5 ms·

So what's the next crisis? actually read the article and this article does not really expound upon some sort of next crisis.. I guess the crisis is that interes

by xt00 11y ago

So what's the next crisis? actually read the article and this article does not really expound upon some sort of next crisis.. I guess the crisis is that interest rates are so low?? awesome click-bait apparently..

adventured 11y ago
There are very few likely possibilities. 1) Some kind of dollar, global reserve crisis that rocks the global economy for a while. Spurred on by the US debt and projected near future large budget deficits due to welfare and entitlement spending. 2) Broader bond market. I think this is a well understood threat, and doesn't require much elaboration. 3) A specific junk corporate debt crisis. About half of the major corporate defaults in 2015 were US companies, which have levered up significantly on the back of the Fed's super easy money policies. 4) Another significant drop backwards in the asset bubbles the Fed just got done re-inflating. If the Fed's policies fail to provide enough to sustain those huge asset classes (real estate and equities primarily), then when they tip over it'll pull the US economy down into a protracted recession. The global economy is practically in a rolling recession as it is, if the US goes next it would cause a lot more global pain (including amplifying the problems in China and Japan, both big exporters to the US). There's a real debate to be had about whether the Fed can ever actually create a scenario in which the intentionally inflated assets can sustain (stand alone without Fed props), or if they have to always deflate backwards with a hefty penalty for the market manipulation / forced capital misallocation (which then prompts even more dramatic action at each turn, to try to re-inflate).
- paulpauper 11y ago
  cooperate profits are at record highs. A bond crisis would require either a crash in profits or a spike in rates, neither which show any signs of occurring.
  - marcusgarvey 11y ago
    This is not as it seems. http://www.businessinsider.com/baml-warns-of-gaps-in-sales-and-earnings-2015-12 http://www.businessinsider.com/baml-warns-of-gaps-in-sales-a...
- shostack 11y ago
  Could you elaborate on what specifically would cause the real estate market to tip over in your scenario with regards to the Fed's policies?
rpgmaker 11y ago
Thanks, I don't have to read this clickbait crap then.
- PhantomGremlin 11y ago
  I don't have to read this clickbait crap The article is a short read, and the guy makes IMO prescient observations. E.g. here's one of them: The zero interest-rate policy broke the social contract for generations of hardworking Americans who saved for retirement, only to find their savings are not nearly enough. Edit: someone else pointed out another great observation from the article: https://news.ycombinator.com/item?id=10805431 https://news.ycombinator.com/item?id=10805431
  - paulpauper 11y ago
    " The zero interest-rate policy broke the social contract for generations of hardworking Americans who saved for retirement, only to find their savings are not nearly enough." But the evidence actually shows that a better returns can be had with stocks than cash (bills). Even with rates at 4%, stocks way outperform cash: http://www.skepticmoney.com/wp-content/uploads/2011/05/1802-returns.png http://www.skepticmoney.com/wp-content/uploads/2011/05/1802-... Putting cash into a bank is a poor way to save for retirement, if past performance is any clue. The 'hardworking person' saving for retirement by stashing all his money in the bank may more myth than reality. The majority of Americans have little savings, so the difference between 0% rates and 4% is immaterial if your expenses exceed your income. http://www.gobankingrates.com/savings-account/62-percent-americans-under-1000-savings-survey-finds/ http://www.gobankingrates.com/savings-account/62-percent-ame... The problem is not that interest rates are too low, but rather people suck at personal fiance. But on the other had, the Paradox Of Thrift suggests that it's 'good' for the economy that too people don't save too much. Those who have more wealth put it in stocks, bonds, or index funds. They seldom keep it in cash.
    - PhantomGremlin 11y ago
      Those who have more wealth put it in stocks, bonds, or index funds. They seldom keep it in cash. How old are the people? All I can give you is anecdotal evidence of quite a few older people I know. People aged between 50 and 80. Many have the bulk of their money in bank deposits. Quite a few people don't own a single stock or mutual fund. That's today. And if you go back perhaps 50 years, then hardly anyone invested in stocks. The vast majority of people kept money in the bank or in real estate (their house or farm). I'm of course not talking about millionaires, I'm talking about average middle class people. Would they have been smart to have more in stocks? Of course, but that's hindsight. Even now I don't blame anyone for staying away from equities. In October 2007 the S&P 500 hit 1576. Then it bottomed at 666 in March 2009 (hard to forget that number!). Now it's 2056. It's easy to overlook that volatility if you have a steady six figure income. But when you're retired, when you'll never earn another dollar of income in your life, you tend to be more cautious. I personally have almost all my money in equities and in real estate. Nothing in bank savings. But I'd never try to talk anyone into taking money out of the bank and putting it into the stock market. If they make money, they think they're geniuses. If they lose money, I'm a schmuck for giving them bad advice!
arthurcolle 11y ago
global negative interest rates
- xellisx 11y ago
  "Negative interest rates sound great, I would get money back on my mortgage and credit card bills!" (Notice the quotes.)
deleted 11y ago
[deleted]
subdane 11y ago
From the article, 'The last line of the movie, printed on a placard, is “Michael Burry is focusing all of his trading on one commodity: Water.”'
- gansai 11y ago
  probably, thats why people like Bill-Gates is investing in things which produce drinking water

by xt00 11y ago

adventured 11y ago

There are very few likely possibilities. 1) Some kind of dollar, global reserve crisis that rocks the global economy for a while. Spurred on by the US debt and projected near future large budget deficits due to welfare and entitlement spending. 2) Broader bond market. I think this is a well understood threat, and doesn't require much elaboration. 3) A specific junk corporate debt crisis. About half of the major corporate defaults in 2015 were US companies, which have levered up significantly on the back of the Fed's super easy money policies. 4) Another significant drop backwards in the asset bubbles the Fed just got done re-inflating. If the Fed's policies fail to provide enough to sustain those huge asset classes (real estate and equities primarily), then when they tip over it'll pull the US economy down into a protracted recession. The global economy is practically in a rolling recession as it is, if the US goes next it would cause a lot more global pain (including amplifying the problems in China and Japan, both big exporters to the US). There's a real debate to be had about whether the Fed can ever actually create a scenario in which the intentionally inflated assets can sustain (stand alone without Fed props), or if they have to always deflate backwards with a hefty penalty for the market manipulation / forced capital misallocation (which then prompts even more dramatic action at each turn, to try to re-inflate).

paulpauper 11y ago
cooperate profits are at record highs. A bond crisis would require either a crash in profits or a spike in rates, neither which show any signs of occurring.
- marcusgarvey 11y ago
  This is not as it seems. http://www.businessinsider.com/baml-warns-of-gaps-in-sales-and-earnings-2015-12 http://www.businessinsider.com/baml-warns-of-gaps-in-sales-a...
shostack 11y ago
Could you elaborate on what specifically would cause the real estate market to tip over in your scenario with regards to the Fed's policies?

rpgmaker 11y ago

Thanks, I don't have to read this clickbait crap then.

PhantomGremlin 11y ago
I don't have to read this clickbait crap The article is a short read, and the guy makes IMO prescient observations. E.g. here's one of them: The zero interest-rate policy broke the social contract for generations of hardworking Americans who saved for retirement, only to find their savings are not nearly enough. Edit: someone else pointed out another great observation from the article: https://news.ycombinator.com/item?id=10805431 https://news.ycombinator.com/item?id=10805431
- paulpauper 11y ago
  " The zero interest-rate policy broke the social contract for generations of hardworking Americans who saved for retirement, only to find their savings are not nearly enough." But the evidence actually shows that a better returns can be had with stocks than cash (bills). Even with rates at 4%, stocks way outperform cash: http://www.skepticmoney.com/wp-content/uploads/2011/05/1802-returns.png http://www.skepticmoney.com/wp-content/uploads/2011/05/1802-... Putting cash into a bank is a poor way to save for retirement, if past performance is any clue. The 'hardworking person' saving for retirement by stashing all his money in the bank may more myth than reality. The majority of Americans have little savings, so the difference between 0% rates and 4% is immaterial if your expenses exceed your income. http://www.gobankingrates.com/savings-account/62-percent-americans-under-1000-savings-survey-finds/ http://www.gobankingrates.com/savings-account/62-percent-ame... The problem is not that interest rates are too low, but rather people suck at personal fiance. But on the other had, the Paradox Of Thrift suggests that it's 'good' for the economy that too people don't save too much. Those who have more wealth put it in stocks, bonds, or index funds. They seldom keep it in cash.
  - PhantomGremlin 11y ago
    Those who have more wealth put it in stocks, bonds, or index funds. They seldom keep it in cash. How old are the people? All I can give you is anecdotal evidence of quite a few older people I know. People aged between 50 and 80. Many have the bulk of their money in bank deposits. Quite a few people don't own a single stock or mutual fund. That's today. And if you go back perhaps 50 years, then hardly anyone invested in stocks. The vast majority of people kept money in the bank or in real estate (their house or farm). I'm of course not talking about millionaires, I'm talking about average middle class people. Would they have been smart to have more in stocks? Of course, but that's hindsight. Even now I don't blame anyone for staying away from equities. In October 2007 the S&P 500 hit 1576. Then it bottomed at 666 in March 2009 (hard to forget that number!). Now it's 2056. It's easy to overlook that volatility if you have a steady six figure income. But when you're retired, when you'll never earn another dollar of income in your life, you tend to be more cautious. I personally have almost all my money in equities and in real estate. Nothing in bank savings. But I'd never try to talk anyone into taking money out of the bank and putting it into the stock market. If they make money, they think they're geniuses. If they lose money, I'm a schmuck for giving them bad advice!

arthurcolle 11y ago

global negative interest rates

xellisx 11y ago
"Negative interest rates sound great, I would get money back on my mortgage and credit card bills!" (Notice the quotes.)

deleted 11y ago

[deleted]

subdane 11y ago

From the article, 'The last line of the movie, printed on a placard, is “Michael Burry is focusing all of his trading on one commodity: Water.”'

gansai 11y ago
probably, thats why people like Bill-Gates is investing in things which produce drinking water