From the NYT:
Home Buyers Are Eager but Sellers Are Scarce, Creating ‘Real Gridlock’
The housing market typically comes to life in spring, when buyers emerge in the warmer weather. This year, the market appears stuck in a deep freeze, and the biggest culprit is a lack of sellers, housing experts say.
There is interest among buyers — mortgage applications were up 10 percent in March from the month before — but the number of homes for sale is low. The mismatch is caused in part by homeowners who are inclined to sell but are sitting on the sidelines, scared off by the steep prices and mortgage rates that they would face as buyers.
More than three-quarters of sellers in a recent survey by Realtor.com said they felt “locked in” to their home by their own low mortgage rate. More than half said they planned to wait until rates fell before putting their homes on the market.
Sandy Robinson, a 71-year-old retired teacher in Fairhaven, Mass., is daunted by the market. She would like to sell her two-bedroom townhouse but is worried about being able to afford a new home. “It’s a little scary now, and you have to be careful,” she said.
A stalemate has mired the housing market, when it should be more robust. Sales of existing homes in March were down 22 percent from the year before, according to the National Association of Realtors. The inventory of unsold homes on the market at the end of March totaled 2.6 months’ supply, meaning it would take that long to sell them. Inventory is typically twice that amount to balance supply and demand.
“We are in a real gridlock situation,” said Robert Frick, corporate economist at the Navy Federal Credit Union. “It’s going to be a tortuous process to unfreeze the market and take a long time to get back to a normal supply-and-demand situation.”
First
second
Sell her 2 BR townhouse at 71 year’s old?
Could they not find a better example? Where is she going anyway?
Feel like there is some real backlash brewing around the “boomer-end-of-life-care-wealth-extraction” business models, notably from the younger generations that will likely see potential inheritances redirected elsewhere.
re” “see potential inheritances redirected elsewhere.”
Yes cultural enrichment via expensive cruises. A friend of mine mother is on a cruise binge now. She had all kinds of titanium hip and knee replacements and is 100% ambulatory, probably can run up stairs with all those metal parts. The cruise crowd on social media are her friends now, since well everyone her age in their 80s are taking dirt naps or doddering around a long term care home now, the trips she goes on are very expensive trips too.
Speaking of wealth extraction and housing, the millennials will be inheriting lots of homes. Those homes will be put up for sale. Why buy now when you can just wait for the coming Boomer die off an housing glut?
“”A study shows that millennials will hold five times as much wealth as they have today and the group is anticipated to inherit over $68 trillion from their baby boomer elders by the year 2030,” Morley Winograd, author of three books on the millennial generation, told Newsweek, quoting a 2019 research by Coldwell Banker.”
https://www.newsweek.com/boomers-millennials-transfer-wealth-future-1795099
As usual, it will mostly be the lazy rich kids getting wealthier further amplifying the separation of generational haves vs. have nots. My bro in law has barely worked over last 25 years, waiting for his parents money, homes in Potomac and Nantucket. He would not take a lowly lunch pail type job because blood too blue.
“It will mostly be white, wealthier millennials benefiting from this massive transfer of wealth. “
I got realtor propaganda pamphlet in the mail yesterday. I usually throw in the trash but this one was multifold, elegant from William Raveis. They spent some money. The advice? People will bid well over-ask, come with cash or even waive mortgage contingency…but you only have until June. Once June comes, they predict that market will turn and buyers will disappear. In essence, it was the usual scare tactic to bolster spring market. Sell now or lose high price forever..these people play both sides. Of course, their list of sales only included 6 and all in Southport or Greenfield hills. The most exclusive ” horse farm” areas of town. Not sure why they sent it to me. I live among teachers and retired garbage workers. The kind that both came to my door with Easter candy for my kids.
This is the way. Demographics matter.
Real estate was always a winner because you had massive population inflation….everyone that purchased would win under these conditions. Now that will change in the coming decades unless immigration or people start having babies.
Juice Box says:
May 2, 2023 at 8:01 am
Speaking of wealth extraction and housing, the millennials will be inheriting lots of homes. Those homes will be put up for sale. Why buy now when you can just wait for the coming Boomer die off an housing glut?
My parents blew through all their wealth in their 60s. There is nothing to inherit.
I would imagine places that are dense population centers will be okay. Less dense locations might very well just die off if we don’t see population growth increasing again.
Look at Italy….some towns are paying people to come and live there. Maybe can be a case study for here eventually.
Why Is Inflation So Sticky? It Could Be Corporate Profits
Some companies might have been raising prices faster than their costs have increased
https://www.wsj.com/articles/why-is-inflation-so-sticky-it-could-be-corporate-profits-b78d90b7?mod=hp_lead_pos2
From the horse’s mouth…pay attention especially to that last paragraph. Openly admitting to price gouging. This is your inflation. Greed. Improve those margins! Sorry, we have to raise prices….the supply chain. Got it!
“Jan Philipp Jenisch, chief executive of construction-materials maker Holcim, said on a recent earnings call: “We are in that inflationary environment already for almost two years now…We have done the pricing in a very proactive way, so that our results aren’t suffering. On the contrary, they are improving the margins.”
One puzzle is why consumers have played ball. Usually, economists would expect any business that raised its prices to lose customers to competitors that don’t, or not by as much.
But these aren’t normal times. In rare situations—such as an economy’s reopening after a pandemic—widespread knowledge that costs are rising allows businesses to raise their prices knowing that their competitors will act in the same way, according to a paper by Isabella Weber, assistant professor of economics at the University of Massachusetts, Amherst, and her colleague, Evan Wasner.
That is a pattern the two economists said has played out in an analysis of recent earning calls in which executives at U.S. businesses present their financial results to analysts.
“We do have to think about pricing differently,” said Ms. Weber. “A cost shock, or bottlenecks can create an implicit agreement among firms that raise their prices, so they can expect others to act likewise.”
Consumers have also been unusually willing to accept higher prices lately. Paul Donovan, chief economist at UBS Global Wealth Management, said businesses are betting that consumers will go along because they know about supply bottlenecks and higher energy prices.”
“Elsewhere, the desire to boost margins, rather than just cover increased costs, appears to be one reason why food prices have continued to rise rapidly in Europe.
Much of the surge in food prices since the middle of last year stems from higher costs, particularly for energy, since most food production is quite energy-intensive. But economists at insurance company Allianz have calculated that about 10% of the rise reflects the search for higher profits. They suggest that is possible because key parts of the food-supply chain are dominated by a small number of firms.
“There is not enough competition in the food sector, especially in distribution,” said Ludovic Subran, chief economist at Allianz.”
“Not all businesses are opportunistically boosting their margins and Ms. Weber said that when some do, it can cause problems for others that are closer to the final consumer and are at greatest risk of facing a backlash.
Over recent months, Germany’s largest retailer, Edeka, has complained about the pricing behavior of its suppliers of branded goods and has stopped stocking some of their products.
“We call on the branded-products industry to live up to its responsibility and stop artificially driving up inflation,” said Edeka’s CEO Markus Mosa. “
“My parents blew through all their wealth in their 60s. There is nothing to inherit.”
https://youtu.be/Q5sRrUU85is?t=210
Feel like there is some real backlash brewing around the “boomer-end-of-life-care-wealth-extraction” business models.
Just wait till Medicare goes bankrupt. Your house will pay for two total joint replacements.
No research, no hard analysis, just gut….today feels different though….may be heading into a sell in May and go-away scenario…..obviously let’s see what effect JPow has tomorrow, maybe it’s just positioning in front of that….bids disappearing, spreads widening….
Online dating bio.
“Have good job with Government health insurance.”
Seems like the majority on this blog are attached to the Government healthcare teet either by themselves or through their spouses. Just sayin’
Left,
From that WSJ article I shared above. Tells you all you need to know. This is the recession signal. This is why that recession has not happened yet. It was pushed out by the ability of businesses to pad profits with raising prices. Eventually, you get to a point where you can no longer do that….we are there.
“For Mr. Donovan at UBS, the period of profit-driven inflation might be coming to an end, in part because of rising public scrutiny.
“We are probably at a point where companies may be reassessing whether to push this,” he said. “A reputation for being poor value for money stays for a long time.””
leftwing says:
May 2, 2023 at 10:23 am
No research, no hard analysis, just gut….today feels different though….may be heading into a sell in May and go-away scenario…..obviously let’s see what effect JPow has tomorrow, maybe it’s just positioning in front of that….bids disappearing, spreads widening….
I hope J. Powell has the balls of Volker. The best course is another .25 increase this week.
Inflation is not tamed yet. Housing market is sending the signal. If the US is really going through a re-shoring of some of the supply chain to North America, you have a lot of inflationary pressure coming down the line. The federal government in DC will keep spending.
J. Powell is the one that needs to be an adult. We’ll see if he has a steady hand tomorrow.
“Got my first $250 monthly interest from my iPhone bank account”
My Primis account with 240K in it is still paying 5.03%. That’s $1,000 in interest a month no-risk. I feel like I am back in 7th grade watching my lawnmowing/driveway shoveling money grow in my first passbook saving account.
CIT bank is doing 4.75% for a savings account minimum 50K I think.
Sofi (which I’ve had since taking advantage of a huge promo still pays 4.2%, but the promo gave me an APY of over 8% for the first year so fully loaded with 240K too.
I’m loving this high rate environment. Just can’t wait to get my stock market money going. For now, it’s nearly all earning between 4 and 5 percent in SWVXX.
And yes, when VIX starts dropping to ZEN , seems to be when the black swan appears.
Went to Borgata for the first time in 6 weeks too. Was invited to a potentially lucrative slot tournament at Bally’s (lord knows I don’t stay there). Only 30 players, winner take all $10K. So that’s a $333 EV event. Came in 12th. Put Slot Exploitation I’ve been reading about into practice andmade 20K. Huzzah!
“Online dating bio. Have good job with Government health insurance.”
And I had a friend or two say my go-to sugardaddy arrangements were ‘soft prostitution’…lol
At least for my consideration I get assured great travel or experiences, variety, a mutual understanding it is not a long term relationship, and a vee-jay that hasn’t pushed three kids through the birth canal.
Speaking of Italy.
My friend’s employer approved transition to WFH and move within in the US. Friend signed a lease on a place in Tuscany.
Hope it works out.
“The best course is another .25 increase this week.”
25bps is a lock. Commentary and (especially since it’s JPow) the Q&A will make all the difference. Higher longer, etc.
Doing more harm than good. There is no point to keep raising rates. Chit is breaking, and if you keep raising, going to really break something important.
Do you understand all the capital is now being diverted from investments to grow the economy to all high interest paying avenues. That has a major impact on the economy over time. They better relax before they go create a depression.
Rates can’t fix a housing supply issue. Understand this if you are cheerleading for higher rates in the hope of lowering home prices with higher rates. Only way higher rates will bring down home prices is by crashing the economy…f that.
crushednjmillenial says:
May 2, 2023 at 10:31 am
I hope J. Powell has the balls of Volker. The best course is another .25 increase this week.
For sure it’s a lock. Nothing bubbling up that’s significant enough to get them to pause.
I printed the statement and created a physical file.
Libturd says:
May 2, 2023 at 10:33 am
“Got my first $250 monthly interest from my iPhone bank account”
I used to buy 5lb bags of coffee beans direct from my favorite roasters. However, I noticed that my local Whole Foods had a fresh supply from a decent local roaster. Even better, WF’s price of $13.49 per bag was cheaper than the price on the roaster’s own website.
I walk up to the shelf yesterday and f me! All bags have been repriced to $19.49. On my way out of the store I stopped by customer support wanting to pick the brain of the department manager, to ask about who gave the orders to reprice, but the customer service desk chalked it up to inflation and I dropped the matter.
I went home and emailed the roaster, who confirmed that their wholesale price to Whole Foods has not changed. MFers! a 30% increase.
what if a few more banks collapse tonite?
grim says:
May 2, 2023 at 10:49 am
For sure it’s a lock. Nothing bubbling up that’s significant enough to get them to pause.
In other news. Our area got over 5″ of rain and my new monster pump did what the old pump couldn’t. Though Lake Lynch (our next door neighbor) reached the same height as during IDA. The more spread out rate of rainfall definitely saved the day. The pumps just stopped running this morning.
Remind me never to buy anything from Harbor Freight again. The Duromax gas powered water pump I got for the back yard starts on the first pull. It just doesn’t pump any water. The $50 infeed hose came with a giant hole in it. I’ve read the reviews on Amazon. about one in four are complete garbage. $220 into the trash.
As to the stock market. Hard to tell if it’s the beginning of the 2nd half of the correction, or if we are just bouncing off of the incredibly stubborn 12K ceiling which we have now bounced down from both May and September of 2022 and again this January. Nasdaq has been flat around this level since getting to this level one final time at the end of March. Interestingly enough, the 12K line also represents the beginning of the upper third band in an incredibly orderly Tirone Level (like Fibonacci retracement) that stretches back one full year and has only witnessed one extremely short breakout and immediate retracement through the Tirone ceiling in August of last year.
https://n9.cl/tirone_shoelaces
I went home and emailed the roaster, who confirmed that their wholesale price to Whole Foods has not changed. MFers! a 30% increase.
Greedflation.
On the whiskey supply chain side, our old barrel manufacturer that cut us off in 2023 reached out to us with nearly 600 barrels available due to order cancellations, which is a significant number, roughly $200k in wholesale value.
Thanks, but no thanks, we found an alternative supplier after you screwed us at the last minute saying you were offering zero allocation against our nearly year-in-advance order. Especially nice that you did it after all of your competitor cut-off dates too.
We’re not done with the impact of the supply chain dislocations, now you’ve got supplier backlash to contend with.
My brother seeing the same thing happening in electronics manufacturing. Bridges were burned in a bad way, whether it was due to incessant, brutal price increases, suppliers picking winners and losers in their customer base, unexpected order cancellations, etc etc.
DNA hits new low $1.14, time to really BUY pumps, but there is this:
Philadelphia, Pennsylvania–(Newsfile Corp. – April 25, 2023) – A federal securities class action complaint against Ginkgo Bioworks Holdings, Inc. (NYSE: DNA) F/K/A Soaring Eagle Acquisition Corp. (NASDAQ: SRNG) and certain of its officers has survived a motion to dismiss.
On October 6, 2021, after the shareholder vote and after Ginkgo’s IPO via reverse merger with Soaring Eagle, market researcher Scorpion Capital released a 175-page report (“Scorpion Report”) describing Ginkgo as a “shell game” whose revenue is highly dependent on related party transactions. On that same day, Citron Research also came out with an article corroborating the factual findings in the Scorpion Report. The Scorpion Report’s allegations were also consistent with an article in the MIT Technology Review, which cited a source stating Ginkgo was acting as “an arm of [its principal investor] Viking,” and that its “true business could be described as financial engineering, not genetic engineering.”
Here, the Court concluded that defendants’ knowledge of their commission of wrongful acts as to most of the claims alleged in the complaint was “easily inferred.”
Jim,
That scorpion report has been found to be bs, yet the damage was done. I believe in the company long-term and embrace the negativity in this current macro environment on the basis that it’s providing a major buying opportunity if they survive this tightening liquidity environment.
Current price is meaningless. As traders and shorts are the only one’s dictating current price. No one long is going to be selling at current prices. Shorts are prob trying to stop traders out of their position in the games they play. Current price has zero ties to fundamentals or anything like that, it is simply a popularity game. I am hoping that I am correct and taking advantage of this popularity game as the stock gets slammed. We will see.
I hope Gingko is successful not just because it will make me money, but because it could become a very valuable tool for our species survival and quality of life.
Unrestricted capitalism is to social breakdowns, as unrestricted throttle plates is to accidents.
I went home and emailed the roaster, who confirmed that their wholesale price to Whole Foods has not changed. MFers! a 30% increase.
our old barrel manufacturer that cut us off in 2023 reached out to us with nearly 600 barrels available due to order cancellations,
My BIL owns a machine shop out west. He said CoViD was the single best thing that happened to his business, picking up SpaceX as a client. I wonder how he is doing recently as things unwind.
Inflation hitting my field very hard. Wages increasing, young nurses demanding top dollar as they can threaten to leave the field and make more on Only Fans.😂😂
Phoenix
Reuters has article on struggle for cheap workers as Fed headache. Crying that can’t pay $17 hr and have to pay $24. What BS…who survives on $17?
Demand for Daikin Applied Americas Inc’s climate control equipment is soaring, and worker recruitment is in hyperdrive, with hiring trips to women’s shelters and immigrant support groups and an open door for applicants with no high school degree or manufacturing experience.
For Minnesota’s healthcare industry, an estimated 5,000 open nursing positions have sparked the invention of a new specialty, the nurse retentionist who is focused on convincing colleagues to stay on the job. It has also prompted talk of capping workloads and led to up to an 18% pay increase over three years for unionized nurses.
the nurse retentionist who is focused on convincing colleagues to stay on the job.
Not going to happen. These young girls like money wayyyyyyy too much. It makes them happyyyyy.
They are also realizing that when they are making six figures and Greedy Boomers are charging them 70% of their after tax income for a one bedroom apartment that wiping boomer azz for a living isn’t all what it’s cracked up to be….
Regional banks getting slammed.
11:04 I listened to a live cast of a guitar pedal maker, basically guy took money for orders and never filled them. Never apologized, just said he couldn’t find the “specific” cases for the pedals he wanted during lockdown.
No mention of returning people’s money or even filling the orders. I shrugged as I was just there to listen to the call and had no money with the guy. Some folks just threw in the towel.
I have a college friend works as VP HR for PAM health in PA. Her entire job is apparently posting that they love nurses, need nurses and will do anything to retain them. It is like 10 posts a day on LI. Flower picture and hearts..
It is all about the green. This market is f-ed bc people who physically have to actually deliver service to end client, have complete power now and can demand more and more. The middle class low six figure knowledge workers in corp world are getting screwed with job losses and zero ability to demand higher wages. Always under threat of AI (let’s face it that India tech centers will be main receipts of work) and down sizing bc of higher rates. Companies want to keep passing costs of lowe wage worker increases but middle in tapped out. To Phoenixs point, I have therapy for my son. My deductible stayed same at 6500. I met it in April and only started service in Feb bc could not get new hites. The BT, probably paid 20/hr, came in April about 4 times then said she has med problems. We have no one but BCBA coming twice week for two hours yet I met deductible three months earlier then when I had BT three hours a day, 5:days a week last year. The coats alhave tripled yet service is completely unreliable. Welcome to new America.
Costs have..
This is not a way to grow, unless ny subsidizes it with tax payer money which is the only thing they are good at.
New York poised to pass first statewide law banning natural gas in new buildings
https://www.cnbc.com/2023/05/02/new-york-to-pass-first-statewide-law-banning-natural-gas-in-new-buildings.html
“Do you understand all the capital is now being diverted from investments to grow the economy to all high interest paying avenues. That has a major impact on the economy over time.”
Pumps, not a lot of time to respond and again the following is for education and offered in support, not to be snarky. Your thesis is exactly opposite of what is correct.
Today’s rate environment is far being ‘high interest’ it is reasonable to historically cheap.
The anomaly is not the current rate environment but the ZIRP of the last ten years.
Listen, I understand you don’t have a background in finance or economics. Please just google WACC for the most general overview for this conversation.
This normal rate environment is not ‘diverting investment’ capital…it is for the first time in ten years imposing discipline to allocate capital to actual *productive* sources.
The cost of debt capital – a big part of a company’s WACC – is no longer distorted to near zero. Today companies must now actually use funding to *be productive* as opposed to taking ‘free’ money, throwing it at the wall, and seeing if something sticks.
The extended low rate anomaly during the last ten years enabled funding of such non-productive activities as SPACs, NFTs, low end crypto, etc. These activities did not need to clear a ‘real’ WACC funding hurdle and as a result were able to get funding and then unsurprisingly went to zero.
This *return* to normal rates while painful to most – and especially painful to operators and entities whose activities or assets offer little value – is necessary and *good* for the economy as it directs capital to the most productive uses. And away from the low quality, one way bets that free capital promotes.
Re: DNA….
“I believe in the company long-term and embrace the negativity in this current macro environment on the basis that it’s providing a major buying opportunity if they survive this tightening liquidity environment. providing a major buying opportunity if they survive this tightening liquidity environment.”
See above. And, note that a major part of your investment thesis in this company requires a very low probability macroeconomic call – movement back to a level of rates that other than the last ten years simply has not occurred. Before anything relating to company specifics you are setting a macro backdrop for success that has only rarely existed and only recently. You are literally entering this trade – before anything to do with the company – requiring a once in 80 years economic event to recur. Again. Near term.
“Current price is meaningless…Current price has zero ties to fundamentals or anything like that…”
Au contraire, Pierre…..if you have paid attention this long, the very simple conclusion that with a *real* cost of capital (return) hurdle to meet for the first time these companies’ fundamentals are under a microscope, and the market doesn’t like what it sees.
DNA has major issues with at least four basic fundamentals….corporate management, liquidity, capital structure, and operating performance. As both BRT (SMH) and I (META) have suggested there are better situations where you can find outsized returns that do not present these existential risks…and that also don’t require a low probability return to a ZIRP type rate structure.
Left,
As simple as you can say it, for any dufus to understand.
But, but you forgot about the Feds next liquidity cycle. Blumpy is counting on it.
Left,
I don’t see how ZIRP won’t return with population growth coming to a crawl. No way, no how. Combine the drastically slowing population combined with high debt, and ZIRP party is only getting started, imho. Rates were going down since the 1980s for a reason…this current uptick in rates is now the anomaly imho.
Bitcoin was created to break away from Fed controlled currency to a decentralized one. It was new technology and the NFTs/cryptos are a result of that exploration with new technology. Low rates or high rates, this was going to happen no matter what. SPACs were just a result of full on greed that comes with the tip of a bull market before it pops.
Maybe I am wrong, but this is what I see.
“The extended low rate anomaly during the last ten years enabled funding of such non-productive activities as SPACs, NFTs, low end crypto, etc. These activities did not need to clear a ‘real’ WACC funding hurdle and as a result were able to get funding and then unsurprisingly went to zero.”
Lib/3b/Most others here (L3M): “Inflation is coming.”
Pumps: “There will NEVER be inflation. Not with all of this population growth which will keep housing prices up forever.”
L3M: “All of this stimulus is going to be the straw that break’s the camel’s back in regards to inflation.”
Pumps: “There will NEVER be inflation.”
L3M: “Look, inflation is out of control! I bet the FED doesn’t stop until rates are at 5%.”
Pumps: “The stimulus didn’t cause inflation, it was supply line issues that caused inflation. This is Deflation.”
L3M: “The FED is going to keep raising rates as long as there are parts of the economy that are still too inflationary (housing, new cars, unsurprisingly, anything where Uncle Sam used to give you money at 1 to 2% to purchase).”
Pumps: “I don’t see how ZIRP won’t return with population growth coming to a crawl. No way, no how. Combine the drastically slowing population combined with high debt, and ZIRP party is only getting started, imho. Rates were going down since the 1980s for a reason…this current uptick in rates is now the anomaly imho.”
L3M: “The FED is going to keep raising rates as long as there are parts of the economy that are still too inflationary (insert the next sector to overheat).”
Pumps: “Remember, wage growth is coming. Not inflation.”
I stand by this. That’s why they raise rates….to remove liquidity. Aka you are taking out the risk of investing in tomorrow by rewarding capital with higher interest low risk rates that pay on par or more than what you can get from investing in risk. That capital can’t be lost now, but it can now only grow at a fixed rate…aka no growth. Slowing down the economy as more money trickles into bonds than investing in high risk growth (that loses, but also wins bigly, driving strong growth).
“Do you understand all the capital is now being diverted from investments to grow the economy to all high interest paying avenues. That has a major impact on the economy over time.”
Taking money away from risk and putting it towards safe risk free investments kills growth. That’s why they went to zirp in the first place….drowning in debt with slowing population growth combined with the need to create economic growth to service said debt. Since capitalism is one big ponzi scheme, it’s hard to achieve economic growth when population growth is not that strong. So, they start lowering the rates to juice growth that is hurting from lack of population growth and high debt.
Maybe I am wrong, but this is the way I see it.
re: ” lack of population growth”
Err where? We don’t need more people. We need less if we are going to stop climate change. We are adding another 2 Billion people to the population in the next 30 years. That is more people than lived on the entire planet 100 years ago. How is this responsible? 10 Billion population by 2050 when in the year 1927 there were only 2 billion?
“that’s why they went to zirp in the first place.”
Wrong. I’ll simplify it for you.
1. Fed rate at 3% tech explodes so rate is increased to slow growth
2. Fed rate at 6% tech bubble pops
3. Fed rate down to 1% to get economy rolling again
4. Housing and IBs explode so rate is increased to 5.5%
5. Housing and IBs pop
6. Fed rate down to 0% to get economy rolling again
7. Housing and tech explodes along with all kinds of stupid high risk investments (Krypto/NFTs/SPACs/DNA (ha ha)) so rate is increased to >5%?
What’s next?
8. Housing and tech implode along with the stupid risk investments.
9. Does the FED restart the rollercoaster or do they finally let the economy grow on it’s own?
My guess would be that it’s based on how deep this recession goes. Bad recession, lower rates. Soft landing? Do nothing.
Think of it like this with volatile high growth risky stocks during their early stages: was the price real at the top bull market bubble cycle? Now apply the same mindset at the bottom of the bear market cycle: is the price real or even matter?
Few understand this, hence, why they should stay far away from volatile high growth stocks where price is driven by emotion as opposed to any sort of fundamental value. This is why emotion causes them to go all in at the top and sell at the bottom.
“Current price is meaningless…Current price has zero ties to fundamentals or anything like that…”
Au contraire, Pierre…..if you have paid attention this long, the very simple conclusion that with a *real* cost of capital (return) hurdle to meet for the first time these companies’ fundamentals are under a microscope, and the market doesn’t like what it sees.
DNA has major issues with at least four basic fundamentals….corporate management, liquidity, capital structure, and operating performance. As both BRT (SMH) and I (META) have suggested there are better situations where you can find outsized returns that do not present these existential risks…and that also don’t require a low probability return to a ZIRP type rate structure.
Lib,
Lower population growth slows down productivity and potential GDP growth, pushing interest rates down.
Read this.
https://www.frbsf.org/wp-content/uploads/sites/4/el2017-27.pdf
This raises the question of whether accommodative monetary policies that were put in place as a response to the crisis are the reason behind the low real rates. If so, this phenomenon should be over as soon as central
banks normalize their monetary policy practices.
Yet, a longer-term perspective reveals a different picture. Figure 1 reports median real interest rates across some developed economies and shows that, in fact, real interest rates have been trending down for more than two decades. This suggests that forces other than the recent accommodative monetary policies could be at play.
Population aging is a natural possible explanation for the declining trend in real interest rates because of its effects on household saving and consumption over peoples’ life cycles. In this Economic Letter we use the macroeconomic model
of Carvalho, Ferrero, and Nechio (2016) to assess how this demographic transition—people living longer and population growth rates declining—has affected U.S. interest rates. We find the overall effect of population aging on U.S. interest rates has been negative and quantitatively relevant and is projected to be long-lasting.
“I stand by this. That’s why they raise rates….to remove liquidity. Aka you are taking out the risk of investing in tomorrow by rewarding capital with higher interest low risk rates…”
“Taking money away from risk and putting it towards safe risk free investments kills growth. That’s why they went to zirp in the first place…”
Not sure I can help you buddy….higher rates raise the hurdle rate of return for investment by companies….call it WACC, NPV analysis, whatever measure you want…
You frequently get so close and then veer off the road at the end…all risk is not equal….when you reduce rates (ie, lower the hurdle rate for a profitable return) you do get more investment by producers. And vice-versa. When the economy is slowing rate reductions lower the cost of AMZN building another distribution center or of some semi putting up a plant in the Midwest. But the *bandwidth* in which those rate adjustments are made to influence investment are a positive to strongly positive rate environment…
When the cost of debt capital (rates) goes to effectively zero there is no hurdle rate a company needs to clear…THAT is how you end up with inexplicable and unproductive investment like $1m condos in a swamp by a highway or $500k digital photographs…the returns to the producers of these *assets* are asymmetric in a ZIRP environment….since the capital cost them effectively nothing bad operators produce as much of *any* asset they can regardless of the quantity….if it succeeds they profit, if it doesn’t there was little cost to them to produce. Heads they win, tails they don’t lose. THAT is the genesis of NFTs, SPACs, bad crypto, tech shitcos, etc.
On a corporate (macroeconomic) level what I am describing is exactly the same as the difference in requiring 20% down for a home downpayment or zero. Zero down markets are neither healthy nor efficient.
It is no coincidence that those players – companies, investment managers, developers – screaming the loudest about rates *just starting* to normalize are demonstrably and factually producing (or holding) the most useless and worthless assets….
Fly-by-night developers, shitcos, and poor investment managers rely on free money to make the spaghetti they throw against the wall stick.
Good companies, good investment managers, and good developers have activities that are profitable and solid enough to clear real hurdle rates.
Understand you are effectively – hell, actually you have outright stated – you are throwing in with the bottom feeders who require a once in a century macroeconomic event to make their activities worthwhile and profitable.
Good conversation, lefty. Appreciate it. It is simple, yet it’s really complicated.
Problem is, no one wants a serious crash. ZIRP was put in place for a reason, it was not put in place on the basis to make people rich, it was put in place to keep the economy growing and avoid deflation in the face of unfriendly population growth. Of course, it leads to different effects.
It was socialist bailout to keep political elite wealthy and in charge along with their rich backers. They hope to string the sham for years so that people forget who did it what while they run out of town with the loot. The middle class will pay down the road with higher taxes, crappier jobs and lower quality of life. You are full of it.
We are rearranging deck chairs on the Titanic, folks.
Nothing to see here.
Bystander is exactly right.
Look at Barney Frank. Look at Nancy Pelosi. These are criminals at the highest positions of government. You and I would be imprisoned for the stuff they get away with. But they resign from the US government to a corporate board position where they will be paid handsomely for access to their former criminal cohorts and will not work a minute outside of attending the annual board meeting.
And no one sees an issue with it. A guy who wants to be a girl drinks a beer on TV (or is the other way around) and the world goes crazy. But Pelosi somehow beats nearly all of the hedge fund managers on Wall Street and its business as usual in Congress. Did you know the CEO of First Republic gave Zuck a sweetheart deal on his six million dollar mortgage in exchange for allowing FRB to open a branch inside of FaceBook headquarters? As Mel Brooks liked to say. It’s good to be the King.
Lib/By,
It is f’ed up, but what do you expect from most people in position of power.
Just try to be open minded. If they just let the economy crash, who suffers the most? Your avg joe. The rich will still be in power, but the avj joe will be the one taking the bat to the head with no job standing on a food line. That’s my only reason for supporting it….crashes ruin your life and risks political instability, which can lead to violence and empty stores. Rather just keep it going than risk losing it all. We lose no matter what…
Ok dingus…you could create rules to ensure money gets down to people who need it. The Jamie Dimons of the world don’t. You could also prosecute bad players. You could also force corrupt board members to resign if taking public money. None of this ever occurs so your BS stance that “it is for the good” rings hollow.
Rivian R1T Owner Was Quoted $42,000 for a Dented Rear Bumper.
Just because someone buys a stupid vehicle like this doesn’t mean anyone who gets into an accident should have to pay for their stupidity.
How about reduced bailouts, no H1Bs allowed or even outsourcing tax, if layoff US workers let go while growing in other countries utilizing our tax money? Dimon doing exact same thing – growing India to 50k workers. IBM has mostly Indian workforce now.
“Morgan Stanley is looking to cut another 3,000 jobs globally by the end of this quarter, outlets including Bloomberg, Reuters and CNBC report, citing anonymous sources. The banking giant, which employs 82,000 people, is reportedly cracking down on expenses as recession fears continue to restrain dealmaking. Morgan Stanley recently cut 2% of its staff, and CEO James Gorman said that he doesn’t expect a rebound before the second half of this year or next year. The bank had also reported a drop in first-quarter profit from a year earlier, dragged down by the slowdown in mergers and acquisitions.
Yet this in MS assessment of India:
India Economic Boom: 2031 Growth Outlook
Global Offshoring Creates a Workforce for the World
Companies around the world have been outsourcing services such as software development, customer service and business process outsourcing to India since the early days of the Internet. Now, however, tighter global labor markets and the emergence of distributed work models are bringing new momentum to the idea of India as the back office to the world.
“In a post-Covid environment, CEOs are more comfortable with both work from home and work from India,” says Desai. In the coming decade, he notes, the number of people employed in India for jobs outside the country is likely to at least double, reaching more than 11 million, as global spending on outsourcing swells from $180 billion per year to around $500 billion by 2030
More to point:
Morgan Stanely, the New York-based global financial services company which already has more than 10,000 employees in India, is now planning to expand its India team further. More people will be hired…
More people will be hired for its Mumbai and Bengaluru global capacity centres, according to ET. Its India workforce has grown by 20 per cent since since 2021.
The global head of HR at Morgan Stanley has revealed that the Company’s global centres employ about 22,000 to 23,000 employees, about half of this number is based out of India.
One bedroom room co-op for sale in sought after Clinton Hill neighborhood in Brooklyn. A rare find, with all the original features and layout in place. It even has a dining nook, (what ever that is). 649k. It does have a nook, so probably worth it.