Comments on: Brooks and Krugman http://mgpaquin.wordpress.com/2012/07/27/brooks-and-krugman-139/ Dragging stuff out from behind firewalls Fri, 17 May 2013 11:22:38 +0000 hourly 1 http://wordpress.com/ By: George H.Bellows http://mgpaquin.wordpress.com/2012/07/27/brooks-and-krugman-139/#comment-19163 Fri, 27 Jul 2012 16:00:26 +0000 http://mgpaquin.wordpress.com/?p=3858#comment-19163 Low interest rates are good for investments when they are nominally lower. Now to gamble that interest rates will go higher one has to keep money in capital markets where exchanges are free and open access to those with good credit. That leaves out hedge funds, and commodities but not indices. Of all these avenues the NYSE is notably the most reliable and liquid. That explains why the market is at 13000 regardless of the news. We’re excited that the GDP is 1.5 instead of 1.3. The markets groan when expectations are not met and exhale and spend when surpassed. So if huge borrowing numbers decrease the interest rates than it follows that normal times will return us to 4% long bonds, or even 7%. A 3% note. That will weigh heavily on the market. Yet we find inspiration in the fact that the market finds providence will be on its side. Forever the optimist.

What’s the tipping point for interest rates? Unemployment below 6.5%? That could take two or three years give or take a housing resurgence. Zero percent returns become 2%. Long bonds rise to 5%. But the market sky rockets because the orgasmic state of euphoria can not be held back. 25000/5. Seems constrained by spending. If investors love the government in bad times than they must hate it during good times. So what then is the return minus 7%? Two. Long term prospects for the market are only 2% if you trade. But they eclipse ten if you hold for more than four decades.

]]>