if trump is successful with cutting immigration you will have upward pressure on wages which will help kick the can down the road. i do think he will be successful here and i do think you will see upward pressure on wages. again, all of this will help

Hmm, that might have to wait for a new congress. Which could help recover from any recession that starts this year. I wonder, do you think the next recession will be so bad as the 2009 one? Will any coming recession even put us into negative growth or just slow us down for a bit?

I wonder if Student Loan defaults would only grow after a recession starts instead of leading to it, looking at this: "The U.S. Department of Education today announced that the three-year federal student loan cohort default rate dropped from 11.8 percent to 11.3 percent for students who entered repayment between fiscal years 2012 and 2013. The trend has moved downward since FY 2010, when the cohort default rate stood at 14.7 percent." https://www.ed.gov/news/press-releases/national-student-loan-cohort-default-rate-declines-steadily

the technical definition of a recession is two or more quarters of negative GDP growth

i am hopeful at the state of the union trump will talk abut the need for immigration reform

aw yiss I hope so

i think the next recession will probably be more akin to 2009 because the boom will have gone on for ~11 or so years. will it be as bad? i dont think so but it wont just be a blip either

yes, i believe student loan defaults may be a lagging indicator of job losses

i wonder if we go thru a period of rapid automation (self driving cars, bank tellers, fast food cashiers, other job??) if the fall out for low IQ people will be so bad to cause a recession

the question is what would come before job losses?

interest rates being too high and companies being unable to get investment project expected returns to pencil?

"to pencil"?

it means to get numbers to make sense to the point where you'd want to invest

if a company needs a 20% IRR (internal rate of return) and getting to 20% requires a discount rate of say 2% but the discount rate is at 3%. the numbers arent going to pencil

Thanks for the thoughts and explanations. It's late here now (on vacation in Italy) so I will have to come back to this later. Good night!

sound good man good night

@Zyzz All this makes sense and is in line with my thinking. Here's one question I've never seen addressed to my satisfaction: what, if anything, will be the consequence of holding interest rates so low for so long? It seems to me that there was a gigantic bolus of new credit created under this ZIRP/near-ZIRP regime that kept things humming since 2009.

@Deleted User you will see big deflation in interest rate sensitive assets. this will be especially pronounced in RE notably single family homes. that is assuming rates rise rapidly over a short period of time. if we have gradual rate hikes over a decade or so and stabilize at a more normal level you will see a stagnant decade of home price appreciation but you will not see a rapid fall out in prices

So you think RE will be the main area of impact then?

it could be

depends on what type

and where of course

What do you think about the corporate buybacks aspect of the stock market rise?

buybacks have historically been a poor use of capital for firms over time. as an investor i always like seeing it because it shrinks the available supply of stock available which means prices go up in the near term (all else holding equal)

exactly. Do you think that will have negative reprecussions beyond the individual companies though?

i think the only drawback could be if they took out a lot of debt to fund those buybacks and having that heavy debt load gets them into trouble when the economy eventually tanks

itll be something that prolongs the recession rather than drives us to it imo

makes sense

an example being in 2008 what caused the recession was giving loans to anyone who was willing to sign their name. what prolonged the recessions were all the derivatives that went bad that caused banks and other financial institutions to go bankrupt

Yup. And it seems to be this was done on a broader scale during ZIRP

e.g. the subprime auto loans mentioned above

yup although companies are much better managers of money than individuals so my hope is they will be able to handle their maturity schedule and not overleverage themselves especially not after 2008/2009

many companies had issues with having enough cash

right on. thanks for your perspective!

It's hard to find sober opinions on the data

sure thing man

>i think the next recession will probably be more akin to 2009 because the boom will have gone on for ~11 or so years. will it be as bad? i dont think so

I think it'll be worse. The big banks are still insolvent, they still have assets on the books that are recorded at historical value, not marked to market. They do have a lot of cash on hand that hasn't moved in a decade. If they start spending it for some reason, that could really ramp up the velocity of currency and destroy purchasing power.

These historically low interest rates will always result in malinvestments. People are getting loans for things that they don't deserve, low-NPV business ideas are getting funded because investment capital has no stable option for return, they're forced to chase returns in risky areas just to avoid the decay of purchasing power.

Why did the FED, in 2006, stop reporting on the M3 total supply of currency?

These historically low interest rates will always result in malinvestments. People are getting loans for things that they don't deserve, low-NPV business ideas are getting funded because investment capital has no stable option for return, they're forced to chase returns in risky areas just to avoid the decay of purchasing power.

^i deff agree with that

And nobody wants bonds at the current artificially low rate, so the fed is printing money and buying bonds with it. Crazy stuff.

if the fed unwinds their MBS portfolio itll be interesting what it does to long rates