[quote=Leorocky]“many investors are either required or expected to earn a yield above a certain percentage”
Are you implying that interest rates should be set at that % or that those investors should have any expectation of such? Rates are a function of the demand for money and fluctuate.
Yes – one reason the Fed might lower rates is to spur investment if everyone is just sitting on cash. This isn’t a manipulation. It’s the Fed’s job.
And again, you’re using the term inflation incorrectly.
“See the correlations between margin debt and stock market bubbles?”
Bubbles, as in plural? The stock market isn’t a bubble right now nor was it in ~2007. Dot com – sure. Investor sentiment will cause margin debt to increase and decrease and there appears to be a reasonable correlation between stock prices. That doesn’t mean everytime margin debt gets high and there’s a correction it was a bubble.
LBO – not a bubble, article clearly states “back to 2008 levels” which was the middle of a recession.
The Forbes article on junk bonds is from a “contributor”, i.e. some guy with an opinion. If you agree with it fine but it’s not fact. Sites like Seeking Alpha, the Oracle one you posted elsewhere and increasingly more mainstream media are allowing the contributor posts or are designed as community sites. They are akin to the Opinion pages in a newspaper.
Meanwhile, bonds continue to rally, mostly due to geopolitical events.
(BTW – it’s odd you’d use Forbes as a reference due to the political “lean” of Steve Forbes. I believe in other threads you’ve attacked “rightwingers” and such)
Yes – “speculators” may have suspected an oil price drop based on increased supply and bet accordingly, so what? Good for them. The same people will look at the history of oil prices and at some point bet that prices will go back up and they will very likely be right.
Buying houses with cash is not indicative of a bubble or speculation. The article is clear that the trend is declining as housing prices have gone up and it’s less of a value play. The fact that the rate of home price growth is declining shows the real estate market is normalizing after a large drop off and then a robust recovery (in certain areas).
Simlar to oil, making an investment based on fundamentals is not speculation. No matter who does it or how large the investment is or where the money came from.
“Yes, a LOT of people are doing this, especially the ones with all the money.”
And if we are to believe the narrative less and less people have any money these days and it’s a small group at the top “with all the money”.
So, no, a lot of people aren’t doing that.[/quote]
First, I want to address the issue of my sources. Unlike many other posters around here, I look to the sources most likely to contain actual facts. I’ve long cited sources that range from the extreme left to the extreme right, and everything in between. Living in an echo chamber ensures that you will be wrong a significant amount of the time, IMO. Best to know the arguments from of the greatest possible number of sources and perspectives, and then debate the merits of each to see which ones are left standing at the end.
While you might only consider CPI in your definition of inflation and whether or not it exists, I take a broader view. I most certainly believe that money supply (and velocity) affects prices; this is the very essence of inflation. I focus more on the cause than the effect, because the cause is what leads. That’s how I see inflation and why I’ve always been able to spot bubbles (both in the late 90s and mid-2000s…and now) when others have been busy trying to convince themselves and the world that bubbles don’t exist because “it’s different this time.”
Regarding LBOs, 2008 was the PEAK in many markets…right before they CRASHED. That’s how bubbles work.
The Federal Reserve is largely responsible for these bubbles and busts because their policies encourage irresponsible risk taking. It’s unbelievable that after the credit bubble and the resulting financial crisis that they not only continued with the same policies that created that mess, they’ve amped it up!
As for the rest of your post…
1.) How do YOU define a bubble? (Personally, I would disagree strongly with your assertion that stocks weren’t in a bubble in 2007-2008…and that they aren’t in a bubble now).
2.) You state that interest rates should not be set, but then argue that the Fed is “doing their job” when they manipulate rates. How is that not setting rates? If you believe in a free market, why do you think the Fed should be spurring people to invest more? Don’t you think that investors might be sitting on cash for a reason? Wouldn’t forcing them out of those positions, or into other positions, be manipulation?
3.) If leveraging up and buying (or selling) assets based on the supposition that prices are going to go up (or down) in the near term isn’t speculation, then I certainly don’t know what speculation is. How would you define it?
4.) Do you believe that having speculators enter a market in anticipation of price increases/declines will have an effect on market prices? If so, do you believe that this can cause higher volatility and the greater likelihood of bubbles and busts?
5.) Yes, the money “at the top” is largely responsible for what happens in the market. While they might be a small percentage of the world’s population, there are still a fairly large number of people doing this. In addition to the wealthiest people, there are those just below them who are speculating as well, and many of them are pooling their money, too.
