Fed rate increase = lower hifi prices?
Will the recent rate hike meant to slow down the economy result in lower hifi prices? Seems everything shot up during Covid. Will we now see some relief?
Showing 15 responses by ghasley
No need for unverifiable phallic measuring contests about whose net worth moved more during a pretty narrow timeframe. You guessed right on real estate and gold during that window. You are also fortunate that the Canadian dollar tracks so nicely with the US dollar. Rather than searching for someone to admire the paper gains you seem to be enjoying, you are hopefully implementing a strategy to secure and hedge against the coming unwind of Canadian real estate gains pushed (until recently) by the arms open policy toward the monied class of China so prevalent in Canada in recent years. |
Housing may or may not have peaked, it may or may not be dropping...housing may be taking a breather due to lack of supply fatigue. If someone is fortunate to have no debt and own their home, then you have an inflation hedge. Relative buying power for your housing remains in tact.
Regarding the rest of economic handwringing, if you have a properly balanced portfolio of assets and actively rebalance periodically then the churn isn't unwelcome. I love the comment about the market dropping yesterday without the same level of zeal for the day prior. The stock market performance for the week isn't a big deal. Audiophiles have predicted 50 of the last 5 recessions. |
Hope you are well Bill!
Demand isn't down, supplies are at historic lows. If you remove "stale" housing inventory from the equation (think a teardown priced at new construction per sq ft, there are some truly stupid listings out there) then the ratio between the number of potential buyers and potential sellers is nauseating in the event you are looking for housing. Another challenge...conforming loan amounts have failed to keep pace with housing prices. I'm not saying housing prices won't fall but there is enough pent up demand from groups with large savings that it won't be anything like 2008...home equity is also at historic highs.
Its the same old adage though right? Its a recession if your neighbor is struggling...if you are the neighbor in question, its a depression. |
The fact that the world economy didnt come to a screeching halt in mid-2020 is clear evidence that the monetary policy worked. Its time to unwind it in as orderly fashion as is possible. Now, are the past 24 months in the economy and financial markets a surprise? If they are a surprise to you then please take some time to explore the topic more deeply. If its not a surprise and you didnt position yourself financially…why not?
I’m pretty conservative so a major part of my portfolio was hedged in March of 2020. I got to unwind the positions in an orderly fashion and the hedges went through the roof(see what happened to the VIX in March 2020). You reinvest when markets are down and repeat. If you dont have a financial advisor, get one. Most who dont have one may be under the mistaken impression they dont have enough investable assets. Keep looking until you find one, it can be financially life altering.
|
@soix well said |
@artemus_5 the only thing I’m absolutely certain of is you haven’t extensively studied macro economics or finance. That’s ok and no offense intended. The money supply will be contracting by $20-30 billion in May, $50ish billion each month thereafter. You seem to imply that markets should only go up…do you hold everything in contempt when your assets grow by 15% in year A if they decline in year B? So, if you hate big corporations and big banks, I hope you dont own any mutual funds…because you too are a stockholder of those very entities you seem to despise.
The markets were functionally flat this week. You had time to convert to 100% cash on Thursday, had you chossen to do so. You would have outperformed the S&P 500 for the week. Long term investors with a balanced portfolio with a strategy dont think that way… |
“J. P. Morgan tells the story of how he would get his shoes shined every Wednesday at the same shop around the corner from his office. One day the shoe shine attendant asked him if he and his friends could buy some stock through Morgan’s brokerage. The three friends had about $40—a lot of money in 1929. Morgan politely refused, hurried back to his office, and ordered that his company was not to have a single share of stock on its books by the end of the day. Morgan simply asked, “If the shoe shine boys are buying stocks, who else is left?” Of course, the 1929 stock market crash was only a few days away, and Morgan looked like a genius. He was not a genius; he noted that the order flow was likely running out on the buy side. It wasn’t his army of analysts that showed him that. It was a public investor.”
Two other great quotes: “Remember, my son, that any man who is a bear on the future of this country will go broke.” and my favorite; “Nothing so undermines your financial judgement as the sight of your neighbor getting rich.”
|
Wow! Let’s get a few things straight shall we? I am a "rightist" extolling the virtues of capitalism...I did not sign up to educate you. Of all the things you say are "up" are you saying that they were at their historically proper price and have now broken through the top of a reasonable pricing model? Gas? Coffee? Are you a self appointed soothsayer of supply/demand/cost to produce/risk analysis?
Were you picketing and lighting your hair on fire when the cost to produce hamburger was BELOW its "fair value"? Probably not. Gasoline and Oil? Probably not. Were you futzing around late spring of 2020 when the price of a barrel of oil went negative? Of course not.
There have been imbalances in markets since the beginning of time. I’m certain the ancients who owned water stops along the Silk Road or the largest buggy whip maker of 200 years ago each lamented loudly that it was someone else’s fault and that life was unfair when circumstances changed. People hate change, those who resist real change suffer the most. I would wager there are people with houseboats on what is left of Lake Powell crying about the value of their boat slip has tanked!
If you had a minor clue about economics, you wouldn’t have assumed that anyone who happens to disagree with your ill informed opinion on certain subjects must be of the opposite political persuasion. I don’t disagree with your analysis because you and I might be on opposite side of a political topic, I disagree with your analysis because it isn’t based on fact or knowledge.
The effects of inflation on the disadvantaged can be a shock because they either don’t have the resources or ability to maneuver. I get it, if your resources are finite then yes, you have to consume less hamburger in order to survive. Real wages have been pretty flat for a couple of generations. That is changing....some may say wage inflation is terrible, others may say it it just catching up to the historical trends.
At the end of the day, I couldn’t care less whether you like or don’t like the concept of capital flows and free enterprise. You are more than welcome to fight the windmills. Oh, and to address the topic of the thread...if a 50 basis point move in the Fed funds rate triggers the need to sell your audio gear at a fire sale, you probably shouldn’t have made the purchase to begin with. I have been under the assumption that the typical Audiogon participant could afford to participate in a not-so-inexpensive hobby. I feel empathy for the individual who through the hard knocks of life find themselves disadvantaged. I feel no empathy for the person who levered up their credit cards in spite of the obvious circumstance that they couldn’t afford the purchase.
|
That’s kind of the point...everyone has good points...everyone’s perspective matters. A word to the wise though...going all in on a gut investment theory, especially one driven by emotion, is the stuff that dreams are made of if you happen to be a bookie or a professional investor. At the dawn of the pandemic, markets actually behaved logically and priced in a rapid slowdown in the economy and asset deflation...then the stimulus, then the change in human behavior, then inflation caused by predictable supply chain disruptions.
There seems to be a pervasive anger brewing among some that the apocalypse hasn’t happened as often as so many like to fear or preach (the choice of the word isn’t accidental). The FEAR of an apocalypse is the most effective way to predict human behaviour though. Interesting stuff to watch. I just try to live drama free and make decisions on that same basis. There’s always someone willing to buy beanie babies and tulip bulbs, which always leaves me scratching my head. Gold is my least favorite place to park investible resources. To each is own.
|
Indeed. Profiteering and gouging are interesting concepts aren't they. I don't know of too many people who willingly sell something they own for less than market value. I want someone to sell me a perfect JBL Paragon at its original MSRP! Somewhat depends on which side of the transaction one finds themselves. I sortof chuckle to myself though when I hear the accusations of gouging. The opposite of much of the accusations of profiteering or gouging is subsidizing.
I don't get a vote, I just get the privilege of participating, but I believe in free markets so I am equally opposed to price ceilings and/or price subsidies. |
It was intended to provoke thought. Its unfair to limit someones profit potential if you are unwilling to limit their losses. I don't support this way of thinking, Its why I am opposed to price caps or floors. Its a problem I have with releasing the strategic oil reserves so car trips to Wallyworld remain affordable.
I hear it frequently said that the price of oil/gasoline is too high at a given point in time and that the industry is "gouging". No one whines when prices are so low that it actually stimulates other industries. We hear it frequently from industries who have no pricing power or who are experiencing a demand/supply imbalance, especially if they believe their product deserves subsidies.
Once again, understanding human nature helps us all place these data points in proper perspective. Lets take western states and water for example. There are numerous examples of communities that were/are subsidized with cheap water and the inherent waste of that precious resource is quite visible. Vegas? Palm Springs? LA? Water has been too cheap as evidenced by its waste. Food and water are the only commodities which cant be substituted. There are subsets of food which can be substituted for other subsets so the free market can work, sortof(regional, climate induced scarcity occurs all the time). Water on the other hand is interesting...you have good/safe water or you don't. Of course, we live in a world where we take perfectly average tap water from one region, run it through a filter, slap a label on it and then ship it around the globe in a plastic bottle with an exorbinant markup. Doesnt matter to me...as long I have access to safe water to substitute. If the cost of hifi gear became prohibitive, maybe people substitute it for a cooperatively funded live performance? Who knows...
The good news is not only are we not burdened with solving these problems of demand/supply imbalance, they inevitably take care of themselves if humans keep being humans. |
@jond +1,000
I wonder if we could ever reach a consensus on which industries should or should not be allowed to price their products as they see fit?
Oil/energy seems to always draw attention when prices rise when, in fact, it may be one of the more efficient markets when it comes to pricing. If a company must prioritize the public good OVER the best interests of the company then wouldn't fair minded people agree that if there is to be a forced pricing ceiling shouldn't there also be a forced price floor? Fair is fair right? Health care costs? Agricultural products? |
The new member (as of today) making an unatrributed reference to an “economic forecasting service” who happens to predict a worldwide depression 13 years from now seems “suspect”.
In your entire career or experience, has any reputable firm EVER made such a forecast? I don’t recall ever seeing anything like that…even doomsday cults stopped using exact dates. |