Tide turning for interest rates?

sabretoothtigger

Since we're referring to tides, this makes most sense to me for a dynamic. The receding sea line just before a tidal wave, if your wondering the most natural course following especially low rates

Drawback

It follows that a very large drawback may herald the arrival of a very large wave.
All waves have a positive and negative peak, i.e. a ridge and a trough. In the case of a propagating wave like a tsunami, either may be the first to arrive. If the first part to arrive at shore is the ridge, a massive breaking wave or sudden flooding will be the first effect noticed on land. However if the first part to arrive is a trough, a drawback will occur as the shoreline recedes dramatically, exposing normally submerged areas. Drawback can exceed hundreds of metres, and people unaware of the danger sometimes remain near the shore to satisfy their curiosity or to collect fish from the exposed seabed.
A typical wave period for a damaging tsunami is about 12 minutes. This means that if the drawback phase is the first part of the wave to arrive, the sea will recede, with areas well below sea level exposed after 3 minutes. During the next 6 minutes the tsunami wave trough builds into a ridge, and during this time the sea is filled in and destruction occurs on land. During the next 6 minutes, the tsunami wave changes from a ridge to a trough, causing flood waters to drain and drawback to occur again. This may sweep victims and debris some distance from land. The process repeats as the next wave arrives.

Glen_Clark

Land prices have tripled in 10 years - thats inflation.
Rising share prices is inflation - unless you think they are rising on fundamentals?
In which case why aren't miners and oil majors rising so much - if manufacturing is picking up there would be increased demand for commodities and oil. (I realise our petrol prices have risen but thats caused by increased tax and a weaker pound)

Thrugelmir

Glen_Clark wrote: »

In which case why aren't miners and oil majors rising so much

Reduced demand from China in particular as the West buys less. The BRICS economies have grown on the back of the Western credit boom. Now this has reduced their economies require growth of domestic consumption. Difficulty then arises that people in these countries are naturally more cautious. So save a far higher % of their incomes.

Glen_Clark

Thrugelmir wrote: »

Reduced demand from China in particular as the West buys less. The BRICS economies have grown on the back of the Western credit boom. Now this has reduced their economies require growth of domestic consumption. Difficulty then arises that people in these countries are naturally more cautious. So save a far higher % of their incomes.

Precisely. So why have share prices risen so much when all the indicators of economic activity (like employment (real jobs not zero hours crap jobs) demand for raw materials etc) remain just as low?
Artificially low interest rates has made 4% yielding shares look attractive. When interest rates normalise deposit accounts will look more attractive than shares, so there could be a stampede out of shares back into cash? Especially since profits are being temporarily boosted by companies paying very little to borrow.
For utility companies there may be another blow. Some say regulators feel the high profits made by heavily indebted utility companies due to lower interest rates, rather than improved efficiency, is unwarranted. So regulators could be less generous when the next pricing review comes around?

PS: A recent story in the local paper showed about 800 applicants for 3 jobs in a Costa Coffee outlet. I find that a more reliable indicator of unemployment than Government Statistics, or Daily Mail stories about welfare scroungers.

lvader

Glen_Clark wrote: »

Artificially low interest rates has made 4% yielding shares look attractive. When interest rates normalise deposit accounts will look more attractive than shares, so there could be a stampede out of shares back into cash? .

More likely you will see a shift from high yield shares to growth shares.

Glen_Clark

lvader wrote: »

More likely you will see a shift from high yield shares to growth shares.

Growth? But the real economy isn't growing is it? - Edit - just found the Nottingham paper and its 1800 applicants for 5 jobs in a new Costa Coffee outlet!!! Raw material prices have fallen too.
As far as I can see all that is happening is that asset prices are being inflated by artificially low interest rates. Telegraph article says lending to business has fallen!!!

lvader

Interest rates are dependant on real economic recovery so for interest rates to normalise it means the recovery happened and therefor the switch the cyclicals is a given.

Glen_Clark

lvader wrote: »

Interest rates are dependant on real economic recovery so for interest rates to normalise it means the recovery happened and therefor the switch the cyclicals is a given.

Interest Rates used to depend on real economic recovery
Currently they are artificially (temporarily?)held down by QE
Thats the point

Glen_Clark

...and how much longer can QE keep interest rates down?
Perhaps nobody knows, because we have never had anything like this situation before...

grey_gym_sock

we know that when bulls say "this time it's different", it's probably all about to go horribly wrong.

i'm beginning to wonder if "this time it's different - in a bad way - because of QE" is a similar bearish mistake.

it's not that there aren't plenty of things to worry about. there are. but that's what you need for markets to rise. "the market climbs a wall of fear."

i'm not saying markets will rise, BTW. just that i don't know whether they will

OTOH, the prospects seem less good for most ppl who have to earn a living.