Talking heads occasionally lose their shit when the bond markets and stock markets diverge, which they are most assuredly doing. One of the guys I follow avidly is David Rosenberg, who put it pretty simply - either the stock market or the bond market is wrong and we're about to find out which. The other thing to keep in mind is the stratospheric rise of the stock market right now is because of a handful of stocks (Apple, Facebook, Google, Gilead etc). The broader market remains stagnant. I went to cash 2nd week in november and backtesting my portfolio to there, I gave up on half a percent of gains. Meanwhile, the Nasdaq is up what? 11%? The very real status quo everyone is experiencing is vanishing yields. When interest rates are near zero, you don't make any money by just holding onto money and when most of the trading is in dark pools, you don't make any money unless you're in those dark pools. Because you need to loan a lot of it to make any money at half a percent over prime, cash is suddenly everywhere. And since cash is suddenly everywhere, it's seeping into everything. So that house you want to buy? You're competing against a REIT that's fronting for a hedge fund that's fronting for a pension fund that's trying to meet its obligations. You're not going to win against Wall Street because they can pay cash while you have to convince Fannie Mae you're worth the risk. On the flip side, large investment firms are now having to buy up houses a few hundred at a time in order to make their yields. It's not just you. It's a weird fuckin' world.Question for everyone older than me (probably most people): is it just me, or is there a growing sense that the economic pie is becoming fixed and that other people's gains mean less for you?
Why were interest rates so high in the 80s? I'm again reminded of a line from some reporting on the causes of the oughts-housing bubble. There was suddenly twice as much money looking for investments but there were not twice as many good investments. Takeaway is to continue investing/creating real value. Skills, my health, thank-my-lucky-stars this house.
I think the factor of 2 is low. I also think it's simplistic to say "there was suddenly twice as much money looking for investments" without acknowledging the cause. Interest rates were high in the '80s because of Paul Volcker.