIAUCSL https://fred.stlouisfed.org/series/CPIAUCSL). That's why the world govt/banks (as if the govt's understand much of this) have enacted deflationary forces of 0% interest rates and bonds of sub 1% and it will fall until the bond market drops out and starts the cascade of defaults. That just manages to slow the current debt bubble and until the debt defaults start, inflation doesn't shrink it. The equity prices have never changed into an increase in consumer liquidity (people are still getting paid the same) while the purchasing power of the dollar has been halved since 2010. Eventually the equities will default or mature (depending on structure) and who has the cash to cover that? Institutions will continue to become insolvent as they are unable to collect on debt, to pay back debt. It's possible (like in Venezuela) the biggest and baddest will survive to remove a couple zeros and declare "the big reset" making it all reasonable again.
- dash2 6y ago
  Now I'm confused. 0% interest rates should be inflationary, not deflationary, no? "Inflation doesn't shrink debt?" Surely it does. Equities will default or mature - erm, equities don't do either? To convince the reader you really know what's going on, it would help to be precise with your language.
  - deleted 6y ago
    [deleted]
  - Supermancho 6y ago
    > "Inflation doesn't shrink debt?" Surely it does. I don't see it that way, because it isn't working that way. The reduced interest rate has not resulted in additional lending, but in additional asset acquisition, mostly more debt (deflationary). This is mostly due to nobody borrowing and the uncertainty leading to people using money to pay down debts, (deflationary). Inflation can makes debt more manageable, but that's if you can get ahold of the liquidity. The liquidity doesn't exist and the printing of money via bonds, doesnt make the problem better because the dollars you get from the fed are at the price of more debt. The presence of inflation today doesn't equal reduced debt today. > Equities will default or mature The vast majority of the market overvaluation is in companies with massive leverage (investment in a type of financial debt - either bonds and mortgages) or are banks that have nothing but that to carry their share price. The modern equity prices are basically tied to the load of debt they have acquired. If you don't see things this way, that's fine. That's what it all looks like to me.