Economics, Advanced Technology, and Social Media

  • values are still going up, so what can go wrong?
  • innovation and growth are more than important than profits. So who cares if they are ever profitable?
  • An innovative business model is its own reward.
  • Central bank policy is playing an unprecedented role in our lives today and for the foreseeable future (“from now on” seems hyperbolic — although I don’t see when this can end).
  • Unemployment is recovering and production is challenged to keep up with newly sparked demand (inflation anyone?).
  • The Federal Reserve is doing its best to keep interest rates low while battling the prospect of new inflation.
  • Despite their efforts, the 10-year Treasury is rising
  • Even with federal funds rates at zero, bond prices seem to be rising — although the average yield on high-yield bonds is still only around 4.0%.
  1. Can the Fed keep interest rates artificially low from now on?
  2. What about longer maturity bonds?
  3. If inflation rises, can the 10-year Treasury note still yield 1.64% if inflation reaches 3.0%?
  • The economic outlook is positive and interest rates will stay low for years
  • Monetary policy is extremely accommodative
  • Fiscal policy has never been more generous (pandemic stimulus packages are more than three times greater than the overall stimulus packages from the 2008 to 2009 financial crisis)
  • Inflation has stayed relatively low, but its prospect is uncertain
  • There is euphoria and risky behavior, especially among certain stocks touted in social media and driven by advanced technologies that few understand but many are willing to invest in, nonetheless.
  • Valuations are high, and a large degree of that value comes from a low interest-rate environment, which may change. Risk is not being compensated, and risk premiums are narrowing further.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store