Friday, December 5, 2014

Stagflationary Mark On Bond Yields


"[O]ur economy cannot tolerate higher interest rates. It only seems to thrive on exponential/parabolic credit expansion and falling interest rates from what I see. The interest rate part of this ride is just about over. We seem destined to hit the floor just like Japan did and get stuck there. That's why I have been so willing to lock in long-term interest rates any time I could. In fact, I'd do so right now if I had more money to deploy."


Stagflationary Mark said...

Check out that hourly earnings growth in private production and nonsupervisory employees.

Party Like It's 1999! (Musical Tribute)

Now that oil has crashed, this is what is going to cause heavy inflation? Seriously? We're not even back to dotcom recession levels, and in case you hadn't noticed, it's a parabola.

CP said...

Regarding rising interest rates:

I can't wait to see what rising interest rates do to:
- private equity companies that were taken over with short term financing
- real estate valuations
- corporate profit margins
- P/Es on equity markets
- pension and insurance company portfolios

CP said...

a highly indebted economy cannot tolerate higher real interest rates. The more debt we build up, the lower rates must go, lest the wheels fall off. That's what we've seen. That's what we'll continue to see. It's just basic math.

We don't really need the Fed to decide this for us. Money cannot really leave the bond market to bid up the stock market, for if it did then bond yields would rise and the economy would choke. And what happens when the economy chokes? Money flows right back into the bond market. It's an economic "death spiral" I tell you.

Stagflationary Mark said...

I can't wait to see what rising interest rates do to...


I can't wait to see what happens to economic growth once we run out of unemployed to put back to work.

Tapping Our Strategic Unemployment Reserves

We are tapping our unemployment reserves to boost growth. That's what the data shows.

Stagflationary Mark said...

How does the business cycle surprise so many people every time?

There are two major ways our unemployment reserves can stop declining.

1. The Fed raises interest rates. It chokes the economy. Unemployment eventually starts rising again.

2. We run out of unemployment reserves. It chokes the economy. Unemployment eventually starts rising again.

I don't know if #2 has ever been attempted here before, but it will happen if we continue on this path.

Today's investors seem fairly convinced that as long as the Fed never raises interest rates, real growth can never slow.

Good luck on that theory!

Anonymous said...

What is your view on residential real estate then?

Prices move lower with declining rates? Seems counter intuitive

CP said...

1) Interest rates rise, investments rise
2) Interest rates fall, investments rise more
3) Interest rates fall, investments fall
4) Interest rates rise, investments fall more

We are just reaching the end of #2.

CP said...


I'm going to do a post on people's 2015 predictions.

5 predictions each with an 80% confidence interval?

Can be about anything. (bond prices, oil price, number of corporate bankruptcies, foreign exchange, #hurricanes in GOM, your favorite long/short)

Care to join in?


Anonymous said...

Timeline from the end of #2 to the beginning of #4?