patrick.net

Heraclitusstudent says

I think internationally we are facing a return of doom and gloom in China at the end of the year, turbulences due to practical consequences of Brexit in Europe and renewed fall in oil prices

Morgan Stanley and Credit Suisse scrap UK recession calls today

The context shows a late cycle dive, which in previous cycles was hardly an harbinger of good things to come...

Logan Mohtashami says

Morgan Stanley and Credit Suisse scrap UK recession calls today

Do they know Brexit didn't happen yet?

Logan Mohtashami says

Poor Americans all that debt next to 80 trillions dollars of assets

The same Americans?
Many had good housing equity during the housing bubble.

Heraclitusstudent says

Do they know Brexit didn't happen yet?

A lot the Brexist fears were very over blown because implication is still far away

But trend data was getting negative for the UK but not enough to push to a recession even with the pound weakness

Heraclitusstudent says

The same Americans?

The people who tend to have the massive debt loads are the ones with the biggest income and financial assets

The purity of the debt structure is the more important variable and the debt is as vanilla as you can get in this cycle.. very important factor

In fact at the conference I will be speaking at in October that is what I am going to focus on

Logan Mohtashami says

The purity of the debt structure is the more important variable

If you mean it won't default, I agree.
I just object to the implied willingness of people and governments to add any quantity of debt to their balance sheets.
Assets of not. People who have real net-worth don't need debts.

Heraclitusstudent says

If you mean it won't default

Defaults should only happen when there is an economic event... mostly a job loss,

Housing was the worst debt leverage bubble because it was highly speculative, bad exotic debt, massive demographic patch as well

Really was a perfect story and that really happened from 2003-2006 . 1996-2002 trend was legit ... to me people discount 1996-2006 as one big bubble, I don't agree with that thesis we had good demographics for housing 1996-2006 but not that good

Speculation is something that should be watched in every cycle to try to find that key over investment thesis.

We had that in oil in this cycle but that isn't a big multiplier economic sector for us outside of a few states

Strategist says

We are his friends. He can't just pack up and leave.

We are victims of his brutal self promotional campaign, coupled by a desire to always be right.
I have a feeling his wife wears the pants in his family and he just has to 'take it out' on us.
Either that or he has tiny hands.

Logan Mohtashami says

Heraclitusstudent says

Total public debt 105% of GDP, at record $19 Trillions , on our way to $40 trillions by 2024.

Means nothing

To you it doesn't... The trend is x2 / 8yrs. There are a lot of citizens watching this and wondering where it all ends.

Heraclitusstudent says

To you it doesn't... There are a lot of citizens watching this and wondering where it all ends.

This is very true, federal debt hasn't been properly explained as some people think it's like household debt..

It's been the most difficult thing to explain outside of demographics over the last few years..

Really its such a political weapon that both parties really don't explain it well either

To me I tell people debt is going to grow every year until 2076 and unless it creates inflation we should be fine, hence why debt has grown and interest rates has fallen

People are trained to think that they need to pay off this debt and that we need surpluses each year, that is actually a bad thing for economics if that was the case

Logan Mohtashami says

To me I tell people debt is going to grow every year until 2076

Do you have any idea where the debt would sit in relation to GDP if it were to continue to double it every 8 yrs until 2076?

Logan Mohtashami says

unless it creates inflation we should be fine, hence why debt has grown and interest rates has fallen

On the opposite: unless it creates inflation, we're fucked.
We can't afford to accumulate debt at this rate with much lower nominal growth.

Heraclitusstudent says

unless it creates inflation,

Hence why King Dollar is very important... America is simply just a economic freak of nature in historical context.

Debt should rise a lot faster than GDP due to demographics since debt is highly loaded on the mandatory side of things 2024-2057 that is high debt cycle here in America

Logan Mohtashami says

Debt should rise a lot faster than GDP due to demographics since debt is highly loaded on the mandatory side of things 2024-2057 that is high debt cycle here in America

The current trend of x2/8yrs started with Reagan, therefore it is NOT (just) demographics.
If debt is ~ 20 trillions end of 2016, assuming +9% a year (as the case on average since Reagan), for 40 yrs until 2057, this puts the debt at $628 Trillions in 2057.
Do you wish to say this is a workable number?

Heraclitusstudent says

$628 Trillions in 2057.

Is this a real assumption I have 75 Trillion being the worst case... because the mandatory side from 2024-2056 will make all recession create a higher debt flow due to a lack a revenue

Logan Mohtashami says

Is this a real assumption I have 75 Trillion being the worst case...

20T x (1.09)^40 = 628 T
Obviously projecting a trend for 40 yrs is more a thought experiment than a prediction, but it serves its purpose.

I think you're forgetting the revenue aspect

Logan Mohtashami says

I think you're forgetting the revenue aspect

You mean that revenue growing 2%/yr (increasingly looking more like 1%)?
Do you really want me to do the math?

Heraclitusstudent says

Do you really want me to do the math?

As someone who has studied government debt and revenue models, lets just say your math is suspect if you believe government debt will go from 20 Trillion to 628 Trillion

Logan Mohtashami says

As someone who has studied government debt and revenue models, lets just say your math is suspect if you believe government debt will go from 20 Trillion to 628 Trillion

I'm just projecting a simple exponential trend. Are you saying we are not on this trend now, or that the trend will change at some point.
I certainly agree it will change. Which underlies the fact we can't simply say "things are great, we'll just go through a period of high debt".

Heraclitusstudent says

Which underlies the fact we can't simply say "things are great, we'll just go through a period of high debt".

Due to demographics we will never see a surplus probably in our life time, the only really shot was between 2016-2017, that didn't happen.

However, since it's majority of mandatory payouts, I see no problem with high federal government debt loads when you have the reserve currency

If anything, we don't do enough government

spending

Logan Mohtashami says

If anything, we don't do enough government

spending

There should be more "Republicans" like you, Logan.

Logan Mohtashami says

I see no problem with high federal government debt loads when you have the reserve currency

There is a fine line between "high debt load" and a $628 Trillions load.

The Fed rate hike is in limbo again, as predicted. As long as they keep zirping or nirping asset prices will stay inflated.