Conversation

Are statements like “5% is a reasonable interest rate, 10% is usurious and extractive rent-seeking” meaningful? What if the numbers were 5 and 6? 5 and 5.5? 5 and 50? How well-posed and precisely determinable is the concept of rents when applied to cost of capital?
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Economic rents imply inefficient pricing and/or monopolistic pricing power. With capital, both apply. A phrase like “capital seeking returns” suggests investors competing on risk and information, but I’m increasingly convinced capital markets seek pure rents, not returns on risk
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The investor class loves to talk about how awash in capital the world is. But nobody who needs money seems to find it easy to get any of it. Capital is willing to take on cosmetic amounts of risk, but really this supposed glut of capital is only interested in risk-free returns.
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Consequence of an asset price stabilisation focused macro-financial regime. Since coverage is never 100%, you want to own stuff as correlated to the assets whose prices are being stabilised as possible, and increase returns via leverage. Idiosyncratic risk only as penny options.
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Housing equity needs some special treatment of its own. They are 'upwardly unstable' yes, also because there is a genuine recalibration going on of: 1. real discount rates into the future - aging society that spends more time in retirement needs higher asset prices for same....
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..level of annual lifetime consumption. 2. What is the reward of taking 'duration' risk with no credit risk at all. These adjustments are fundamental and happen in steps. But overlaid on top is an asset price stabilisation regime that encourages leverage.
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So people living longer means “retirement” is the basic asset being price stabilized and it’s really upwardly unstable because it’s increasing faster than either useful working lifespan or productivity. Ie it’s the damn boomers again 😆