@Erroldo: This does look suspiciously like Japan 1990. The Nikkei was just short of 40K. Today it is around 26K. The entire growth structure changed and the never got it back up. The index was still under 10K in the late 2000's. The world of the late 1980's was all in Japan. Cheap money never bailed it out as there was massive debt as it appeared the road went on forever and the party never ended.
The high stock market was accompanied by another bubble, land and real estate. One might look at the price of US farmland. Even at inflated prices, you can expect a gross of around $500 from an acre of wheat. Deduct gas, tractors, time and fertilizer, that doesn't leave much. At $10K an acre, discounted at 5%, you can't finance it. 10%, it goes in the craper. Corn, which is normally $3 to $4 a bushel, I have understood can produce 300 bushels an acre. Again, fertilizer, 2 or 3 trips through the field and such diminishes that price. At next to zero, it makes sense. I have seen enough land bubbles in my day and everyone has seen the farm bankruptcies. You can put the entire US population on roughly 60,000 square miles, low density at that. Land is necessary, but it is amazingly worthless, on a financial basis, if it can't achieve a dense use. Everything goes to crap when the building stops. See Japan.
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The only function of economic forecasting is to make astrology look respectable.---John Kenneth Galbraith
If Summer Driving Season dies though, hotels, restaurants, airlines, and tourist destinations will suffer as a result for better or for worse.
Hopefully for the worse. Most of the those industries played along with pandemic panic theater and now deserve to suffer. Masks required. Vaccinated only. **** you you overpriced tourist traps. I haven't forgotten. I hope all of your businesses die. I'm also looking at you cruise ship (floating bacterial breeding grounds under normal circumstances) industry. May all of your boats sink with the vaccinated Karens aboard.
Last time I checked, land prices were north of $15K an acre for irrigated "good" land.
But the cash flow on that note DOES. NOT. WORK.
The new "Unrealized Capital Gains" tax is concerning as well.
Planting just started here in Iowa. This is year two of a drought. Many states are worse. Dry land farming is hard in a normal year, in a year like this it doesn't pan out.
Also, the big buyers appear to be "straw" buyers. Dad died a year ago, and my Mom keeps getting letters from obvious fronts on buying the land, sight unseen. Gates is gobbling up a lot.
@Stoic - I've never understood the appeal of cruises. They are floating petri dishes with inadequate plumbing that leads to norovirus outbreaks during the best of times. The accommodations aren't great, it's crowded, and there are way too many mortgage broker types in overpriced Tommy Bahama shirts drinking it up like frat guys during rush. So much barfing going on. Went on one cruise, and while the food situation was really good, it still wound up costing a lot more than advertised...everything was a plus up dollar wise unless you wanted to subsist on continental style breakfasts for 5 days. No thanks.
Sometimes you just can't make this stuff up...Janet Yellen, Treasury Secretary, testifying before the Senate says that eliminating abortion access would damage the economy...
But not shutting down business or firing people for not taking the jab...those kinds of things have no impact. Not like open access at the borders or shutting down the Keystone pipeline.
Don't even get me started on inflation or WW III. The world is upside down I tell you!
@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.
@Heartlander -- You're quite welcome; it's really quite strange how maligned the younger generations are (Millennials in particular), especially when you consider that Millennials have essentially zero input on government's public policy. (See pic.)
I suspect that a surprising amount of "what screwed them?" will be answered by future historians as generally being abused & abandoned by leadership. -- I've noticed, particularly in the corporate world, a culture which despises training, works to [almost actively] devalue an employee's knowledge/skills, and (as I put it for my last job) "requires you to be on their team, yet refuses to be on mine."
Coming from the military, this was quite the culture-shock; training is valued there, and if you don't have the ability to do X, you train someone (usu. multiple) to get the skills to do it (and remain operational if one or two guys get sick [or shot]) -- corporately, it's like a widespread, endemic, subconsciously integrated violation of the rule "Leaders Eat Last":
Veeger wrote..
@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.
@Veeger -- Understood. It's rather sad, almost melancholy, when you consider that most of the **** will be falling on those who had no input into the underlying causes.
Mannfm11 wrote..
The western world has nothing to sell but debt. We are seeing the potential of collapse at funds rates still below 1%. There is no electric shock coming to revive the patient.
@Mannfm11 -- I consider our 'public' debt to be nothing less than our political caste trying to sell us and our descendants into slavery, forever. As the Bible says: the borrower is servant to the lender.
What I have seen, is that many managers are worried that if they are on "your" team, they might be held accountable for the results.
I have told multiple managers that if you throw me under the bus, I have access to the drive train and brakes. The temptation is to delegate all responsibility while keeping all authority.
There are some stereotypes of Millennialism that are wholly deserved, aligning with the everyone gets a trophy mindset.
However, there is some incredible irony and exceptional ignorance when you hear they just can't afford a house because they won't give up their aVoCaDo ToAsT aNd StArBuCkS. One other thing I'd note is that millennials probably comprised the vast majority of troops on the ground in GWOT. Hell with some of the senior leadership, but characterizing them as a pussy generation is not deserved, IMO.
As for what's headed our way economically, perhaps it will be taken for the opportunity it is. Hope they aren't leveraged, though.
I used to have sympathy for millennials, I know they got a raw deal with boomer breeders and divorce, daycare, publik skoolz, and offshoring for others to raise.
But eventually...you gotta adult. You just got too. We all did.
And no millennial.....you have not had it harder than any generation before you. Quite the opposite. Very few of you have ever done a manual job. You got easy loans, soft degrees, and trophies and grades for doing nothing. You were lied to.....I understand your frustration, life was not as it was presented to you.
Join the club. We all get curb-stomped by reality. It's called adulthood, and maturity. 1/3rd of millennials get this. But 2/3rds do not. Even approaching age 40.
When the millennial stops voting overwhelmingly for leftists (i.e. overt thieves), gives up their SJW nonsense, and starts accepting a modicum of responsibility for their ****ery, instead of acting like adult children, with excuse after excuse after excuse for failures.....then there may be some hope for them. Until then, they clamor for their own destruction.
So, my experience with the millennial work force is this (YMMV): a majority have zero grit and no real ability to problem solve in real time. Anything that makes them think outside the box and away from rote learned processes is problematic. This goes for their personal lives as well and unlike previous generations they do not check their personal issues at the door, they bring time into the workplace. Thanks to the 'be your true self' movement at so many companies (the one I work for is all in on this mindset), this demographic only wants to work on what they have 'passion' for - they quarter ass whatever doesn't interest them.
Now those are all generalities, but they apply to so many of the younger workers that report to me. The challenge is keeping the Gen X and older Gen Y employees motivated while their younger peers fall apart and drag down overall productivity and morale. And not all millennials are like this, I have some fantastic workers in that demographic, but a majority demonstrate the negative behaviors mentioned above. Oh, and firing a millennial? You better be ready to defend yourself against all kinds of misdirection from that employee and HR. They know every single loophole and disability to throw out while being performance managed...my new favorite is when someone claims they are 'neuro-diverse' so traditional schedules, learning/training methods, and ability to retain info do not apply to them. Not awesome.
Corp governance is run by Silents and Boomers. They have made ****ting on the next generations (Gen Z, Millenials, Gen Z) a blood sport. They have also blown up corp budgets in order to award themselves riches far in excess of their contributions. Debt was taken on willingly with no plan (as our host has documented).
After getting a taste of the top leadership + the board let me tell you these people aren't as smart as they think. Their access to cheap money is what has made their escapades possible.
If the cheap money goes away all will be exposed, like when a lake suddenly drains of water.
So, on the ground here in Phoenix, plenty of subdivisions going up on the outskirts. Someone told me buyers they know put down $5000 on lots and builder said 6 months to build houses. Rates were 3.5% then. Now rates are 5.5% and they can't afford the payment on said mortgages anymore. So they walk away. This is starting to balloon. By the time this makes it to the media print, it is full blown. Overbidding on property was yesterday's action. That has dried up now. Price WILL have to drop. Builders will have to drop price to get some houses sold, or leave the lots fallow. mark my word, these actions will be here come fall, if not before. Definitely into 2023. Remember our host 2024 predictions.
@Hyem ... what's coming is going to make 2008 look like a bloody fiesta and 1929 look like a party. It's going to ugly and brutal and eventually bloody as a whole lot of folks suddenly have absolutely nothing left to loose, including their health, thanks to PfauXi Ouchie.
Yes Karl! I remeber that. My grandparents made out like bandits.
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"P**** Pfizer "The strongest memory is weaker than the palest ink" Chinese proverb "The enemy of my enemy is my candidate" Random commenter "We have the government we deserve"
Looks like the revolving debt y/y may have some weird noise as the actual amount of credit card debt declined in the first quarter by $15 billion from 4Q21 (see link below from NY fed). I think the y/y thing looks higher in March due to the stimulus checks sent out a year ago when we saw a big paydown in revolving debt in march 2021.
Total household debt has gone up 8% in the last year, spread fairly evenly over the last year so doesn't appear to be accelerating and 8% is roughly in line with inflation (arguably below inflation). https://www.newyorkfed.org/microeconomic....
I think we'll see pain in the S&P 500/Nasdaq still for a while but a drop to 1350? Unlikely IMO - that would be the second worse decline in US history after 1929-1930. There are plenty of over-levered, non-cash flowing companies out there that may go belly up but most of the S&P 500 has a fairly good balance sheet and the maturities are fairly long, so even if rates do continue to increase, it'll be years before most of the S&P 500 really feel it much. The index's are tied to better companies than a lot of the companies listed in the Nasdaq & NYSE - more than 50% of firms are already down 50%+ and ~25% are down 75%+.
That said, completely agree the increase in rates is going to continue to cause problems for valuations for a while. I personally see the S&P bottoming probably in the ~3250 range with another 15-25% drop in the Nasdaq (chance to 2450-tied for fourth largest drop in history), with more than 75% of Nasdaq companies down more than 50% its 52 week highs.
I think the input from rising debt, while painful, will not be a clean 4-6x servicing cost in the near term - I'd guess closer to 35-50% higher on average. 1) Most of the debt issued when rates were that low are fixed for a while/long while (30 years for mortgages, 7-10 years on average for corp debt) and credit card debt going from 21% to 24% I'm not sure is going to make a huge difference. It'll be a while before the impact is fully felt and it'll be spread over a long time 2) Most debt was not refinanced and current rates are not that far off from pre-pandemic. Corporate bonds in particular can be very expensive to refinance early. Term loans & revolver can be done easier but that tends to be the smaller, less leveraged part of the debt stack. And that which as refinanced or just issued won't mature for a number of years.
Interesting times here. Trying to be nimble in general - I am still diversifying into cash, short term bonds and I-bonds (going to buy 2024 & 2025 gifts soon for another $40k), metals, very strong cash flowing real estate (all taxable taxable accounts) and stocks (retirement accounts - not touch for 1.5-2 decades) as I still think the range of potential outcomes for all of these is very high and also depends on investment horizon. Deflation recession or inflationary recession? Soft landing? Bit of all 3 perhaps depending on the thing in question?
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"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
@edward.fish I agree that millenials have it rough. Since selling out from approximately the 70s onwards, the boomer generation had all the short term gains while leaving the pain on the millenials.
The biggest issue is, they (boomers) can't understand the source of their favourable circumstances, nor how the opportunities are no longer available to most millenials. They think the world has always been milk and honey, and can't understand that what they experienced was a historic anomaly that is well and truly over by now.
Even my parents and older friends can't sympathise. They grew up in a nuclear family. The country was homogenous. Women weren't really in the workforce. The Fed wasn't printing/QE. Commodities were cheap. WESTERN COUNTRIES ACTUALLY MANUFACTURED.
Sure, boomers worked hard and didn't have many gimmicky luxuries. But what they fail to see is that the middle class is evaporating. We are a service economy. We compete with foreigners for jobs and homes. Women are not marriage material. Men need not apply for white collar work (DEI).
Someone made an excellent post on tickerforum, stating that to get a septic tank cleaning business up and running today, you have massive costs relating to red tape and compliance. The boomers just needed a shovel.
Millennials see that there is no hope to own a house or have a stable family, so they're just going full hedonism - I can hardly blame them. That said, being raised by laissez faire parents and socialist education certainly hasn't helped..
Re Mannfm11 and Redjack's comments on farmland prices.
I would love to add to my farmland holdings. However, just like they indicate prices are way out of line with the productive value of the land. There is some land for sale near mine but the price is easily 3x what it is really worth.
BTW, I feel like I am honest when it comes to valuing farmland. I value it by its paying for itself in 20 years while generating a modest income for me.
Flap
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Here are my predictions for everyone to see: S&P 500 at 320, DOW at 2200, Gold $300/oz, and Corn $2/bu. No sign that housing, equities, or farmland are in a bubble- Yellen 11/14/13 Trying to leave the Rat Race to the rats...
@Magus - 2/3rds of the SPX' current price is nothing but hot air and the NDX and RUT is worse. A huge number of NDX and RUT names are ALREADY down more than 50% and the index has not fallen anywhere near that far.
It has ALL been a leverage game -- and the same is true for real estate.
Here it comes.
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Civil Society requires 99%+ consent. Stop consenting and it is forced to stop. Always. No violence required.
FED is going to paint themselves into a corner where the only way to get out is an emergency 10% or greater rate increase.
Quote:
While Waller drew the comparison to the Fed of the 1970s and early 80s, which eventually defeated inflation with a series of massive interest rate hikes when Chairman Paul Volcker took over, he said he doesnt think the current policymakers need to be as aggressive.
They had zero credibility, so Volcker just basically said, Ive got to just do this shock and awe, Waller said. We dont have that problem right now. This is not a shock-and-awe Volcker moment.
The Volcker moves took the Feds benchmark interest rate to close to 20% and sent the economy into recession. Waller said he had a conversation with the former chair before his death, and Volcker said, If I had known what was going to happen, I never would have done it.
Inflation is running away from the Fed and Waller thinks it's not a problem? How hot do the numbers have to get in order for them to recognize the crises?
We know they are lying, they know they are lying, they know we know they are lying, we know they know we know they are lying, but they are still lying. - Aleksandr Solzhenitsyn
Edward. What I have seen, is that many managers are worried that if they are on "your" team, they might be held accountable for the results. I have told multiple managers that if you throw me under the bus, I have access to the drive train and brakes. The temptation is to delegate all responsibility while keeping all authority.
@Redjack -- Exactly so.
The whole dust-up with the University I experienced illustrated it particularly well: They put out the gene-therapy mandates and, when challenged, went silent... eventually simply terminating everyone who hadn't complied. (When this goes to court, I fully expect the excuse of "we were just doing what the governor/OSHA told us to do!", trying to worm their way out of accountability.)
Someone here on the forum recently said something to the effect that the corporations look like they're trying to keep from admitting any fault and "sweep it under the rug" letting "bygones be bygones".
Ring_main wrote..
There are some stereotypes of Millennialism that are wholly deserved, aligning with the everyone gets a trophy mindset. However, there is some incredible irony and exceptional ignorance when you hear they just can't afford a house because they won't give up their aVoCaDo ToAsT aNd StArBuCkS. One other thing I'd note is that millennials probably comprised the vast majority of troops on the ground in GWOT. Hell with some of the senior leadership, but characterizing them as a pussy generation is not deserved, IMO.
@Ring_main -- Even the "everyone gets a trophy" is wrongly ascribed to Millennials: or do you think that it was kid's born in the 80s that were whining and complaining they didn't get a trophy, or were the "participation trophies" thrust upon them, devaluing the winners' efforts and mocking the losers?
You have a good handle on the Avocado-Toast thing though: it is so dethatched from reality that it's easier for me to imagine a Millennial looking up from a bowl of Ramen or rice with a look of frustrated anger than having avocado anything on the plate.
Dxd1200 wrote..
this demographic only wants to work on what they have 'passion' for - they quarter ass whatever doesn't interest them.
@Dxd1200 -- Well, to be fair, even the good jobs are doing that dodge-accountability + keep authority thing that Redjack mentioned. (See above.)
As an example, where I was working for the University they had me and three or four other guys operating & maintaining the telescope, which when fully staffed by NSO (the previous operating organization) had a crew of 40 or so people. -- The hired me on specifically as a software developer, but the majority of my effort went to physical maintenance of the computers, configuration & troubleshooting, networking (etc). When a programming job came up, getting good specifications was difficult, and there was zero organizational support. (I was the only programming guy up there.) -- Now, you could say that I was quarter-assing everything, but when you consider how kneecapped I was in doing the things I wanted to, and how organizationally when you have four or so people doing what forty did, you just can't afford to take time off... well-then, it becomes a bit more understandable, doesn't it?
(And let's not kid ourselves; corporations have been 'consolidating' roles to a ridiculous degree; to the point where it's common to come across a technical job-posting where it's not a person's skills they're asking for, it's a whole R&D department... and this isn't helped by the HR-tendency of offloading all the work of the old-style Personnel department onto the employees.)
Dxd1200 wrote..
Now those are all generalities, but they apply to so many of the younger workers that report to me. The challenge is keeping the Gen X and older Gen Y employees motivated while their younger peers fall apart and drag down overall productivity and morale. And not all millennials are like this, I have some fantastic workers in that demographic, but a majority demonstrate the negative behaviors mentioned above.
@Dxd1200 -- I think part of this is that there's a severe deficit of real leaders (see the video in my last post) in their lives, and many of those in leadership positions have betrayed them, as Redjack explained, selling them out instead of guiding and protecting them. -- If you think it's a problem, do some mentorship/apprenticeship with them.
Doladin wrote..
I agree that millenials have it rough. Since selling out from approximately the 70s onwards, the boomer generation had all the short term gains while leaving the pain on the millenials. The biggest issue is, they (boomers) can't understand the source of their favourable circumstances, nor how the opportunities are no longer available to most millenials. They think the world has always been milk and honey, and can't understand that what they experienced was a historic anomaly that is well and truly over by now. Even my parents and older friends can't sympathise. They grew up in a nuclear family. The country was homogenous. Women weren't really in the workforce. The Fed wasn't printing/QE. Commodities were cheap. WESTERN COUNTRIES ACTUALLY MANUFACTURED. Sure, boomers worked hard and didn't have many gimmicky luxuries. But what they fail to see is that the middle class is evaporating. We are a service economy. We compete with foreigners for jobs and homes. Women are not marriage material. Men need not apply for white collar work (DEI).
@Doladin -- The middle-class disappearing is downright terrifying. Consider how this interacts in a society where access to the courts is determined by money, and exactly what the now lower-middle-class and lower-class don't have. Consider it in conjunction with things like these gene-therapy mandates, and the obvious protections the corporations are getting.
I have noticed that for the first time in over a year, I am seeing "For Sale" signs that are still up a week or 2 or even 3 later. For most of the last year, a sign would go up, and within a day or two be gone, or else have "pending" or "sold" sign added to it. But not so here recently.
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