The FED is already behind the ball
I was listening this morning on Bloomberg radio to a conversation about revival of commercial real estate thanks to the very low interest rates, which push people to look for opportunities in commercial real estate in search or return and how the mortgage rates are so low and favorable. Even GS didn’t expect such a recovery
And it struck me how similar this is to the beginning of our housing bubble, - people are becoming very cognizant o artificially low interest rates and they are taking them for granted. I also hear all the time how current market P/E of 13 is low for where the interest rates are. Plus, I also keep hearing people are being pushed into stocks in search of yields or grandmas completely lost in this new brave world where they get 1% on their 5 years CDs.
Yet nobody seems to give a second thought that these low interest rates are ARTIFICIAL. We have already a beginning of the next bubble on our hands and FED is already behind the ball. When you have all mainstream financial world no longer fighting for survival and actually doing well enough to start building models based prolonged 0% interest rates you know something is wrong, you know FED is behind the ball. The 0% interest rates were set when the financial industry and the economy was on the brink of collapse. They are no longer for at least a year. It is time to remove them from life support even though it is already late and increase in interest rates will probably cause a mini-stock market crash. I am pretty sure though it will stabilize pretty quickly in view of saner monetary policy. Low interest rates are like a drug for the economy, the dependency builds up pretty fast and it gets impossible to give up.