US Economy

wayneL said:

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

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Value Collector said:

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.

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noirua said:

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

May 31, 2022

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wayneL said:

So you don't remember the CDO debacle?

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Value Collector said:

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)

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wayneL said:

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.

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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.

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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.

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wayneL said:

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.

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wayneL said:

Bumpity bumpity bump bump bump.

Odds of this scenario shortening dramatically.

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wayneL said:

So you don't remember the CDO debacle?

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wayneL said:

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

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divs4ever said:

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

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qldfrog said:

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

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wayneL said:

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?

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