What say you?

Decline in savings rate, 10%+ expansion of consumer credit, extreme amounts of non residential construction stimulus spending.... can't sustain for long

JSKolache said:

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Yeah but buffett always leans bearish. He hoards cash until prices drop then does mega deals.

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He's hoarding more than ever now

From a macro perspective, S&P 500 P/E ratio of ~26x implying a sub 4% return and forward PE ratio of ~20x implying a 5% return. Going to need very strong growth in earning to justify the risk premium vs ~5.4% T-bills.

jamey said:

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JSKolache said:

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Yeah but buffett always leans bearish. He hoards cash until prices drop then does mega deals.

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He's hoarding more than ever now

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Could be due to unintentional hoarding. Businesses/stock/bonds are kicking off more cash than in the considerable past. He might just not want to reinvest that $.

Red Pear Luke (BCS) said:

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The market can stay irrational longer than you can stay solvent.

Think our current market is a perfect example of that.

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A clsssic. And as always, applicable

We pumped $5 trillion into the economy in the name of Covid-19.....one trillion is a ton of money, and multiply that times 5. Whoa. I think we've got a least 24 months of value reset because of the continued devaluation of the dollar. Sitting in cash seems like a mistake, maybe real estate or similar assets to fend off the inflation.

Bonfire97 said:

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(unless you own tangible assets).

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examples of tangible assets?

jagvocate said:

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Fireman said:

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maybe real estate

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taxes and insurance skyrocketing

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Carrying costs are getting more expensive, and if rates stay high, prices will stagnate and possibly decline. The hard part is discounting the 20-year value relative to Treasuries.

jagvocate said:

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Fireman said:

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maybe real estate

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taxes and insurance skyrocketing

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Taxes and insurance is skyrocketing because of the value of the underlying asset. Same story is happening with inflation right now...

If you break out discretionary goods inflation and non-discretionary goods inflation it's something like <1% and >4%, respectively.

The sticky inflation we're seeing right now, in my opinion, is a result things the Fed can't control and are really unavoidable given the price movements we've already experienced. Same goes for auto insurance - it's all (probably most to be conservative) driven by the underlying labor, parts and replacement cost of vehicles that have skyrocketed.

2 years ago, people freaked out that Owners equivalent rent was a broken metric and wasn't fully capturing inflation. Now OER is close to 6% and represents almost 30% of the CPI metric and those same people are using that for the primary basis of "inflation is still super high".

A different metric to look at is the Cleveland Fed NTR (new tenant rate) which is dropping quickly...it's a bit more violent than the smoothed CPI...but that's what you get with lagging, seasonally manipulated Fed data





I agree with the poster above that we'll go back to secular inflation but before we do that, I wouldn't be surprised to see a few quarters between 0% and 1.5%. Unless of course Biden/Trump fire off the fiscal bazooka again in 2025.

Ag92NGranbury said:

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jamey said:

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JSKolache said:

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Yeah but buffett always leans bearish. He hoards cash until prices drop then does mega deals.

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He's hoarding more than ever now

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Could be due to unintentional hoarding. Businesses/stock/bonds are kicking off more cash than in the considerable past. He might just not want to reinvest that $.

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It's counterintuitive but the case could be made with debt levels so high that the debt service cost of the government is actually stimulative to (parts of) the private sector. Someone's gotta collect that $T per year that didn't exist until recently.

Stat Monitor Repairman said:

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The global economy is gliding with both engines flamed out and power being supplied by that little turbine that pops out from belly of the plane.

Passengers onboard plane have raided the beverage cart and are oblivious.

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You really should be a writer if you aren't already. You have a comedic way with words that's always highly entertaining to read

Sims said:

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Ag92NGranbury said:

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jamey said:

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JSKolache said:

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Yeah but buffett always leans bearish. He hoards cash until prices drop then does mega deals.

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He's hoarding more than ever now

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Could be due to unintentional hoarding. Businesses/stock/bonds are kicking off more cash than in the considerable past. He might just not want to reinvest that $.

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It's counterintuitive but the case could be made with debt levels so high that the debt service cost of the government is actually stimulative to (parts of) the private sector. Someone's gotta collect that $T per year that didn't exist until recently.

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Every historical example studied that I have read has shown the opposite effect. Public debt squeezes out private investment resulting in a stagnant economy.

Net net, absolutely right and going that way no matter what. I just think the level of interest is unprecedented so we might just be looking a slightly different script in the near term compared to other examples.

I am also of the mind that there probably is not any historical example for the situation we are in. Everyone's attempt to call when this musical chair game stops is probably futile.

We have been hearing a lot of people pretty fearful of an impending collapse or mini collapse, or even a slow multi-year burn back to reality. Lots of cash sitting out of the market right now, including my own, but we may end up looking like fools when it ends up taking decades to unravel instead of a few years.

Personally, I'm licking a finger and holding it in the air to see which way the wind is blowing this summer, and if not much has changed by the end of July I will probably go on a buying spree with half my cash looking to go long with conservative trailing stops and then slowly buy in with the remainder over the next year.

I have set aside a decent sum to start building up my stockpile of lead and brass reserves, all the while knowing that will not save me if we get to the point of needing it.

In the end, lead and brass may not save you, but they can become extremely good currency during unsure times. Reports from Venezuela and other similar locations, that the most valuable items are a good quality pistol and a 50 rnd box of ammo. Stacks of Glock 19s and ammo to go with them, could be the best financial hedge possible.

CS78 said:

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In the end, lead and brass may not save you, but they can become extremely good currency during unsure times. Reports from Venezuela and other similar locations, that the most valuable items are a good quality pistol and a 50 rnd box of ammo. Stacks of Glock 19s and ammo to go with them, could be the best financial hedge possible.

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Even in good economic times those have been valuable in Venezuela.

Kansas Kid said:

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flashplayer said:

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I am also of the mind that there probably is not any historical example for the situation we are in. Everyone's attempt to call when this musical chair game stops is probably futile.

We have been hearing a lot of people pretty fearful of an impending collapse or mini collapse, or even a slow multi-year burn back to reality. Lots of cash sitting out of the market right now, including my own, but we may end up looking like fools when it ends up taking decades to unravel instead of a few years.

Personally, I'm licking a finger and holding it in the air to see which way the wind is blowing this summer, and if not much has changed by the end of July I will probably go on a buying spree with half my cash looking to go long with conservative trailing stops and then slowly buy in with the remainder over the next year.

I have set aside a decent sum to start building up my stockpile of lead and brass reserves, all the while knowing that will not save me if we get to the point of needing it.

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No one knows when the music stops but it will at some point based on every other time a country has gotten to this level of indebtedness. I don't subscribe to the bullets and gold idea.

I believe the world will go on but it will be a very difficult time like the 30s in the US and most countries. How the world will reset is hard to say but the sun will still rise in the East. Vast sums of wealth will be destroyed and there will be a few winners but almost everyone will feel pain.

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Yes, it has to otherwise everything we've ever experienced in human history and mathematical theory is wrong and/or somehow this time is different. We simply can't spend and ignore our way out of this but that is damn sure the strategy that has been taken.

The problem with debt is a little is good and actually productive like a home mortgage, business loan or government borrowing for real infrastructure. Then people start going a little more into debt for some big wants and it makes them feel better but then it starts to spiral into more and more spending on unproductive things like wealth transfers, vacations, needless gadgets, etc until the whole system collapses and needs to be reset.

Kansas Kid said:

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The problem with debt is a little is good and actually productive like a home mortgage, business loan or government borrowing for real infrastructure. Then people start going a little more into debt for some big wants and it makes them feel better but then it starts to spiral into more and more spending on unproductive things like wealth transfers, vacations, needless gadgets, etc until the whole system collapses and needs to be reset.

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Well, that's personal debt and yes what you described is stupid, but at least there are governors on that debt and collateral damage is relatively limited. At some point, you have to go bankrupt or you simply run out of ways to fund your stupidity.

Not so with our government who have removed any pretense of having a governor by not passing a budget in over 20 years and by automatically increasing spending every year with zero thought put into the impact of doing that. They spend profligately into perpetuity with collapse here resulting in global catastrophe. They shouldn't be compared on the same level.

YouBet said:

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Kansas Kid said:

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The problem with debt is a little is good and actually productive like a home mortgage, business loan or government borrowing for real infrastructure. Then people start going a little more into debt for some big wants and it makes them feel better but then it starts to spiral into more and more spending on unproductive things like wealth transfers, vacations, needless gadgets, etc until the whole system collapses and needs to be reset.

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Well, that's personal debt and yes what you described is stupid, but at least there are governors on that debt and collateral damage is relatively limited. At some point, you have to go bankrupt or you simply run out of ways to fund your stupidity.

Not so with our government who have removed any pretense of having a governor by not passing a budget in over 20 years and by automatically increasing spending every year with zero thought put into the impact of doing that. They spend profligately into perpetuity with collapse here resulting in global catastrophe. They shouldn't be compared on the same level.

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I was including the government debt as well with the comments on infrastructure and wealth transfers among many ways we use debt at that level. The problem we have is Americans want stuff and they want it now. Other countries have followed our lead.

I do agree there are some governors on personal debt but the Feds have reduced some of those like student loans and laws that make getting mortgages way too easy, especially without 20% down.