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  1. #8176
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    Still waiting for a real catalyst.
    Trump going to war with Iran before Christmas is the only x facto that comes to mind.

    There is no nationwide over leveraged accounts like housing in ‘08. Tech could pull back with a trade war with “Ghina” but even if tech drops, Apple, Facebook or Amazon will buy up the remains.

  2. #8177
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    Plus you know Trump is gonna try to pull a rabbit out of his ass somehow and give things a boost heading towards the election.

  3. #8178
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    Quote Originally Posted by mud View Post
    Still waiting for a real catalyst.

    There is no nationwide over leveraged accounts like housing in ‘08. Tech could pull back with a trade war with “Ghina” but even if tech drops, Apple, Facebook or Amazon will buy up the remains.
    There are plenty of over-leveraged entities within the USA to serve as catalysts on the downside. The consumer is likely to lag, not lead the next down cycle.

    Corp debt issuance is what funds stock buybacks, which are the single biggest source of demand for equities. Consumer demand & retail sentiment (the strongest parts of the economy) are highly dependent on asset prices staying high. So any disruption or overwhelming of the sequence of corp debt issuance --> buyback demand --> equity index support portends a reversal of the 'virtuous cycle' of debt-fueled asset price growth. Either issuance fading or large allocators getting defensive could trigger this feedback loop of declining asset prices --> inverse wealth effect --> lower aggregate demand --> labor market weakness.

    Within the labor market there's a large share of high-paying jobs that fall under unprofitable firms seen in the gig economy & SaaS. Disruption in those firms ability to keep borrowing to fund operations is the primary weakness that hangs over what's been a very robust labor market.

    Attachment 292500


    Attachment 292501
    ^^overall issuance going down while IG lags & junk surges

  4. #8179
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    So how far do corporate bonds have to drop to cause a recession?

    Stock buybacks were fueled by the recent Republican tax bill, it had nothing to do with businesses doing well. The 6% drop shows smart money was probably moving their cash into stocks not into bonds. I don’t see how corporate bonds crashing would trigger a recession like what happened to mortgage backed securities.

  5. #8180
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    Quote Originally Posted by mud View Post
    So how far do corporate bonds have to drop to cause a recession?

    Stock buybacks were fueled by the recent Republican tax bill, it had nothing to do with businesses doing well. The 6% drop shows smart money was probably moving their cash into stocks not into bonds. I don’t see how corporate bonds crashing would trigger a recession like what happened to mortgage backed securities.
    High quality corp bonds probably won't crash and likely go lower rate. I don't see a big problem because even most lower quality borrowers will be able to re-finance at lower rates. There will be defaults but I suspect the next recession will be shallow but perhaps protracted with a smaller bounce which has been the scenario for decades. The effect on equity is more unpredictable I think.

    LQD can go a lot higher
    https://finance.yahoo.com/chart/LQD/...YXJ0In19fX0%3D

  6. #8181
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    Defaults are around 1%. Very low. Is that concerning? Only if you’re chicken little.

    More debt and leverage? Interest rates are...what you could say...low. And maturities are pushed out at least 3 years.

    Sky is falling going on 10 years. Benny have you even learned Italian yet??
    Decisions Decisions

  7. #8182
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    i still think that debt is accessed too easily. a lot of high paid jobs backed by fluff as bro called out (good summary). i definitely fall in this camp; it’s a difficult thing for a lender to measure.

    brock posts in a suit and ski boots [and i support it]

  8. #8183
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    Quote Originally Posted by Bromontane View Post
    So China says they're growing at 6% but their trading partners are all in recession or headed towards one. Maybe we can divine something from econometrics to offset this disturbing reality.
    It's not all trade. They're still buiding infrastructure.

    Let's do some livin'
    After, we die

  9. #8184
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    Quote Originally Posted by Benny Profane View Post
    It's not all trade. They're still buiding infrastructure.
    I really wish the USoA would learn a thing or two from China in this regard. You could fuel growth in the states for decades just rebuilding core infrastructure for the next century. Would be a tailwind to productivity for another 100years as well. It's good business, good statecraft, good politics, etc.

  10. #8185
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    The money comes slowly
    Zone Controller

    "He wants to be a pro, bro, not some schmuck." - Hugh Conway

    "DigitalDeath would kick my ass. He has the reach of a polar bear." - Crass3000

  11. #8186
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    Quote Originally Posted by Bromontane View Post
    I really wish the USoA would learn a thing or two from China in this regard. You could fuel growth in the states for decades just rebuilding core infrastructure for the next century. Would be a tailwind to productivity for another 100years as well. It's good business, good statecraft, good politics, etc.
    Devil’s advocate question, how would we pay for it?
    Reduce the military in half?
    (In general I agree with the sentiment, though)
    StokePimpin' ain't easy

  12. #8187
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    Quote Originally Posted by rideit View Post
    Devil’s advocate question, how would we pay for it?
    Reduce the military in half?
    (In general I agree with the sentiment, though)
    Not to be a smartass, but via US Treasury. Authority resides within D.C. to move in that direction both in terms of funding & implementation. Looking back fifty years in this country, we've seen labor get absolutely crushed by factor price equalization and corporatism (capital buying off legislatures to exploit foreign labor & get rich while excluding American labor). The social effects of this ascendancy of capital over labor are essentially why Trump was elected - it never would have happened with healthy involvement of labor in economic decision making.

    So we agree on a new social contract where debt is taken on at a national level to do something that actually benefits the populace. In doing so we could really pull in a large segment of the population that's been left behind, rebalance the power dynamic in Washington to more fairly weight the interests of labor, drive aggregate demand by increasing the employment base, enable the normalization of interest rates & offset the invariable pain that would entail by an influx of infra-related manufacturing projects. Engineers, project managers, materials, fabricators, grunts, you name it: there would be enough pie to refocus the country on building the next chapter.

    In doing something like this you would actually produce the economic output gains that would justify deficit spending. Unlike prior misadventures of supply-oriented tax breaks & ill-fated foreign wars, there would actually be a payoff to moving in this direction. Pair it with right-sizing the military complex & you could find a sustainable budget for the longer term.

  13. #8188
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    Call it the Bro New Deal.

    Smart roads (built in wireless charging, autonomous driving logistics) are going to be insanely expensive to build out nationwide anytime soon. But with it brings increased productivity, reduced healthcare liabilities, etc that will benefit society and offset costs.

    Oh, and in the mean time redo all the existing highways for us gas burners. That'd be nice.

    Or, we could spend trillions more on wars. What could go wrong?

  14. #8189
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    Let's do some livin'
    After, we die

  15. #8190
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    Quote Originally Posted by Bromontane View Post
    .......

    In doing something like this you would actually produce the economic output gains that would justify deficit spending. Unlike prior misadventures of supply-oriented tax breaks & ill-fated foreign wars, there would actually be a payoff to moving in this direction. Pair it with right-sizing the military complex & you could find a sustainable budget for the longer term.
    I've been saying this for nearly 30 years. Good thing I wasn't holding my breath waiting to see it start to happen.

  16. #8191
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    Quote Originally Posted by gravitylover View Post
    I've been saying this for nearly 30 years. Good thing I wasn't holding my breath waiting to see it start to happen.
    The sad part is it has next to zero traction because incentives in the legislature are inverted against the populace. Hope is dead.

  17. #8192
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    Quote Originally Posted by Benny Profane View Post
    /\ charges 1% of assets to index your money.

  18. #8193
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    Posted this in polyass, curious what you guys think.

    https://www.cnbc.com/2019/09/02/here...shing-red.html
    StokePimpin' ain't easy

  19. #8194
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    A recession is not necessarily bad for equity. A lot of growth has been pulled forward recently through fiscal and geopolitical pressure.

    Historical signals are less reliable when price discovery has been mitigated by central banks

    The yield curve has been flat for so long I'm not sure it means much

    The whole complex of negative and low sovereign rates is dangerous for too many reasons to list but structural risk to currency and debt relationships is the biggest risk out there in my view.

  20. #8195
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    Quote Originally Posted by 4matic View Post
    /\ charges 1% of assets to index your money.
    Well, that's for stupid people.

    Let's do some livin'
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  21. #8196
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    Quote Originally Posted by Bromontane View Post
    The sad part is it has next to zero traction because incentives in the legislature are inverted against the populace. Hope is dead.
    Quoted for truth.


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  22. #8197
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    September, a good time to sell and go on vacation for a bit.

    Our massively inflated debt-fueled standard of living is completely and utterly dependent on the continual creation of more debt.

    In essence, this study found that without debt we wouldn’t have much of an economy at all. In fact, Bloomberg says that U.S. per capita income would collapse from $66,900 a year to “negative $4,857”…

    To get this somewhat dystopian measure, Bloomberg took each economy’s 2020 GDP as projected by the International Monetary Fund as a starting point. We then adjusted the number by removing the ability to borrow, while adding reserves to create an alternative wealth measure.

    U.S. per capita income of $66,900 would be slashed to a negative $4,857 using this measure. That’s a total loss of almost $72,000 for every man, woman and child.

    So the only thing keeping us from complete and total economic collapse is the fact that debt is flowing like wine.

    But what would happen if some sort of major national crisis erupted someday and all of a sudden everyone was afraid to lend money?

    That is something to think about, because such a scenario may be a whole lot closer than many people might think.

    As it stands, we appear to be on the precipice of the worst economic downturn since the last financial crisis, and our trade war with China just went to an entirely new level as the month of September began…

    The biggest reason for last week’s torrid stock market rally was rekindled “optimism” that the escalating trade war between the US and China may be on the verge of another ceasefire following phone conversations, fake as they may have been, between the US and Chinese side. This translated into speculation that a new round of tariffs increases slated for this weekend may not take place or be delayed.

    However, that did not happen, and with no trade deal in sight, at 12:00am on Sunday, the Trump administration slapped tariffs on $112 billion in Chinese imports, the latest escalation in a trade war that’s ground the global economy to a halt, sent Germany into a recession, and given the market an alibi to keep rising because, wait for it, “a trade deal is imminent.”

    Only, it isn’t, and 1 minute later, at 12:01am EDT, China retaliated with higher tariffs being rolled out in stages on a total of about $75 billion of U.S. goods. The target list strikes at the heart of Trump’s political support – factories and farms across the Midwest and South at a time when the U.S. economy is showing signs of slowing down.

    The Chinese knew that these tariffs were about to go into effect, and so they were ready and waiting to retaliate just one minute later.

    Of course many U.S. companies will be hit extremely hard by these tariffs that the Trump administration just implemented. The following comes from CNBC…

    That means that when an electronics company imports a TV, or a smart speaker, or a drone from China starting September 1, it will have to pay a 15% tax to the U.S. government.

    Eventually, this will end up raising prices on gadgets and other products for people in the United States, said Bronwyn Flores, a spokeswoman for the Consumer Tech Association (CTA), a trade group that represents 2,000 different companies in the electronics industry, including brands like Apple and LG and retailers like Walmart and Best Buy.

    Basically, people are not going to be able to buy as much stuff during the holiday shopping season, and overall economic activity will be slower than it otherwise would have been.

    Meanwhile, President Trump continues to sound hopeful that trade talks with China will bear fruit…

    President Donald Trump said trade talks with Beijing are still planned for September after a new round of tariffs went into effect on Sunday.

    “We are talking to China, the meetings in September, that hasn’t changed,” Trump told reporters Sunday on the White House South Lawn after returning from Camp David.

    These sorts of comments helped stabilize the financial markets last week, but if there was any hope that a trade agreement was imminent we would not have seen both sides impose new tariffs on Sunday.

    And now we are moving into the month that is traditionally the worst for Wall Street. The following comes from Fox Business…

    Investors may breathe a sigh of relief that August, typically a volatile month for stocks, is over, but history shows that September could be even worse for Wall Street.

    Since 1950, September has been the worst month for the S&P 500 Index, which has dropped, on average, 0.5% during the month, a phenomenon referred to as the September effect. According to Dow Jones market data, the average decline of the Dow Jones Industrial Average in September is 1%, while the Nasdaq Composite generally sees an average fall of 0.5%.

    We shall see what this September brings. Certainly things are really shaky on Wall Street right now, and any piece of really bad news is likely to set off another wave of panic.

    Without a doubt, the market is more primed for a crash than it has been at any point since 2008, and it definitely will not take much to make this a “September to remember”...


    https://www.zerohedge.com/news/2019-...depression-new
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    I think you'd have an easier time understanding people if you remembered that 80% of them are fucking morons.
    That is why I like dogs, more than most people.

  23. #8198
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    Says Zerohedge every day for the last 10 years. Nonsense:

    Even before the United States was founded in 1776, debt existed. Paying for the American Revolutionary War (1775 - 1783) was the start of the country's debt. Some of the founding fathers formed a group and borrowed money from France and the Netherlands to pay for the war.

    To manage the new country's money, the Department of Finance was created in 1781. The next year, Government debt was reported to the public for the first time. The U.S. debt in 1783 totaled $43 million. That year, Congress was given the power to raise taxes to cover the Government's costs. However, the taxes did not bring in enough money. The debt continued to grow as the Government grew and provided more services to the people.

    The Continental Congress, forerunner to the U.S. Congress, did not have the power to tax citizens, and the debt continued to grow. By 1790, it had topped $75 million, with a 30 percent debt-to-GDP ratio, according to an accounting presented that year by Alexander Hamilton, the first secretary of the U.S. Treasury.

  24. #8199
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    Yes, there is an enormous amount of debt, absurd amount, relative to history (most either forget or don't even know of historical restrictions and bans on usury, which, certainly, 28% interest rate on cards, is). Furgetabout China right now. But, Zerhedge? Really? They predicted the end of the world ten years ago. C'mon. As long as rates stay close to zero, and the developed world's population becomes and stays very old, there won't be any "crashes" or "disasters". Just, the rich getting richer and the poor getting poorer, which leads to revolution and war, not financial crashes. But, if you hear of the market being fueled by easy, cheap margin loans, run.

    Let's do some livin'
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  25. #8200
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    Is Benny saying zerohedge was always cuckoo for coco puffs? There is some serious revisionist history right there. There were times when Benny quoted ZH multiple times in a thread in minutes - and usually about the impending end of the world. 🤦♂️


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