A Quote by Mohamed El-Erian
The theory is that if you take interest rates negative, people are going to say, "That's a silly game! I'm not going to lend my money to governments who want me to pay them. I am going to go into the stock market where I can get positive returns!"
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The underlying strategy of the Fed is to tell people, "Do you want your money to lose value in the bank, or do you want to put it in the stock market?" They're trying to push money into the stock market, into hedge funds, to temporarily bid up prices. Then, all of a sudden, the Fed can raise interest rates, let the stock market prices collapse and the people will lose even more in the stock market than they would have by the negative interest rates in the bank. So it's a pro-Wall Street financial engineering gimmick.
Successful investors like stocks better when they’re going down. When you go to a department store or a supermarket, you like to buy merchandise on sale, but it doesn’t work that way in the stock market. In the stock market, people panic when stocks are going down, so they like them less when they should like them more. When prices go down, you shouldn’t panic, but it’s hard to control your emotions when you’re overextended, when you see your net worth drop in half and you worry that you won’t have enough money to pay for your kids’ college.
I am absolutely against positive thinking. You will be surprised that if you don't choose, if you remain in a choiceless awareness, your life will start expressing something which is beyond both positive and negative, which is higher than both. So you are not going to be a loser. It is not going to be negative, it is not going to be positive, it is going to be existential.
If I've got a problem with one of my clients that needs to get solved, guess what I'm going to do? I'm going to call them up, and I'm going to say, 'Hey, here's what's going on. This is the situation. This thing went sideways. I didn't expect it. Now it's going to take me some more time to get you what you need.' But I'm going to do that upfront.
I have resigned from the professional undertaking of coin flipping. I am not here to tell you where gold's going to be. I have no idea. That's my existentialism. I am a student of uncertainty, I have no idea where the stock market is going to be. So when I am creating trades in my portfolio for my clients, I am agnostic. I just want to enhance the probability that I make money come what may.
The only thing that looks good is the stock market, but if you raise interest rates even a little bit, that's going to come crashing down.
We live in a global market and money's fungible and hedge fund private equity is looking for momentum plays, and there ain't no momentum plays in bonds, right? When the interest rates were spiking up or down, well they never really spike down they do spike up though. Something's got to happen, there's got to be motion, the dice has to be rolling on the board, and if it's not then they're not going to play because they're not going to get the adrenaline rush from looking at... you know, money markets fund interest rates or bond interests or whatever. It's got to be sexy.
And that's the one thing that people do not understand is that we have very low interest rates and if those go back to historical levels or even go back to scary thoughts that they're back in the late '70s, early '80s, then that's going to really be hard to actually pay off those debts. It's going to be a - it's going to be a very big problem.
Start listening to what you say. Are your comments and ideas negative? You aren't going become positive if you always say negative things. Do you hear yourself say"I could never do that","I never have any luck","I never get things right". Wow - that's negative self-talk! Try saying"I am going to do that","I am so lucky""I always try to get things right". Can you hear how much better that sounds?
How long can interest rates stay negative? Think about this. Not only are you lending your money to governments, but you're paying them interest for the privilege of doing so.
There are times when a market such as housing, transportation or the stock or mortgage market keep rising and people with capital want to join in this growth. Soon the markets become overheated, partly because of the abundance of investment money and speculation. This is when the government should raise interest rates and increase the cost of borrowed money. Governments are shy about doing this because it could cause the very recession. Yet this is the best time to do this so that the inevitable recession never reaches the magnitude of the recent Great Recession.
I want to pass on my secrets to people who are going to say, 'I have realised that I love baking, and now I'm going to make my bread and sell it at the local farmers' market,' or who might say, 'I am going to use the local Post Office in our village to sell my cakes.' I want to give them that little bit of fire.
When I talk about how we're going to pay for education, how we're going to invest in infrastructure, how we're going to get the cost of prescription drugs down, and a lot of the other issues that people talk to me about all the time, I've made it very clear we are going where the money is. We are going to ask the wealthy and corporations to pay their fair share.
If we are going to have a Fed, it should not fall into the tyranny of experts with the a fatal conceit that a few wise people can determine interest rates. Interest rates should be driven by the market, and people's time preference, and we see these boom-bust cycles.
I am going to go on with my life, and if they call me and say 'Yo, you are going to be in the Hall of Fame or you are going to be in this,' then I am going to say, 'So be it.' If I make it, I will go to the ceremony, and I'll have fun.
Well, I'm telling them two things. One is that, look, this is going to be something when the American people realize - once it's passed - that, A, it does take care of preexisting conditions; B, you're insurance rates aren't going to skyrocket; C, the insurance companies aren't going to be running the show like they were before; D, you're going to be in a position where you can keep your insurance that you have. That once the American public realizes that, you're going to get a reward for this. They're going to be rewarded.
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