tag:blogger.com,1999:blog-1110014885778996459.post7075675071679941065..comments2024-03-28T04:16:11.729-07:00Comments on Idiosyncratic Whisk: Signs of Recession, Part 2Kevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-1110014885778996459.post-31290591439480594682016-10-26T20:57:06.613-07:002016-10-26T20:57:06.613-07:00Great post. I have been trying to interest people ...Great post. I have been trying to interest people in property zoning…but on one cares. Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-24366784137295394642016-10-25T15:50:35.149-07:002016-10-25T15:50:35.149-07:00I think you have to be careful to separate nominal...I think you have to be careful to separate nominal and real growth and capital gains vs. income.<br /><br />I think cost of equity could possibly remain somewhere close to what it is today, but risk free rates would rise up to meet them. If there weren't tax advantages to debt, maybe there wouldn't be much demand for debt, and that would all be sustained because real growth rates would be higher and the targeted growth level together with broader equity ownership would mean that systemic contractions would be very tame.<br /><br />I don't know if that would be the case, but it is interesting to think about.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-25796450922961738412016-10-25T15:36:49.844-07:002016-10-25T15:36:49.844-07:00I'd be leery of that. If equity prices were t...I'd be leery of that. If equity prices were truly guaranteed to follow a lock step rise, they'd be (closer to) risk free so total returns would be lower, which means the cost of capital would be lower. I think we'd see a rush of firms looking to go public and firms being founded to go public and firms really couldn't afford to stay private. With total return equal to div yield plus the rate of appreciation, what total return or appreciation would be target? Historically, stocks have risen approx. in line with NGDP growth. So if we targeted 4% growth for both, dividend yields would fall from 2% toward zero and prices would approach... infinity? not really, but you see my concern. Frankly, even my advice to use 10-year yields might run into problems once it became known. It should only be used as a warning bumper and the bumpers adjusted over time once the Fed moves to a stated NGDPLT target. At the current time though, with a stated 2% inflation target that is purportedly symetrical, tightening with the 10 year at 1.75% is outrageous and stupid. billnoreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-42101058476992616512016-10-25T13:23:43.932-07:002016-10-25T13:23:43.932-07:00I think Roger Farmer's idea of targeting the p...I think Roger Farmer's idea of targeting the price of equities is interesting. From a CAPM point of view, what would happen if we basically completely removed cyclical risk from the equity market? I think it could potentially raise interest rates and lead to much more productive investment.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-52309702083363107242016-10-25T13:12:55.641-07:002016-10-25T13:12:55.641-07:00Do we know why the jobs figures tend to miss turni...Do we know why the jobs figures tend to miss turning points? I seem to recall that the jobs figures for Jan 2008 to August 2008 showed a total loss of about 400,000 jobs. Yet those have since been revised to a total loss of 1,200,000. If the Fed asked me for advice, I'd say loosen, loosen and loosen any time the 10 year Treasury was yielding less than 3.5% and tighten any time it was yielding more than 5%. Treasury yield data doesn't get revised. [smiley face]billnoreply@blogger.com