US Economy

[Value Collector]

That won't stop the debt market blowing up and taking everything else with it.

Well I am not sure what you mean by blowing up, but sure there will be fluctuations in the prices of existing bonds, but new bonds that are issued will be issued at higher interest rates, and would be attractive to a lot of people, the older lower Interest bonds will create losses for any short term traders that bought them thinking they were going to go up in value, but as I said the long term guys that just warehouse them on their books till maturity won’t feel a thing.

 

[wayneL]

Well I am not sure what you mean by blowing up, but sure there will be fluctuations in the prices of existing bonds, but new bonds that are issued will be issued at higher interest rates, and would be attractive to a lot of people, the older lower Interest bonds will create losses for any short term traders that bought them thinking they were going to go up in value, but as I said the long term guys that just warehouse them on their books till maturity won’t feel a thing.

So you don't remember the CDO debacle?

 

[3 hound]

This guy is an idiot,

"The Biggest Stock Market Crash Is On Us NOW" - Robert Kiyosaki's Last WARNING​

May 31, 2022

scare mongering for views. I used to watch him when I was clueless thinking how edgey he was then every other video was just another version of the apocalypse and impending doom where we will be eating each other for food so he can go to buggery - he is an idiot.

 

[Value Collector]

So you don't remember the CDO debacle?

That was caused because the underlying mortgage holders were defaulting on their debt obligations, this is not going to be a problem with USA government debt.

(But as I said above provided the bonds don’t go into default, a long term owner has nothing to fear when it comes to price fluctuations, the institutions that suffered because of CDO’s had either borrowed short term to fund them planning to flip them for a profit but instead got stuck with them and went bust or had bet big that they wouldn’t drop in value by selling credit default swaps on them, it’s a different ball game to long term holding of government bonds)

 

[wayneL]

That was caused because the underlying mortgage holders were defaulting on their debt obligations, this is not going to be a problem with USA government debt.

(But as I said above provided the bonds don’t go into default, a long term owner has nothing to fear when it comes to price fluctuations, the institutions that suffered because of CDO’s had either borrowed short term to fund them planning to flip them for a profit but instead got stuck with them and went bust or had bet big that they wouldn’t drop in value by selling credit default swaps on them, it’s a different ball game to long term holding of government bonds)

I said the "debt market" which includes bonds, not just fed govt bonds, but municipal, corporate, etc., and derivatives thereof (which are now greater than GFC).

These things are all interconnected and interdependent.

BTW Japanese 10yr Govt Bonds just ticked over 25bp which was thought to be functionally impossible... Nikkei didn't like that.

 

[Value Collector]

I said the "debt market" which includes bonds, not just fed govt bonds, but municipal, corporate, etc., and derivatives thereof (which are now greater than GFC).

These things are all interconnected and interdependent.

BTW Japanese 10yr Govt Bonds just ticked over 25bp which was thought to be functionally impossible... Nikkei didn't like that.

Well we will have to wait and see I guess, I am not that worried though.

 

[wayneL]

There are greater implications than the debt market itself, VC. There two overarching questions:

What does a debt market implosion tell us about the health of the entire financial system and its markets, and how will a debt implosion further affect them?

The GFC was at its core, a debt market cluster####. It was debt that blew everything else up and the Fed/CBs are finding themselves in a quandary with multiple issues of their own making.

I haven't pull up the charts yet but there is news of Euro bond yields inverting and lots of other such news, eg:

 

[mullokintyre]

Been reading an interesting article about the stability of US companies.
From Livewire markets

In 1965, companies in the S&P 500 index stayed in the index for an average of 33 years. By 1990, that figure had dropped to 20 years. At the current churn rate, about half of today’s S&P 500 firms will be replaced over the next 10 years.1

There are many reasons why companies go backwards or fail. One of the more obvious reasons is the inability for companies to adapt to the changing environments in which they operate.

As the famous biologist, Charles Darwin, stated;

“It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.”
While this quote was originally in relation to species, there should be no doubt about the relevance and application to the evolution of companies. Below are two informative examples of companies that ultimately failed to respond to their changing environment, as well as the hidden benefit of index investing.

It then goes on to look at both Kodak and Blockbuster, two near monopoly megafirms that went bankrupt.

What’s the lesson?

Many companies fail because they don’t evolve, but there’s also a hidden lesson relevant to index investing. The idea of holding only the top 100, 200 or 500 companies within a given market have greater implications than what meets the eye. For example, only ~10% of companies that were in the S&P 500 in 1955 remain in the index, with the other 90% either failing, merging or falling out of the top 500.8

But, if you had invested US$100 in the S&P 500 Index in 1955, it would be worth more than US$80,000* today in nominal terms.9 How does that work? As companies come and go, broad-market indices adhere to Charles Darwin’s quote, and systematically evolve with shifts in market dynamics, the introduction of new ideas and the companies at the forefront of change.

Mick

 

[noirua]

US national debt nears $31T: What it means and why it's a concern

The U.S. national debt is approaching a record $31 trillion, according to data released by the Treasury Department, and it could have ramifications for the economy.

www.foxbusiness.com

Markets have reversed sharply on the news with Bitcoin down nearly 5%. Currencies have reversed against the dollar as inflation remains high at 8.3% and an interest rate rise by the Fed. moves sharply back into focus. DOW opens 2% down.

 

[wayneL]

Watch the debt market, bonds. This is where everything is going to blow the @#$& up.

This time it's going to be epic, absolutely biblical in proportion. Everything is a derivative of the bond market... Real estate, stocks, everything.

Bumpity bumpity bump bump bump.

Odds of this scenario shortening dramatically.

 

[qldfrog]

Bumpity bumpity bump bump bump.

Odds of this scenario shortening dramatically.

Well is it the start...?
I sold my shorts ETF on the asx yesterday for a handsome profit but i was too early
.too few shorts ammos left.
portfolio climbing but i should make undecent coins.was really too early by one month.
I even bought 5k of GEAR yesterday late arvo. Ishould stop reading the permabulls here ?

 

[wayneL]

FYI re debt market implosion

Thread by @biancoresearch on Thread Reader App

@biancoresearch: 1/7 Today's edition of all is not well in the bond market. ------ The Move (the "VIX of the bond market") closed today at 158.12. This is its second highest print in 13 years. Since...…

threadreaderapp.com

 

[wayneL]

So, what are members thoughts on Alf's question?

 

[Craton]

Interest On Debt and welfare (Social Security) numbers and that Deficit is eye watering too!

 

[divs4ever]

So you don't remember the CDO debacle?

YES , but only as an observer ( and newbie investing student )

what was interesting was the almost total absence on mention in 2022 when the last tranches of the ( supposedly ) expired ( matured ? )

 

[divs4ever]

So, what are members thoughts on Alf's question?

others ( on the sending side ) seems to be understated , and maybe the interest on debt ( given it is in 2022 ) looks questionable

 

[qldfrog]

others ( on the sending side ) seems to be understated , and maybe the interest on debt ( given it is in 2022 ) looks questionable

I thought the interest on debt has just surpassed the tax income in the US in 23.
Not sure where I read that...
So surprised by the smallish amount of debt interest

 

[wayneL]

Debt repayments is also what raised a query for me. Perhaps a reason why interest rates have been consistently below inflation.

Tin foil hats, anyone?

 

[divs4ever]

I thought the interest on debt has just surpassed the tax income in the US in 23.
Not sure where I read that...
So surprised by the smallish amount of debt interest

i can't remember where i saw that either

i am ASSUMING that interest debt was calculated near the middle of 2022 ( rather than then end of 2022 )

but also wonder how that debt was calculated , for example was only outstanding Treasury notes,bills and bonds used , disregarding other obligations ( like the refilling of the Strategic Reserve ) until later

 

[divs4ever]

Debt repayments is also what raised a query for me. Perhaps a reason why interest rates have been consistently below inflation.

Tin foil hats, anyone?

can i buy them ( tinfoil hats ) by the carton ( i am starting to convert the stray associate )

ideally the US Treasury needs high REAL inflation ( to inflate away the obligations ) but needs low interest rate repayments

the problem is folks ( like me ) do NOT lend ( buy bonds ) at unsatisfactory rates of return