Markola
Thinks s/he gets paid by the post
The OP thinks he can outsmart Wall Street. OK. Thanks to staying diversified and fully invested, we both semi-retired at 54.
If you don’t agree, fine, just move on and let interested members have their say.Discussions about market timing, individual stocks, commodities, bitcoin, precious metals and all other alternative asset classes. How to select and evaluate a financial advisor. This is NOT the forum to debate passive vs active or if the use of advisors is appropriate.
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A reminder, this forum is specifically to discuss market timing and related concepts.
If you don’t agree, fine, just move on and let interested members have their say.
+1 I can fully understand that higher interest rates dampen demand which in turn reduces inflation, but I don't understand why the interest rate would have to exceed the inflation rate for it to dampen demand enough to reduce inflation.
Interest rates higher than inflation provide real returns for savers, encourage saving over spending, and reduce demand. If inflation is running 10% and you can only get 5% on your investments, it makes more sense to buy a car this year instead of saving your money. Next year the car will be 10% more expensive, and your invested money will be worth 5% less than it was this year. But if those numbers are reversed, then you might decide to hold off buying the car and earn some real interest on your money for a year or two.
In April, consumer credit increased at a seasonally adjusted annual rate of 10.1 percent. Revolving credit increased at an annual rate of 19.6 percent.
Except this logic assumes that consumers have infinite resources - the only issue is when they’ll make a purchase. For a lot of consumers the reality is that they can afford a $400 car payment, but not a $500 payment, so rising rates will preclude the purchase even if it is theoretically advantageous to purchase now vs later. I.E not everyone can afford to buy four cars they don’t need right now to stockpile for later.This. This. This. (Saying it three times.)
Once consumers have inflation expectations, they will BUY NOW instead of waiting. From the Federal Reserve G9 report: (https://www.federalreserve.gov/releases/g19/current/)
We have had 10+ years of declining money velocity which helped to cap inflation even with an accommodative fed, then super accommodative starting Spring 2020 due to the pandemic.
I *personally* bought TWO new vehicles in the last 7 months because I expected prices to continue rising and locked in 0% financing in doing so. While one of those you could maybe consider necessary to replace an old car, the second one was primarily fueled by the above reasoning. (I have four vehicles for two people in total.)
Except this logic assumes that consumers have infinite resources - the only issue is when they’ll make a purchase. For a lot of consumers the reality is that they can afford a $400 car payment, but not a $500 payment, so rising rates will preclude the purchase even if it is theoretically advantageous to purchase now vs later. I.E not everyone can afford to buy four cars they don’t need right now to stockpile for later.
[T]the extent to which [inflation expectations] are anchored can change, depending on economic developments and (most important) the current and past conduct of monetary policy. In this context, I use the term ‘anchored’ to mean relatively insensitive to incoming data. So, for example, if the public experiences a spell of inflation higher than their long-run expectation, but their long-run expectation of inflation changes little as a result, then inflation expectations are well anchored. If, on the other hand, the public reacts to a short period of higher-than-expected inflation by marking up their long-run expectation considerably, then expectations are poorly anchored.”
Except this logic assumes that consumers have infinite resources - the only issue is when they’ll make a purchase. For a lot of consumers the reality is that they can afford a $400 car payment, but not a $500 payment, so rising rates will preclude the purchase even if it is theoretically advantageous to purchase now vs later. I.E not everyone can afford to buy four cars they don’t need right now to stockpile for later.
Not really planning to get back in cause I never got out.
Another factor is that, beyond a few months, little-used or unused cars store quite poorly. When I was a child, my father was burned twice by buying older used cars with low mileage. It made enough of an impression that I've been a new car buyer.Except this logic assumes that consumers have infinite resources - the only issue is when they’ll make a purchase. For a lot of consumers the reality is that they can afford a $400 car payment, but not a $500 payment, so rising rates will preclude the purchase even if it is theoretically advantageous to purchase now vs later. I.E not everyone can afford to buy four cars they don’t need right now to stockpile for later.
Another factor is that, beyond a few months, little-used or unused cars store quite poorly. When I was a child, my father was burned twice by buying older used cars with low mileage. It made enough of an impression that I've been a new car buyer.
The JP Morgan analysis had a similar finding: Someone who invested $10,000 in the S&P 500 on Jan. 1, 2002, would have a balance of $61,685 if they remained invested through Dec. 31, 2021. By missing the market's 10 best days over that 20-year period, they would have $28,260.
The JP Morgan analysis had a similar finding: Someone who invested $10,000 in the S&P 500 on Jan. 1, 2002, would have a balance of $61,685 if they remained invested through Dec. 31, 2021. By missing the market's 10 best days over that 20-year period, they would have $28,260.
The JP Morgan analysis had a similar finding: Someone who invested $10,000 in the S&P 500 on Jan. 1, 2002, would have a balance of $61,685 if they remained invested through Dec. 31, 2021. By missing the market's 10 best days over that 20-year period, they would have $28,260.