Low Interest Rate Environment

[Shiyi]

If his point is that interest rates will eventually recover from its lows, it is well taken. But I'm not convinced that his argument supports his conclusion.

These are massive topics/issues that he is discussing. I'm not sure if the writer has bitten off more than he can chew, by trying to connect multiple global/local phenomenons with simple reasoning and plenty of unexamined assumptions. For example:

an initial swing to the left is bad for supply but good for demand - particularly coming from a point of significant inequality - and in the initial stages of a swing left, the rich get poorer but the poor and middle class get richer, as wealth and income is redistributed from the rich to the poor. 

The task of connecting multiple phenomenons and arriving at a convincing conclusion -- if it is indeed intended to convince the author and/or the reader -- is probably best undertaken over a longer piece, and with supporting data. I don't recall anybody who can claim to be able to produce a convincing and data-supported text, detailing how present conditions/phenomenons will lead to a certain future economic outcome. 

Nevertheless, I do think it is good exercise for the brain when one makes such an attempt. If you can predict marco economic outcomes, surely you will be able to tell which industries/companies will do well in the future?

I personally don't make such attempts. It consumes way too much effort and the findings may only be mildly helpful in achieving better investment outcomes, at best. In the end, the author recognises the futility of macroeconomic crystalball gazing and makes what is perhaps the most useful point in the essay: 

I feel very fortunate that my investment approach does not rely on predicting macro outcomes such as these, or variables such as interest rates. I plan to keep doing what I always do - find stocks trading at low prices relative to their likely future distributable cash flow. A margin of safety, and low prices/rapid cash flow payback is always the best hedge against an uncertain future.

In short, reincarnation of Buffetology.

[edragon]

Singapore sees negative rates creep in with flush liquidity
THU, MAY 21, 2020 - 4:45 PM

The one-month swap rate dropped to minus 0.01141 per cent on Wednesday, the lowest since August 2011. The gauge, computed from the benchmark dollar interbank rate and Singapore dollar forwards, also reflects expectations for the Asian nation's currency and its liquidity.


LINK:  https://www.businesstimes.com.sg/banking...-liquidity

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[edragon]

[edragon]

I look up the relative temperature scale and found the following:

In 1742, Swedish astronomer Anders Celsius (1701–1744) created a temperature scale that was the reverse of the scale now known as "Celsius": 0 represented the boiling point of water, while 100 represented the freezing point of water.
Now. the boiling point is 100 degrees and the freezing point is 0 degrees Celsius.

As to the current financial condition in the World with 0 percent interest rate, can we say that the World financial system is under freezing condition and in the midst of winter?

It may not be the intention of the administrator to come as low as 1.141 basis points below zero but definitely it was a consequential effect of the 'action' of flushing the system with liquidity in order to bring down the dollar swap rate.

What was the reason for doing so?
How long will this action be carried out?
What would be the side effects if our real interest rate fall to zero and below?
Will businessmen seeing this action wants to continue to borrow based on current prime lending rate of 5.25% for S$?
(why not go for Yen loan as an alternative or even US$ loan or even Aussie, OCR 0.25%)

Comments welcome.
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[soros]

Anders Celsius was born on November 27, 1701 in Uppsala, Sweden. He was a Swedish astronomer and physicist who taught at the University of Uppsala. He published a collection of observations of the aurora borealis and built the Uppsala Observatory. He also invented the Celsius (or centigrade) thermometer scale. Though he originally set the scale with a boiling point of 0° and a freezing point of 100°, the inverted form of the scale, setting the freezing point of water at 0° and the boiling point at 100° is considered the standard among scientific work today. Another scale, developed by Daniel Gabriel Fahrenheit, is commonly used in the United States. Anders Celsius died in 1744 at the age of 42.

Local business men borrow in local currency from banks in their own country and to get the loan , they are required to show certified accounts for last 3 years trading to their bank loans manager. Most local business men don't want to worry about fx rates.

If the interest rate falls to zero, the S$ should fall against other currencies.

[Behappyalways]

A Rare Paradigm Shift With Huge Implications... 5 Reasons Why It's Imminent
https://www.zerohedge.com/economics/rare...s-imminent

[Behappyalways]

3Y Treasury Auction Finds Solid Demand Thanks To Highest Yield Since 2007
https://www.zerohedge.com/markets/3y-tre...yield-2007

A Rare Paradigm Shift With Huge Implications... 5 Reasons Why It's Imminent
https://www.zerohedge.com/economics/rare...s-imminent

[Behappyalways]

https://www.cmegroup.com/trading/interes...-fomc.html

Market is now expecting a 1% rate increase in July and 0.75% increase in Sept after yesterday US June inflation print.

Strangely risk assets has still not come around to reflect the higher interest rates......going to be bloody....

[weijian]

https://www.cmegroup.com/trading/interes...-fomc.html

Market is now expecting a 1% rate increase in July and 0.75% increase in Sept after yesterday US June inflation print.

Strangely risk assets has still not come around to reflect the higher interest rates......going to be bloody....

I started my investing journey as a "bottom-up fundamental investor". Recently, I started some "cross pollination" by reading about how successful traders function and think.

Less liquid markets with much smaller companies (like SGX) might have some amount of inefficiency. But it is hard to see how much bigger/liquid equity markets (eg. US ones) and also the bond markets (several times bigger than equity markets) demonstrate significant inefficiencies.

I used to relate to the joke that the Economics Professor does not believe there is a 50dollar bill lying on the floor (because if it were really one, it would already be picked up), and then someone simply picks up the bill and is 50 dollar richer...At least, that was how it was supposed to work in theory. But alas, I got to realize that theory and practice have no difference in theory. So, the joke was on me.

The numbers are for ALL to see and there are no surprises. People have been talking about inflation for close to a year now and the Ukraine war is almost 6 months old.

Rather than imposing our view on the market, may be a better way is to let the market tell us the view?

[Behappyalways]

I am a bottom up investor. Which is why I continue to build up a small database in investideas. So that when I want to catch a fast glimpse on a particular stock, I could just open up and take a look. It gives me a feel on the company before I go into deeper research.

But I realised that if a stock market crash is coming then most stocks' price will probably come down. Maybe a few stocks would behave otherwise but the probability that they are the ones one hold.....is pretty low. In normal times ( no market crash) bottom up will do well.

When your portfolio is significantly down due to market crash, it takes quite a while to restore it to former value. So one not just need to learn to pick up good bargains, but also need to learn how to protect it from losses.

Remember Warren's rule number 1..... don't lose money....

快下大雨了， 快收衣服