The Most Convoluted Macro Environment Ever
You've probably heard it before, and you'll doubtlessly hear it again: It's the rapidity of rate rise that matters to equities, not necessarily the absolute level of yields.
We often talk about thresholds. "How high can 10-year yields go before stocks notice?", for example. I've mentioned repeatedly that 1% on 10-year reals in 2018 was the breaking point for stocks.
But at least locally, it's the speed of the move that determines stocks' reaction. "The recent move in nominal rates was a 1.5 st
Goldman (i.e., William) was right: nobody knows anything.
The fed can announce a taper in november or december. Thats ok. They would be wise to take their time. Powell saying I think a mid year end for that is probably unhelpful and unwise. Better to say we will go at moderate pace and adjust to circumstances, and emphasize flexibility.
re. Tech, someone was saying something I thought was quite true: “hyper growth will beat inflation” i.e. Revenue for the tech winners are going to severely outpace inflation…
I mean, I get DCF, it’s simple enough in theory. But when you got such large error bar around revenue growth 2 years out, let alone for the terminal value in 10 years, do minute changes in the discount rate really matter?
It seems to me the IR impact on tech valuation is mostly something that is true b/c everyone decided to treat it as true…
I am expecting that even though the Fed is broadcasting that in the future they plan on being more “hawkish”, when we get to the future, they won’t be able to do everything they are indicating. There are so many readily available and plausible reasons and 30 plus years of evidence.
I am definitely staying in technology as the means to replacing/reducing human workers and I view any selloffs as an opportunity over my investing horizon.
An interesting story about the difficulty in moving to clean energy. In spite of the green movement in California, the Diablo Canyon nuclear plant (clean energy- absent a potential meltdown), which provides about 9% of California’s energy, is being shut down earlier than planned because people are afraid of a repeat of Fukushima. That lost energy production will be partially replaced by a coal plant. When faced with “destroy the environment” or “live with the fear of a potential nuclear disaster”, the decision is not always “green”.
The USA should be investing in fusion technology- clean energy without the risk of a catastrophic meltdown from a fission reactor. If mankind figures out a viable fusion nuclear reactor, we will solve so many problems we are currently facing.