The effect of 8% rate of interest would be disastrous on the markets, economy, all.
0:00 Economic Environment
5:05 Effect of 8%.
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Hi Sven
I don’t know how else I can reach you so writing here. I want to have your opinion about STMicroelectronics.
I see it as a great value opportunity.
growing net income
growing profit margins
P/E less than five year average
fairly valued (10yr DCF FCF based with 12% discount)
But the stock price is below where it was back in 2021. It is down 20% from its previous highs.
Is there something crucial I am missing?
I don’t know the business to give an opinion
Hi Sven, thanks for your great video. Many of the largest companies in the S&P 500 have an enormous amount of cash and at 8% interest rates would generate more profit from interest than from their operating business. You can already see that with crwd and co. from the Nasdaq 100 that they were able to increase their profits enormously through interest income. The situation is different for real estate companies or industries with high levels of debt, but these are no longer highly weighted in the S&P. Therefore, the danger that tech is so heavily weighted in the index can actually be an advantage when interest rates are high
You’re right, but I think that 8% Interest Rates could have a disruptive effect on stock multiples.
By “many” you mean big tech. Most of the sp500 companies are over leveraged. And you can see that big tech vastly outperformed since the rate hikes, so the market evolved naturally.
@@therighteous802 i mean that the relative part of the S&p is tech you are right the absolute number of companies are not tech
first, at what inflation rate
second, who would be buying their products with such rates
so, yes, there are always plusses and minuses
Dividends could be cancelled at any moment
yes, depends on the risk the business is taking and how that changes in a changing environment!
Question also …when have those bankers given reliable forecast or valuable guidance?😂
This is correct due to the range: can be anything
Not to mention the fact that Dimon sold a lot of his shares recently.
Grazie as a always.
thanks for sharing!
That’s why we put money in Rubis and forget interest rates 😎
:-)))
So what’s worse keeping rates low and inflation? or keeping rates high and basically going into government default?
the government will never default, it can just print
When Dimon says something, I listen. His job is to make JPMorgan ready for everything and ensure the survival of the bank no matter what, and he is damn good at it
the focus on book value is already a big differentiator compared to others.
Thanks for the video Sven.
thank you for commenting Eline!
But Sven, the most important metric to follow is price-to-adressable-market. All aboard the train going to the moon, choo-choo!
:))))
5:15 haha, funny 🙂 Will watch the remainder now, great video so far!
Glad you enjoyed it!
The market is expecting rates to go down but nobody knows for sure. Personally I will close all positions the day FED announces hiking the rate again ..
🙂
And so will many others. In theory, at least
So the borrowing part of Sources of financing, already at 24%, would need to go to close to 50% ? After that it would go to 100% …. 🙂 which would default the US dollar…. but thats not going to happen of course…
All USD at all times is a creation by the “government” under law. Until that law is revoked or not applied there is no conceptually coherent way to think about the government becoming insolvent.
It would be like saying a lawyer could run out of the stock of legal contracts if they made too many in a day. No the limitation is presumably on how fast their hand moves and who wants a contract
You might think it is a bad idea for the government to create all that money, but please have a theory that has a causal mechanism for WHY it will be bad at 8%.
thanks for sharing!
I like 8%. Bring on the higher dividend yields.
if you have the money to buy at those prices and for the businesses
@@Value-Investing , it’s like you say in many of your videos, not to spend on what we don’t need and be frugal so that we can seize on these opportunities.
8 % for US government is a no-no at current debt levels. If free market tries to force them there we would see a yield curve control Japan style. Doesnt change your investments though.
people think it can be controlled, which is correct, it can be controlled, until it can’t, that is how it works!!!
What is the source for the S&P500 EPS TTM?
ohh this was great video. Thank you
people are delusional to think the Fed would lower interest rates in this kind of inflationary environment.
Good video Sven we in the west should have a low debt low growth economy. Now we are gonna pay a heavy price for it.
Very sobering Sven, thanks for posting