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"everything is a bit oversold right now on negative emotions" No!!! The Fed is raising rates. That is reality. That is not an emotion. That is absolute econom

"everything is a bit oversold right now on negative emotions" No!!! The Fed is raising rates. That is reality. That is not an emotion. That is absolute economic fact. Inflation is high and will remain high for at least a year (maybe longer). The period from 2008 to 2022 is going to be remembered as an abnormal period when we experienced abnormally low rates. The low rates fueled speculation, and bid up certain stocks and assets. The era of low rates is over. It is possible that you might live another 100 years and never again see a 14 year stretch where rates average as low as they did from 2008 to 2022. Emotions? No. These are not emotions. Rising rates are a material fact that people need to adjust to.

arcticbull 4y ago
> Inflation is high and will remain high for at least a year (maybe longer). Is it? Month over month inflation numbers are only slightly elevated, in the annualized 3% range. This isn't particularly high - the high inflation already happened, it's over. CPI and PPI numbers both came in good. PPI of particular note, services were up 0% month over month, and commodities 1.3% for a blended 0.56% (in line with expectations). Commodities of course are likely to correct hard and fast once the geopolitical situation resolves. The market is forward looking, so don't get stuck on a dead narrative! > The era of low rates is over. I'm not sure we know this either. If the hikes play out, we'll land around what, 2-3% for the fed funds rate? That's low, historically. And that's a big if, IMO, since inflation is showing signs of being quite well controlled again, and the Fed's goal isn't to achieve a specific funds rate - just low inflation and high employment. High funds rate hurts the employment goal. It's fun to speculate but important to remember, you're just speculating. So am I. There's no certainty here, and it's pretty easy to construct a compelling counter-narrative. All we know for sure right now is the Fed funds rate is 1%.
- mcguire 4y ago
  "If the hikes play out, we'll land around what, 2-3% for the fed funds rate? That's low, historically." But it's not the 0.1% that drove money out of other asset classes (i.e. bonds) because they couldn't generate any returns.
  - arcticbull 4y ago
    Do you really see folks broadly moving from risk assets to a 2-3% interest savings account in a 3.x% inflationary environment?
    - Spivak 4y ago
      I mean this sincerely if I could just park my savings in an “exactly matches inflation” account I would be over the moon. So yeah kinda, I believe it. Terrible interest rates have genuinely caused me to have to find somewhere to put my money that isn’t a bank.
      - arcticbull 4y ago
        You can! [1] Although it is slightly less liquid, if you're treating it as an emergency savings account, it's really not a big deal. [1] https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl...
    - mcguire 4y ago
      Yes. But think institutional investors of various flavors rather than personal, individual accounts. The 2-3% is the Fed funds rate; actual rates on government and commercial bonds will be somewhat higher. (A friend recently pointed out the current 6% advertised rate on lower-grade commercial bonds.) Couple that with much lower risks (on things that aren't those 6% bonds) and it becomes a good third option for anyone whose previous choice was between -3% inflationary return on cash and stock market risks.
zippergz 4y ago
The emotion is the entirely predictable market overreaction to rate changes we all knew would eventually be coming. Market swings are drastically out of proportion to the actual impact these rate changes will have on the underlying businesses. In both directions. It's ALL emotion.
echelon 4y ago
> The era of low rates is over. It is possible that you might live another 100 years and never again see a 14 year stretch where rates average as low as they did from 2008 to 2022. Goodness, I hope not. The amount of progress we've seen in these years has been astounding. Deep learning, SpaceX, smart phones. I felt like things had gotten stagnant, then we truly started hitting our stride.
- Spivak 4y ago
  It’s not relay about how much “progress” we’ve made. It’s about employment, once we hit full employment there’s no more water you can squeeze from the rock. Which is why I’m kinda shocked that the US isn’t more gung ho about immigration because as long as there’s more useful work to do, and there is, we can fuel growth with capital plus people.
ryathal 4y ago
I think there are going to be two periods remembered in 2008-2022. The 2008-2012-15 where interest rates were made low to prevent a depression and it worked. The the 2012-15-2022 period where interest rates were kept abnormally low because politicians didn't want to be blamed for hurting the stock market causing a bubble that pops when interest rates are forced to rise.
- lamontcg 4y ago
  Nope, the fed will crank up short term rates and crater the economy to tamp down wage inflation. That will invert the yield curve and long rates (>10 years) will still remain historically low and disinflationary. And they've been playing this game since the 90s and the Greenspan fed did it first a blew up the housing bubble that popped in 2008. This cycle goes beyond the memories of Millennials. It just keeps getting worse every cycle.
  - Spivak 4y ago
    This is the bit that makes me so angry. Wages lag behind commodity prices and the correction always happens because businesses complain about labor costs (“muh jobs” despite us being at near full employment) and don’t let them catch up to CoL. It’s infuriating how much the game is rigged against laborers.
spywaregorilla 4y ago
> The era of low rates is over. It is possible that you might live another 100 years and never again see a 14 year stretch where rates average as low as they did from 2008 to 2022. The interest rate is currently at 1%. In the 80s it hit 20%. I expect it'll go negative in the next 20 years.
- mcguire 4y ago
  The inflation rate also hit 13.55% in 1980 and didn't go much below 6% between 1973-1982.
  - spywaregorilla 4y ago
    You're not wrong. I just think inflation will get within comfortable numbers again, but we'll still face recession events that cause a drive to lower the interest rates.
lamontcg 4y ago
Okay, go out and buy puts on the S&P500 that are 6 months out and see how you do. I suspect the market will bounce and blow you out. Rates are rising, but the yield curve isn't inverted yet, and the stock market is unlikely to continue this losing streak straight down. It normally doesn't happen that way. Emotions right now are very negative and a lot of people are going to make bets thats are exceedingly negative and in the 3-6 month short term period other people will make money off of them. This does not feel to me like the start of the crash, possibly not even the top, although we might go sideways until the crash. And there will be low interest rates again. The point of the Fed raising interest rates on the low end is to tank the economy hard enough to eliminate wage inflation. Given the overhang of jobs over jobseekers (and likely the effects of COVID death and disability on the workforce and boomers retiring) this one is likely to be exceedingly painful. When the Fed engineers the economy tanking that means that rates will get slashed again and >10 year bonds will not budge upwards. What it will look like when long rates go up is that wage inflation will actually take hold consistently. And low rates already blew up the dot com bubble in 2001 and the housing bubble in 2008. Read up on the Greenspan Fed. They're going to jack rates up, tank the economy and then go back to ZIRP again. Short rates != Long rates. Fed doesn't control long rates.

arcticbull 4y ago

> Inflation is high and will remain high for at least a year (maybe longer). Is it? Month over month inflation numbers are only slightly elevated, in the annualized 3% range. This isn't particularly high - the high inflation already happened, it's over. CPI and PPI numbers both came in good. PPI of particular note, services were up 0% month over month, and commodities 1.3% for a blended 0.56% (in line with expectations). Commodities of course are likely to correct hard and fast once the geopolitical situation resolves. The market is forward looking, so don't get stuck on a dead narrative! > The era of low rates is over. I'm not sure we know this either. If the hikes play out, we'll land around what, 2-3% for the fed funds rate? That's low, historically. And that's a big if, IMO, since inflation is showing signs of being quite well controlled again, and the Fed's goal isn't to achieve a specific funds rate - just low inflation and high employment. High funds rate hurts the employment goal. It's fun to speculate but important to remember, you're just speculating. So am I. There's no certainty here, and it's pretty easy to construct a compelling counter-narrative. All we know for sure right now is the Fed funds rate is 1%.

mcguire 4y ago
"If the hikes play out, we'll land around what, 2-3% for the fed funds rate? That's low, historically." But it's not the 0.1% that drove money out of other asset classes (i.e. bonds) because they couldn't generate any returns.
- arcticbull 4y ago
  Do you really see folks broadly moving from risk assets to a 2-3% interest savings account in a 3.x% inflationary environment?
  - Spivak 4y ago
    I mean this sincerely if I could just park my savings in an “exactly matches inflation” account I would be over the moon. So yeah kinda, I believe it. Terrible interest rates have genuinely caused me to have to find somewhere to put my money that isn’t a bank.
    - arcticbull 4y ago
      You can! [1] Although it is slightly less liquid, if you're treating it as an emergency savings account, it's really not a big deal. [1] https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl...
  - mcguire 4y ago
    Yes. But think institutional investors of various flavors rather than personal, individual accounts. The 2-3% is the Fed funds rate; actual rates on government and commercial bonds will be somewhat higher. (A friend recently pointed out the current 6% advertised rate on lower-grade commercial bonds.) Couple that with much lower risks (on things that aren't those 6% bonds) and it becomes a good third option for anyone whose previous choice was between -3% inflationary return on cash and stock market risks.

zippergz 4y ago

The emotion is the entirely predictable market overreaction to rate changes we all knew would eventually be coming. Market swings are drastically out of proportion to the actual impact these rate changes will have on the underlying businesses. In both directions. It's ALL emotion.

echelon 4y ago

> The era of low rates is over. It is possible that you might live another 100 years and never again see a 14 year stretch where rates average as low as they did from 2008 to 2022. Goodness, I hope not. The amount of progress we've seen in these years has been astounding. Deep learning, SpaceX, smart phones. I felt like things had gotten stagnant, then we truly started hitting our stride.

Spivak 4y ago
It’s not relay about how much “progress” we’ve made. It’s about employment, once we hit full employment there’s no more water you can squeeze from the rock. Which is why I’m kinda shocked that the US isn’t more gung ho about immigration because as long as there’s more useful work to do, and there is, we can fuel growth with capital plus people.

ryathal 4y ago

I think there are going to be two periods remembered in 2008-2022. The 2008-2012-15 where interest rates were made low to prevent a depression and it worked. The the 2012-15-2022 period where interest rates were kept abnormally low because politicians didn't want to be blamed for hurting the stock market causing a bubble that pops when interest rates are forced to rise.

lamontcg 4y ago
Nope, the fed will crank up short term rates and crater the economy to tamp down wage inflation. That will invert the yield curve and long rates (>10 years) will still remain historically low and disinflationary. And they've been playing this game since the 90s and the Greenspan fed did it first a blew up the housing bubble that popped in 2008. This cycle goes beyond the memories of Millennials. It just keeps getting worse every cycle.
- Spivak 4y ago
  This is the bit that makes me so angry. Wages lag behind commodity prices and the correction always happens because businesses complain about labor costs (“muh jobs” despite us being at near full employment) and don’t let them catch up to CoL. It’s infuriating how much the game is rigged against laborers.

spywaregorilla 4y ago

> The era of low rates is over. It is possible that you might live another 100 years and never again see a 14 year stretch where rates average as low as they did from 2008 to 2022. The interest rate is currently at 1%. In the 80s it hit 20%. I expect it'll go negative in the next 20 years.

mcguire 4y ago
The inflation rate also hit 13.55% in 1980 and didn't go much below 6% between 1973-1982.
- spywaregorilla 4y ago
  You're not wrong. I just think inflation will get within comfortable numbers again, but we'll still face recession events that cause a drive to lower the interest rates.

lamontcg 4y ago

Okay, go out and buy puts on the S&P500 that are 6 months out and see how you do. I suspect the market will bounce and blow you out. Rates are rising, but the yield curve isn't inverted yet, and the stock market is unlikely to continue this losing streak straight down. It normally doesn't happen that way. Emotions right now are very negative and a lot of people are going to make bets thats are exceedingly negative and in the 3-6 month short term period other people will make money off of them. This does not feel to me like the start of the crash, possibly not even the top, although we might go sideways until the crash. And there will be low interest rates again. The point of the Fed raising interest rates on the low end is to tank the economy hard enough to eliminate wage inflation. Given the overhang of jobs over jobseekers (and likely the effects of COVID death and disability on the workforce and boomers retiring) this one is likely to be exceedingly painful. When the Fed engineers the economy tanking that means that rates will get slashed again and >10 year bonds will not budge upwards. What it will look like when long rates go up is that wage inflation will actually take hold consistently. And low rates already blew up the dot com bubble in 2001 and the housing bubble in 2008. Read up on the Greenspan Fed. They're going to jack rates up, tank the economy and then go back to ZIRP again. Short rates != Long rates. Fed doesn't control long rates.