We are at historically unprecedented times. Consider these facts:

1. There are over $9T worth of government securities that are yielding negative nominal interest rates. That’s right, people are giving governments trillions of dollars with a guaranteed negative return. Hmmm.
2. Many unicorns are losing money but still getting premium IPO prices. Lyft lost nearly $1B last year, but still commands a market capitalization of $22.4B. Uber is set to top this when it goes to IPO as it lost $1.8B in 2018. Hmmm.
3. The U.S. will break $1T in its budget deficit in a time of robust growth and unemployment. Even Keynes would roll over in his grave.
4. Most retirement funds are in serious problems, with public sector retirements a major disaster. Hmmm.
5. By one estimate, the S&P 500 PE based on 10 year average earnings is 30–a high only achieved in Oct 1929 and then in the tech bubble years. Hmmm.
6. While U.S. consumers have deleveraged since the financial crisis, firms and governments have loaded up. Hmmm.
7. The Fed blinked yet again (thanks to stock market and Mr. Trump pressure) and will keep its balance sheet at almost $4T (less than $1B when the financial crisis began). Hmmm.

What’s up with this? Is there something that is common to all of these very unusual economic facts? Post your thoughts in the comments and I’ll report back in a week or so.

EDIT UPDATE–My Answer 17 Apr

The common denominator to these items is the central bank/Gov’t regulatory policy discretion that has driven interest rates to such abnormal lows. Let’s see how each plays out:

1. The best answer I’ve read on this one is that regulators are keeping negative yielding bonds on institutions portfolios. So as the European Central Banks drive yields into negative territory, there is no selling possible to drive the price down and the yield up.
2. I argue that you would never have the stock market we have and the allocation we have if not for near zero interest rates for the last decade. Lower interest rates make every long term capital project relatively more valuable. And money losing ventures are the longest of long term projects. It doesn’t mean these unicorns won’t ultimately be great companies (although I doubt it), but it means a natural market would not have allocated capital this way. When people complain about the old economy going away and destroying jobs and transferring wealth to the new economy and Silicon Valley, the easy money program of the Fed is a big contributor.
3. It’s easy for the federal government to run large deficits with zero interest rates. As we climb off zero, this is going to get much harder. But if we would have had 6% interest rates the last decade, I guarantee you that the politicians would have already been forced to deal with our entitlement mess.
4. As the Fed drove interest rates down to zero over the last decade, it became impossible for the pension funds to make their required 7-8% projected returns to meet their obligations. With lower return, funds would have to allocate significantly hire employee contributions. And states especially were unwilling to do so. It will be some other politician’s problem down the road when hopefully I’ll be in a higher/better office (or retired).
5. You’ve seen me write on this before. Every asset is more valuable with lower interest rates. While earnings drive individual stock performance, the interest rate drives the stock market itself. Which is why the Fed’s tightening did cause a bit of a market hiccup at the end of the year, and why their decision to stop was greeted with such market relief.
6. Easy money makes debt virtually free. When you consider the tax advantages to debt, and managerial incentives to boost stock price, it should not be a surprise that companies levered up. Further, as a politician, spending just got cheaper when interest rates went down.
7. We are now in a situation where the Fed is seemingly going to guarantee the market outcome forever. Every time, with every Fed chair, the Fed blinks when the market swoons. The Greenspan put became the Bernanke put and now we have the Powell put. The Fed is not going to allow the stock market to go down. At least, until they can’t stop it.