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This article completely misses the mark. Low and negative interest rates make stocks and real estate more attractive than bonds and housing loans cheaper incre

This article completely misses the mark. Low and negative interest rates make stocks and real estate more attractive than bonds and housing loans cheaper increasing demand for homes. This new phenomenon with FAANG and tech stocks that don’t require capital to grow, so their high (albeit reasonable) valuations weigh on the market and market sentiment. Now add in pandemic stimulus. Remember moral hazard from the Great Recession? Now firms are doubly confident of bailouts when things go south. It’s wishful thinking to think it’s permanent or even long term. Jerome Powell is already talking about raising rates. We’ve had low rates for the past decade. I’m a bull, but who knows when rates will rise. the market is dynamic and to think anything is permanent or predictable is wrong-headed. It’s always good to have some cash if and when there’s a major correction.

an_opabinia 5y ago
> FAANG and tech stocks that don’t require capital to grow Facebook lobbied intensely for TikTok to be banned, which went nowhere, and its discounted threat price was $55b, which went nowhere, and also, Facebook could not afford to buy them at their real price. Attention is zero sum, and the big tech cos will eventually need capital, maybe even next year, to make the acquisitions they have been putting off.
- nradov 5y ago
  Which specific large acquisitions do they need to make?
  - FractalHQ 5y ago
    My bet says Amazon buys both Microsoft and Canada next year before lobbying to ban water not ordered via Amazon Prime.
chrisco255 5y ago
They talked about possibly raising rates in 2023. In my opinion, they're bluffing. They can't do what Paul Volcker did in the 80s and raise rates to stave off inflation without crashing the stock and real estate markets deeply. They can't raise rates without triggering a deep, deep recession and taking everyone's retirement fund out with it.
- refurb 5y ago
  Your assumption is they can keep rates low while inflation goes wild. That’s not an option either.
  - MattGaiser 5y ago
    Wild? No. 3-5% a year? I think that would be very doable.
  - chrisco255 5y ago
    I think they've run out of options and are between a rock and a hard place.
- arcturus17 5y ago
  > without crashing the stock and real estate markets deeply And, perhaps more immediately, without paying abhorrent interests on public debt?
  - imtringued 5y ago
    We are talking about inflation causing an increase in interest rates. Public debt is not a problem in this scenario because the real interest rate doesn't change that much. However, inflation will kill the bank accounts of rich corporations and encourage them to invest their money.
- imtringued 5y ago
  That's why you should have inflation every year instead of concentrating 20 years of inflation into one. (what you get when you do the deflation thing) In practice rates will be raised but but carefully enough that we still end up with 0% real interest.
  - rdtwo 5y ago
    Aren’t real rates like -2% right now?

an_opabinia 5y ago

> FAANG and tech stocks that don’t require capital to grow Facebook lobbied intensely for TikTok to be banned, which went nowhere, and its discounted threat price was $55b, which went nowhere, and also, Facebook could not afford to buy them at their real price. Attention is zero sum, and the big tech cos will eventually need capital, maybe even next year, to make the acquisitions they have been putting off.

nradov 5y ago
Which specific large acquisitions do they need to make?
- FractalHQ 5y ago
  My bet says Amazon buys both Microsoft and Canada next year before lobbying to ban water not ordered via Amazon Prime.

chrisco255 5y ago

They talked about possibly raising rates in 2023. In my opinion, they're bluffing. They can't do what Paul Volcker did in the 80s and raise rates to stave off inflation without crashing the stock and real estate markets deeply. They can't raise rates without triggering a deep, deep recession and taking everyone's retirement fund out with it.

refurb 5y ago
Your assumption is they can keep rates low while inflation goes wild. That’s not an option either.
- MattGaiser 5y ago
  Wild? No. 3-5% a year? I think that would be very doable.
- chrisco255 5y ago
  I think they've run out of options and are between a rock and a hard place.
arcturus17 5y ago
> without crashing the stock and real estate markets deeply And, perhaps more immediately, without paying abhorrent interests on public debt?
- imtringued 5y ago
  We are talking about inflation causing an increase in interest rates. Public debt is not a problem in this scenario because the real interest rate doesn't change that much. However, inflation will kill the bank accounts of rich corporations and encourage them to invest their money.
imtringued 5y ago
That's why you should have inflation every year instead of concentrating 20 years of inflation into one. (what you get when you do the deflation thing) In practice rates will be raised but but carefully enough that we still end up with 0% real interest.
- rdtwo 5y ago
  Aren’t real rates like -2% right now?