<instructions>Your goal is to analyze the following comment and estimate how highly it will be upvoted by the Hacker News community.</instructions><comment><author>mrep</author><text>CPI includes rent which has gone up 2.7% per year averaged out since 2008 [0].  I wouldn&amp;#x27;t call that extreme.  As for stocks, the S&amp;amp;P 500 P&amp;#x2F;E ratio is about 20 which is pretty much average for recent times [1].&lt;p&gt;[0]: &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;fred.stlouisfed.org&amp;#x2F;series&amp;#x2F;DTENRX1A020NBEA&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;fred.stlouisfed.org&amp;#x2F;series&amp;#x2F;DTENRX1A020NBEA&lt;/a&gt;&lt;p&gt;[1]: &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;www.macrotrends.net&amp;#x2F;2577&amp;#x2F;sp-500-pe-ratio-price-to-earnings-chart&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;www.macrotrends.net&amp;#x2F;2577&amp;#x2F;sp-500-pe-ratio-price-to-ea...&lt;/a&gt;</text><parent_chain><item><author>gridlockd</author><text>What laypeople need to realize is the following relation:&lt;p&gt;Low federal funds rates allow companies to acquire huge amounts of debt very cheaply.&lt;p&gt;Huge amounts of cheap debt allow companies to buy lots of stock, driving up prices.&lt;p&gt;Stock prices inflated in such a way are not supported by fundamentals and so the downside risk greatly increases.&lt;p&gt;Once the downside eventually materializes, markets drop violently. At first, the FED ignores this, but eventually it bails. The funds rate is once again lowered, so the game can continue.&lt;p&gt;In any event, the game &lt;i&gt;must&lt;/i&gt; continue, because companies need new debt to service old debt. If the new debt was more expensive, the companies would eventually risk defaulting.&lt;p&gt;To understand the risk of corporate defaults, one must look at the importance of corporate bonds in pension funds. Ironically, the low federal funds rate is part of what drives pension funds to purchase more risky corporate debt, in order to meet their yield requirements.&lt;p&gt;All of this causes massive asset price inflation. Stock prices are detached from actual revenue, real estate prices are detached from rent income. The rich are getting richer - at least on paper - because they own most of the assets.&lt;p&gt;The CPI doesn&amp;#x27;t immediately reflect this kind of inflation, so the FED gets to claim &amp;quot;there is no inflation&amp;quot; and everything is &amp;quot;just fine&amp;quot;. Well, it&amp;#x27;s not fine and they know it, they just can&amp;#x27;t really do anything about it.</text></item></parent_chain></comment><story><title>IBM Stops Buybacks to Pay for Red Hat</title><url>https://investorplace.com/2019/08/ibm-stops-buybacks-to-pay-for-red-hat/</url></story>
<instructions>Your goal is to analyze the following comment and estimate how highly it will be upvoted by the Hacker News community.</instructions><comment><author>SpicyLemonZest</author><text>It&amp;#x27;s hard for me to see why this dynamic would happen. What specific federal funds rate would make stock prices &amp;quot;supported by fundamentals&amp;quot; rather than &amp;quot;inflated&amp;quot;, and why in your view can&amp;#x27;t the Fed just set that rate to avoid these problems?</text><parent_chain><item><author>gridlockd</author><text>What laypeople need to realize is the following relation:&lt;p&gt;Low federal funds rates allow companies to acquire huge amounts of debt very cheaply.&lt;p&gt;Huge amounts of cheap debt allow companies to buy lots of stock, driving up prices.&lt;p&gt;Stock prices inflated in such a way are not supported by fundamentals and so the downside risk greatly increases.&lt;p&gt;Once the downside eventually materializes, markets drop violently. At first, the FED ignores this, but eventually it bails. The funds rate is once again lowered, so the game can continue.&lt;p&gt;In any event, the game &lt;i&gt;must&lt;/i&gt; continue, because companies need new debt to service old debt. If the new debt was more expensive, the companies would eventually risk defaulting.&lt;p&gt;To understand the risk of corporate defaults, one must look at the importance of corporate bonds in pension funds. Ironically, the low federal funds rate is part of what drives pension funds to purchase more risky corporate debt, in order to meet their yield requirements.&lt;p&gt;All of this causes massive asset price inflation. Stock prices are detached from actual revenue, real estate prices are detached from rent income. The rich are getting richer - at least on paper - because they own most of the assets.&lt;p&gt;The CPI doesn&amp;#x27;t immediately reflect this kind of inflation, so the FED gets to claim &amp;quot;there is no inflation&amp;quot; and everything is &amp;quot;just fine&amp;quot;. Well, it&amp;#x27;s not fine and they know it, they just can&amp;#x27;t really do anything about it.</text></item></parent_chain></comment><story><title>IBM Stops Buybacks to Pay for Red Hat</title><url>https://investorplace.com/2019/08/ibm-stops-buybacks-to-pay-for-red-hat/</url></story>