EPTTrading/Investing Thread - Page 134
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{CC}StealthBlue
United States41117 Posts
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iPlaY.NettleS
Australia4315 Posts
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Sermokala
United States13735 Posts
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{CC}StealthBlue
United States41117 Posts
+ Show Spoiler + edit: | ||
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Mohdoo
United States15391 Posts
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RvB
Netherlands6190 Posts
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Salazarz
Korea (South)2590 Posts
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Slydie
1881 Posts
On May 04 2023 21:07 Salazarz wrote: Price increases that affect the poor the most aren't happening because of 'inflation', they're happening because of corporate profiteering. It's not as if potatoes and milk go up in price 25% because of 'inflation' and it's not as if raising interest rates is a solution to that. Inflation does not effect every are of the economy equally, but the inflation has been so low for so long most of us don't even know what it looks like. Interest rate is the tool we have to bring inflation under control. When more money is siphoned out of the economy and putting money in the bank is encouraged, prices are bound to drop. Unfortunately, inflation is a problem you can't throw money at. Ask anyone living in Venezuela or Turkey about how what living in a country with constant, heavy inflation feels like. | ||
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{CC}StealthBlue
United States41117 Posts
edit: PacWest halted. | ||
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Ryzel
United States519 Posts
On May 02 2023 09:05 KwarK wrote: As supported by the example you provided earlier of “when the cost of oil doesn’t go up the price of oil goes up and they make record prices”. The back and forth between the two of you has been really educational to read, but I feel like there’s some talking past each other here. KwarK, I get your point that price = what the market can bear. Presumably, you mean the optimal $/unit that ensures sufficient quantity of units bought to maximize $. But how well defined is that point? I would imagine it would require a very scientific process of making a hypothesis (“based off our best guess of the state of society and rates of buying, it’s X $”), rigorous testing-retesting of that hypothesis (increase/decrease X by Y % over short periods to gather data), and re-evaluating based on data collected, probably in meetings like the one you took place in. The point being that this optimal price point is a fluid best guess of market conditions that fluctuates based on events that shape public opinion. Ukraine was an example of American gas companies gambling that they could use the war as an excuse to push that price point higher among the uneducated consumers. It ended up paying off; despite grumbling and whining people didn’t boycott them en masse. How I interpret GH’s point is, like Ukraine, banks have an opportunity to push the price point higher by shaping public opinion among the uneducated masses saying “wow, with all these banks failing everywhere, we need to pay out less in order to make sure we stay afloat”. In this sense, while the banking crisis poses a cost to banks by requiring more liquidity, it also provides an opportunity to increase what the market will bear by providing an easily digestible buzzword for the public to swallow. Ergo the cost of the banking crisis will, at least partially, be made up by increased price to consumers. | ||
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Mikau313
Netherlands229 Posts
On May 04 2023 21:07 Salazarz wrote: Price increases that affect the poor the most aren't happening because of 'inflation', they're happening because of corporate profiteering. It's not as if potatoes and milk go up in price 25% because of 'inflation' and it's not as if raising interest rates is a solution to that. You seem confused. Inflation isn't the cause, it's the effect. Inflation is simply what we call the phenomenon where life in general gets more expensive, regardless of whether the cause is real economic factors or 'just' corporate greed. | ||
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Acrofales
Spain17826 Posts
On May 04 2023 21:07 Salazarz wrote: Price increases that affect the poor the most aren't happening because of 'inflation', they're happening because of corporate profiteering. It's not as if potatoes and milk go up in price 25% because of 'inflation' and it's not as if raising interest rates is a solution to that. In addition to what Mikau said, raising interest rates really is a solution to that. Situation 1: low (or even negative) interest rates. Ergo, money is super cheap to borrow. Therefore anybody with an idea can borrow money with low risk to invest in any kind of crockamamy scheme. Some clever people find a way to make profit with potatoes and milk, exploiting people who actually need the potatoes and milk => high inflation. Situation 2: high interest rates. Ergo, borrowing money is expensive. "Risky" investments with low ROI such as messing about with potatoes and milk is unattractive. => less inflation. Although to be fair, the inflation in potatoes and milk is not due directly to people speculating on milk and potatoes (I'd assume), but rather doing so with other goods, which either make using land use more expensive => milk and potato prices go up, or transport more expensive => milk and potato prices go up. | ||
KwarK
United States41934 Posts
This trick has been used almost continuously since the Great Recession but there’s only so much demand you can borrow from the future before the future is today and you have to pay it back. It creates a feedback loop where simply ending the stimulus has a depressant effect and so you need a constantly increasing amount of stimulus just to break even. This has, of course, been politicized. Whenever the Federal Reserve Chair tried to end stimulus programs under Trump Trump would call him a cuck on Twitter and, despite in theory being apolitical, that somehow worked. With that background established we can see how the inverse must also be true. Raising interest rates works by taking circulating money out of the economy which depresses demand. Depressed demand, in theory, reduces prices. There is an optimal equilibrium point where the profit per unit and the volume of sales maximize total profit. As demand, and therefore sales volume, falls that equilibrium point shifts and a lower profit per unit across a higher volume becomes more acceptable. The depressed demand also reduces job expansion, capital investment, and so forth. Just as the inflated demand pressured businesses to rapidly expand their capacity which meant new plants, new equipment, more labor, the depressed demand pressures businesses to defer CapEx and reduce heads. This has a knock-on impact throughout the economy, if company A , seeing less demand, defers the purchase of manufacturing equipment from company B then company B, seeing less demand for the equipment that it manufactures, defers the purchase of tooling from company C and so forth. This assumes no real world economic factors of course. I can assure you all that the price of Walmart gallon OJ will be going up due to hurricane Ian wiping out Florida and the HLB blight reducing Mexican harvests. Right now Brazil is the only game in town and there simply aren’t enough oranges for everyone. It’s not monetary inflation, it’s just supply and demand, a bunch of Brazilians are getting rich. Meanwhile fluid milk has historically been extremely deflationary due to steady cost reduction and changing consumer demand trends in that industry. It barely moved within the $2.50-$3.00 range between 1985 and 2020 which, in real adjusted for inflation terms, is a colossal decline. Overall I'm in favour of allowing the Federal Reserve to pay the piper. It's overdue and Biden's choice to allow them to do their jobs (which shouldn't be up to him but as we saw with Trump it somehow is) comes with a political cost which he appears willing to pay. That's the kind of statesmanship I appreciate about Biden. There's a tendency for laypeople to assume that everything is some kind of conspiracy to defraud them, when we had year after year of stimulus that saw profits pushed up, cheap cash churned into the markets, stock buybacks and so forth the demagogues pushed a narrative that this was a colossal transfer of wealth from the working people to the 1%. When that policy is ended somehow the demagogue narrative is still that this is abusing the working people to serve the 1%. | ||
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{CC}StealthBlue
United States41117 Posts
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Salazarz
Korea (South)2590 Posts
On May 05 2023 01:01 Acrofales wrote: In addition to what Mikau said, raising interest rates really is a solution to that. Situation 1: low (or even negative) interest rates. Ergo, money is super cheap to borrow. Therefore anybody with an idea can borrow money with low risk to invest in any kind of crockamamy scheme. Some clever people find a way to make profit with potatoes and milk, exploiting people who actually need the potatoes and milk => high inflation. Situation 2: high interest rates. Ergo, borrowing money is expensive. "Risky" investments with low ROI such as messing about with potatoes and milk is unattractive. => less inflation. Although to be fair, the inflation in potatoes and milk is not due directly to people speculating on milk and potatoes (I'd assume), but rather doing so with other goods, which either make using land use more expensive => milk and potato prices go up, or transport more expensive => milk and potato prices go up. I know what inflation is and what interest rates do, but low interest rates are not the reason food prices are exploding recently. We've had 15 years of much lower interest rates and basic life's necessities were going up in price, sure, but not nearly as much as they have been in the past couple years. The main thing affected by low interest rates that actually resonates with 'normal' people is the housing market. The idea that overpriced foodstuffs today are the consequence of near-zero interest policies of the past 15 years somehow now catching up to us seems rather far fetched to me. Inflation talk is a cart blanche used by anyone and everyone to justify ramping up prices beyond what would have been considered reasonable or acceptable in the years prior, it is well reflected in the fact that companies across a variety of sectors are posting record high profits despite the never-ending talk of needing to cut spending at a time when regular people are barely making ends meet. You can't seriously claim that the price of potatoes and milk is high because of inflation or 'related factors' in a year where pretty much every major food retailer ever has posted record profits of the last 10-20 years while interest rates have finally bulged from being effectively zero for over a decade. It's plain old profiteering in a time of crisis, the kind over which people used to lynch merchants back in the day. | ||
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Slydie
1881 Posts
On May 05 2023 11:48 Salazarz wrote: I know what inflation is and what interest rates do, but low interest rates are not the reason food prices are exploding recently. We've had 15 years of much lower interest rates and basic life's necessities were going up in price, sure, but not nearly as much as they have been in the past couple years. The main thing affected by low interest rates that actually resonates with 'normal' people is the housing market. The idea that overpriced foodstuffs today are the consequence of near-zero interest policies of the past 15 years somehow now catching up to us seems rather far fetched to me. Inflation talk is a cart blanche used by anyone and everyone to justify ramping up prices beyond what would have been considered reasonable or acceptable in the years prior, it is well reflected in the fact that companies across a variety of sectors are posting record high profits despite the never-ending talk of needing to cut spending at a time when regular people are barely making ends meet. You can't seriously claim that the price of potatoes and milk is high because of inflation or 'related factors' in a year where pretty much every major food retailer ever has posted record profits of the last 10-20 years while interest rates have finally bulged from being effectively zero for over a decade. It's plain old profiteering in a time of crisis, the kind over which people used to lynch merchants back in the day. Remember that sellers also compete, and often fiercely. Companies can only profiteer when the conditions are there. There increased costs for the food supply chain too, for example on fuel and heating. | ||
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Salazarz
Korea (South)2590 Posts
On May 05 2023 14:19 Slydie wrote: Remember that sellers also compete, and often fiercely. Companies can only profiteer when the conditions are there. There increased costs for the food supply chain too, for example on fuel and heating. The competition and increased costs for supply chain argument doesn't fly when entire sectors are posting record profits. If we saw Tesco make big bucks while Sainsbury's and Asda were struggling, sure, I could buy that argument. But that's not at all what's happening. | ||
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Slydie
1881 Posts
On May 05 2023 15:04 Salazarz wrote: The competition and increased costs for supply chain argument doesn't fly when entire sectors are posting record profits. If we saw Tesco make big bucks while Sainsbury's and Asda were struggling, sure, I could buy that argument. But that's not at all what's happening. Companies will always charge as much as they can. Do you remember the price of sending a single SMS message? Or have you wondered why there are several fancy stores for buying glasses and contact lenses in every main street? The conditions are there to sell at outrageous profits, and the whole sector is in on it. For cars, we are already seeing the opposite happen. Suppliers have to drop prices to sell at all. The banks collapse for the same reason, bonds have to be sold at a loss because of an urgent need for cash. As stated above, there is a long delay in the system. | ||
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Uldridge
Belgium4558 Posts
They might want the profits now while they expect conditions to worsen in the (near) future. If they don't have as much left over to expand or secure, they immediately find themselves in dangerous waters. They can then keep their prices more or less stable when all the projects are in motion and be more competitive when all the rest has to increase their prices making them seem the more constant force. Of course this is all based on thorough financial analysis - something I can't fathom what they precisely do - and any disrupting event can always easily fuck them over as we're all eagerly awaiting another global catastrophe. | ||
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BlackJack
United States10180 Posts
With the semi-conductor chip shortage and supply chain issues new and used cars were selling for record highs. Some dealers were tacking on up to $10,000 dealer fees above MSRP which I’m sure was probably good for their profit margins even if their inventory was lower. Would you say the much higher price on a vehicle was caused by supply-demand issues from the chip shortage or would you say it’s caused by the greed of $10,000 markups? Another way to look at it is that if the market is willing to pay $10,000 + MSRP then that’s the new market value of the vehicle. Is it greedy to not sell cars at below market value? | ||
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