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 The Simple Facts On Equities And Debt
Trappedinca 46 posts, incept 2021-09-14
2022-09-16 09:32:03

While you are correct that Berkshire Hathaway has $119 billion in debt as of 6/30/22, to be fair they also have $101 billion in cash + short term investments, most of which will reprice at about the same rate as their debt. Berkshire also has another $38 billion of fixed income investments plus loans and receivables, at least a portion of which is likely to be variable rate (e.g. market rate) and will show higher NII as market rates move up. So yes, their debt is going to cost more when rolled over but the hit won't be quite as large as you calculate because they are going to get some of the benefit of higher market interest rates on their cash, short term investments and other bond investments.
Djsnola 286 posts, incept 2009-03-16
2022-09-16 09:32:28

Karl I read on another site this concept that the world is fracturing into two sets of countries.. those following the green energy doctrine and those that aren't ... this map shows the countries... do you see this fracturing becoming a reality ?

these countries almost seem intent on shrinking their economies to lower energy demand ... no way to do this without also lowering standard of living...
Dingleberry 498 posts, incept 2011-11-06
2022-09-16 09:32:35

Great post, succinct so even those of us who are maff-challenged in the commentariat can understand.

Homeowners did the same with refi's.....rolled over their debts on an asset that went higher, and the carrying costs went lower.......until it doesn't.

Now it is in partial or full reverse, location depending. Inevitably RE will be full reverse for all.

I would add another factor in the pending stock market debacle is the utter absence of nearly any decent bond yield. They haven't paid dick in years. So all that money had to go on the stock roulette wheel. Stocks have not had much "competition" to attract money for very a long time. In the old days you could make a percent or two above inflation fairly risk-free. Now everything is a huge gamble.

Hope granny's heart can handle the volatility!

Purplefang 688 posts, incept 2010-03-28
2022-09-16 09:32:42

In addition to increasing interest expense I have wondered about the impact of wokeness and the green policies. If profit is no longer the highest priority how much does wokeness raise costs? Also there seems to be a big risk that your business model no longer is viable because of new government rules. Banks are going to holding a bunch of useless RE because many small businesses are just closing. I also see risk in having such a large chuck of the market value in the 10 bloated pigs at the top. If for some reason Apple has a bad quarter it erases a bunch of wealth.
Tickerguy 188k posts, incept 2007-06-26
2022-09-16 09:33:23

@Trappedinca - No, because liquid cash has to be in short term paper and time is never free.

Well, it isn't in the real world. In Clown World IT HAS BEEN for the last couple of decades. THAT is a huge part of the problem.

NASA faked out a computer instead of running the test.
Then tried to launch and aborted instead of going "BOOOM!"
Did they abort the JABS after faking THOSE tests?
Tdurden 1k posts, incept 2015-01-29
2022-09-16 09:38:32

Given the corn-holing that Fed Ex is getting, it looks like more than a couple of players decided to check their math, then shit their pants when they realize they forgot to carry a one in several places. Should have learned how to use RPN on their HP calculators.

"I'd like to live just long enough to be there when they cut off your head and stick it on a pike as a warning to the next 10 generations that some favors come with too high of a price." -Vir Cotto Ba
Tickerguy 188k posts, incept 2007-06-26
2022-09-16 09:38:59

Yep @Tdurden.

And FedEX isn't even paying ANY of the higher interest cost on that paper yet.

But they will be, and there's no way around it.

NASA faked out a computer instead of running the test.
Then tried to launch and aborted instead of going "BOOOM!"
Did they abort the JABS after faking THOSE tests?
Kolya02 46 posts, incept 2021-08-20
2022-09-16 09:44:11

KG helped us understand how we American consumers thought our economy was a juggernaut, and enjoyed "prosperity" because all of our inflation was parked overseas during the past 3+ decades,

And now he's serving the bitter redpill that our next corporations were probably nothing but three-carde-monte credit hucksters as well.

I'll bet the next red pill to swallow is that none of this could have been possible without a mafia-life military the whole world feared might shoot it in the kneecaps. And now RUSSIA has supersonic missiles that outperform ours! :D.
Interesting times, indeed
Dji 1k posts, incept 2009-04-21
2022-09-16 09:45:17

Lets see words that start with the letter D...





Are they in the correct order?

Don't be a bag holder-Me

What goes up Must come Down- Alan Parsons Project
Takewhatyoucan64 26 posts, incept 2022-08-30
2022-09-16 09:53:38

and remember.....There wont be bank BAILOUTS this time. Its gonna be BAIL INS.

Depositors are on the hook this next go round.

Hedge accordingly.

Giddyup...........looked at this stuff enough today. Is it wine time yet???
Tickerguy 188k posts, incept 2007-06-26
2022-09-16 09:54:06

Got evidence for that @Takewhatyoucan64 or would you like a strike for that crap?

NASA faked out a computer instead of running the test.
Then tried to launch and aborted instead of going "BOOOM!"
Did they abort the JABS after faking THOSE tests?

Disgusted 415 posts, incept 2021-07-20
2022-09-16 09:59:15

It's clear that the Fed is going to keep raising until something breaks. Good luck trying to control the markets when panic sets in. For me, (completely out of the markets), it's going to be FUN to watch. I'd bet the Shitler Admin fuckheads are LITERALLY BEGGING Powell to keep taking baby steps so the crash comes after November. The problem with the world is that everything is so connected, I'm thinking that when the stock market crashes everything will crash right along with it. That's why even gold will crash too. At least it probably won't go to zero like paper garbage, but who knows. This coming crash I have a feeling will be the biggest in history. Buckle up, I just hope it hits the middle of October.
Nedpuddleman 104 posts, incept 2012-07-01
2022-09-16 10:21:18

I had a dinner conversation with some friends recently and we discussed some of the stupid things the companies they work for are doing. As this ticket correctly points out you can't out-run the math forever. The general consensus at the table was you can't depend on a job in the future and you have an extremely short window to strengthen your personal balance sheet for what's coming.
Ring_main 87 posts, incept 2012-01-16
2022-09-16 10:21:24

So does the realization of the impact of higher rates on earnings reflect gradually in the stock price, i.e. reflected each time the rates hike, or will we hit an all-at-once threshold?

At what point does the federal budget/overwhelming medicaid costs begin to get recognized and come into play?
Whitehat 10k posts, incept 2017-06-27
2022-09-16 10:21:34

Just speculation, however the pressure on profits and borrowing in general might finally break that method where cheap money allowed corporations to run at a loss and take over numerous independent industries and small businesses.

Would love to see that scam, which is illegal btw, curtailed.

Nothing, absolutely nothing, in history ever kept more people at the bottom than this whole mentality that lower level and trade occupations must occur in the corporate borg hives. Hell, it even started permeating skilled credential occupations in the 90s.

Working people of all stripes could never raise the capital to own a venture or at least advance in an industry with lots of smaller, truly profitable players.

This crap also removes quality and differentiation from the consumer of products and services. i.e. fuck chain restaurants, personal beef.

smiley Je souhaite
Takewhatyoucan64 26 posts, incept 2022-08-30
2022-09-16 10:21:59

The crux of my previous article was to point out to our readers that statutory bail-ins, as defined in the Dodd-Frank Act, amount to forcing a failed institutions shareholders back into a similar double liability exposure situation should a financial institution failand by extension, the bank depositors as well. Can it be any more frightening than this? Is it really possible that our current laws could subject the public to this sort of unexpected dilemma? Unfortunately it is.
Lobo 1k posts, incept 2013-12-25
2022-09-16 10:22:53

Corporations basically never pay off debt; they always roll it over. Since 1980, roughly, the cost of money has always been cheaper, so every time that bond comes due and has to be rolled over the amount of money you must pay in interest on the new one is less.

...its one thing to exploit a trend for a while when its in your favor, but if you do it at the expense of getting fucked when it reverses, boy YOU ARE STUPID and you deserve what you're going to up your chute when it does.

The company I work for had everyone play a finance "game" so we would understand the inputs to company profitability. It covered low inventory, JIT delivery and borrowing to buy the inventory along with the usual "reduce costs." I tried to pay off the loans so I could run on a cash basis. Couldn't do it. The "rules" of the game made it very uneconomical to try. Interest rates didn't change in the game and were around 2 or 3%, IIRC. With interest rates rising, maybe I should suggest that we play the game using current conditions.smiley

Village Idiot
Abelardlindsey 1k posts, incept 2021-03-26
2022-09-16 10:23:08

I had this discussion with a friend of mine a couple of days ago. He told me that Powell was actually a student of Volchar when Powell was young. My friend also told me that all of the regional board members of the FED are now on the same page that killing inflation has to be Job #1, including the lady in San Francisco (who is the most liberal-lefty member of the board). This suggests to me that the Federal Reserve is serious about killing inflation, even if we have a major recession in the process (just like '81-'82).

Corporations are going to get the crap squeezed out of them. But a repeat of that 70's show will even be worse for them. Either way, they're screwed.

It's all in the mitochondria.

"It's the future,'re not."
Tdurden 1k posts, incept 2015-01-29
2022-09-16 10:23:14

It doesn't look like "woke" has had enough of an impact to impede the billionaires championing that crap. Why....? because Boobus Amerikanus seems to have an infinite capacity for accepting abuse. They just won't boycott or go on a consumption strike no matter how many humiliations are inflicted upon them. But it's not like we're entirely special in that regard. The Russians rolled over for the Bolsheviks and communists for the better part of a century. The Maoists starved tens of millions of their own people without a whole lot of resistance. North Korea has been a brutal and repressive hermit kingdom since they started calling it North Korea. They put their pants on every day one leg at a time just like we do. The laws of human nature haven't been repealed.

"I'd like to live just long enough to be there when they cut off your head and stick it on a pike as a warning to the next 10 generations that some favors come with too high of a price." -Vir Cotto Ba
Tickerguy 188k posts, incept 2007-06-26
2022-09-16 10:24:54

@Takewhatyoucan64 - Citing some site somewhere does NOT change any of the facts.

Specifically, you've ALWAYS been exposed as a depositor in excess of FDIC limits. You have also ALWAYS been exposed as a stock or bondholder.

Dodd-Frank did not change any of that, NOR DID IT ABROGATE THE FDIC LIMITS. In fact at roughly the same time the limits were greatly expanded.

Never mind the "citation" you provide is in fact a sales pitch, which is clear in the last paragraph. It is therefore NOT analysis but another load of bullshit much like Cramer runs EVERY SINGLE FUCKING DAY.

This is NOT a conspiracy site and I gave more than fair warning. Strike given.

NASA faked out a computer instead of running the test.
Then tried to launch and aborted instead of going "BOOOM!"
Did they abort the JABS after faking THOSE tests?

Jesjohn94 803 posts, incept 2019-05-07
2022-09-16 10:27:38

Too much debt has always been risky and always will be for individuals, businesses or governments. Low interest rates fool people into thinking it is safe but what happens if your income dries up? The markets are definitely heavily manipulated but they are too big to be controlled. One thing you can be sure of is many of the big boys that manipulate the market will make a shit load of money if it does crash. I don't think a crash is guaranteed. We might get a long slow decline. I think TPTB would prefer a crash to that and it doesn't seem like it would be that hard to manipulate one.
Smacktle 7k posts, incept 2009-01-20
2022-09-16 10:29:35

For the last 2 months or so, I've been asking friends, relatives, just about anybody I talk to what they are investing in. Most say the stock market via IRAs, 401Ks etc...Then I ask when are you going to take it out or move it to something more conservative or even cash? All of them say I have a guy watching that for me or I can only invest in what they let me. I ask them, at what point do you sell and take the gains? My brother tells me, yeah it goes down but it always comes back.

One guy I spoke to was complaining that he lost $50,000 off of $800,000 since Biden was in office. I asked him if he was going to move it to cash or did they have a more conservative plan? He's the one who told me he was stuck with what they offered him. Doesn't make sense to me. This guy will probably lose half or more of his money. These people have no control over their money, or at least think they don't.

I point them to articles like this to no avail. People are told to just leave it there and let it sit for long term. These people are going to lose a big chunk of their money and this time that market aint gonna come back like it did before.

I ask the same question here. Are you people invested in the stock market? If you're a trader, I can understand but for the long term? WHY?!


Kikknback 1k posts, incept 2020-03-17
2022-09-16 10:46:22

Thank you Karl Denninger for the detailed financial analysis America's future is facing.

We now take you on scene where our reporter, Tom Petty, is about to go live on the streets, and tell you what the future of the markets will look like:

Take it away Tom...

"The most grotesque act of Treason is to be born into a free Constitutional Republic, for which you did not risk your life or shed blood to create, and sit back and watch it slowly be taken from you w
Ihsmta 798 posts, incept 2008-04-10
2022-09-16 11:03:22

Rolled my 401K over into a new investment firm and sitting in cash. Young guy who is handling my account has been overly-cooperative about keeping in cash. That, in itself, is telling.

Sent him a copy of today's Ticker. His reaction will be interesting.

Back when I was ag lending in the 1980's farmers/ranchers got it in both holes. Loaded up on debt at the behest of EVERYONE then got hammered when rolling over debt into increasing interest rates. Deflation eroded the asset values they depended on for borrowing. People who had new vehicles, new homes, members of country clubs and had beautiful operations lost the entirety of their equity in less than two years. It was swift and brutal. I doubt most of them ever understood what happened to them. It will happen again.

"Economists are no different than the prophets of ancient Pompeii who reassured that Mt Vesuvius would never blow. After all, it never had before." Baxter Black, DVM and Cowboy Poet

"You can avoi
Bluebird 2k posts, incept 2008-05-02
2022-09-16 11:13:25

"People are told to just leave it there and let it sit for long term."

Yep. If they get out, they will lose the gains when the markets go back up. The markets came back after 2008 and some people lost a lot then.

Nothing to worry about. <sarcasm>
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