The Impact Of 8% Interest Rates Would Be Disastrous...
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- Опубликовано: 6 июн 2024
- The impact of 8% interest rates would be disastrous on the markets, economy, all.
0:00 Economic Environment
5:05 Impact of 8%
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What are they doing, Definitely, high interest rates can have a significant impact on various aspects of the economy.
It could lead to decreased consumer spending and investment, as borrowing becomes more expensive. Exactly what we have been running from, this is cr*zy with the government excessive spendings...
That's true. Mortgages, car loans, and business loans are more costly, economic growth slowed down.
it could also affect the stock market, as companies may face higher borrowing costs, impacting their profitability
I have been digging the net for a good one, can you recommend
Overall, an 8% interest rate environment would definitely present challenges for both individuals and businesses alike, i will like to stay afloat
ohh this was great video. Thank you
Hi Sven, thanks for your great video. Many of the largest companies in the S&P 500 have an enormous amount of cash and at 8% interest rates would generate more profit from interest than from their operating business. You can already see that with crwd and co. from the Nasdaq 100 that they were able to increase their profits enormously through interest income. The situation is different for real estate companies or industries with high levels of debt, but these are no longer highly weighted in the S&P. Therefore, the danger that tech is so heavily weighted in the index can actually be an advantage when interest rates are high
You're right, but I think that 8% Interest Rates could have a disruptive effect on stock multiples.
By "many" you mean big tech. Most of the sp500 companies are over leveraged. And you can see that big tech vastly outperformed since the rate hikes, so the market evolved naturally.
@@therighteous802 i mean that the relative part of the S&p is tech you are right the absolute number of companies are not tech
first, at what inflation rate
second, who would be buying their products with such rates
so, yes, there are always plusses and minuses
But Sven, the most important metric to follow is price-to-adressable-market. All aboard the train going to the moon, choo-choo!
:))))
Thanks for the video Sven.
thank you for commenting Eline!
I remember when people said that if the funds rate went above 3% the US economy would completely implode. That was 18 months ago. Corporate revenue and profits keep growing, wages keep growing, unemployment is still hovering near 55 year lows, inflation is headed back up, near 40 year low bankruptcy rate, and the stock market is near ATH's. Oh, and we are now at 5.25% on the funds rate. Go ahead and keep believing interest rates cannot go higher. If the politicians keep deficit spending trillions, interest rates can totally go higher from here. If the politicians even so much as whisper the words "balanced budget," the economy will go into recession and then fiscal spending will increase by even more and interest rates will go even higher. National debt/deficit spending goes up massively during recessions, not down. This is the trap they are in.
Read the Dao of Capital recently and boy was it timely ;). Thanks so much for the brilliant and evocative content, Sven. You rock!
Very sobering Sven, thanks for posting
Not to mention the fact that Dimon sold a lot of his shares recently.
Grazie as a always.
thanks for sharing!
Great info Sven! Thank you!
5:15 haha, funny :) Will watch the remainder now, great video so far!
Glad you enjoyed it!
Being ok no matter what happens, that is the key to investing as an individual over a lifetime. Thanks Sven!
interest rates have to go to 15%. Gov needs to stop spending and trade surplus must become the norm. It's not fun but it has to be done
Sven is the man. Thank you.
When Dimon says something, I listen. His job is to make JPMorgan ready for everything and ensure the survival of the bank no matter what, and he is damn good at it
the focus on book value is already a big differentiator compared to others.
What do you think of the ev charging infrastructure stocks increasing demand and lock in effects
So what's worse keeping rates low and inflation? or keeping rates high and basically going into government default?
the government will never default, it can just print
@@Value-Investing So basically high rates could also lead to inflation... if gov doesn't afford to pay its debts
Berkshire is hoarding cash because they know valuations are ridiculously high. I think the mass adoption of index funds are part of the problem.
part of it, yes!
Sven mentions JPM, stock drops immediatly. Correlation yes, if you truely believe in it.
That's why we put money in Rubis and forget interest rates 😎
:-)))
What is the source for the S&P500 EPS TTM?
Dividends could be cancelled at any moment
yes, depends on the risk the business is taking and how that changes in a changing environment!
yes good example Intel.
Good video Sven we in the west should have a low debt low growth economy. Now we are gonna pay a heavy price for it.
Hi Sven
I don't know how else I can reach you so writing here. I want to have your opinion about STMicroelectronics.
I see it as a great value opportunity.
growing net income
growing profit margins
P/E less than five year average
fairly valued (10yr DCF FCF based with 12% discount)
But the stock price is below where it was back in 2021. It is down 20% from its previous highs.
Is there something crucial I am missing?
I don't know the business to give an opinion
So the borrowing part of Sources of financing, already at 24%, would need to go to close to 50% ? After that it would go to 100% .... :) which would default the US dollar.... but thats not going to happen of course...
All USD at all times is a creation by the "government" under law. Until that law is revoked or not applied there is no conceptually coherent way to think about the government becoming insolvent.
It would be like saying a lawyer could run out of the stock of legal contracts if they made too many in a day. No the limitation is presumably on how fast their hand moves and who wants a contract
You might think it is a bad idea for the government to create all that money, but please have a theory that has a causal mechanism for WHY it will be bad at 8%.
thanks for sharing!
The market is expecting rates to go down but nobody knows for sure. Personally I will close all positions the day FED announces hiking the rate again ..
:-)
And so will many others. In theory, at least
8 % for US government is a no-no at current debt levels. If free market tries to force them there we would see a yield curve control Japan style. Doesnt change your investments though.
people think it can be controlled, which is correct, it can be controlled, until it can't, that is how it works!!!
Do you think it matters that it is an election year?
Question also ...when have those bankers given reliable forecast or valuable guidance?😂
This is correct due to the range: can be anything
Dr. Sven, I think you mixed up your maths 7:37 and 9:14 ; the US debt is 54 trillion USD, the non developed is around 50 tn, and only developing countries' is 38; consequentally, at 9:15 the maths are to be adjusted accordingly.
Sorry if I am missing something, RS.
people are delusional to think the Fed would lower interest rates in this kind of inflationary environment.
Well, if the crash & long recession comes... at least I didn't buy China on the top but 50% down...
In my opinion as long as China keeps subsidizing the world with massive trade surplus, these higher government deficits can be sustained.
I understand this worrying. Give us the alternative.
There is no alternative, youtube now works the same way as any other media source that just limits to report chaos and profits on it :)
I gave the alternative in the video, but I accept the feedback that it wasn't clear, will do better next time!
I wish we could get to 8% interest! My money could actually make a good, safe return for the first time in 16 years!
not if inflation is 10%
@@Value-Investing I'll take 'inflation' at 10% with interest rates at 8%. All day everyday. Inflation goes down...I still get 8%. :) Inflation stays up. 8% on my money!!!!
So what you are saying is that 8% would get rid of all the inflation of the last 40 years???
cash flow real estate baby. True diversification away from TICKER symbols.
:-)
I like 8%. Bring on the higher dividend yields.
if you have the money to buy at those prices and for the businesses
@@Value-Investing , it's like you say in many of your videos, not to spend on what we don't need and be frugal so that we can seize on these opportunities.
Bit of a click bait title (i understand why its needed for YT)
There is practically zero chance of 1980s interest rates coming back just as there is no chance of 0% interest rates. Economy changes all the time and businesses would just stop operating if they got 8% on cash. Crazy.
thanks for sharing!
Higher interest rates are no problem for governments as long as inflation is even higher. To be more precise government love that.
The % is going higher and higher, rising faster than inflation
@@Value-Investingif they got fed chair with balls 😏 but could be otherwise. I agree that theUS is interested in some sort of inflation to wipe out debt purchasing power, at least short term.
Lol, that is what I also always say. Nice to see, I'm not alone with this opinion. Great video. Never understood, why everyone is expecting lower interest rates.
wow you're smart and impressive! Wish i was like you
@@crohmer Well, everybody does. But be aware: it's a gift and a curse.
This guy is pulling some numbers out of his ass.
Yeah why 8% and not 30% interest rates? Why not -100% interest rates?
There is NO CHANCE that the interest rates will go up above 5 the coming years
9:15 that something is: the Brandon administration will raise taxes after reelection.
Gold and silver stocks is the most logical for me. Speaking of undervalued assets.Gas stocks locks interesting too.
no thx
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