5 ms·

Why can't low interest rates be good for tech stocks, but also all the innovation in the 90s be good for tech stocks? It appears like you're saying that only o

Why can't low interest rates be good for tech stocks, but also all the innovation in the 90s be good for tech stocks? It appears like you're saying that only one of these can possibly be good for tech stocks. Why not both? How do you know tech stocks couldn't have done much better in the 90s under different monetary conditions (ZIRP and a Federal Deficit of 35% of GDP)?

deleted 5y ago
[deleted]
paulpauper 5y ago
speculative bubbles are independent of monetary and fiscal policy. if someone thinks they can make 100% returns on their investment,what difference does 0 vs 2% interest rate makes? Look at the housing market in the 2000s , which surged despite interest rates being high.
- gruez 5y ago
  >speculative bubbles are independent of monetary and fiscal policy If the fed pumps a few trillion dollars into the market and causes everything to go up in price, and bystanders look at that and decide to buy in, then that seems like that the fed's action caused the speculative bubble.
  - lottin 5y ago
    Actually the Fed doesn't pump dollars into the market. The fed buys bonds in the open market with newly created deposits. This alters the composition of balance sheets of financial institutions but not the size.
    - gruez 5y ago
      >Actually the Fed doesn't pump dollars into the market Except when they did. Random google search: >The central bank began purchasing ETFs such as the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Vanguard Intermediate-Term Corporate Bond ETF (VCIT) in early May last year. However, even if all they do is buy bonds, money is fungible so those purchases will still spill over to other markets as investors chase for yields. If you pump a few trillion dollars into the bond market it's unrealistic to assume that it'll stay contained to just the bond market.
      - lottin 5y ago
        If you are a bond holder, and the Fed buys $1000 worth of bonds from you for $1000, how is this causing everything to go up in price? Notice that your purchasing power is exactly the same before and after the purchase.
        gruez 5y ago
        >If you are a bond holder, and the Fed buys $1000 worth of bonds from you for $1000 Then what, do you just keep that $1000 in cash while inflation slowly eats away at it? No, you'll invest it in something else (eg. stocks), so now the market for that has an extra $1000 injected into it.
        lottin 5y ago
        You already had a bond.
        gruez 5y ago
        That's generally the precondition for selling a bond. I don't see how that's relevant to my previous comment though.
        lottin 5y ago
        You said you'd use the cash to buy an investment because you don't want to hold cash, but you already had an investment —the bond— which you sold for cash. That doesn't make a whole lot of sense, does it?
        gruez 5y ago
        >but you already had an investment —the bond— which you sold for cash. And then what? After you sold that bond you're going to stop investing?
        5y ago

deleted 5y ago

[deleted]

paulpauper 5y ago

speculative bubbles are independent of monetary and fiscal policy. if someone thinks they can make 100% returns on their investment,what difference does 0 vs 2% interest rate makes? Look at the housing market in the 2000s , which surged despite interest rates being high.

gruez 5y ago
>speculative bubbles are independent of monetary and fiscal policy If the fed pumps a few trillion dollars into the market and causes everything to go up in price, and bystanders look at that and decide to buy in, then that seems like that the fed's action caused the speculative bubble.
- lottin 5y ago
  Actually the Fed doesn't pump dollars into the market. The fed buys bonds in the open market with newly created deposits. This alters the composition of balance sheets of financial institutions but not the size.
  - gruez 5y ago
    >Actually the Fed doesn't pump dollars into the market Except when they did. Random google search: >The central bank began purchasing ETFs such as the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the Vanguard Intermediate-Term Corporate Bond ETF (VCIT) in early May last year. However, even if all they do is buy bonds, money is fungible so those purchases will still spill over to other markets as investors chase for yields. If you pump a few trillion dollars into the bond market it's unrealistic to assume that it'll stay contained to just the bond market.
    - lottin 5y ago
      If you are a bond holder, and the Fed buys $1000 worth of bonds from you for $1000, how is this causing everything to go up in price? Notice that your purchasing power is exactly the same before and after the purchase.
      - gruez 5y ago
        >If you are a bond holder, and the Fed buys $1000 worth of bonds from you for $1000 Then what, do you just keep that $1000 in cash while inflation slowly eats away at it? No, you'll invest it in something else (eg. stocks), so now the market for that has an extra $1000 injected into it.
        lottin 5y ago
        You already had a bond.
        gruez 5y ago
        That's generally the precondition for selling a bond. I don't see how that's relevant to my previous comment though.
        lottin 5y ago
        You said you'd use the cash to buy an investment because you don't want to hold cash, but you already had an investment —the bond— which you sold for cash. That doesn't make a whole lot of sense, does it?
        gruez 5y ago
        >but you already had an investment —the bond— which you sold for cash. And then what? After you sold that bond you're going to stop investing?
        5y ago