Low Interest Rate Environment

[koh_52]

where printed money go to?

Agreed, with both donutte and freedom sans...my take,

1. go to buy bonds
2. go to purchase properties.

[donutte]

Since most agreed that this "low interest rate environment" is causing inflation I would assume that we will get higher inflation in time to come. Meaning higher property prices etc without and increase in real wage (your salary and mine).

Facing this problem the government worldwide will need to raise interests rates such as to tame inflation. Assets like bond issue by most government is I my view are all over valued. Especially those countries where they are essentially in deficit like the US and Euro countries.

In the serious scenario of a default or high interest rate the value of these bond will go down very quickly.

This will cause the balance sheet of major banks and insurance companies to shrink drastically and cause financial panic again. Hence I would not invest in banks or insurance companies in general for the long term for this reason.

[corydorus]

This come back to the question. Sg Gov uses exchange rate not interest rate. Just curious is our money still back by gold or currencies. How much to buy to determine ?

[freedom]

not back by gold. by a basket of currencies.

[corydorus]

ok. Which mean Euro and US Print money, we indirectly printing as well even when our economy is doing ok. darn .. no wonder high inflation.

[freedom]

check M2, you will know MAS has been printing since 97 bust.

[dreamybear]

Writer suggests educate oneself, investing for longer period and start earlier, in our low interest rate environment.

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Outlook 2020: Income


Income seekers may need to adjust their expectations and be prepared to invest for longer and spread their investments more.

06/12/2019

The years since the 2008-09 global financial crisis have been difficult for income seekers and I think this is unlikely to change in 2020. We live in a world where record low interest rates and years of asset purchases by central banks have led to ultra-low bond yields....In developed markets in particular, rates of inflation are higher than deposit rates, meaning the value of cash savings is actually being eroded.

The future won’t be the same as the past

Investors and savers around the globe seem to be drawing on their memory of the 1970s, 1980s and 1990s, when interest rates looked very different to now.

Those were the days when my father could put money into an National Savings & Investment bond, backed by the British government, and gain a 8.75% risk-free return. Savers in many countries could live off the income from their savings accounts.....

https://www.schroders.com/en/sg/private-...20-income/

[BlueKelah]

Writer suggests educate oneself, investing for longer period and start earlier, in our low interest rate environment.

--------------------------------------

Outlook 2020: Income


Income seekers may need to adjust their expectations and be prepared to invest for longer and spread their investments more.

06/12/2019

The years since the 2008-09 global financial crisis have been difficult for income seekers and I think this is unlikely to change in 2020. We live in a world where record low interest rates and years of asset purchases by central banks have led to ultra-low bond yields....In developed markets in particular, rates of inflation are higher than deposit rates, meaning the value of cash savings is actually being eroded.

The future won’t be the same as the past

Investors and savers around the globe seem to be drawing on their memory of the 1970s, 1980s and 1990s, when interest rates looked very different to now.

Those were the days when my father could put money into an National Savings & Investment bond, backed by the British government, and gain a 8.75% risk-free return. Savers in many countries could live off the income from their savings accounts.....

https://www.schroders.com/en/sg/private-...20-income/

Things might reset with a big uncontrollable credit crisis/recession happening, way overdue for one soon, how long more do you think central banks can drag it out for?

[weijian]

I thought this blogger has written a pretty illuminating article on our current environment of low interest rates. A long read though, but thoroughly worth it if attention is given to it, i believe.

Demystifying post-GFC economics; the problem with scarcity; interest rates; long political cycles; and the end of history

The post-GFC era has given rise to widespread investor confusion, as macroeconomic and market outcomes have deviated from the received economic wisdom about what 'ought' to have happened. Old hands have been particularly wrong footed, as their tried and true mental and financial models about how the world operates, which worked so well during 1980-2007, have failed them. Traditional monetary policy has stopped working, and many economies (e.g. Europe) have remained sluggish and unresponsive to very low, or even negative, interest rates. Low rates were supposed to stimulate investment and consumption, and yet both have remained weak. "Unprecedented" unconventional monetary stimulus (in quotation marks as very similar policies were tried - with similar results - in Japan during the 1990s) in the form of QE has been undertaken, but despite this vigorous 'money printing' which was expected by many to result in inflation, we have had disinflation bordering on deflation, with inflation stubbornly refusing to rise towards central bankers' 2% trend-rate goal.

https://lt3000.blogspot.com/2020/01/demy...oblem.html

[karlmarx]

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.