If a tree falls in the woods and nobody is there to hear it, does it make a sound?

We have all heard this philosophical question. We know that it has nothing to do with sound waves and the physics of sound. The question is merely asking whether the existence of a perceivable thing is entirely dependent on its being perceived.

We could go to great lengths considering what it means to talk of a sound if it cannot in principle be heard. Or the depth of what sound entails. Etc.
But what is of significantly more interest to us is to consider a derivative question: If there are enough sounds that are all the same, are they the sounds that we hear the most? If we hear a tui enough, is that then the birdsound we recognise most easily? Or a bellbird, or a kereru?

Which leads us to consider whether if enough voices are repeating the same message, is that the message that implants itself on our consciousness? We know that one of the keys to advertising is repetition of the message. Even if it is significantly annoying, the repetition is what implants it on our brains.

What we have heard over the last nine months is essentially a repetition of the message that as interest rates rise, so should yields. That may be a simplification, but boil it down, and that is what multiple voices are repeating. The more times it is repeated, the more it becomes accepted fact.
Where does this message come from? The repetition factor is obvious. People will take a simplification they relate to, or suits their purposes, and repeat it simply because it is simple and suits their purposes. Just look at MAGA as an example.

But of more importance is the origination. We blame the HIPPO (the acronym for HIghest Paid Person's Opinion) factor.  A few voices (mainly HIPPO’s ) trot out a simplified theory of what should happen when interest rates rise, and it doesn’t take long before it is the accepted truth. All the factors which contradict this simplistic view are conveniently ignored. Just as when building a wall would MAGA ignored a raft of systemic and inherent problems in American society.

We would not like to think that HIPPOs were simply serving their own agendas.

Because rents have not decreased. And it is only latterly that deposit interest rates have risen – but so has inflation, which counters the impact of interest rate rise. Many rates per square metre have not dropped dramatically.

Because vacancy rates have not increased. Certainly new build rates have escalated. And investors (who have more of an interest in yield than owner- occupiers ) are seldom borrowing more than 50% of capital value, which means paying interest on less than 50% of value. We could go on with comparisons of returns from other asset classes which lead to the conclusion that focus on the mantra of “higher interest rates should equate to increased yields” being both simplistic and unhelpful. There are enough other factors which have greater impact on value than interest rates and yield. But through repetition, that has become the predominant message we hear – and remember.

So we come back to the original question, which of course is futile to take too seriously. But if we take the question to it’s logical conclusion, the answer wouldn’t be “No it doesn’t make a sound”, but “what tree?”
 
Perhaps before we let the repetitive voices get into our heads in future we need to be a little more inquisitive in considering whether the simplistic answer is addressing the right question.

And we don’t believe that yield is the only right answer to the investment question. Inherent value always has a longer time span than yield.
 
And, to start the week on the right note:  You don't need to be the sharpest tool in the shed when you are a hammer.