If you are looking for financial yield–for retirement, for example–then you are interested in equity valuation. The rate of interest is fully charged (whole) but the capacity to determine it is limited.
Determination is reduced to a probability, and in the financial realm the rate of interest is discounted to reflect divergence of the real and actual rate of interest.
The discount rate is effectively determined on demand. (The price of a bond, for example, is determined by the discount rate, determined by the rate of interest in it.) This “attributive value” yields to the distribution of equity (the price to be paid to actually possess it now, with the risk of loss–the rent–fully assumed in priority). Divisibility (diversification of the risk) trends the probable value of equity in the futures now (the occupation of space over time) at a rate essentially determined–discounted–by the capacity to measurably affect it and thus transact an interpretation (having resolution authority).
(See, also, other articles by griffithlighton on attributive value.)
The authority to interpret transactions, like when the Fed looks for “signals” to raise the discount rate, is the authority to resolve the futures into now, deriving certainty from a random existence that in the macro dimension is really not random at all until you try to affect it. The difference, of course, then has an attributive value, having a transactional interpretation (yielding to observable signs or symbols, like the little birdie, which is an interpretation of objective reality), existing on demand (expanding at the margin) to occupy space over time (resisting absolutely nothing).
Even if you are into funds you don’t directly manage, the signal-to-noise matters to you. What is trending occupies your space, anyway.
(The last time I commented on equity-market trending it was about the sentiment surrounding a June interest-rate rise. I haven’t said much about the recent rise in equity valuation since then because the sentiment, the attributive value, or the interpretation that transacts the risk, is just that–a sentiment.)
Notice that the objective, technical measure of GDP (like I was telling you) still struggles to break 1%, but inflation is being measured at 2% or more. This happens (like Sanders is saying) because income is distributing so that “the top one-tenth of 1% has more money than the bottom 90%.” Technically, this means the capacity to make demands, trend the marketplace, and determine the value of equity is controlled by a handful of oligarchs.
Sanders’ technical evaluation is the object of a lot of jokes, which trivializes the real issue, just like the court jesters are paid to do in service to their masters. It is the same way with market sentiment and equity valuation. There is a lot of noise to the signal, and as the real issue gets technically clearer, it is necessary to reduce the signal by increasing the amount of noise.
Technically, rising inflation against slow growth is the whipsaw effect. This is what the big ugly monster (deflation) technically looks like and don’t think it won’t get around to you, consolidating your equity interest and boosting its value in the form of securitized debt.
(AIG if you recall, for example, is an insurance company steeped in the art of securitizing the debt, which led to the last financial crisis. Hank Greenburg, its CEO, lost a lot of money, gobbled up by the deflation monster. Compared to most everybody else he was still a rich man, but to the top one-tenth of the 1% he’s just another servant of the servant class, scratching out a living, doing their bidding on demand.)
Secured debt in the form of equity continues to rise because “the top one-tenth of 1% has more money than the bottom 90%.” That it is driven by whether the Fed raises the rent (thus blaming it on the Fed–operating by fiat) is a lot of noise. It is a lot of nonsense intending to reduce the irreducible risk of loss fully assumed (determined–occupying space over time) in all the futures, existing on demand, in priority.
NOW is the time to demand it.
Vote for Sanders, anyway!