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birb_cromble  19d ago (text post)   934 thread views

Qeekly Finance Thread - 2026-09-26

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My financial news feeds this week have been blowing up about the 10 year Treasury yield and the effect that it's having on mortgage rates

The average 30-year fixed-rate mortgage hit 7.49% on Friday, leaving rates a bruising 30 basis points higher than where they started the week, according to Mortgage News Daily.

Rates remain some distance from late 2023's peak around 7.8%, but the latest rise is nonetheless jarring and could easily be enough to chill home sales ahead of the market's typical winter slowdown.

As somebody who's considering relocating, watching these movements has been a rollercoaster. Looking at housing prices vs rates, we're not seeing the usual negative correlation between the two. Single family detached dwelling prices seem to be unusually sticky in the face of rate increases this year. It's reaching the point where I might legitimately be better off saving for a cash payment than trying to take on a mortgage.

The rates I understand, but I'm not 100% sure what's going on with prices. Is it simply that people who are sitting on 2% mortgages from several years ago aren't motivated sellers? It feels like there has to be more going on than that.

It's also been interesting watching my holdings in a state municipal bond fund get kicked in the balls. The average weighted duration for a bond in the fund is 8 years. I'd expect a 25bps increase in rates to drive a 2% drop in share value. I could understand a 4% drop, if the market was pricing in another 25bps home this year. However, it's down 9% on share value. The fund hasn't had any notable failures in their holdings, so I'm guessing the market at large is expecting 3 more 25bps hikes instead of one.

We have 3% inflation, full employment, and strong economic growth (5% according to GDPNow).

This is goldilocks. So why doesn't it feel like? Why is there a vibecession?

Interest rates going up 4% in a short period of time has got to be a big part of the reason. Sucks that you have to compete with a datacenter for your mortgage. We should probably be cutting rates instead of raising them.

3% inflation is fully 50% higher than the supposed long term target that we've seldom hit. 3% inflation is too hot.

Stock market has gotten very narrow though we seem to do this every 18 months or so lately which I think has a lot to do with ETFs dominating a market and perhaps to a lesser extent the rise of direct-indexing and tax aware wealth management products. 53% of SP500 stocks are currently below their 200 DMA. That’s very significant for a market that is 1.48% off an all time high.

It is an interesting time to think about rotating to active value but maybe too early.

Honestly a lot of stocks act with a negative beta to indexes now. It’s almost two stock markets now. If we get an AI momentum crash/margin call again a lot of stocks that suck now will likely rally. It was only 2 months ago AI stocks sucked and equal weight SP was booming.

Yeah, anything that’s not speculative AI is getting blown up due to interest rates. Data centers are killing the old economy but just not in the way anyone thought.

We should probably be cutting rates instead of raising them.

I do remember in the latest episode of the Moody's podcast, of the 3 economists, two preferred no-hike while one thought one-hike is ok.

We should probably be cutting rates instead of raising them.

Isn't that what Burns tried back in the 1970s? What do you think is different about the current era such that it would lead to a different outcome?

No one knows anything. It's worth a shot.

It goes without saying that the economy today is vastly different than the 1970s.

  1. Energy as a percent of the economy is much less
  2. The US is largely energy independent
  3. Unionization is way down (except for public sector parasites). Back in the 1970s, unions might negotiate a 5 year contract baking in 10% raises each year to compensate for anticipated inflation. This makes inflation extremely persistent

My point is that inflation is actually low enough (less than 3% core). In fact, many things are collapsing in price including rents. But inflation FEELS high to some people because of the cost of borrowing.

We could lower rates and make inflation feel lower, even if the headline number is higher.

As an aside: People have become absolutely untethered from reality on inflation. They'll say stupid shit "like, actually inflation is 10%" and point to eggs, gas, or whatever. Then when the price collapses they just ignore that. I think exposure to high income people via social media is driving status anxiety. Of course, if you want to win the retard vote, you can't actually say that so politicians talk about an "affordability crisis" or "K-shaped economy". When clued-in people point out that the numbers don't support these arguments, they'll just say the numbers are fake. Cursed discourse.

We've had double-digit inflation annualized over the last 5 years. The 2008 crash kept inflation low from 2010-2020, but 2000-2010 was 15% annual inflation and we've been 12% since 2020.

We should expect double digit inflation or very close to it over a 5 year period, as 2% per year works to 10.4% in total over 5 years. I'm not sure what you mean by "annualized", but typically that would mean "converted such that it communicates the rate of a given period's inflation occurring over a 12-month span". We have not even been close to double digit annual inflation pretty much ever - even 2022 was only 7%. But, yes, the Fed has overshot its target significantly post-pandemic and continues to miss in 2026.

what you mean by "annualized"

The rate at which, when compounded annually, matches the inflation over time. So, doubling in 3 years means a 26% annualized rate, because 1.263 = 2. More generally, the rate r raised to the # of periods n equals the ratio of ending level to starting level.

1+rn= end / start

In this way the annualized rate of a single year, n=1, is one less the year over year ratio.

And if you want to cherrypick starting years, say 1979, then you'd find the spot price of gold was $230 Jan/79 and was $4335 Jan/26, you have:

(1+r)(2026-1979) = 4335/230

(1+r)47 = 867/46

47*ln(1+r) = ln(847/46)

r = e ( 18.8 / 47 ) - 1 = .064

6.4% annual rate of growth.

Again, cherry picked, and already assuming that gold is the yardstick by which to measure the currency, and not just another commodity. But it's been maybe 7% inflation annually since 1971.

Gold is definitely not a good choice for measuring inflation.

I am seeing no collapse in rents unless you mean a collapse in the rate of increase of rents.

People have become absolutely untethered from reality on inflation. They'll say stupid shit "like, actually inflation is 10%" and point to eggs, gas, or whatever. Then when the price collapses they just ignore that.

Relatable. Actual conversation:

This specific peanut butter just doubled in price. Are we supposed to believe inflation is less than that?

Inflation is about a basket of goods over a period of tome. Why would you just look at a single price change for a single peanut butter?

crickets

Years pass.

That specific peanut butter just got 20% cheaper. I guess we are now having 20% deflation?

It's still not back to the original price so it doesn't count.

But you looked at a single instantaneous price change and concluded yearly inflation must be way more than 4%. Why can't we look at this single instantaneous price change and conclude that it must actually be way less than 3%?

Well we're still not back to the original price so inflation must still be way higher than 3%.

There's no reason to use peanut butter when there's a series that goes back millenia using a perfectly uniform unchanging product.

Gold is inflated at a rate of 17% over the last 5 years, and at a rate of 11% over the last 25 years. Or rather, the USD has been debased at those rates. The gold is the same as it has always been.

I still remember when we had 75% deflation from 1980-2000. What a time to be alive!

Gold is obviously such an important part of the economy. We use it for lots of things like Monster cable connectors, and tooth fillings, and chains for rappers. That's why it's the ONLY thing we need to calculate inflation.

And gold won't let you down. My car from 2026 that drives itself and doesn't need gas? Just trash compared to a 1980 Chevy Impala. Good old gold is always the same.

All those economists who measure inflation are just a bunch of silly-nillys. I can measure inflation every time I go down to the rare coin shop.

Sometimes, after too much wine, I like to think about how in 30 years Elon will go out to the asteroid belt and bring down 10 quadrillion dollars worth of gold. Imagine the deflation! We'd all be so rich.

Speak plainly, in pursuit of light rather than heat. Sarcasm (like humor) can be deployed effectively but often it just comes off as antagonism--or worse, falls subject to Poe's Law.

You can abuse the start of time series all you like, it won't change my point.

The fact that the start of time series can be abused shows you that gold is not a good proxy for money.

Interesting. I'm seeing a drop from $4310 to $4135 over the weekend. I guess we had 4% deflation in three days and I didn't even notice!

It takes time for inflation to work its way through the economy, and prices are sticky. Both are econ 101 quiz points when it comes to inflation.

it takes time for inflation to work its way through the economy, and prices are sticky.

Difficult to square your worldview with sharp swings in the price of gold. The gold is always the same, so when the value of gold changes it's an indicator of the value of the dollar changing. If it takes time for inflation to "work its way through the economy", why does the price of gold change so rapidly with inflation?

Or perhaps it's the case that not every change in the price of gold is due to inflation?

More comments

My point is that inflation is actually low enough (less than 3% core)

Core PCE (https://fred.stlouisfed.org/series/PCEPILFE) year over year has been above 3% for the entirety of 2026. You may be thinking of CPI, which is fair (and lower in 2026 because it has a higher housing weight), but PCE is what the Fed cares about.

While I agree with your points that high consumer borrowing costs play a big role in the vibecession, I would describe the primary driver of these high borrowing costs as bond markets' assessment of the long-term inflation outlook (nominal interest rates need to be higher to compensate for higher inflation) and US debt situation (current deficit and deficit growth is not sustainable, raising the risk that US will be forced to inflate its way out of debt - which again requires higher nominal interest rates).

The increase in money supply seems relevant. If there's 6-8% more money in circulation year over year, you can't just point to "3% inflation", right?

Nominal GDP growth last 4 quarters was 6.5%, so money supply growth would seem to be inline. https://fred.stlouisfed.org/series/NGDPSAXDCUSQ

Increase in actual income seems more important. It's lower than even the official inflation figures.

American wages have increased faster than inflation for a long period of time.

I appreciate you walking through your rationale on this. This is a huge topic and I'm still trying to learn as much as I can.

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