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Packetcap
Posts: 263
Incept: 2021-07-23

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a stock market rout + rising interest rates is going to wreck all the private equity *******s. They deserve it!

Jw.
Posts: 453
Incept: 2019-10-10

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@Abelardlindsey

The RUB is currently at 69, it was as low as 64 last week, before all this happened it was between 70 and 74 for a year, it was in the mid 60's two to three years ago.

A few scenarios could be at play, the dollar is falling rapidly, the ruble is growing strong or a bit of both.

Certainly not the financial brimstone for Russia it was sold as thats for sure. But for a minute there it was at 120 and that is the only thing most people remember from what has happened since war broke out.

Operation: Fool the Retards, has been an unquestionable success.
Tickerguy
Posts: 184126
Incept: 2007-06-26
A True American Patriot!
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The ****ty deal is that with the sanctions you couldn't trade that. I would have.

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Civil Society requires 99%+ consent.
Stop consenting and it is forced to stop. Always.
No violence required.
Jesjohn94
Posts: 685
Incept: 2019-05-07

Atlanta
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I think the Fed will manipulate the longer dated treasuries to keep them low. If they don't then I'll believe they are going to normalize interest rates. There are so many benefits to higher rates for pensions/insurance etc. If the Fed forces the long rates low that tells me they are still playing politics and wants to pump new bubbles first chance they get. I'm not buying any stocks as I have no clue what is going to happen.
Dolemite
Posts: 1
Incept: 2022-05-09

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Karl,

With all of the recent tightening and more tightening to come, plus liquidity draining from risk assets, I was shocked to see the Feds overnight reverse repo balances still at record highs.

Has the Fed made any comment about their plans to tighten up this facility?
I have not read much about this chart in months, but it seems very relevant right now.

If they drain this, it could accelerate a lot of what has been happening lately in my opinion. Seems like a potential canary.

Thanks!
Mannfm11
Posts: 8119
Incept: 2009-02-28

DFW, Tx
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@Dbigkahuna: Based on the Feds target of 2% inflation, rates should have never been below 5%. That was risk free. Everything is a theory, but the real rate being inflation plus 3% holds a lot of water. Maybe the rule was using a higher tax rate, but 70% of 5% is 3.5% or a 1.5% real return. 70% of 3% is 2.1%. Why would anyone give their money up for 10 years for a .1% return?

I have real a lot about interest and money and my education is in finance. I read a lot of Rothbard around 10 years ago and the principals he expounded revolved around being paid to not spend your money. I think history has verified that principal. They have been fooling with a natural phenomenon, at least since 2008 and likely a lot longer.

We are watching a maximum **** up come to a head. Karl brought out a point he made when I met him several years ago. It probably sank in because I was already aware of how much debt SPX companies were carrying. Back in 2001, I wrote a post on Prudent Bear, where I made a forecast of a list of companies that would go broke, based on their debt loads. The list included the GSE's, GE and GM. Only GE hasn't been reorganized, but it has fallen from the lead US corporate structure to a dead fish. This was in a climate of falling rates, but also a recognition their assets weren't solvent.

A bond yielding 2% is worth 50X. One yielding 5% is worth 20X. Of course that isn't adding back in the discounted value of the corpus. If you don't understand this principal, pull out the amortization schedule on your mortgage. Look at the balance in 10 years. Lets say it was originally $100K and the rate was 3%. That produces a 10 year value of $76020. At par, 3%, that is a NPV of $56,566. Move the rate to 5%, that same money is $46,669, taking $10K off the NPV of the corpus and not discounting the income stream. If I want to sell that instrument, I'm likely taking a roughly 15% bath or more. There are trillions of these instruments, leading to a $150 billion or more loss on every trillion. If you have to roll that debt as a borrower, that becomes your additional cost.

Then we have the discount on stocks, which are risky assets. I looked at over 100 years of stock prices. It was my deduction that the market should be priced around a risk free plus 6% discount. This is where they get the 9% return. Stocks depend on inflation, if one is looking at price gains. Something has always happened that has pulled that return back to reality. We have already moved from a risk free 10 year of under 1% to 3%, the discount from around 7% to 10%, under this model. I believe the dividend should make up the risk free premium, which is 3% and we are around 2% now. We have another 33% to get to that figure. Then we have the growth risk. Real cyclical bear markets have generally produced dvidend yields in the 8% range. This puts the inflation adjusted bottom around 10K and 1K respectively on the Dow and SPX. If this is compounded by debt, a lot of these stocks go to zero. That is the deflation.

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The only function of economic forecasting is to make astrology look respectable.---John Kenneth Galbraith
Edward.fish
Posts: 206
Incept: 2021-12-17

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Tappedout wrote..
And when the music stopped, it was a fire sale. People learned painful lessons, and moved on.
But now we have an entire generation who has never lived through a real recession, much less a depression.

@Tappedout -- This isn't quite true. Millennials have lived through no less than three "once in a lifetime" economic downturns, all positioned perfectly to cut their knees out from under them.
(1) 9/11, just as the oldest were graduating high-school. This led to the meat-grinders of Iraq and Afghanistan; while there are a huge portion that didn't go overseas, a lot did.
(2) 2008-2010: The "Great Recession" (which they pulled every spin and redefinition they could to keep from being labeled 'Depression') hit at about the time when a lot of Millennials were graduating College and getting situated into the workforce...
(3) 2010-2012: The Affordable Care Act, and its roll-out, which motivated employers to cut jobs and cut hours. -- Combined with #2, this birthed the "gig economy" and made multiple jobs more common.
(4) 2020 Shutdowns: This put tens of thousands of small businesses out of business, permanently, just as a significant portion of Millineals would be getting into "Senior" level/titled positions -- just in time for:
(5) big-corporate America to be able to pick up senior level talent at entry-level prices, because of the desperation, and
(6) making the economic environment extraordinarily risky, as the government can just label you non-essential and shut you down.
-- #5 & #6 combine to drastically reduce the feasibility/security of working-for or starting-up a small business;
-- #4 was particularly insidious: the shutdown forced all the small-/medium-business customers & market-share to Amazons and Wal-marts, coincidentally where all the pensions are invested.

As you can see, professionally these all came right around the Milestones of the Millennial's lives -- disproportionately hitting them with the negative aspects, while those slightly older maybe "took a haircut" or "burned a finger", but weren't undercut.

Forget the headlines whining that "Vacations/Diners/Picnics are dying because of Millennials" or "Millennials are failing in life... because they're lazy and entitled! (We need more H1Bs, and that's a good thing!)" -- Millennials, for the large part, have tried to play by the rules as they were related by their family/teachers/etc and have been screwed over again and again.

While Millennials have been kneecapped from accumulating wealth, they also have been positioned so that the warning you give ("But now we have an entire generation who has never lived through a real recession, much less a depression") wouldn't be a surprise, but more a "Figures."/"*sigh* As expected." reaction.

Ocdawg wrote..
At the risk of exposing my naivete (and banhammer), I'm reminded of something my dad said long ago (he passed when I was 16)... "War always seems to wash out the debt."

So what's that little "skirmish" in Ukraine realky about again and Karl's Ticker on Gampy **** Pants assigning land for loading resources ("We are now at war with Russia") which similar got us into WWII?

@Ocdawg -- I think you're right; I'm of the opinion that Russia/Ukraine was started in order to (a) give some external explanation [blame] for our "elite's"/"leaders" foolish financial policies "coming home to roost", (b) distract from the disastrous consequences of the gene-therapies, and possibly (c) to allow for some sort of excuse to rachet down on information regarding a & b, thus allowing for destruction of evidence or ignoring it until "everyone's forgotten about that".

My opinion might be on the tinfoil side of things, but some things are obvious from the actions of the past 2-3 years: (1) our "elites" and "leaders" view themselves as apart and distinct from the normal-people, (2) they see themselves as above the law, (3) they expect that they will never be held to account, and (4) they would gladly ruin the people financially, or kill them off (in war, engineered famine, or mandatory toxic injections, it makes no difference), because they do not consider us to be a singular people, much less their people.
Raftermanfmj
Posts: 4980
Incept: 2010-09-06

USA
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@Hyem

Two people that I respect and follow daily, Karl and Vox Day have consistently been predicting deflation or even a deflationary collapse so thats the way Im leaning on the strength of their experience and arguments

Plus, everything you read is nearly 100% predicting inflationary collapse and since all they do is lie and mislead its a good bet to believe the exact opposite of the promoted wisdom

Ive read were in for strong inflation in the price of things you need and deflation in the incidentals and frivolous and that also sounds about par for the course

There was an OG Star Trek episode years ago that focused on a war between two planets that was resolved through computer simulated attacks and the loser of a particle virtual battle would have their number of casualties voluntarily walk into incinerators. You get the war death toll without damaging costly planetary infrastructure

Wouldnt it be interesting if a way had been found to balance the Western demand side part of the inflation / deflation equation by instituting voluntarily population reduction that one could adjust the lethality as needed? Perhaps one could develop an purpose designed injection, relentlessly promote it, and adjust its lethality and distribution every quarter, say, as demand and inflation statistics demanded?

After all, the proles are simply abstract factors of production and any deaths are akin to the loss of a cell or two from your own bodythe body politic survives even if some millions of nameless mindless cells kick off in old folks homes or cardiac unitsright? Should a pure consumer like granny kick off its a huge net benny for the economy since she produces nothing and is just an unwanted tick on the resources of the collective - just like a fetus is oft an unwanted parasite on his or her mother amirite?

One can think of these theoretical injection deaths as simply late term voluntary abortions that are on the collective whole great for the economy and the rulers of the State. The economy shambles along and those in power stay in power. In fact, they gain and consolidate more power.

A good farmer doesnt shy away from culling the herd when necessary

Sorry, I like to write SF short stories and sometimes ridiculous fantasy like this just slips out.

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This world is a comedy to those that think, a tragedy to those that feel. - Horace Walpole

The universe is not only stranger than we imagine; it is stranger than we can imagine. - Haldane's Law
Veeger
Posts: 398
Incept: 2013-02-13

Washington state
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@Edward.fish

I'd say that those 3 once in a lifetime downturns were more like headwinds than true downturns. Sure, the turned down by definition but the magnitude was not anywhere near the coming downturn.

I'm not quite sure that your a/b/c explanations for the Russia/Ukraine thing were the actual reasons. I think the Admin basically stumbled into it and then realized that all of your above reasons were nice benefits so no reason to stumble out of the R/U thing too soon. Mostly, I suspect that it came from two Needs. The Need to keep their little foreign aid pocket lining scam going and to prevent anyone from uncovering just how deep that scam was/is.
Ingar
Posts: 294
Incept: 2017-02-14

Mobile,AL
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Years ago I worked for a small loan company that made easy unsecured loans with big interest. The company encountered more than their share of deadbeats. One of the favorite deadbeat tactics was to max out the credit cards just before declaring bankruptcy. Does last months' upsurge in credit card debt predict an upswing in personal bankruptcies?
Probably not a good time to loan money to friends and family.
Franco
Posts: 293
Incept: 2009-10-06

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Maybe more meaningful than the interbank interest rate set by the Fed would be to look at its balance sheet. The Fed claims that it will start reducing its balance sheet starting in June. So what's gonna happen when the Fed is reducing its assets and the Treasury needs to sell another trillion dollars of debt? Something's gotta give. Either the Fed will stay put and let the market absorb the debt (and get your popcorn ready if that happens) or they will put their anti-inflation measures on hold and expand their balance sheet again.
Eoinw
Posts: 81
Incept: 2021-07-14

Canada
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As a natural saver, talk of deflation gets my attention - bring back 10 cent chocolate bars! I agree with the reasoning behind this prediction. My question is: if we get deflation does that mean the best play is actual cash under the mattress?
Tickerguy
Posts: 184126
Incept: 2007-06-26
A True American Patriot!
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That depends on how much it is. Why not put it into something that, if you don't get it back, it means its time to go hunting and make THEM be responsible for its safety?

During the '08 blowup I made damn sure I wasn't over SIPC or FDIC limits anywhere, which meant having things quite diversified. If it comes to that again the same will apply. But Treasury Direct, for example, has high limits and if the government blows up I don't think money is going on the "that's a concern" list.

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Civil Society requires 99%+ consent.
Stop consenting and it is forced to stop. Always.
No violence required.
Franco
Posts: 293
Incept: 2009-10-06

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If we get deflation you'll be busy staying alive. You won't have time to worry about "the best play".
Tickerguy
Posts: 184126
Incept: 2007-06-26
A True American Patriot!
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Meh @Franco; deflation is good for anyone who isn't levered.

If you are, well, that was a choice. Welcome to Hell. Stupid is supposed to hurt and for a long time it hasn't. Maybe it will once again.

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Civil Society requires 99%+ consent.
Stop consenting and it is forced to stop. Always.
No violence required.
Edward.fish
Posts: 206
Incept: 2021-12-17

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Veeger wrote..
I'd say that those 3 once in a lifetime downturns were more like headwinds than true downturns. Sure, the turned down by definition but the magnitude was not anywhere near the coming downturn.

@Veeger -- I never said, nor implied, that the coming downturn wouldn't blow the former out of the water; it probably will. My point is that the majority of younger adult-generations (particularly Millennials, but some older Zoomers, too) simply are not the irrational optimist that your original post was predicated on: a huge number are saying "Screw it!" to the propositions that have been fed (e.g. "college-degree -> well-paying job") and have come to consider them to be false promises, lies, fraud, televangelist-prostitute bull**** pyramid-schemes where they are the sucker.

What else are they to think after getting into STEM because they like tech and (late-90s/early-00s) looked to be well paying jobs... only to be undercut by corporate employers spamming H1B fraud to import tens of thousands of cheap[er] foreign workers? What else do you think they're going to take away from the fact that no matter how hard they work and save, it seems the price of family housing sprouts wings and flies ever further away? What else are they going to do after being told for two years "you're essential", then being coerced into gene-therapy injections or dumped off so fast your head would spin? -- Hell, how else would you expect them to act after being told "get a degree, any degree, or else you'll wind up flipping burgers!" from nearly EVERY authority in their like from parents to teachers to the government to universities, only to have trouble getting gainful employment and, when they express discontent/frustration in obtaining that work, they're told "Take any job, even if it's flipping burgers!"?

My point is that the younger generations have, at least functionally, been betrayed. (Certainly in the career- and financial-realms, very arguably in the societal-realm.) -- Being told they're forced to go fight a war they don't want, or that everything collapsed (and somehow it's their fault), would simply be the cherry on the ****-sundae that political- and corporate-leadership has been crafting for them all their lives.

Hell, there's a bunch of Zoomers that NOPE! on out of employment when their management starts mistreating them... and while there's certainly some cases od "snowflake", on the whole I approve: if employers are going to terminate you at the drop of a hat, then they should get no sympathy because "they didn't give me two weeks!" (Not that "two weeks" makes a **** of difference to them, considering how long and tedious application/interview/onboarding-paperwork has gotten.)

Veeger wrote..
I'm not quite sure that your a/b/c explanations for the Russia/Ukraine thing were the actual reasons. I think the Admin basically stumbled into it and then realized that all of your above reasons were nice benefits so no reason to stumble out of the R/U thing too soon. Mostly, I suspect that it came from two Needs. The Need to keep their little foreign aid pocket lining scam going and to prevent anyone from uncovering just how deep that scam was/is.

@Veeger -- Granted, I could absolutely be wrong about them being causal.
The things that makes me think it's not "just stumbled into it" are (a) timing, (b) the elite connections, (c) the DoD biolabs, (d) the corruption [e.x. Biden pressuring the Ukraine to drop that case that Hunter was involved in], (e) the corruption [Biden, Romney, etc children connections], and (f) just how much Russia/Ukraine was pushed by the MSM, social platforms, and corporations.
Chemman
Posts: 209
Incept: 2021-05-03

Concho Arizona
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"Gets old though."

@Thombradley. True, but at the end of that week you still have a full belly.

Those that won't do what you do will have an empty belly and eventually a meeting with their maker.
Winesorbet
Posts: 408
Incept: 2010-08-23


Online
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To most ordinary folks this is just noise. This is all fun and games until jobs rollover. Then the true cascade of defaults will rip through the economy like **** through a goose and the house of cards fall.

Til then, most Americans, like any good goldfish, will consume until they explode.
Voyager
Posts: 31
Incept: 2021-12-02

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I should probably movey 401k into bonds for a couple years, shouldn't I?

I'm decades out from retirement, so not entirely convinced it will be there when I get there, but would like to keep the employer match.

Company changed all of the default 401k investment profiles this year, and still haven't figured out their new and glorious user interface.
Heartlander
Posts: 1654
Incept: 2021-02-25

Kansas
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@Edward.fish

THANK YOU for your well-thought-out anysis/summary.

Especially as I am mother to two millennial sons who work hard and play by the rules, I deeply, deeply appreciate your defense of this much-maligned demographic. They have been screwed beyond belief.
Jw.
Posts: 453
Incept: 2019-10-10

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2008 was a notable collapse/recession, the rest not so much. 2020 was different with the lockdowns granted, the market went sluggish but then went way back up, people got money for lost business, rent and employment, in 2008 a lot of people lost everything as only the banks were bailed out. Business closures may have been permanent but there was "free" money to be found by business owners with any type of survival instinct. **** in 2020 you could have sold your house, in 2008, not so much. 2008 saw a widespread financial collapse unlike 2000 (tech crash) and 1992 ("recession").

The betrayal doesn't really matter in any real sense regarding change, I saw all of these events when I was in the workforce (being three years into the workforce in 1992), some people saw them as full fledge adults on the heels of the gas shortages in the 70's. Yet they keep voting for the same two parties that have been ****ing them for decades. ****, most people think one party or the other is going to fix the very thing they installed and profit from, election after election, you can see it happening today like its the first time all over again. This **** was happening when my parents were in their 20's and they are baby boomers, some people my parents age were actually forced to fight in the Vietnam war, Iraq ain't got **** on VN in terms of actually being forced to kill or die. Please.

There has been a total lack of historical perspective on war and the economy for many generations. The younger generations blame the Boomers, they are just as stupid as the Boomers for allowing and voting for it all to happen over and over again (how many Boomers voted for Obama and/or Trump??). How many that blame the Boomers voted for Trump and/or Biden/Obama? Tons of them, they have only themselves to blame in reality.

The very same **** is being done over and over again because it works.

The blame game has been devised to get people to overlook and keep buying into the con.

And buy it they do.

It's been rinse and repeat for over 100 years and counting.

Thombradley
Posts: 159
Incept: 2021-11-01

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deflation is a godsend for people with cash As I am 80 percent cash I love it. Interesting thing in sw az a house down the block went on sale a couple of months ago open house was standing room only and the house was under contract that day for 10 percent over asking. another house similar went on the market last week no open house scheduled and no traffic that I have seen. will be interesting to see how that plays out. Houses here were built in the early 90s with half inch drywall and wiring a blind monkey could do better. I wrote about this before. I can fix about anything short of climbing a ladder to do it. I sense a RE collapse here The house I referred to has an asking price 75 K above what I paid 4 years ago for a house 2/3rds of my size w/o a pool or spa and in need of a 20K + roof.
Veeger
Posts: 398
Incept: 2013-02-13

Washington state
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@Edward.fish

Were in violent agreement. The details are somewhat speculative on our parts but they are an educated speculative.

I only was adding that if the Millennials thought theyd seen hard times, theyll understand soon enough what hard times really are.
Generalee
Posts: 39
Incept: 2011-04-30

S.W. Ga
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@Voyager, nahh. Just leave it there. Between the market fall and monthly fees there won't be anything left in a couple years. Like the crash in spring of 2k and I have nothing from my rollover to Ira. Some guidance!
Mercury
Posts: 29
Incept: 2017-05-13

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I think the market is fooked with the American people to follow. However, as we have seen in the past our Congress will eventually ignore the law and change the rules at their whim. Mark to myth anyone!! Same for the Fed with illegally purchasing MBSs. Lie, cheat, and steal. I would love to have the same toolbox available. If it gets real hairy both will blinkcount on it! It may not work this time around. Interesting times, no?

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