patrick.net

Fortwaye says

401k is usually managed by fund managers not like IRA. same goes for pension funds, that’ll pull cities down.

Huh? You get a choice of various investments in
your 401k. Some have better choices (mine even allows individual stocks), some worse, but no 401k plan would consist of PE only.

Hope he doesn't totally Weimar my pile. I have a Walmart greeter's vest in the closet just in case.

clambo says

Without a long explanation, the USA debt interest isn't under the direct control of the Federal Reserve.

The Federal Reserve can change the prime interest rate, which will impact the interest rate you make on a deposit, and pay for a loan.

USA debt is sold as bonds (IOUs) in an auction, and the prices the bonds make at the auction vs. their face value=interest.

Nobody can directly control what happens at an auction. The stock markets are also auctions.

The Federal Reserve, since 2009ish, also pays interest on the deposits banks have at the Fed. There's over $4 trillion in reserves and they are paying interest at above 4%. Those reserves would quickly flow to the US Treasury market if the Fed stopped paying interest. This would drop long term rates dramatically.

Misc says

There's over $4 trillion in reserves and they are paying interest at above 4%.

Or, they just pay 2%.

Perusing the CEPR it appears the articles are rather left wing oriented. Personally there have been many times, when doing research on a new company with great potential, I find the only way to tap into it is through PE. By the time they go public the big bucks are gone.

It's true. But for everyone making a good living lower rates are much better for wealth preservation and financial independence.

mell says

It's true. But for everyone making a good living lower rates are much better for wealth preservation and financial independence.

How? Lower rates mean lower returns on cash assets and more speculative borrowing fueling inflation.

Lower rates would help stimulate the economy and the stock market would also like it; Trump wants to appear as causing a growing economy.

clambo says

Lower rates would help stimulate the economy with more malinvestment.

Fixed it for ya.

clambo says

Lower rates would help stimulate the economy and the stock market would also like it; Trump wants to appear as causing a growing economy.

if it stimulates economy why ever have it above 0 or even negative?

If interest rates are zero there is no incentive for anyone to lend…

Rates are fine where they are. We have normal rates now.

The real problem was the Obama Era Rates used to gild the Rotten Obamunist's Regime.

ForcedTQ says

If interest rates are zero there is no incentive for anyone to lend…

fed rates is the topic. fed controls that.

HeadSet says

mell says

It's true. But for everyone making a good living lower rates are much better for wealth preservation and financial independence.

How? Lower rates mean lower returns on cash assets and more speculative borrowing fueling inflation.

no speculative borrowing. Most stable assets go up with inflation and if your borrowing rate is below that you are making money. In fact that's what the wealthy do, they borrow against their assets, the lower the rates the better for them, no capital gains tax ever, free monies, all they need is their assets to appreciate with their borrowing rate or more. If you could go back to the zirp era and borrow at 2% while the market makes 10-15% => free monies. Of course the middle and lower class pays for it.

Lower rates make dividends from stocks more attractive vs. interest so stocks will go up.

clambo says

Lower rates make dividends from stocks more attractive vs. interest so stocks will go up.

Yes, but didn't the stock market reach all times recently with the current "high" rates?

HeadSet says

clambo says

Lower rates make dividends from stocks more attractive vs. interest so stocks will go up.

Yes, but didn't the stock market reach all times recently with the current "high" rates?

rates aren’t the only thing that increases stocks. low rates are artificial gains though.

Lower rates encourage asset speculation and are largely responsible for unaffordable housing prices and consequentially sub-replacement birthrates in this country.

In a high interest situation, saving and prepaying mortgages is encouraged. I.e., it centers investment into the now, as opposed to stealing investment from the future. Higher interest rates are the best insurance against malinvestment, because these higher rates properly price the opportunity cost of malinvestment.

We have lived so long in an artificial economy that we have forgotten how a real political economy functions as opposed to the fake economy we've had to endure for the last 30 years.

That, and ban corporations from buying back their own stock. This was the rule before the 1980's - let's bring it back. Same thing applies to commodities trading - only those entities who are the producers and consumers of said commodities can trade or engage in futures markets. Fuck the banks - they have no business interfering in industrial affairs other than finance.

stereotomy says

That, and ban corporations from buying back their own stock.

This

What's wrong with companies' buying back their own stock?

Patrick says

What's wrong with companies' buying back their own stock?

1) It was illegal until the 1980's, for good reason.
2) It encourages reckless RSU distributions instead of salary increases (a friend in a startup gets plenty, but they're worth shit by the time he can cash them in) - the stock buybacks counteract the dilution of shares.
3) It manipulates stock prices and destroys transparency to price discovery and the stock market in general.
4) It's a gross misallocation of capital which could better be spent on R&D or better wages for employees.

That's just off the top of my head. There are multiple good reasons why this was not allowed before the 1980's.

stereotomy says

1) It was illegal until the 1980's, for good reason.
2) It encourages reckless RSU distributions instead of salary increases (a friend in a startup gets plenty, but they're worth shit by the time he can cash them in) - the stock buybacks counteract the dilution of shares.
3) It manipulates stock prices and destroys transparency to price discovery and the stock market in general.
4) It's a gross misallocation of capital which could better be spent on R&D or better wages for employees.

That's just off the top of my head. There are multiple good reasons why this was not allowed before the 1980's.

Main reason they do it: To take advantage of tax differential between standard income taxation on dividends vs capital gains on stock sales.

Shareholders this prefer stock buybacks over dividends.

Right now Google Gemini AI states the Congressional Budget Office is forecasting the FY 2025 deficit to be equal to the FY 2024 deficit.

Even if the FY 2025 deficit is no more than FY 2024 deficit when adjusting for inflation, that will help to subdue the bond markets and maybe lead to the 10 Year Treasury dropping below 3.8%.

MolotovCocktail says

Main reason they do it: To take advantage of tax differential between standard income taxation on dividends vs capital gains on stock sales.

Shareholders this prefer stock buybacks over dividends.

C Level gets compensated mostly via stock ownership.

Also they can borrow against their stock as collateral, so they want the stock value to appreciate with greater unrealized capital gains.

And they'll even borrow money when rates are low which indirectly helps them to buy back stocks.

Its a short sided mindset, but a lot of times the C Level may be there for only 5 years so this works out to their advantage.

.