Is the Crystal Ball Clearing? | 148 comments (147 topical, 1 editorial, 0 hidden)

Re: A shift in expectations (none / 0)

A not insignificant fraction of all ~~capital~~ assets is not in the stock market, but in (generally) far less risky investments like bank accounts, corporate and sovereign bonds, or real estate. As they (usually and in the long run) have a lower return, a higher return on stocks might very well be sustainable even in the long run, as long as economic growth runs at a reasonable clip.

Only assuming that you do not reinject your gains from the stock market into the stock market. If you do, then the stock market's fraction of all assets in the economy will increase.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Mar 13th, 2012 at 11:07:56 AM EST
[ Parent ]

Re: A shift in expectations (none / 1)

But why build a factory when you can simply invest in one with less risk and better return? Of course sooner or later you run out of bricks and mortar and are left with paper and electrons, but isn't it loverly while it lasts?

by rifek on Tue Mar 13th, 2012 at 02:52:13 PM EST
[ Parent ]

Re: A shift in expectations (none / 0)

Because it might be cheaper to build a new one compared to buying an already existing one, depending on market valuations.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Mar 13th, 2012 at 04:37:02 PM EST
[ Parent ]

Re: A shift in expectations (none / 1)

But that involves lags and risks that buying an existing asset doesn't have.

Also, if you buy the existing asset on credit, the existing asset acts as collateral. If you borrow to build, there's no collateral until the thing is built.

Therefore, the banking sector has a bias against lending for capital formation and for lending towards asset bubbles.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Mar 13th, 2012 at 04:42:56 PM EST
[ Parent ]

Re: A shift in expectations (none / 0)

But that involves lags and risks that buying an existing asset doesn't have.

True. Which is why people talk about risk-adjusted returns, and why choosing the highest risk-adjusted return is what you should, given that the absolute level of risk is something you can stomach.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Mar 13th, 2012 at 06:06:54 PM EST
[ Parent ]

lending for construction (none / 1)

is what project finance is about.
And - again, it works, it's quite safe, but it's also quite a bit of work. Which may be the problem...

(Also - project finance bankers do not get million-dollar bonuses)

Wind power

by Jerome a Paris (etg@eurotrib.com) on Wed Mar 14th, 2012 at 08:48:21 AM EST
[ Parent ]

Re: lending for construction (none / 0)

I have been wondering, how much of banks lending is project financing and how much is based on existing assets?

Ball-park figures is what I am looking for really.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Mar 14th, 2012 at 09:07:23 AM EST
[ Parent ]

Re: lending for construction (none / 0)

most bank lending is still to corporations, and it is impossible to tell if that money is used for investment (and if so, in what) or for other purposes.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Wed Mar 14th, 2012 at 01:08:52 PM EST
[ Parent ]

Re: A shift in expectations (none / 0)

Still, a a lot of non project-finance new construction projects are done by established actors, not startups, which actually have collateral available to pledge.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Wed Mar 14th, 2012 at 10:44:01 AM EST
[ Parent ]

Is the Crystal Ball Clearing? | 148 comments (147 topical, 1 editorial, 0 hidden)

Top Diaries

The end of the Tories

A Democratic Backstop

Defending Ireland

NI-Only: Boris As Escape Artist

Agrophotovoltaics
, Agriphotovoltaics
, Solar Sharing

Rerversing the dominant submissive British Irish polarity

Reforming the UK Constitution

A Glossary of Brexitology

Recent Diaries

Defending Ireland

A Democratic Backstop

NI-Only: Boris As Escape Artist

Money, Drugs, Guns, Liquidation - Love A'dam

The end of the Tories

Agrophotovoltaics
, Agriphotovoltaics
, Solar Sharing

Saudis Signal Iranian Build Cruise Missiles Used in Attack

Houthi Drones Have Become Cruise Missiles

Rerversing the dominant submissive British Irish polarity

Stingray Catchers and Netanyahu Wrong Footed

Reforming the UK Constitution

The penny has dropped

A few first principles

A Glossary of Brexitology

LQD: EU27 [including France] not to say "non"

Peace At Hand ... Bolton Is OUT!

Revolt in the Heart of UK Democracy

Boris and Leo press conference

City Agriculture - September 8, 2019

LQD - France to say "non"

Occasional Series