2021 - Is inflation finally back in the conversation?

[Satoshi 129]

 

[workswithseed 2099]

[Satoshi 129]

 

[Neonmoon 38129]

Some of the people you follow are scary crazy 

[Satoshi 129]

1 hour ago, Neonmoon said:

Some of the people you follow are scary crazy 

I’m going to share a secret with you. I almost never share tweets from people I follow. Doxxing precautions and all. 

[Satoshi 129]

On 11/9/2021 at 5:21 PM, washparkhorn said:

I am not seeing many signs of consumer driven demand-pull inflation, are you?

 

 

[Satoshi 129]

https://www.bridgewater.com/its-mostly-a-demand-shock-not-a-supply-shock-and-its-everywhere

another breakdown of supply vs demand components of inflation.  

[washparkhorn 9939]

2 hours ago, Satoshi said:

 

2 hours ago, Satoshi said:

https://www.bridgewater.com/its-mostly-a-demand-shock-not-a-supply-shock-and-its-everywhere

another breakdown of supply vs demand components of inflation.  

From the second opinion piece, quite a bold assertion and assumption:

"supply of almost everything is at all-time highs"

[jimmyjazz 45898]

58 minutes ago, washparkhorn said:

From the second opinion piece, quite a bold assertion and assumption:

"supply of almost everything is at all-time highs"

That seems quite at odds with a lot of data I've seen over the past couple of months.

[elfenix 34229]

44 minutes ago, jimmyjazz said:

That seems quite at odds with a lot of data I've seen over the past couple of months.

supply and inventory being two different things.  tsmc, for example, is running at higher capacity than ever and still can't get enough out the door. 

Edited November 15, 2021 by elfenix

[Satoshi 129]

European perspective from a noted criminal and one of the 10 or so more powerful and influential people in the world. 
 

 

[washparkhorn 9939]

GR Horn - she may be correct.

The way this economy is structured, with it's dependence on international capital, -- well,  it almost acts like a poison pill for the rest of our economy if subsidies/free money/low interest rates are yanked. 

[Satoshi 129]

23 minutes ago, washparkhorn said:

GR Horn - she may be correct.

The way this economy is structured, with it's dependence on international capital, -- well,  it almost acts like a poison pill for the rest of our economy if subsidies/free money/low interest rates are yanked. 

Oh I agree. That’s why I think we’re stuck. 
 

It’s why Powell et al keep saying it’s transitory or otherwise downplaying it. Jawboning to try to keep expectations under control because there’s not a lot of tightening that can be done. 

Edited November 16, 2021 by Satoshi

[washparkhorn 9939]

10 hours ago, Satoshi said:

Oh I agree. That’s why I think we’re stuck. 
 

It’s why Powell et al keep saying it’s transitory or otherwise downplaying it. Jawboning to try to keep expectations under control because there’s not a lot of tightening that can be done. 

The data and the tools confirm his read. I don't believe he is using monetary policy to keep that pump flowing. Supply lines have an opportunity to smooth out - and should.  (cost-push inflation). Remember, he is a respected republican pick. He's not a maverick.

As for the $120 billion a month given to the financial markets, reducing that amount to $105 billion certainly should have ripple effects. It's a deliberate brake on inflation. If it has no effect on inflation, we know that free money is feeding overstuffed coffers (and asset bubbles). This first $15 billion reduction in the flow may be priced in to the markets addicted to its presence.

Kudos to those who profited by following the Fed. The wealthy certainly did - as designed -  to recompense them for the Fed forcing them to move higher on the risk scale. Snowflakes everywhere.

Edited November 16, 2021 by washparkhorn

[Satoshi 129]

 

[washparkhorn 9939]

To translate the negative interest rate issue above, may I present BlackRock's narrative on this phenomenon - and the drivers:

https://www.blackrock.com/us/individual/insights/negative-real-rates (Note: not dark mode compatible):

Spoiler

Real interest rates on Treasuries have been strongly negative throughout 2021. But why do investors keep piling into these negative “real” yielding assets? BlackRock’s systematic investment experts decode the markets to reveal why rates are so disconnected from fundamental values and what it means for your bond portfolio.

Understanding real interest rates

First off, what are real rates and why do they matter? The rates or yields you see on a bond like the 10-year U.S. Treasury are typically “nominal” rates. “Real” rates are the interest rates that an investor receives after adjusting for inflation—in this sense they are the “real” yield you receive from owning the asset. To illustrate, a Treasury bond that pays 5% in nominal yield per year when inflation is 3% per year would have a real rate of 2%. So, the real rate is determined by the combination of the nominal level of rates and the level of inflation.

The real economics aren’t adding up

Why are markets so focused on real rates now? It’s no secret that nominal rates have been declining for a long time. COVID accelerated that trend as investors flocked to safe haven assets like Treasuries during the crisis. This pushed nominal yields down to record lows, but inflation expectations collapsed as well. In early 2021, as economies opened up and economic growth restarted, demand for Treasuries waned and nominal yields rose. But now, with economies still chugging along and yield-eating inflation rising, investors are piling back into Treasuries. The result is real yield dynamics plunging to record lows in the U.S. with the 10-year U.S. Treasury yield around 1.3%, inflation expectations around 2.3% and a real yield at -1.0%.

Real yields have been pushing more and more negative
10-yr U.S. Treasury yield, inflation, and real yield.

 

 

/blk-one-assets/cache-1631121905000/images/media-bin/web/shared/insights/negative-real-rates-image3.jpeg

Source: Bloomberg, as of 9/6/2021.

Once again, at current levels, investors who are buying Treasuries now are essentially expected to earn NEGATIVE 1.0% in real yield annually. The economics just don’t make sense.

Decoding the “real” disconnect in rates and inflation:

So, if the economics of Treasuries have been clearly distorted, who is continuing to gobble up these negative real yielding assets? While continued concerns over the spread of the virus may be having an effect, a number of “non-economic” investors are currently creating excess demand for longer-dated Treasuries and driving nominal rates down. Let’s take a closer look at who these investors are:

• Foreign investor demand: As the U.S. economy has reopened, imports of goods from other countries has increased significantly. Many of these exporting companies and countries have bought U.S. debt to build up their foreign exchange reserves. Additionally, while nominal yields are low in the U.S., they are even lower in other parts of the developed world. Many foreign investors have been picking up U.S. Treasuries because of their (relatively) high yield.

• Large institutions are rebalancing: The low level of rates is forcing large institutional investors like pension funds to rebalance their portfolios. Without getting into the nitty gritty of pension accounting, in essence, many pension funds must buy Treasuries to fund longer-term liabilities and cash flows that they must pay in the future. When rates fall, their calculated level of liabilities rises, forcing them to buy more Treasuries to offset their future liabilities. The result is steady demand from some of the world’s largest investors.

• Momentum players are piling in: The Treasury trading ecosystem now has a large number of algorithmic-based investors that hedge portfolios by responding to the direction of rates quickly. Our research shows that these momentum traders have recently shifted from going short (selling U.S. Treasuries), to going long (buying U.S. Treasuries). Once again, adding incremental demand.

What is the catalyst for real rates to move up?

One thing each of these investor types has in common is that none of them are buying Treasuries because they are cheaply priced or have a strong long-term return potential.

The catalyst for higher nominal rates (and as a result real rates) will not be the fact that they are out of sync with the current macro story. This is already well-known by the market. Instead it may come down to a combination of factors that may startle the investors who have been steadily grazing on Treasury bonds. It could be upside surprises in job growth, even more profound moves in fiscal spending, sooner-than-expected rate hikes by the Fed, or the realization that “transitory” inflation might be much longer than expected.

In our view, the most powerful catalyst may be a starkly positive real growth surprise that will finally move the non-economic players—resulting in the real rate economics to matter once again and significantly elevating nominal rates. However, without significant growth surprises, it will be hard to move the excess demand for longer safe assets that is being created by large excess liquidity in the financial system.

What do negative real rates mean for bond investors?

Low nominal rates in Treasuries results in low yields everywhere else in fixed income markets—creating a major problem in the face of higher inflation. The most recent reading of U.S. inflation in July was 4.3% as measured by Core CPI. To put that into context, if we look at the Bloomberg Barclays Multiverse Index as a proxy for the global bond market, only 3.7% of bonds are yielding more than 4% in nominal terms. While this level inflation is likely to abate, it’s a clear headwind for fixed income returns right now.

Viewing inflation across a more realistic 5-year timeframe shows just how high of a hurdle inflation poses for nominal yields. The chart below outlines the real yields of different fixed income asset classes based on the current nominal yield minus the market implied rate of inflation over the next five years of 2.5%.

Real yields are a real problem for fixed income
Nominal yields and real yields by sector

 

 

/blk-one-assets/cache-1631121905000/images/media-bin/web/shared/insights/negative-real-rates-image2.jpeg

Source: Bloomberg, as of 8/31/21.. Real rate represented by nominal yield-to-maturity minus the 5-yr inflation breakeven rate of 2.5%. “U.S Agg” represented by the Bloomberg Barclays U.S Aggregate Bond Index. “U.S Mortgages” represented by the Bloomberg Barclays U.S MBS Index. “IG Corps” represented by the Bloomberg Barclays Investment Grade Corporate Index. “U.S HY” represented by the Bloomberg Barclays High Yield Corporate Index. “$ EM Debt” represented by the J.P. Morgan EMBI Global Core Index.

High quality bonds such as Treasuries, mortgages, and investment grade corporates all result in strongly negative annual rates of real yield. Looking at the Aggregate Index, which is commonly used as the core of investors’ bond portfolios, the expected real yield is -1.1% over the next 5 years. In order to gain any positive real yield, investors must look at lower quality holdings such as U.S. high yield corporate bonds or dollar-denominated emerging market debt to gain low single-digit yields.

Clearly there are some hard choices ahead for bond investors. Doing nothing and staying in the safety of high quality bonds results in negative real yields. On the other hand, reaching out into lower credit quality securities like high yield and emerging market debt comes with higher default risk, more volatility, and potentially greater correlation to equities—all for a meager level of positive real yield.

Bottom line

Real rates are likely to remain low in the absence of a sudden growth surprise with some room to slowly rise as non-economic demand forces abate slightly. For investors who care about bond economics and the “real” rate of return, many have turned to finding higher nominal yields in riskier areas of the fixed income market. This strategy comes at the cost of sacrificing the safety of bond allocations and reduces diversification potential if equity markets sell off. To that end, the real problem of negative real yields looks like it is here to stay and makes rethinking the 60/40 portfolio framework more imperative than ever.

 

[Satoshi 129]

10 hours ago, washparkhorn said:

To translate the negative interest rate issue above, may I present BlackRock's narrative on this phenomenon - and the drivers:

https://www.blackrock.com/us/individual/insights/negative-real-rates (Note: not dark mode compatible):

  Reveal hidden contents

Real interest rates on Treasuries have been strongly negative throughout 2021. But why do investors keep piling into these negative “real” yielding assets? BlackRock’s systematic investment experts decode the markets to reveal why rates are so disconnected from fundamental values and what it means for your bond portfolio.

Understanding real interest rates

First off, what are real rates and why do they matter? The rates or yields you see on a bond like the 10-year U.S. Treasury are typically “nominal” rates. “Real” rates are the interest rates that an investor receives after adjusting for inflation—in this sense they are the “real” yield you receive from owning the asset. To illustrate, a Treasury bond that pays 5% in nominal yield per year when inflation is 3% per year would have a real rate of 2%. So, the real rate is determined by the combination of the nominal level of rates and the level of inflation.

The real economics aren’t adding up

Why are markets so focused on real rates now? It’s no secret that nominal rates have been declining for a long time. COVID accelerated that trend as investors flocked to safe haven assets like Treasuries during the crisis. This pushed nominal yields down to record lows, but inflation expectations collapsed as well. In early 2021, as economies opened up and economic growth restarted, demand for Treasuries waned and nominal yields rose. But now, with economies still chugging along and yield-eating inflation rising, investors are piling back into Treasuries. The result is real yield dynamics plunging to record lows in the U.S. with the 10-year U.S. Treasury yield around 1.3%, inflation expectations around 2.3% and a real yield at -1.0%.

Real yields have been pushing more and more negative
10-yr U.S. Treasury yield, inflation, and real yield.

 

 

/blk-one-assets/cache-1631121905000/images/media-bin/web/shared/insights/negative-real-rates-image3.jpeg

Source: Bloomberg, as of 9/6/2021.

Once again, at current levels, investors who are buying Treasuries now are essentially expected to earn NEGATIVE 1.0% in real yield annually. The economics just don’t make sense.

Decoding the “real” disconnect in rates and inflation:

So, if the economics of Treasuries have been clearly distorted, who is continuing to gobble up these negative real yielding assets? While continued concerns over the spread of the virus may be having an effect, a number of “non-economic” investors are currently creating excess demand for longer-dated Treasuries and driving nominal rates down. Let’s take a closer look at who these investors are:

• Foreign investor demand: As the U.S. economy has reopened, imports of goods from other countries has increased significantly. Many of these exporting companies and countries have bought U.S. debt to build up their foreign exchange reserves. Additionally, while nominal yields are low in the U.S., they are even lower in other parts of the developed world. Many foreign investors have been picking up U.S. Treasuries because of their (relatively) high yield.

• Large institutions are rebalancing: The low level of rates is forcing large institutional investors like pension funds to rebalance their portfolios. Without getting into the nitty gritty of pension accounting, in essence, many pension funds must buy Treasuries to fund longer-term liabilities and cash flows that they must pay in the future. When rates fall, their calculated level of liabilities rises, forcing them to buy more Treasuries to offset their future liabilities. The result is steady demand from some of the world’s largest investors.

• Momentum players are piling in: The Treasury trading ecosystem now has a large number of algorithmic-based investors that hedge portfolios by responding to the direction of rates quickly. Our research shows that these momentum traders have recently shifted from going short (selling U.S. Treasuries), to going long (buying U.S. Treasuries). Once again, adding incremental demand.

What is the catalyst for real rates to move up?

One thing each of these investor types has in common is that none of them are buying Treasuries because they are cheaply priced or have a strong long-term return potential.

The catalyst for higher nominal rates (and as a result real rates) will not be the fact that they are out of sync with the current macro story. This is already well-known by the market. Instead it may come down to a combination of factors that may startle the investors who have been steadily grazing on Treasury bonds. It could be upside surprises in job growth, even more profound moves in fiscal spending, sooner-than-expected rate hikes by the Fed, or the realization that “transitory” inflation might be much longer than expected.

In our view, the most powerful catalyst may be a starkly positive real growth surprise that will finally move the non-economic players—resulting in the real rate economics to matter once again and significantly elevating nominal rates. However, without significant growth surprises, it will be hard to move the excess demand for longer safe assets that is being created by large excess liquidity in the financial system.

What do negative real rates mean for bond investors?

Low nominal rates in Treasuries results in low yields everywhere else in fixed income markets—creating a major problem in the face of higher inflation. The most recent reading of U.S. inflation in July was 4.3% as measured by Core CPI. To put that into context, if we look at the Bloomberg Barclays Multiverse Index as a proxy for the global bond market, only 3.7% of bonds are yielding more than 4% in nominal terms. While this level inflation is likely to abate, it’s a clear headwind for fixed income returns right now.

Viewing inflation across a more realistic 5-year timeframe shows just how high of a hurdle inflation poses for nominal yields. The chart below outlines the real yields of different fixed income asset classes based on the current nominal yield minus the market implied rate of inflation over the next five years of 2.5%.

Real yields are a real problem for fixed income
Nominal yields and real yields by sector

 

 

/blk-one-assets/cache-1631121905000/images/media-bin/web/shared/insights/negative-real-rates-image2.jpeg

Source: Bloomberg, as of 8/31/21.. Real rate represented by nominal yield-to-maturity minus the 5-yr inflation breakeven rate of 2.5%. “U.S Agg” represented by the Bloomberg Barclays U.S Aggregate Bond Index. “U.S Mortgages” represented by the Bloomberg Barclays U.S MBS Index. “IG Corps” represented by the Bloomberg Barclays Investment Grade Corporate Index. “U.S HY” represented by the Bloomberg Barclays High Yield Corporate Index. “$ EM Debt” represented by the J.P. Morgan EMBI Global Core Index.

High quality bonds such as Treasuries, mortgages, and investment grade corporates all result in strongly negative annual rates of real yield. Looking at the Aggregate Index, which is commonly used as the core of investors’ bond portfolios, the expected real yield is -1.1% over the next 5 years. In order to gain any positive real yield, investors must look at lower quality holdings such as U.S. high yield corporate bonds or dollar-denominated emerging market debt to gain low single-digit yields.

Clearly there are some hard choices ahead for bond investors. Doing nothing and staying in the safety of high quality bonds results in negative real yields. On the other hand, reaching out into lower credit quality securities like high yield and emerging market debt comes with higher default risk, more volatility, and potentially greater correlation to equities—all for a meager level of positive real yield.

Bottom line

Real rates are likely to remain low in the absence of a sudden growth surprise with some room to slowly rise as non-economic demand forces abate slightly. For investors who care about bond economics and the “real” rate of return, many have turned to finding higher nominal yields in riskier areas of the fixed income market. This strategy comes at the cost of sacrificing the safety of bond allocations and reduces diversification potential if equity markets sell off. To that end, the real problem of negative real yields looks like it is here to stay and makes rethinking the 60/40 portfolio framework more imperative than ever.

 

What do we think are the effects of the 60/40 portfolio going out of favor? Just move more into equities? Or is there another uncorrelated asset that should appreciate with inflation? That would be interesting. 

[Parliament 14254]

12 hours ago, washparkhorn said:

To translate the negative interest rate issue above, may I present BlackRock's narrative on this phenomenon - and the drivers:

https://www.bla

15 hours ago, Satoshi said:

 

ckrock.com/us/individual/insights/negative-real-rates (Note: not dark mode compatible):

  Reveal hidden contents

Real interest rates on Treasuries have been strongly negative throughout 2021. But why do investors keep piling into these negative “real” yielding assets? BlackRock’s systematic investment experts decode the markets to reveal why rates are so disconnected from fundamental values and what it means for your bond portfolio.

Understanding real interest rates

First off, what are real rates and why do they matter? The rates or yields you see on a bond like the 10-year U.S. Treasury are typically “nominal” rates. “Real” rates are the interest rates that an investor receives after adjusting for inflation—in this sense they are the “real” yield you receive from owning the asset. To illustrate, a Treasury bond that pays 5% in nominal yield per year when inflation is 3% per year would have a real rate of 2%. So, the real rate is determined by the combination of the nominal level of rates and the level of inflation.

The real economics aren’t adding up

Why are markets so focused on real rates now? It’s no secret that nominal rates have been declining for a long time. COVID accelerated that trend as investors flocked to safe haven assets like Treasuries during the crisis. This pushed nominal yields down to record lows, but inflation expectations collapsed as well. In early 2021, as economies opened up and economic growth restarted, demand for Treasuries waned and nominal yields rose. But now, with economies still chugging along and yield-eating inflation rising, investors are piling back into Treasuries. The result is real yield dynamics plunging to record lows in the U.S. with the 10-year U.S. Treasury yield around 1.3%, inflation expectations around 2.3% and a real yield at -1.0%.

Real yields have been pushing more and more negative
10-yr U.S. Treasury yield, inflation, and real yield.

 

 

/blk-one-assets/cache-1631121905000/images/media-bin/web/shared/insights/negative-real-rates-image3.jpeg

Source: Bloomberg, as of 9/6/2021.

Once again, at current levels, investors who are buying Treasuries now are essentially expected to earn NEGATIVE 1.0% in real yield annually. The economics just don’t make sense.

Decoding the “real” disconnect in rates and inflation:

So, if the economics of Treasuries have been clearly distorted, who is continuing to gobble up these negative real yielding assets? While continued concerns over the spread of the virus may be having an effect, a number of “non-economic” investors are currently creating excess demand for longer-dated Treasuries and driving nominal rates down. Let’s take a closer look at who these investors are:

• Foreign investor demand: As the U.S. economy has reopened, imports of goods from other countries has increased significantly. Many of these exporting companies and countries have bought U.S. debt to build up their foreign exchange reserves. Additionally, while nominal yields are low in the U.S., they are even lower in other parts of the developed world. Many foreign investors have been picking up U.S. Treasuries because of their (relatively) high yield.

• Large institutions are rebalancing: The low level of rates is forcing large institutional investors like pension funds to rebalance their portfolios. Without getting into the nitty gritty of pension accounting, in essence, many pension funds must buy Treasuries to fund longer-term liabilities and cash flows that they must pay in the future. When rates fall, their calculated level of liabilities rises, forcing them to buy more Treasuries to offset their future liabilities. The result is steady demand from some of the world’s largest investors.

• Momentum players are piling in: The Treasury trading ecosystem now has a large number of algorithmic-based investors that hedge portfolios by responding to the direction of rates quickly. Our research shows that these momentum traders have recently shifted from going short (selling U.S. Treasuries), to going long (buying U.S. Treasuries). Once again, adding incremental demand.

What is the catalyst for real rates to move up?

One thing each of these investor types has in common is that none of them are buying Treasuries because they are cheaply priced or have a strong long-term return potential.

The catalyst for higher nominal rates (and as a result real rates) will not be the fact that they are out of sync with the current macro story. This is already well-known by the market. Instead it may come down to a combination of factors that may startle the investors who have been steadily grazing on Treasury bonds. It could be upside surprises in job growth, even more profound moves in fiscal spending, sooner-than-expected rate hikes by the Fed, or the realization that “transitory” inflation might be much longer than expected.

In our view, the most powerful catalyst may be a starkly positive real growth surprise that will finally move the non-economic players—resulting in the real rate economics to matter once again and significantly elevating nominal rates. However, without significant growth surprises, it will be hard to move the excess demand for longer safe assets that is being created by large excess liquidity in the financial system.

What do negative real rates mean for bond investors?

Low nominal rates in Treasuries results in low yields everywhere else in fixed income markets—creating a major problem in the face of higher inflation. The most recent reading of U.S. inflation in July was 4.3% as measured by Core CPI. To put that into context, if we look at the Bloomberg Barclays Multiverse Index as a proxy for the global bond market, only 3.7% of bonds are yielding more than 4% in nominal terms. While this level inflation is likely to abate, it’s a clear headwind for fixed income returns right now.

Viewing inflation across a more realistic 5-year timeframe shows just how high of a hurdle inflation poses for nominal yields. The chart below outlines the real yields of different fixed income asset classes based on the current nominal yield minus the market implied rate of inflation over the next five years of 2.5%.

Real yields are a real problem for fixed income
Nominal yields and real yields by sector

 

 

/blk-one-assets/cache-1631121905000/images/media-bin/web/shared/insights/negative-real-rates-image2.jpeg

Source: Bloomberg, as of 8/31/21.. Real rate represented by nominal yield-to-maturity minus the 5-yr inflation breakeven rate of 2.5%. “U.S Agg” represented by the Bloomberg Barclays U.S Aggregate Bond Index. “U.S Mortgages” represented by the Bloomberg Barclays U.S MBS Index. “IG Corps” represented by the Bloomberg Barclays Investment Grade Corporate Index. “U.S HY” represented by the Bloomberg Barclays High Yield Corporate Index. “$ EM Debt” represented by the J.P. Morgan EMBI Global Core Index.

High quality bonds such as Treasuries, mortgages, and investment grade corporates all result in strongly negative annual rates of real yield. Looking at the Aggregate Index, which is commonly used as the core of investors’ bond portfolios, the expected real yield is -1.1% over the next 5 years. In order to gain any positive real yield, investors must look at lower quality holdings such as U.S. high yield corporate bonds or dollar-denominated emerging market debt to gain low single-digit yields.

Clearly there are some hard choices ahead for bond investors. Doing nothing and staying in the safety of high quality bonds results in negative real yields. On the other hand, reaching out into lower credit quality securities like high yield and emerging market debt comes with higher default risk, more volatility, and potentially greater correlation to equities—all for a meager level of positive real yield.

Bottom line

Real rates are likely to remain low in the absence of a sudden growth surprise with some room to slowly rise as non-economic demand forces abate slightly. For investors who care about bond economics and the “real” rate of return, many have turned to finding higher nominal yields in riskier areas of the fixed income market. This strategy comes at the cost of sacrificing the safety of bond allocations and reduces diversification potential if equity markets sell off. To that end, the real problem of negative real yields looks like it is here to stay and makes rethinking the 60/40 portfolio framework more imperative than ever.

 

 

[Cheeseweasel 26438]

3 hours ago, Satoshi said:

What do we think are the effects of the 60/40 portfolio going out of favor?

When bond rates are negative?

[Satoshi 129]

 

[washparkhorn 9939]

1 hour ago, Satoshi said:

 

To be fair, the Fed did not give away money to humans. 

The only way for humans to cash in on the Fed "free money" was to "Follow the Fed" - which the surly collective embraced enthusiastically.

The Fed is still pumping free money to non-humans - but rather than $120 billion a month in free money, it will be $105 billion, then $90 billion a month, . . .. -  some say the tapering has already priced into the market.

If the taper has not been priced in - good luck to us all. 

[Satoshi 129]

21 minutes ago, washparkhorn said:

To be fair, the Fed did not give away money to humans. 

The only way for humans to cash in on the Fed "free money" was to "Follow the Fed" - which the surly collective embraced enthusiastically.

The Fed is still pumping free money to non-humans - but rather than $120 billion a month in free money, it will be $105 billion, then $90 billion a month, . . .. -  some say the tapering has already priced into the market.

If the taper has not been priced in - good luck to us all. 

i have a feeling they meant the government giving away free money to people. In any event “free” money was, and is still, being handed out. 

[elfenix 34229]

definitely the fed:

 

[NotActuallyALonghorn 4976]

Alright folks. If you are going to post a chart or graph, it better damn well have labels. I'm just going to have to assume that the Y axis is related to Penelope Whitherspoon's deranged negging crusades. 

[jimmyjazz 45898]

34 minutes ago, NotActuallyALonghorn said:

Alright folks. If you are going to post a chart or graph, it better damn well have labels. I'm just going to have to assume that the Y axis is related to Penelope Whitherspoon's deranged negging crusades. 

Is the X axis your menstrual cycle?

[Satoshi 129]

39 minutes ago, NotActuallyALonghorn said:

Alright folks. If you are going to post a chart or graph, it better damn well have labels. I'm just going to have to assume that the Y axis is related to Penelope Whitherspoon's deranged negging crusades. 

It’s number of rescue cats residing in her home 

[NotActuallyALonghorn 4976]

10 minutes ago, jimmyjazz said:

Is the X axis your menstrual cycle?

I mean, a menstrual cycle pretty well follows a timeline, so...

[Nice Guy Eddie 13509]

What’s the biggest shame with this inflation is that the cause (low interest rates) of the inflation has made many people a lot of money. Most of it on the stock market or increased land/house value. Sure they’re annoyed about higher prices at the store or restaurant but higher prices haven’t impacted their purchasing.

on the other hand, we have people that haven’t benefited much from lower interest rates but now they’re getting killed with higher prices taking more of the income.

it’s heartless but the American way of the last 40 years is to not be poor.

[Satoshi 129]

1 hour ago, Nice Guy Eddie said:

What’s the biggest shame with this inflation is that the cause (low interest rates) of the inflation has made many people a lot of money. Most of it on the stock market or increased land/house value. Sure they’re annoyed about higher prices at the store or restaurant but higher prices haven’t impacted their purchasing.

on the other hand, we have people that haven’t benefited much from lower interest rates but now they’re getting killed with higher prices taking more of the income.

it’s heartless but the American way of the last 40 years is to not be poor.

I agree with all of this but some people here say rich people are upset about inflation and that’s why it’s getting play in the media. It’s really good for the little guy. Literally the exact opposite opinion. Like so many things today.  

[Nice Guy Eddie 13509]

39 minutes ago, Satoshi said:

I agree with all of this but some people here say rich people are upset about inflation and that’s why it’s getting play in the media. It’s really good for the little guy. Literally the exact opposite opinion. Like so many things today.  

I’m sure there are many well-off people complaining about inflation but they haven’t necessarily changed their purchasing behavior.

[elfenix 34229]

3 hours ago, Nice Guy Eddie said:

the cause (low interest rates)

you're gonna need to show your work on that. 

[Satoshi 129]

 

[tbone_ 14115]

What’s the biggest shame with this inflation is that the cause (low interest rates) of the inflation has made many people a lot of money. Most of it on the stock market or increased land/house value. Sure they’re annoyed about higher prices at the store or restaurant but higher prices haven’t impacted their purchasing.
on the other hand, we have people that haven’t benefited much from lower interest rates but now they’re getting killed with higher prices taking more of the income.
it’s heartless but the American way of the last 40 years is to not be poor.

It’s usually best to own assets

[Nice Guy Eddie 13509]

On 11/21/2021 at 11:36 PM, elfenix said:

you're gonna need to show your work on that. 

I don't think it's a stretch to assume that low interest rates have created a tremendous new amount of money in the economy. Part of the reason that the Fed lowers interest rates is to super charge the economy. We're now on year 12 (13?) of extremely low, nonmarket-based interest rates.  The bill for this behavior will come due at some point. 

We should want a gradual removal of govt controls to allow the private sector to adjust. Instead I fear that we will experience a drastic shock. And we're seeing that now to some extent. The public wants to buy items at quantities that the private sector can't produce. Suppliers will ask for higher prices. Which they should.

 

[elfenix 34229]

explain this then:

[Wulaw Horn 19069]

On 11/21/2021 at 8:00 PM, Nice Guy Eddie said:

What’s the biggest shame with this inflation is that the cause (low interest rates) of the inflation has made many people a lot of money. Most of it on the stock market or increased land/house value. Sure they’re annoyed about higher prices at the store or restaurant but higher prices haven’t impacted their purchasing.

on the other hand, we have people that haven’t benefited much from lower interest rates but now they’re getting killed with higher prices taking more of the income.

it’s heartless but the American way of the last 40 years is to not be poor.

 

4 hours ago, Nice Guy Eddie said:

I don't think it's a stretch to assume that low interest rates have created a tremendous new amount of money in the economy. Part of the reason that the Fed lowers interest rates is to super charge the economy. We're now on year 12 (13?) of extremely low, nonmarket-based interest rates.  The bill for this behavior will come due at some point. 

We should want a gradual removal of govt controls to allow the private sector to adjust. Instead I fear that we will experience a drastic shock. And we're seeing that now to some extent. The public wants to buy items at quantities that the private sector can't produce. Suppliers will ask for higher prices. Which they should.

 

So I think there’s a lot to agree with here, I will push back just a little bit on one thing- your use of “non market” based. I don’t think that’s correct. I don’t think rates are artificially low. I think the world is getting flatter through technology, more people are entering labor market (both locally through migration and globally through tech innovations) and expanding freedom globally (compared to say- the Cold War) and this is driving down wages while increasing productivity which should in turn lower prices- as economic growth gets difficult. When that happens interest rates are lower. I think the fed is more worried, in a general sense, about deflation than inflation. Deflation should scare the shut out of everyone and that’s why they want inflation (but at a manageable 2%). I’m taking broadly in trend terms over the past 30-40 years. 
But yeah- 2 good posts. 

[Wulaw Horn 19069]

4 hours ago, elfenix said:

explain this then:

Quantities of alcohol produced while watching Texas football games?  Shits given when we lose?  Number of times blowing a second half lead in embarrassing fashion? 
I give up- what is the chart purporting to describe? 

Edited November 23, 2021 by Wulaw Horn

[NotActuallyALonghorn 4976]

If you can't explain it you are obviously out of the loop.

[elfenix 34229]

while low interest rates may be a necessary condition for some sorts of inflation, that alone isn't sufficient because we've had low interest rates for quite some time, so doesn't explain why now?  there's better explanations such as consumers whipsawing their buying behavior from services to goods.  and, again, half of observed inflation right now is in cars/trucks, which do have supply constraints (both new, which can't get necessary parts, and used in part because so few new cars were made last year), and gas, which is set at the whims of foreign nation states. 

[Wulaw Horn 19069]

47 minutes ago, elfenix said:

while low interest rates may be a necessary condition for some sorts of inflation, that alone isn't sufficient because we've had low interest rates for quite some time, so doesn't explain why now?  there's better explanations such as consumers whipsawing their buying behavior from services to goods.  and, again, half of observed inflation right now is in cars/trucks, which do have supply constraints (both new, which can't get necessary parts, and used in part because so few new cars were made last year), and gas, which is set at the whims of foreign nation states. 

And domestic energy policy. And government taxation and a bunch of other things as well on gas price at the pump. I don’t know how much the price of crude plays at the price at the pump but my sense would be less than 50%. IOW if they sold oil for fee my bet is it might still cost over $3.00 a gallon in SF or the other places they are paying $6 ish a gallon for it right now. And of course all the down stream affects that has on other consumer goods, inflation wise. 
here’s another way to look at if interest rates are really artificially low or market based- the price of a jumbo mortgage, on average, has crossed over and gone lower than the price of a similar mortgage that’s government backed. That’s not typical. Sometimes you see spreads that would be 1/2 a point. The jumbo is a pretty market based rate as there is no federal guarantee on backing that like a guideline based loan. That’s a really small example that I watch all the time and am sort of scratching my head about. I know there’s some upstream effects on that pricing but it’s an interesting comparator. 
again, my only push back was slight against the idea that rates haven’t been market based and are being kept artificially low by policy. I’m not saying that’s wrong just I don’t know that it’s right either. 
 

[elfenix 34229]

41 minutes ago, Wulaw Horn said:

And domestic energy policy. And government taxation and a bunch of other things as well on gas price at the pump. I don’t know how much the price of crude plays at the price at the pump but my sense would be less than 50%. IOW if they sold oil for fee my bet is it might still cost over $3.00 a gallon in SF or the other places they are paying $6 ish a gallon for it right now.

basically none of which has changed markedly in the last few months.  and all of which would be swamped by however saudi arabia, in particular, decides to discipline the market.  it decided to put fracking out of business a couple years back, remember that?  investors don't want to get burned again by throwing a bunch of money down a well only to lose it when the sheiks decide to play hardball. 

irregardless, that doesn't have much of anything to do with the fed setting interest rates, so is a moo point.

Edited November 24, 2021 by elfenix

[Wulaw Horn 19069]

4 minutes ago, elfenix said:

basically none of which has changed markedly in the last few months.  and all of which would be swamped by however saudi arabia, in particular, decides to discipline the market.  it decided to put fracking out of business a couple years back, remember that?  investors don't want to get burned again by throwing a bunch of money down a well only to lose it when the sheiks decide to play hardball. 

irregardless, that doesn't have much of anything to do with the fed setting interest rates, so is a moo point.

Just like a cow makes man. Just like a cow makes. 

[NotActuallyALonghorn 4976]

If it's a polled breed it doesn't have any moo points.

Edited November 24, 2021 by NotActuallyALonghorn

[Parliament 14254]

Hey Guys.  Less logic, more "Brrrrrrrrr."  K?

[Cheeseweasel 26438]

12 hours ago, Parliament said:

Hey Guys.  Less logic, more "Brrrrrrrrr."  K?

Quantitatively Ease me more, daddy. 

[workswithseed 2099]

1 hour ago, Cheeseweasel said:

Quantitatively Ease me more, daddy. 

 

[Satoshi 129]

@Neonmoon

 

[Satoshi 129]

 

[Satoshi 129]

convenient

[tbone_ 14115]

Paid $3.89 for regular unleaded in Scottsdale today. Just a data point.

$4.29 today. Same pump.