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Any thoughts on "The Price of Time" by Edward Chancellor?
Old 01-30-2023, 02:14 PM   #1
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Any thoughts on "The Price of Time" by Edward Chancellor?

Goodreads link: The Price of Time

My reading is that Chancellor paints a convincing picture of a US economy that has been pumped up for decades by the feds, but especially so for the last 15 years (which isn't news for any of us). However, as there’s an expectation that this Fed policy will continue, it not only means that growth in equities has been fake for the last few decades but also that all markets (equities, RT, and bonds, as they are still dependent on corporate profits) are still way over-priced.

Of course, this challenges our assumptions about withdrawal rates (~4%) as well as long-term growth over inflation because these calculations depend on data that hasn't taken Fed intervention over the past decades into account.

So, what do y'all think? Any counter-points to Mr. Chancellor? I haven't read Bernanke's book ("21st Century Monetary Policy") but perhaps others on this forum have and can help give more insights.
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Old 01-30-2023, 03:58 PM   #2
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You may find this paper by Michael Pettis interesting (here). He references John Kenneth Galbraith, who described “ the bezzle”, which is the excess of market value of assets over their real fundamental value. In his view it is quite high today, even after the recent correction.
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Old 01-30-2023, 04:37 PM   #3
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Thanks for sharing this article. Indeed, "the bezzle" was also covered by Chancellor in this book. I would venture to say that this article is a fair summary of the arguments made by Chancellor. However, I'm hoping to find counter-points, as I think Chancellor has done a fairly credible job making his case. Intellectual honesty requires some "poking of the holes" especially when the argument is counter to the prevailing narrative.
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Old 01-31-2023, 08:38 AM   #4
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The author was interviewed by Barry Ritholtz on the Masters in Business podcast on 11/4/22. I’m going to give it a re-listen, but I heard it as an interesting bit of history not a profound warning of imminent danger.
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Old 01-31-2023, 12:57 PM   #5
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There is no "natural" level of asset pricing...what any asset is worth is what people are willing to pay for

IMHO equities in general are not perceived as risky as they once were, e.g. post-WWII up to the 1980s.

Of course, LT bond yields have dropped steadily for 40 years so equities also benefitted from "TINA."

Not to mention the very favorable federal tax rates for LTCG & qualified dividends low as 15%.
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Old 01-31-2023, 02:59 PM   #6
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Last year we saw how the bond market could be very good for some decades and then there was a correction in rates. It was a somewhat slow moving event. Could such a thing happen in equities?

Maybe but I don't know how to time it. Just using a moving average technique one could at least partially protect against such a thing as long as it is not very sudden like Oct 1987. There is probably an insurance premium to pay i.e. returns could be somewhat reduced by whipsaws. My data shows that returns on the SP500 have been better then buy-hold of the SP500 when using a monthly moving average. These are returns over a long period of time though and any decade could see just a few whipsaws or several.

I haven't read the book by Chancellor and probably won't. What is the alternative to stocks/bonds?
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bernanke, federal reserve, monetary policy, withdraw

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