Is This Time Different?

[Sunset]

Sunset…4.35% for a 2 year cd is too tempting. Where did you find that? I don’t see it on the Ally website. High yield cd is showing as 3.16% for 18 months

These are "brokered" CDs, found on brokerage sites like Schwab, Fidelity, Vanguard, etc.

Yes, it's on the brokerage sites as Aja8888 says.

When I showed it to DW, she was peeved as she is a big CD buyer at each online bank.
She kept wondering why a better rate was at the brokerage.
I pointed out that lots of folks only buy at the bank out of habit and belief that it's "safer". So the banks can offer less and still sell a lot.
Now she is going to check the brokerage site for the next CD she buys.

 

[COcheesehead]

I see 4.5% two year CDs at Fidelity right now.

 

[davidfin]

Seems they say “this time is different” every time there’s a recession.

 

[COcheesehead]

CPI due out 10/13. We’ll see just how different it is or isn’t.

 

[SecondAttempt]

Post Keynes, Gailbraith lamented in his book, "Affluent Society", that despite advances in technology and human productivity, people were working even more hours per week in modern times for low value and useless items, that really didn't add that much to their happiness levels.

I don't know. Most of my partner's ancestors were Filipino or Puerto Rican sugar plantation workers as most people were in Hawaii 100 years ago. It is shocking to see in the old census documents how many hours they worked for so little pay. And they came to Hawaii as contract workers to make better pay in better conditions than at home. Remember Puerto Rico and the Philipines were US teritories after 1898. Of course PR still is.

And she knew most of her grandparents and great grandparents in their old age. They talked about how good life was in the plantation camps back then. Hard work by day and playing music, dancing, and other fun at night, 6 days a week. Most people were on 3 year contracts but most stayed on after their contracts expired. I think people back then saw life differently and expected to work hard and enjoy the simple things.

 

[SecondAttempt]

Another factor that have not seen mentioned is the reversal in globalization the last few years. The good and bad of globalization for societies is certainly debatable but most agree it has been a driver of economic prosperity.

I rarely think any time is different. I think the reversal of globalization and the reversal of the 40 year drifting decline of interest rates are the biggest long term trends that could make the next 40 years different. I think Ukraine, supply chain issues, and even inflation are short term challenges that will be worked out.

 

[Chuckanut]

IMO, answering the question "Is this time different?" requires a few more words such as "compared to the years YYYY to YYYY."

 

[daylatedollarshort]

Has the world ever had 0% to negative interest rates before? That seems different, at least as far back as I can remember. Those really low rates seem to have fueled the bubbles that are bursting now.

 

[Out of Steam]

I rarely think any time is different. I think the reversal of globalization and the reversal of the 40 year drifting decline of interest rates are the biggest long term trends that could make the next 40 years different.

I'm not convinced that we're seeing the reversal of globalization, rather it is a recognition of geopolitical risk in supply chains, including risk from concentrating sourcing in China, as well as a reconsideration of some of globalization's excesses. One example I've heard is catching fish in Alaska or Northern Europe, shipping it to Vietnam for processing/filleting, and returning it to the US or Europe for sale.

Paying American, or even Mexican, wages for sewing or hand assembly labor on a mass scale probably isn't going to happen.

As someone who has taken several adjustable rate mortgages, I agree that the end of the trend of 40 years towards lower interest rates is a major economic change.

 

[SecondAttempt]

I'm not convinced that we're seeing the reversal of globalization, rather it is a recognition of geopolitical risk in supply chains, including risk from concentrating sourcing in China, as well as a reconsideration of some of globalization's excesses.

I don't disagree with your characterization of the causes, geopolitical risk, etc. But I think those causes are leading to reversal of globalization. It started with Trump's trade war with China (not getting political here, Biden has effectively continued mostly the same policies). And I think the pandemic made everyone realize how tight, efficient supply chains and transportation systems were intensely vulnerable to disruption. We won't go back too far but we will spend a few years building in resiliency and that ultimately leads to inefficiency.

I don't think the reversal is all good or all bad, I just think it is a factor that must be considered in assessing the direction of the next few decades.

 

[NW-Bound]

Having been through the 2000 tech bust and the 2008 financial fiasco, I will say that this time is different.

For me, it is different mainly because 1) we are older and have less time left in this world, 2) my wife draws SS now, and I am not that far from the age of 70 now to draw mine, 3) we are on Medicare now, and 4) we spend much less than before.

So, if the market performance in future years is different than the past in a bad way, we can still handle it well I believe.

Not to sound callous with regard to valid concerns by younger ERs, but the truth is that the above are the only advantages, if you can call it that, that growing old gets you.

 

[SecondAttempt]

Having been through the 2000 tech bust and the 2008 financial fiasco, I will say that this time is different.

To be clear, when I say I don't think any time is different, what I mean is that the same underlying laws of economics and human behavior are at play. But the details are always different.

One of the things that has made the 20th and 21st century busts less bad in general was having the Fed and, to a lesser extent, government regulation of financial markets to build confidence and stability. People have diverse opinions of the Fed and what it does. But go look at some of the panics in the 1800s and ask yourself if what happened then would be preferred. And say what you want about government regulation in general, I think everyone on this forum is glad that they can go to a broker, buy a stock or bond on a regulated exchange, and be confident it is not a swindle. It might go down, perhaps to $0, but it is not a complete fraud unless it is spelled Enron or Theranos.

The difference between 2000 and 2008 is that those were asset bubbles and deflated pretty quickly. My fear this time is that we might be looking at long term downtrends as the global economy restructures. I actually do not expect anything dramatic. And I think the short term might be good as supply chain and employment issues are worked out. But I think the next few decades could be a period of sideways markets, low interest rates, low inflation, and low growth. The growth rate of the economy overall should be the population growth rate plus productivity growth rate. Both of those are shrinking in most developed countries.

 

[audreyh1]

Well, a few well nourished, rich actors just don't get it across to me as well as the real thing. I didn't look to find the video which was most poignant (that I saw yesterday) but here's another one showing real people from the era:

DF grew up during the Dust Bowl in Kansas. He told us stories about the dust storms. His folks ended up losing their farm when the price of wheat crashed. His dad went to Port Arthur to work in the oil fields which was really far away. I’ve sais that his dad wasn’t able to visit the family often during that time. His mom was a school teacher.

 

[copyright1997reloaded]

DF grew up during the Dust Bowl in Kansas. He told us stories about the dust storms. His folks ended up losing their farm when the price of wheat crashed. His dad went to Port Arthur to work in the oil fields which was really far away. I’ve sais that his dad wasn’t able to visit the family often during that time. His mom was a school teacher.

Something to ponder. Why did the great depression last as long as it did?

We certainly had depressions and financial panics before it. Most were short. Sometimes very sharp, but typically over in 1-2 years. A couple of longer ones, 1839-1843 (4 years), 1873-1879 (panic of 1873 and the "Long Depression"), but most were fairly short. In fact, the depression here in 1873-79 was called the "Great Depression" until it was replaced by the 1930's version.

 

[NW-Bound]

Uh Oh. On this forum, in the market meltdown in 2008, we talked a lot about the Great Depression and the Dust Bowl. Soup lines, and the work.

I surely hope it will not get as bad this time. A bit too early for such gloomy talk.

And I mean compared to the 2008 financial crisis, not the Great Depression, for our sake.

 

[HarryHawk]

I don't ever recall talk of banning fossil fuels with the hope that a viable alternative be discovered and developed.

 

[frayne]

Can anyone explain why the market bounced up today ?

 

[aja8888]

Can anyone explain why the market bounced up today ?

I have heard it was a short covering rally. I did not participate.

 

[milford]

Can anyone explain why the market bounced up today ?

From the technical side, market's been oversold and shorts covering as well. Classic dead cat bounce in bear market.

 

[Amethyst]

Unless I missed it, nobody has mentioned population graying (to which most of us are contributing) as an inflationary factor.

Lots of people collecting SS, government and military pensions; fewer young people to work and pay taxes.

This won't change in our lifetimes.

 

[marko]

Unless I missed it, nobody has mentioned population graying (to which most of us are contributing) as an inflationary factor.

Lots of people collecting SS, government and military pensions; fewer young people to work and pay taxes.

This won't change in our lifetimes.

Yes, but many of us oldsters are spending a lot less as we age and more of it is going to critical expenses vs luxury items. Likely with incomes much less than our working days

 

[audreyh1]

Can anyone explain why the market bounced up today ?

Short covering rallies are very common during long bear markets. Expect more of them.

 

[arcyallen]

Can anyone explain why the market bounced up today ?

We can all guess, but we can't know. Knowing why your fellow investors did what they did twelve hours ago is a crapshoot. The headlines just take stabs at it. I laughed watching the headlines quickly change at Yahoo! Finance.