Investment Thread

[Jeffrey]

I think the hardest part of valuing the current market is placing an appropriate valuation on the U.S. Government’s current and anticipated actions. The market has experienced pandemics but not this level of government support. I think the market currently has a high valuation on current and anticipated government actions.

[bundabergdevil]

Your love is like a rollercoaster baby...

[PackMan97]

I think the hardest part of valuing the current market is placing an appropriate valuation on the U.S. Government’s current and anticipated actions. The market has experienced pandemics but not this level of government support. I think the market currently has a high valuation on current and anticipated government actions.

More interesting to me are the choices left to the government.

Choice #1 - Do too little and we fall into a deflationary depression (which would be disastrous to a country with as much personal, corporate and governmental debt as we have).
Choice #2 - Get it exactly right...hahahahahaahhaaa
Choice #3 - Do too much and inflation seriously kicks up on the other side. Not good, but much better than deflation.

I see the government going with #3 because it's the least bad choice. I see deflation as something that the government will try and avoid at any cost. Therefore, stocks aren't that risk of an investment.

[Jeffrey]

Choice #3 - Do too much and inflation seriously kicks up on the other side.

I think it will be a very long time until inflation is a problem in the USA.

[bundabergdevil]

So, do we think we're going to surpass WWII debt-to-GDP ratios? Sure seems like it's inevitable at this point. I'm more than a little concerned that the skyrocketing public debt around the world coupled with sharp decline in revenues from unemployment and consumer spending pullbacks is going to end up having a bunch of countries playing musical chairs ---- we're all sitting in bad seats but some country is going to end up with its I'm a real wanker for saying this.I'm a real wanker for saying this.I'm a real wanker for saying this. on the floor.

[elvis14]

So, do we think we're going to surpass WWII debt-to-GDP ratios? Sure seems like it's inevitable at this point. I'm more than a little concerned that the skyrocketing public debt around the world coupled with sharp decline in revenues from unemployment and consumer spending pullbacks is going to end up having a bunch of countries playing musical chairs ---- we're all sitting in bad seats but some country is going to end up with its I'm a real wanker for saying this.I'm a real wanker for saying this.I'm a real wanker for saying this. on the floor.

You never want to be the guy that ends up with your wanker on the floor!

[YmoBeThere]

Argentina already is out, again...

https://www.nytimes.com/2020/05/22/w...a-default.html

[PackMan97]

So, do we think we're going to surpass WWII debt-to-GDP ratios? Sure seems like it's inevitable at this point. I'm more than a little concerned that the skyrocketing public debt around the world coupled with sharp decline in revenues from unemployment and consumer spending pullbacks is going to end up having a bunch of countries playing musical chairs ---- we're all sitting in bad seats but some country is going to end up with its I'm a real wanker for saying this.I'm a real wanker for saying this.I'm a real wanker for saying this. on the floor.

The only problem is we aren't going to be able to solve it like we did after WWII where we cut the military to the bone. I think government spending dropped 70%, mostly on the backs of military cuts. It took (I think) 16 years for spending to creep back up to the same levels as 1945. Our budget is structured differently these days and that level of austerity is not possible.

[budwom]

The silver lining could be that, with all this fuss going on, perhaps the price of Greenland has decreased.

[CrazyNotCrazie]

The only problem is we aren't going to be able to solve it like we did after WWII where we cut the military to the bone. I think government spending dropped 70%, mostly on the backs of military cuts. It took (I think) 16 years for spending to creep back up to the same levels as 1945. Our budget is structured differently these days and that level of austerity is not possible.

We could cut military, and many would argue we should cut military, but it ain’t gonna happen, and even if it did, it wouldn’t have the same impact plus it would create a lot of unemployment.

[PackMan97]

We could cut military, and many would argue we should cut military, but it ain’t gonna happen, and even if it did, it wouldn’t have the same impact plus it would create a lot of unemployment.

Cutting the ENTIRE military budget would get us about $700 billion (give or take tens of billions). Not even 15% of the federal budget. As I said in my original post, the budget now is structured completely differently. I didn't specifically get into the differences because I think it would get into PPP discussions...but it is interesting to see what we did after WWII and to note what is and isn't applicable to today's environment.

[bundabergdevil]

Cutting the ENTIRE military budget would get us about $700 billion (give or take tens of billions). Not even 15% of the federal budget. As I said in my original post, the budget now is structured completely differently. I didn't specifically get into the differences because I think it would get into PPP discussions...but it is interesting to see what we did after WWII and to note what is and isn't applicable to today's environment.

I don't know, I think we could treat the discussion like a 10-K...just dispassionate analysis of the financial inflows and outflows and the factors impacting each without it treading into PPP.

[mpj96]

So the Bundabergdevil Packman conversation led me to do a quick google search on the federal budget & us debt. Really interesting and a bit disturbing:
https://usdebtclock.org/#

Do folks here think sovereign debt crisis in the US is plausible? Or are we an exceptional case maintaining global reserve currency / "too big to fail" invulnerability?

[OldPhiKap]

So the Bundabergdevil Packman conversation led me to do a quick google search on the federal budget & us debt. Really interesting and a bit disturbing:
https://usdebtclock.org/#

Do folks here think sovereign debt crisis in the US is plausible? Or are we an exceptional case maintaining global reserve currency / "too big to fail" invulnerability?

At some point, we will need to cut spending and increase revenue (tax) to pay the debt. But hey, they’re still taking our credit card at the bar and interest rates are low . . . .

[budwom]

So the Bundabergdevil Packman conversation led me to do a quick google search on the federal budget & us debt. Really interesting and a bit disturbing:
https://usdebtclock.org/#

Do folks here think sovereign debt crisis in the US is plausible? Or are we an exceptional case maintaining global reserve currency / "too big to fail" invulnerability?

I'm reminded of Dick Cheney's comment that no one ever lost an election due to the national debt, though in fact I think many would say he's wrong, given that GHW Bush lost to Clinton when Ross Perot, running largely on the debt issue, grabbed roughly 20% of the vote in 1992.

[Indoor66]

At some point, we will need to cut spending and increase revenue (tax) to pay the debt. But hey, they’re still taking our credit card at the bar and interest rates are low . . . .

The only flaw in your statement is that the "cut spending" part will never occur.

[OldPhiKap]

The only flaw in your statement is that the "cut spending" part will never occur.

Exactly.

The UK just went through a painful process they called “austerity.” That day of reckoning has to come at some point.

[bundabergdevil]

So the Bundabergdevil Packman conversation led me to do a quick google search on the federal budget & us debt. Really interesting and a bit disturbing:
https://usdebtclock.org/#

Do folks here think sovereign debt crisis in the US is plausible? Or are we an exceptional case maintaining global reserve currency / "too big to fail" invulnerability?

I think both things can be 'yes'.

At some point, we will need to cut spending and increase revenue (tax) to pay the debt. But hey, they’re still taking our credit card at the bar and interest rates are low . . . .

The only flaw in your statement is that the "cut spending" part will never occur.

There's a debt load at which we would have to, there always is for every person, family, business, country at some point. We've talked on this thread before about how little practical finance is taught in high school. Things like time value of money, how the fed and rate markets function, retirement vehicles, and various debt and loan structures. But let's be honest, the best and brightest MBAs, finance wizards, and the biggest companies and countries in the world all have the same problem as your average idiot with a credit card. Over-extending ourselves is just how our species gets down and it will catch up with the U.S. eventually.

[PackMan97]

Do folks here think sovereign debt crisis in the US is plausible? Or are we an exceptional case maintaining global reserve currency / "too big to fail" invulnerability?

I used to think we were heading for a crash, but I was wrong.

The fact is that as messed up as the US might be from a budget/debt point of view, every other industrialized country is in worse shape. Therefore the US wins by being the least bad choice.

At some point there will be a reckoning, but it won't be an American thing it will happen around the entire globe at more or less the same time.

[YmoBeThere]

Another market melt-up.