Posted: 07 Mar 2021 08:41 PM PST

https://www.bloomberg.com/opinion/articles/2021-03-05/powell-needs-a-stock-selloff-to-act-on-bond-yields

Quite interesting (some charts in the link)

// What Could Possibly Go Wrong? (Real Estate Edition)

The excitement over rising yields and reflation has brought an analytical backlash. Both Albert Edwards, the famously bond-bullish and stock-bearish investment strategist at Societe Generale SA, and Joshi of BCA Research produced notes suggesting that the low for bond yields isn't yet in. In other words the deflationary slump has yet to run its course, and the rise in yields will itself provoke a final downswing. Edwards warns that "by going all in on that bet now, investors have likely gone too big, too soon, and are very exposed to a downside shock." He agrees that we end with inflation, thanks to the Fed's desperation to kindle it, but not yet.

Meanwhile Joshi makes an important argument that I have heard little about. In short, he reminds us that global real estate, all bar about 10% of which is residential, is worth far more than the world's entire supply of stocks and bonds. At some $290 trillion, it's even worth far more than the world's annual gross domestic product:

This is important because housing has boomed on the back of low yields just as much as stocks — in fact, probably more. As Joshi shows, real estate prices have vastly outperformed rents, which have risen roughly in line with nominal GDP. Just as stocks' P/E multiples have been buoyed by low yields, so house prices have been supported by startlingly cheap mortgage finance:

The implication is that we are all leveraged to low bond yields. As Joshi's chart below shows, the implied rental yield paid by property has moved in line with yields on long U.S. and Chinese bonds. An increase in bond yields that in turn causes a drop of 10% in the level of global house prices isn't hard to imagine. That would be a wealth effect of almost $30 trillion, or about a third of global GDP, and a sledgehammer to the world economy:

Thus, Joshi argues that such a decline would inflict one last deflationary downdraft. That by extension means not betting all out on inflation just yet. He suggests the crucial stress point would come when 30-year yields reach 3.75%:

where is the pain point? Our answer is that if inflation fears lifted the average US and China 30-year bond yield to 3.75 percent (from 3 percent now), it would constitute the change in trend that would unleash a massive countervailing deflationary impulse from falling house prices

If any of this seems counterintuitive, look at the bizarre state of affairs where an entire generation seems to be unable to afford to buy a house, and adults are continuing to live in the parental home for many years after leaving school. That's a clear indicator that housing is artificially expensive. Bringing prices down would be a great way to alleviate some of the ugliness and division in society — but it's hard to see how that can happen without an accident. //

Would love to read the mentioned research done by Albert Edwards and Joshi.

submitted by /u/mag300
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Greensill Revisited

Posted: 08 Mar 2021 04:47 AM PST

submitted by /u/Beren-
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Drugs that are their own pipelines

Posted: 07 Mar 2021 11:22 PM PST

submitted by /u/ilikepancakez
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SALT Talks: Impact Investing with Jeff Ubben, Founder of Inclusive Capital Partners

Posted: 07 Mar 2021 08:14 AM PST

https://www.youtube.com/watch?v=fnvjQnCZzDk&ab_channel=SALT

submitted by /u/3012hs
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