Will you recognize me?
Call my name, or walk on by?
Rain keeps falling, rain keeps falling
Down, down, down, down
--Simple Minds
The Fed has suppressed short term borrowing rates to zero. It is buying $90 billion monthly in Treasuries. It has said it supports policies that pushes financial asset prices higher.
In this environment of financial repression, how much is too much to pay for a yield bearing security?
Stated differently, how distorted can discounting mechanisms get in this environment?
position in SPX, Treasuries
There is the possibility ... that, after the rate of interest has fallen to a certain level, liquidity-preference may become virtually absolute in the sense that almost everyone prefers cash to holding a debt which yields so low a rate of interest. In this event the monetary authority would have lost effective control over the rate of interest.
ReplyDelete~John Maynard Keynes