Letter from Lex from New York: The price of luxury goods
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The loose monetary policy of the US Federal Reserve has played a certain role in the resurgence of price inflation. This hit the wallets of ordinary Americans. These policies have also pushed up asset inflation and increased the savings of those at the other end of the salary level.
Ordinary households are obsessed with the recently announced US Consumer Price Index. The recent annualized inflation rate was 6.2%, the highest level in 30 years. Especially gasoline prices have soared. The recently reappointed Fed Chairman Jay Powell is under increasing pressure to tighten monetary policy quickly and sharply before inflation spirals out of control.
In addition to curbing the rise in prices of daily goods and services, higher interest rates should also eliminate the bubble in risky assets, which has been inflated by one percent of people.
The market value of Rivian, a recently listed electric truck manufacturer, has already touched More than 100 billion U.S. dollars, Although only relatively few vehicles have been assembled. If the discount rate rises slightly, the net present value of such companies should be seriously affected, and the profits of these companies are so remote. Of course, this assumes that traditional valuation techniques are still valid.
Then there are those assets that do not generate continuous cash flow. Divorced New York City Power Couple, Harry and Linda McGraw, Only sold 35 They sold their acclaimed art collection for US$676 million, much higher than the US$400 million estimated by Sotheby’s auction house. In today’s hot art market, Basquiat, which sold for $400,000 in 1998, is now changing hands for $40 million.
But that is something of the old economy.A set of physical, digital and non-fungible tokens-unique and non-interchangeable data units-from Fashion digital artist Beeple It was just sold at an auction for $25 million.
Speaking of old works, hedge fund billionaire Ken Griffin bought a rare copy of the U.S. Constitution late last week.After the DAO (a decentralized cryptocurrency expert group), the auction attracted attention In vain Concentrate resources to win artifacts.
Once, professional sports teams provided a place for savvy people to store their wealth. The rise in the prices of these assets has also continued unabated. In a partial sale earlier this year, the Sacramento Kings were a small-market professional basketball team valued at $1.8 billion. Just eight years ago, its control was acquired for $530 million.
In Manhattan, it’s not cheap to find a place to showcase your art (at least in kind).Number of apartments sold in Manhattan More than 4 million U.S. dollars According to data from research firm Miller Samuels, the third quarter not only increased from last year, but also more than doubled from the same period in 2019.
However, the rise in asset value means more investment banking business. According to New York State data, Bonuses for Wall Street broker-dealers Will break the record after the 2017 financial crisis. The average expenditure of securities workers last year was $184,000. These figures do not include those in the more profitable hedge funds and private capital sectors, whose bonuses should easily exceed this figure.
Economists ask themselves, since 2009, to what extent the loose money aimed at avoiding a recession has led to more serious income and wealth inequality. Even so, tighter monetary conditions are sure to cause pain at the bottom of the wealth pyramid, and those who cry over raising interest rates rarely admit this.
We can only hope that the U.S. economy no longer needs the Fed’s continued paternalistic monetary support. An economic soft landing can bring some much-needed sanity to all types of asset prices, whether real or virtual.
Take a good rest for a week.
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