TMC #1! Mainstream financial commentators are overlooking the most important labor market indicator and drawing misleading conclusions about what Fed tapering really means.
Hey Alfonso - interesting thoughts! Can I ask which Bloomberg tickers you use to construct the "Observed real rates minus r-star" plot, please? Can't bring it up quite the same to play about with...thanks.
Alfonso could u explain this part regarding tapering:
less policy accommodation = drop in inflation expectations and higher nominal rates required to own bonds
i understand that less policy accommodation results in a drop in inflation expectations. But why are higher nominal rates required to own bonds?
if there's a drop in inflation expectations, shouldn't investors require lower nominal rates to own bonds, considering that inflation will not erode the interest rate yield of bonds as much?
Hi, Alf. I am enjoying your articles and learning a lot. Thank you for creating this substack. I am not a professional in your industry or banker. I am just a regular person who is trying hard to understand this stuff. I note that the St. Louis Fed suspended reporting on r*. I don’t know. Maybe they were looking down the road and decided that, if they ostensibly ignored r* for awhile, they would have plausible deniability in the future when the economy falls apart. Is there some other metric we could use since r* is no longer available? If this is something you discussed after you wrote this particular article, then I am sure I will come across it as I continue to read the rest of your articles. Best regards.
Hey Alfonso - interesting thoughts! Can I ask which Bloomberg tickers you use to construct the "Observed real rates minus r-star" plot, please? Can't bring it up quite the same to play about with...thanks.
Alfonso could u explain this part regarding tapering:
less policy accommodation = drop in inflation expectations and higher nominal rates required to own bonds
i understand that less policy accommodation results in a drop in inflation expectations. But why are higher nominal rates required to own bonds?
if there's a drop in inflation expectations, shouldn't investors require lower nominal rates to own bonds, considering that inflation will not erode the interest rate yield of bonds as much?
Very good article and focus on a number too often overlooked! Well done, Alfonso!
Hi, Alf. I am enjoying your articles and learning a lot. Thank you for creating this substack. I am not a professional in your industry or banker. I am just a regular person who is trying hard to understand this stuff. I note that the St. Louis Fed suspended reporting on r*. I don’t know. Maybe they were looking down the road and decided that, if they ostensibly ignored r* for awhile, they would have plausible deniability in the future when the economy falls apart. Is there some other metric we could use since r* is no longer available? If this is something you discussed after you wrote this particular article, then I am sure I will come across it as I continue to read the rest of your articles. Best regards.
Excellent presentation of what happens at the front stage and what stays hidden at the back stage. Helps long term allocation investing .
Nice one, thanks for sharing!