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

They are stealing purchasing power from savers and forcing that money into bonds.

10-30yr bonds specifically

And there's so much money sloshing around in the stock market because all kinds of cattle are herded into it. Every schmo in corporate america gets like 10% of their pay tied up in government regulations forced into the stock market with the "5% contribution, 5% match" 401k nonsense. The corporations do it because the government taxes them less on payroll if a portion of it is forced into the market. And tax breaks on normal IRAs also forces more people into the market that otherwise would not be in the market.

"I'm gonna steal your money unless you put it in the stock market" is what the government is doing over and over.

They say they need tax breaks to drive saving, but only if it's channeled into the stock market, then they say they need lower interest rates to drive spending. It's nonsense.