This feels a little like 2011

HFNY

But more real this time. Prepare your BleachedAnus!

https://yahoo.com/finance/news/danger-lurks-global-markets-transfixed-210000142.html

creepycoug

HFNY said:

But more real this time. Prepare your BleachedAnus!

https://yahoo.com/finance/news/danger-lurks-global-markets-transfixed-210000142.html

Makes logical sense. If rates have been next to zero for forever, and you're committed to bonds, you're going to try and stretch for more yield by taking on longer-term maturities. I myself am never pulled in by that ... if a return sucks, I'm not all hot to get married to some long-term instrument for marginally less sucky yield.

Of course, it's easy for me to say that now, because I don't live off of the returns of a bond ladder.

Connect the dots for me a little for why this risk is, as the article says, inherently present in stocks too.

HoustonHusky

My guess is that the yield will hit somewhere between 2.5-3%, a point at which it will spook stocks when they start seeing the cascading effect of that. The stock market will bounce down and the Fed will freak out, step in, and buy a shiteton of bonds by printing even more money to “control” the yield curve.

And in the words of Monty Python there will be much rejoicing. Except for the folks not owning hard assets and getting screwed by the nonexistent inflation.

creepycoug

HoustonHusky said:

My guess is that the yield will hit somewhere between 2.5-3%, a point at which it will spook stocks when they start seeing the cascading effect of that. The stock market will bounce down and the Fed will freak out, step in, and buy a shiteton of bonds by printing even more money to “control” the yield curve.

And in the words of Monty Python there will be much rejoicing. Except for the folks not owning hard assets and getting screwed by the nonexistent inflation.

Meaning when yield creeps up in the bond market all those long-term bonds will get crushed and that freaking out stocks? Or that stocks will have to compete with a better risk-free yield which will drive down prices?

HoustonHusky

It’s more of having higher interest rates removes a lot of stimulus...higher borrowing rates for mortgages, higher borrowing rates for companies, and a shiteton more interest payments by the govt on their massive debt.

Basically reality kicks in and nobody wants that.

doogie

and when the market finally catches up to the Stimulus? and the Economy hits another bump? Rates are at zero.

Seems to me the Fed is pinned down.

creepycoug

doogie said:

and when the market finally catches up to the Stimulus? and the Economy hits another bump? Rates are at zero.

Seems to me the Fed is pinned down.

#nowheretogo

BleachedAnusDawg

What does this mean for someone who is looking to buy a new car. Should I buy now or wait a year? Give some of us illiterate investors/spenders some real-world examples to work with.

HFNY

BleachedAnusDawg said:

What does this mean for someone who is looking to buy a new car. Should I buy now or wait a year? Give some of us illiterate investors/spenders some real-world examples to work with.

If inflation really is picking up, it is better to buy now than a year from now after prices are that much higher (part of the Fed's plan to stimulate spending now vs. deflation where people wait and wait for lower prices which then feed on themselves).

If you are borrowing to buy a new car, rates could be 3.99% now and 4.50% or 5% a year from now.

I don't think it makes much sense to buy an expensive car (now over $50k or $60k) and borrow a lot of it since cars are such a depreciating asset. Electric cars don't depreciate as much as ICE cars though, particularly in the first few years.