> Asset prices are highly inversely correlated to interest rates

I present you the US housing market.

I don't quite understand. Are you commenting on the much discussed U.S. Housing Prices Fall for First Time in a Decade" stories? https://time.com/6217372/us-housing-prices-fall/

Down 0.44% after 100% increase over the last two years

that 'fall' is a joke. 0.44% ?

When asset prices are low it's cheaper to acquire new assets with the money obtained from the inflated prices everyone else is paying. Then wait for the asset prices to rise again. If you are less wealthy you are more likely to need to dispose of your assets at a lower price in order to pay the higher price for your day to day needs.

Even nominal profits are down, so not true.

The interest rate is the discount facter. Low asset prices may not be equivalently low.

Unless you're rich and make a cash offer.

Then you lose the opportunity cost. No difference.

I think that's impossible to say without know what the other opportunities are, or what the person's strategy is.

Higher prices don't mean more profit. People adjust their behavior and retailers eat some of the costs of higher prices. They'll sell a lot less. Their revenue might not even go up necessarily

Not sure why you are being downvoted. Stock prices are on the slide and property prices and rental yields are extremely precarious.

I also agree that low rates were good as you could invest in property with leverage and in businesses which could borrow and raise money to cheaply to grow.

Nobody is having a good time right now.

Because the British media feeds this narrative by making it look like the rich always win. The only changes in their wealth that the media draws attention to are increases, and if there's a drop that just gives a new baseline for the next round of headlines about increases. High inflation and increased interest rates got assets down across the board? Well, that means that the better off are getting lots of "unearned income" from interest whilst normal people's wages decline in real terms, never mind that the value of whatever savings they're earning that interest on is also dropping in real terms by more than they're making back in interest.

Because they do always win (in aggregate, in relation to other income brackets). With changing economic situations, those with more resources have more options, and are therefore on average able to adapt more effectively. Sure there will be winners and losers in every tax bracket but a quick look at a graph of income inequality over time should disabuse you of the notion that the rich are somehow at a disadvantage in all this.

The parent's point is that these events are not making the rich any richer than they would be.

Anyone with debt is better off with higher inflation as the amount required to pay back is worth less. Anyone who gave money away for interest takes a haircut. The richer entities usually loan money so this is better for the poor with debt. If wages don't raise than this changes

Rich people have a lot more debt than poor people. If you're too poor, nobody will loan you anything. The more money you have, the better the conditions will be which are available for you. Would a rich person ever consider something like your average payday loan? After the last couple of years with practically free loans, who do you expect to have borrowed more? The rich or the poor?

More than that - loans to the very rich will always have a below-inflation rate. or worst case a near-inflation rate.

Loans to the poor will always have an above-inflation rate. And the poorer you get the more extreme the rates.

Interestingly this is somehow not considered inflationary.

Because only one class will come out of this with MORE assets that at some point will return back to their higher valuable. It's a completely facetious argument. Sure you lost your house, but think of how much the poor billionaire's paper value dropped (while the billionaires asset acquisition continued apace taking advantage of the firesale forced upon the lower classes).

It isn’t facetious. People with investments and assets have lost a stack as inflation has taken off and could be waiting for a long time to return to the peaks. On a long enough timeline I’m sure you are right, but this year and likely over the next few years nobody is winning.

If a billionaire loses 90% of their net worth, they are still rich.

If a beggar doubles his money, he's still broke.

This is not relevant to the comment you are replying to.

Of course it's relevant. It's absolutely fundamental.

The real metric isn't total cash, it's outgoings vs income.

Billionaires do not have significant non-discretionary outgoings. At the billionaire level food, housing, and transport are essentially free, and your time is your own. There may be mild chagrin if you can't afford a bigger yacht or another private jet, but mild chagrin is all.

That's not true for most people. The poorer you get, the more aggressively you have to sell your time, and the more likely it is that your outgoings are going to exceed your income.

Not because you can't organise your finances, but because inflation and wage stagnation have made any other outcome impossible.

> property prices and rental yields are extremely precarious

I noticed you didn't say "declining" because that wouldn't be true.

Over what period?

1 Feb Guardian - house prices fall for fifth month in a row

1 March Guardian - house prices fall at fastest annual rate since 2012

And they're still hugely inflated compared to a couple of years ago, while wages are either constant or significantly lower in real terms.

The price-to-earnings ratio is 9X in London and around 5X in the rest of the UK.

Property speculation is always ten steps forward and one step back. Prices in the UK would have to crash by at least 50% to return to any kind of widespread affordability.

> Over what period?

At least 2-3 years, anything less is too small a sample size. You could be highlighting a 10% decline after a 200% increase.

> I also agree that low rates were good as you could invest in property with leverage and in businesses which could borrow and raise money to cheaply to grow.

You can't get something from nothing.

This was simply subsidizing business borrowing / capitalists at the expense of the labor's purchasing power.

It shouldn't be a mystery why inequality sky-rocketed to surpass Belle Epoch levels under ZIRP.

> "property prices are down, etc"

Well, idk about your area, but property prices in northern Germany are still well above the 2020 mark.

Top level comment was about the UK, and over here property prices are down.

https://www.theguardian.com/commentisfree/2023/mar/05/house-....

Are they down YoY or compared to pre-Covid? The linked article doesn't seem to have that information concretely, but does include "The average British home now costs about nine times average earnings: one estimate I recently read reckoned that the last time UK houses were this expensive was in 1876." which suggests they're still higher by that measure than three years ago. So: correction of a super crazy time, but still a "win" for asset values for the owners over the last 4 years, or "overall trending down"?

Nope. They went up this month.

"UK house prices defy gloom with an average £3,000 rise"

20/03/2023

https://www.theguardian.com/money/2023/mar/20/uk-house-price...

So they went down by £14,000 and then went up £3,000. So are still down.

they "have" to be when interest rates are up, since it means the price of money (to borrow) is high. When money can be had for cheap (rates), prices balloon, and when rates are up, real estate prices will, relatively speaking, go down. Another way to put it is that RE prices are always viewed through the relative lens of current interest rates. Yet another way to put it is that it can be hard to figure out if they have objectively risen or fallen, because of the changed rates.

UPDATE: I can see a comment below says they have gone up in some places. Well, when both rates AND prices have gone up, it is not hard to tell :-)

Germany property prices are probably the most insane in EU.

Inflation, asset deflation and a financially strained middle/low class causing them to be upside down on debt = firesale on what assets they had for the top class to acquire. I believe this cycles used to be called pump and suck when directed at third world economies, get them addicted to debt then acquire their desirable assets. Crazy to see it being used now on the UK and USA middle class. We never thought the banking leopard would eat our face.

Monetary policy cycles are for insiders to use information to make more $

it's emergent out of the incentives e.g. the Cantillion effect

it wont be around forever with AGI making this so obvious

> Asset prices are highly inversely correlated to interest rates

this is true in the short term because a lot of assets are held with borrowed money. when interest rates go up those assets get sold to cancel the debt and bring down the market value.

however, either if inflation is sustained or interest rates go down, asset values will inevitably bounce back, but money will NEVER recover its value.

Always worth remembering that, at least for property prices, "being down 10%" doesn't mean that 1y they were worth 100 and this year are worth 90, but that 2y ago they were worth 100, 1y ago they were worth 110, and this year they are worth 119. In other words we often talk about "the % year on year increase is down", not "the value of the house is down".

Can you point to a single usage in the context of property prices where "being down X%", without specifying that X is referring to a YoY increase, means what you say?

Folks feast like kings when the cheap money is flowing, failing to realize that eventually the tab comes due.

It's what you're seeing happening in Silicon Valley right now.

Usually a reality check occurs every decade or so, bringing heads back down to Earth, but I think too many felt that the COVID lockdown lows in the markets were that reset. They then went right back to their old habits, after a brief pause.

Just thinking about how long it took to recover from 2000, 2008, etc., it's obvious that we didn't truly have that reset.

The lockdowns fundamentally changed a lot, but few people seem to want to acknowledge it. The effects of the lockdowns will been seen for a long time, I honestly do believe.

Just my take on it all.