tag:blogger.com,1999:blog-1110014885778996459.post1508981632196425519..comments2024-03-28T04:16:11.729-07:00Comments on Idiosyncratic Whisk: Risk & Valuations, Part 9: The Greenspan PutKevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-1110014885778996459.post-53642534380023716512014-07-23T19:50:45.507-07:002014-07-23T19:50:45.507-07:00I liked this post a lot.I liked this post a lot.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-13314049203832901572014-07-16T16:51:55.453-07:002014-07-16T16:51:55.453-07:00Thanks, Travis. Being an independently operating ...Thanks, Travis. Being an independently operating contrarian, there is always a little voice in the back of my head, wondering if I'm going off the rails without knowing it. I think I have a small, but very high quality, group of regular readers, so it's always nice to get positive feedback from one of you. I'm glad you find my work interesting.<br /><br />And, I didn't completely answer #2 in your comment above. I'm not sure that the market expects an expansionary Fed. Eurodollar futures suggest a Fed Funds rate rising at less than 1% per year as we leave the zero lower bound, and topping out at 4% or less. That suggests muted expectations of both real growth and inflation, I think.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-13861214592711796312014-07-16T07:21:06.520-07:002014-07-16T07:21:06.520-07:00TravisV from TheMoneyIllusion comments section her...TravisV from TheMoneyIllusion comments section here.<br /><br />Thank you very much for your timely reply! Unfortunately, I don't have any sources on historical Japanese P/E ratios, etc.<br /><br />I'm a huge fan of your work and LOVE seeing some of Sumner's concepts applied to valuation / finance theory!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-78512016042669193362014-07-15T17:45:09.149-07:002014-07-15T17:45:09.149-07:00(1) Nominal rigidity is a fundamental part of the ...(1) Nominal rigidity is a fundamental part of the model I am laying out here. In part 6 and 7, I describe the fixed for variable rate swap embedded in a typical labor contract. When outcomes reach variances beyond the range equity can handle, unemployment is a result.<br /><br />(2) I more or less agree with his analysis. I am optimistic about the economy. I am pessimistic about policy makers and the Fed. I believe that home prices would rise 30% or more in a healthy economy with reasonable money supply management, and I'm afraid that the consensus will misinterpret that as inflationary and push the Fed to kneecap us like it did in 2008. Despite pro-cyclical labor policies the Feds seem to be establishing a habit for during downturns and the likely drag on growth of things like health care, I think our economy is on fairly good footing, natural short term interest rates are probably already above zero and will rise fairly steeply, and the labor market will continue to be strong in the near term. I don't buy the secular stagnation story. I think it's based on a misinterpretation of recent developments and the concerns it projects onto the far future are mostly the product of imposing our moral norms on the future. The future won't care what we thought about work norms, wages, etc.<br /><br />(3) I'm not an expert, and I haven't found a good source of long historical data on these items, but it does look like corporate deleveraging since about 1990 has coincided with declining interest rates, which is a counter-intuitive expectation that I have outlined here. PE ratios were rising until the 2000s, which was a period of low growth and, apparently, deleveraging, which goes along with what I discussed in part 1:<br />http://www.vectorgrader.com/indicators/japan-price-earnings<br />But, there is a lot to account for there, and it would take a lot of work to pull the information together to do a better review. Do you have a source for this kind of work?Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.com