All assets are at all time highs - bubble levels for most. Hence those « valuations » - but if history repeats itself, things can change quickly.
Perhaps finance people have less money raising money. Or perhaps people are more willing to pay for things that save/make money.
2. No.
3. Not at a comparable rate as is evident from the graph.
4. Are equities and other assets completely disconnected from the consumer economy? Many of the new rich and retirees will cash out or take loans against their assets.
5. Economically speaking Bitcoin is inconsequential in this story. Careful using its proponents as another strawman.
Inflation always lags behind, though, and it’s pretty likely at this point that rising inflation indicators in the coming quarters force the fed to tighten. Opinions are very much divided on this, where many are convinced the fed needs to take drastic action to keep inflation from getting out of control with another financial crisis as a result. The other mainstream view is that we’re only seeing transitory inflation right now and as long as the real economy is healthy we shouldn’t expect inflation to persist and cause carnage.
I believe the situation is the same with stocks. They were criminally undervalued for decades (imo still are somewhat undervalued) so additional money supply causes the prices to increase (it's profitable to buy into great opportunity and pay back cheap loan later) but it's only because the assets were very cheap. If they weren't it wouldn't make sense to buy them no matter how much money is around (as you need to pay it back).
What may cause inflation though are programs when you just hand money to people (not as loans but as handouts) as then you just diluted everyone's else money.
Because another way to read the situation is that stocks are simply the asset of last resort. In a world with no interest, you can't park money in bonds (or CD's etc.) so you've basically got stocks, real-estate and commodities left as options.
Large-scale asset managers are not going to park billions of dollars under the mattress, so basically it has to go to stocks.
More info: https://fredblog.stlouisfed.org/2021/05/savings-are-now-more...
(Edit: Updated link to a more recent blog post)
This gave banks more wiggle room to sit out the pandemic without reducing lending at the exact wrong time.
So the Fed has done its job on the way down. Now they just have to do their job on the way up as well, or this money will eventually end up as new money in someone's pocket (via new loans) and potentially create inflation.
We had this unprecedented crash that clogged up global supply chains and caused a huge shift in what people are buying. We have massive government spending increases. I don't think it's possible to work out what impact QE is having on inflation right now or whether it will indeed be transitory as the Fed believes.
For that to happen you need enough credit demand in the economy.
It could happen, and, as you say, the Fed would increase the interest rate making reserves less available (credit more expensive), but the number of reserves in the system doesn't cause directly more money in the economy. It depends of the type of recovery.
They may justifiably want to keep interest rates low and loans easily available to help businesses and governments roll their pandemic induced debt until they can grow out of it.
But then some other credit worthy borrower comes along and snaps up those cheap loans to buy into some asset market that doesn't need any support.
And where they do have the tools to make that distinction they don't appear to be using them. I don't understand why they keep buying mortgage debt while house prices are already looking dangerously inflated.
https://drive.google.com/file/d/1AT9bcRZygdcCiMs5TvRXK50iik5...
Despite it being where-everyone presumably-is I do not want to use Instagram, so I am not sure what's best to do.. is there a good-enough 'open'/decentralised alternative now?
Maybe a simple rss feed would do it?
I am more interested to find a passionate niche of ppl that really love the journey than getting general exposure, I guess that's another side of things: 2d fractals don't really have much mass-market appeal, but if you know what's going on there, it's a lot more interesting to follow!
I made an account on shared.graphics:
Valuations in other sectors are still somewhat reasonable.
It is fantastic to see it play out, such as valuations much larger than before, as well as the unexpected areas of speculation and shifts in market tolerances for worse deals.
But we aren't even done yet! And this comes with a pretty clear agreement on the limitations of monetary policy, like we know massive central bank balance sheet increases don't accomplish their [stated] goals well. But we also expect central bank balance sheets to increase by further distorting the market. When central banks purchase things, whoever they bought it from now has money that didn't exist before the transaction. This money doesn't "trickle down" into the economy, instead it more so pools with these people that are active in the capital markets, and they are trying to figure out how to make more of that money faster than the central bank buys and creates more. So the only way to do that is to attempt greater and greater deals. Because there is nothing else to buy - the central bank already bought the "good investments" (bundles of mortgages, treasuries, investment grade corporate bonds, even some junk bonds) and is also looking for more just like you are! So now you have to take greater risks, maybe this $29 Billion deal that the central bank won't try to get in on!
The conundrum is that now the capital markets are expecting the central bank to buy everything, especially the dips. (most central banks don't buy stocks, but when they buy fairly illiquid bonds from people those people often buy stocks. in US a lot of the stimulus money came directly from the central bank after Congress modified its charter to give currency directly to people in exchange for nothing, and the recipients also bought stocks. the same sentiment is distributed in all socioeconomic classes even the top 0.01%.). So if the central bank gives a hint at reducing purchases (called "tapering"), the markets crash, and the central bank is strongly advised to continue!
The stated purpose is to get people to invest in "main street", instead of just the same small collection of assets. Turns out, it doesn't matter and nobody wants to invest in random entrepreneurs. The market is signaling that it would rather pay to not invest in randoms (in many parts of the world, government bonds have a negative yield, which means people are paying to own a bond while also further losing on inflation). So if you do have access to the capital markets due to your pedigree or network or net worth, the stuff you sell - your company's shares that you typed up on a sheet of paper, or whatever - will have a much higher valuation because other people have nothing else [eligible] to buy and need to put their money somewhere!
The US is the strongest hold out on negative interest rates, and is the largest market too, so the anticipation of the "season finale" is that the US gets to that territory as well, and then we really get to see some fireworks in the market as it is a major psychology barrier as well. Watch the 2 year and the 10 year treasury rates, as they are seen as having the most liquidity and trading activity.
https://www.treasury.gov/resource-center/data-chart-center/i...
As you can see they are really close to 0% right now, for a prolongued period of time. Getting to this negative stage requires SOOOOooooo much infathomable amounts of money, hoarding government bonds. But the central bank is the main purchaser of these bonds, from both the treasury and private owners on the secondary market, as they buy they push the yields closer to zero. (bond price increase = lowers yield)
fun times ahead! expect greater valuations and quick!
For non-financial folks, dust off the little equation you may have learned in high school, where you value something that goes out forever, but where the rate of growth is higher than that of inflation and the risk-free cost of capital. It goes to infinity. So as interest rates go down, valuations grow. But as interest rates really get low ... the valuations vault into the stratosphere.
Only in a weird universe can we really expect these companies to grow at those rates for very long periods of time ahead of absolutely everything else without much risk.
So the discussion is really about markets, less so local types of consumer payments.
Matt Levine’s writings on Bloomberg occasionally go into macroeconomic territory, he has a facetious and satirical approach to current events in capital markets
There are a few other sensational editorial publications about macroeconomics and credit markets, but I wouldn't recommend them for actually learning
Sadly, I think this leaves a void between dry material, and sensational disinformation sites
AfterPay's valuation puts it at two thirds of mid-2012 Facebook. Up until now, I've never heard of them