The federal funds rate greatly affects credit rates, that's why it's a primary instrument in financial policy.
> Pensions and retirement funds are only affected by the overnight rates in so much they use hold short term reserves as cash equivalents.
That's the direct effect, but because all other credit rates are affected, so are corporate bonds, which are a major component of pension fund allocations.
> All the forward looking indexes of inflation are down: commodity crb index, metals index (including gold), tips spreads - all down in the last six months.
> No, then there would be an arbitrage opportunity (if you so easily see it obviously the smart, deep pocketed money would see it too).
Why? Who says that prices aren't going to stay "permanently inflated"? I'm talking about downside risk, not a guaranteed and easily timed market selloff.
> All the forward looking indexes of inflation are down: commodity crb index, metals index (including gold), tips spreads - all down in the last six months.
Sure, if you look at commodities, there is no inflation. If you look at the CPI, there is no inflation. It depends on where you look. Gold is way up though, regardless of what the index says.
But the fed doesn't control long term rates (probably wish it did). The short end is heavily driven by technical factors including the overnight rate (even then that is only a target and it doesn't anyways follow what the fed wished it was). The long end isn't the same. It is driven by return on capital (higher returns both seek out loans and can afford to pay more for them).
If there was long term mispricing we would see it in the tips market, and we don't. The research shows the opposite - been little arbitrage exists in the market and it is extremely well allocated.
The Fed only signaled a return to rate cuts two months ago.
> But the fed doesn't control long term rates (probably wish it did).
I never said they "control" long-term rates, but they greatly influence them, especially in terms of how low they can go.
> The long end isn't the same. It is driven by return on capital (higher returns both seek out loans and can afford to pay more for them).
Like this?
https://m.privatewealth.usbank.com/pcrcp/images/articles/201...
> If there was long term mispricing we would see it in the tips market, and we don't.
I don't see that. It takes quite a while for overvalued asset prices to make a dent in the CPI, by that time it's more likely that the bubble has popped.
> Stock prices inflated in such a way are not supported by fundamentals
Inflation - what your describing, more dollars chasing same production - is a fundamental factor and doesn't affect rate of return in the time scales you are talking about.
> All of this causes massive asset price inflation. Stock prices are detached from actual revenue,
No, then there would be an arbitrage opportunity (if you so easily see it obviously the smart, deep pocketed money would see it too). Stock prices are still set by future income streams but now that is nominally pumped by inflation so they are bid up. Since equity prices are forward looking their prices rise faster than the backwards looking cpi.
There really isn't a lot of extra dollars sloshing around though. All the forward looking indexes of inflation are down: commodity crb index, metals index (including gold), tips spreads - all down in the last six months.