What we’re reading (10/14)
“Fed Worried About Inflation Risk As It Firmed Up Tapering Plan” (Wall Street Journal). “Minutes of their Sept. 21-22 Fed meeting, released Wednesday, revealed a stronger consensus over scaling back the $120 billion in monthly purchases of Treasury and mortgage securities amid signs that higher inflation and strong demand could call for tighter monetary policy next year. The bond purchases have been a key piece of the Fed’s effort to stimulate growth since the coronavirus pandemic disrupted the U.S. economy last year.”
“Wages Are Surging Across The Rich World” (The Economist). “When covid-19 first struck, most forecasters expected bosses to slash bonuses and yearly rises, or even to cut basic pay, as they did after the global financial crisis in 2007-09. Although wage growth did slow modestly early in the pandemic, that restraint has since been abandoned. Oxford Economics, a consultancy, finds that pay in the rich world is growing at a rate well north of its pre-pandemic average. The acceleration in compensation per employee across the OECD, a club of mostly rich countries, is equally arresting.”
“China Is Probably the Most Overvalued Property Market in the World. Evergrande is a Symptom of That” (The Market). “[E]conomically, it’s very hard to justify an economy that is two thirds of the size of the US, with having property that is worth twice as much as US property is worth. It’s not as if US property is cheap. It’s probably too expensive in the US too, which means it’s incredibly expensive in China. The amount of income it takes to buy an ordinary apartment in China is several times what it would take even in Switzerland.”
“Busting the Tech-Stock, Bond-Yield Connection Myth” (Morningstar). “It turns out that when the numbers are crunched, over the past 15 years there has only been a small inverse correlation between technology stocks and bond yields. In other words, when bond rates rise, there is a slight tendency for tech stocks to fall.”
“The Problem With America’s Semi-Rich” (Vox). “There are some defining characteristics of today’s American upper-middle class [between the proverbial 0.1 percent and the lower 90 percent.] They are hyper-focused on getting their kids into great schools and themselves into great jobs, at which they’re willing to work super-long hours. They want to live in great neighborhoods, even if that means keeping others out, and will pay what it takes to ensure their families’ fitness and health. They believe in meritocracy, that they’ve gained their positions in society by talent and hard work. They believe in markets. They’re rich, but they don’t feel like it — they’re always looking at someone else who’s richer.”
