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birb_cromble  19d ago (text post)   941 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.

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.

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.

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.

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).

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.

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?

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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.

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.

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.

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.

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.

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.

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

I maintain a twelve month emergency fund, and I recently got over my various trauma-responses to the point where I was able to roll half of that into a six-month CD that's offering 80bps over my HYSA.

While I know I could probably do "better", sometimes you have to have to take the small victories.

If anybody out there is reading this, don't get so hung up on the difference between "better" and "perfect" that you do nothing at all. Every improvement is a stepping stone.

I recently got over my various trauma-responses to the point where I was able to roll half of that into a six-month CD

Congrats, it can be quite scary.

While I know I could probably do "better" ...

Assuming you are U.S.-based, I see @Mantergeistmann has already suggested I Bonds. I think, under most circumstances, rolling short-dated T-bills into a ladder of seasoned I Bonds is slightly "better" if you are working a normal-length career, aren't maximally aggressively shopping introductory rates, are planning on keeping a full-year emergency fund, and are willing to replace low-real-rate tranches of I Bonds when reasonable. TreasuryDirect is still clunky, but it has slightly improved. This also has a slight advantage over rolling CDs, as it saves you from having to change banks every six months for the best rate. But, yes, on a modest emergency fund, the real difference is probably smaller than other choices, and you do have to get over the small personal limit and one-year hump for I Bonds.

You could buy BOXX which probably pays as much or more than your CD.

The big advantage is that you don't get "interest" which is taxed as normal income. You get "capital gains" which are only paid when you sell. If it's more than a year, the capital gains are taxed at a max of 20% (23.8% for high income Obama tax victims).

You also aren't locked in like you are with a bank. You can sell anytime with virtually zero trading cost.

If you're curious for how this works under the hood, ask AI. It takes awhile to explain.

Edit: Probably don't buy BOXX right now

I don't trust the IRS not to reclassify BOXX. The tax treatment is using some tricks that I don't think will stand up to regulatory scrutiny.

Possibly but if so I wouldn't expect the unwind to be painful.

That said, I don't think they will, at least not now. Are they going to reclassify futures trades too? Because there are already companies that will do box trades in your Schwab or other brokerage for a small fee. And with AI, it's going to get very easy to do that.

So is it rules for thee but not for me. Box spreads are democratizing finance in a cool way. I thought about buying my house with box spreads.

Edit: I can understand your concern if you're just looking for "emergency funds". I'm mostly doing cash management with a fully invested portfolio that I can sell from any time I need cash and don't have an emergency fund. But for a more normal situation, CD's are probably fine. The tax implications are not as stark either.

https://www.irs.gov/pub/irs-drop/n-26-62.pdf from today seems relevant; may be applied retroactively.

https://www.irs.gov/pub/irs-drop/n-26-62.pdf

I saw that on another forum I visited. Crazy timing. They heard that regular people were using a strategy previously reserved for the elite and had to immediately stamp it down.

I still doubt a painful unwind, but it probably makes sense to steer clear of BOXX since the juice isn't worth the squeeze if you have to file an extra tax form somewhere.

Did you know that, under Delaware law, Anthropic is a PBC (Public Benefit Corporation).

This is a new type of corporation that has been allowed in Delaware since 2007. It requires.

  • The corporation to state a specific public benefit in its charter.

  • The corporation to balance three interests in board decisions: shareholders’ financial interests, the interests of people materially affected by the company’s conduct, and its stated public benefit

It's also completely unenforceable bullshit.

Think for a second about the implications of a PBC. It means that, as a shareholder, management is not working for you. It is working for a coalition of people that includes you, but not necessarily as the primary component. And while I'm sure this will appear as a risk in their S-1 "Item 2437: As a PBC we may decide to simply not give a shit about shareholders", investors don't seem phased. I never hear anyone talk about it. People probably wave it off as stupid bullshit that doesn't matter. And of course they are right about it being bullshit, although not about it mattering.

I actually shorted a different PBC back in 2022. It is called Lemonade. They claim to have some secret sauce insurance algorithm (they don't). But the stock certainly has had a wild ride. They debuted in 2020 and peaked in 2021 around $160/share before collapsing over 90%. It has recovered somewhat and today the stock trades around $40. They lose oodles of money every quarter but avoid bankruptcy by issuing more stock and gradually pissing away their IPO cash.

They love SBC (stock-based compensation). At its peak, it was 35% of revenue! Now its only 8.3% of revenue. Note this is not profit-sharing, it's just giving insiders a giant share of revenue. They don't have profits - they lose money. The executives of Lemonade also love pulling money out of the company with about $600 million in insider stocks sales since IPO vs. a market cap of $3 billion.

So as a shareholder, you're garbage. As an insider, you're golden. And it's unclear how any of the PBC stuff matters at all.

I think if you're going to virtue signal, it is up to society to impose real cost. I want Anthropic to commit, right now, to giving 1% of its shares to the people of the United States each year. I want them to commit to capping executive compensation. You shouldn't get to be a billionaire and run a "Public Benefit" Corporation. Be honest about what you are.

There is an enforcement mechanism:

§ 367. Suits to enforce the requirements of § 365(a) of this title.

Though, surprisingly, there's apparently no case law (according to my lawyer on retainer, Claude McClaude Esq.) around a PBC not fulfilling its public benefit. There is for shareholders' financial benefit: Drakes Landing Associates, L.P. v. Tilden Park Capital Management, L.P. It was dismissed, though, as the plaintiffs didn't account for the other purposes.

It does seem like it disempowers shareholders, without adding meaningful checks to enforce the public benefit. If you're not looking out for shareholder financial interests, it's because you're looking out for the public benefit; if you're not looking out for the public benefit, it's because you're looking out for financial interests.

Nice for insiders, and maybe has the benefit of making nuisance suits harder to prove.

I recently had to pay someone to repair something at my house for a few thousand dollars. As expected, I am not able to pay the repairman via credit card, as they don't want the fees.

But I am able to choose Klarna at checkout and pay Klarna via a credit card, for which Klarna does not charge fees, and thus earn credit card cashback points on a large purchase that I would not ordinarily expect to. This seems like an unsustainable hack, right? I guess pay-as-you-go apps are one of the sectors currently transferring money from private equity to consumers, with the early days of Uber (when it was cheap and heavily subsidized by investor losses) being another recent example. Someone is losing approximately $100 on my transaction, and it seems like the loser is Klarna's investors, right?

Where else are startups currently just handing out free money?

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