Edge #7 - Interest Rate Rises and the Economy
What I’m reading
The 22 Immutable Laws of Marketing is a surprisingly engaging read. Despite the fact that we’re now in 2022 the age of social media and the authors wrote the book in 1994. The author makes a case that these marketing laws are timeless as they are rooted in human psychology. I’ll share two laws I’ve read so far:
- The law of leadership. Focusing on convincing people you have a better product is wrong. It’s better to be first than better. The first brand in any prospects’ mind is usually the leading one, from Coca-Cola, IBM, to more recently Tesla as the first mainstream all electric car company.
- The law of perception. It’s almost impossible to change someone’s mind once it’s made up. When you want to make a favourable impression with someone, you don’t gradually build up a favourable impression over time but ‘blast’ them. Once they perceive you a certain way, it’s mostly set. It’s the reason watches like Rolexes command prices many, many times over a Grand Seiko, even though, in some cases, the latter can be superior in every measurable way.
Resource of the Week
I started learning Russian not too long ago using Duolingo. I’ve never been very good at learning languages. I have no idea how effective the app is, but it’s great fun. The interface is beautiful and it feels like a game, they put in in leaderboards according to your ability and incentivise you to form streaks. Most importantly, because of those things, I’m managing to stay consistent with it; 15-30 mins a day doesn’t feel like a chore at all. I’ll provide an update in a few months. (They also have one of the most hilarious company TikTok profiles).
Quote
When rain falls, it flows downhill. If desired, you can collect the rain in a bucket and carry it uphill, but the natural tendency of water is to flow toward the lowest point.
Most situations in life have a tendency—a direction in which things want to flow. You can choose to go against the flow (just as you can choose to carry water uphill), but your results tend to be better when you find a way to work with the gradient of the situation.
Position yourself to benefit from the external forces at hand and you will get more from the same unit of effort. Energy is conserved and results are multiplied.
James Clear
Thoughts
Most of you reading will not have missed yet another round of interest rate rises. I believe that coming into 2022, most people were expecting this to happen, given the spiralling inflation. What I didn’t expect was how frequently this is happening, the fourth consecutive time since December.
The combination of interest rate increases and the general rise in the cost of living raises many questions and puts the economy in a precarious position. Here I feel it’s essential to keep things in perspective. Here is a chart of historical base rates going back to 1975.
We’re still near historic lows. Although times are also different, the house price to earnings ratio is the highest it’s ever been.
Given the current inflation, there wasn’t much else the Bank of England could have done differently. A big part of how the economy will fare going forward depends on how long this squeeze on the cost of living remains.
When it comes to the property market, the stock of homes for sale is still much lower than in the recent past, but there are signs of it slowing down.
I’m taking this as an opportunity to look to acquire as things cool down. I’ve found the market to be impossibly hot the last 6-8 months. I will keep you up to date here on future progress.
If any of you are interested, I have a 1:1 property consultancy slot that’s opening up. My existing client has had an offer accepted. Just drop me an email.
As always, just reply to this email if you have any feedback, thoughts or questions. I read every email.