Cigarbutt

Well the unrealized losses from the interest rate exposure hasn't improved in Q3 (!) and the interesting feature of the BTFP is the sterilization of such losses so. There are still a huge amount of excess uninsured deposits sloshing around. There is no direct link between those unrealized losses and supply appetite for loans and leases but there is a link: There is no point in arguing cause and effect (banks tightening standards, yield curve inversion etc) and there seems to me more than transitory unrealized positions' discomfort in explaining the slow grind of higher funding costs, including when banks turn to the markets for debt:

It's been reported that Mr. Buffett met Jack Byrne, then recently appointed CEO in May of that year and immediately after (starting the next day) started to buy large blocks of shares in the open market. Mr. Buffett had also contacted and met a person named Wallach, a key boss (insurance commissioner) at a small but critical regulatory agency (it seems somehow that Mr. Buffett became convinced that Geico was not to be put in receivership). A key concurrent move was to contribute capital before visible improvements in the bottom line and any financial or operational moves that would support Geico.

That's interesting and the topic (household equity allocation) has been discussed before here (some years ago..). Here's a graph you included above: So there was this person from Philosophical Economics who produced this correlation graph (with some potential forward looking value) up to 2013: Since the GFC, the correlation seems to have broken down? Why? It's hard to suggest that the democratization of investing is responsible since it's hard to see why there would have been such a delay between the onset of this demographic feature and the advent of a permanent plateau in multiples? Maybe it's one of those unknown unknowns that is different when this time is different? Let's try a tentative explanation for the (temporary or transitory?) disconnect. First, a conceptual issue. When people mention that 'money' flowed from bonds to equities, in general, it does not correspond to the reality of money movements. When people sell bonds, others are buying bonds and the 'money' stays with the previous bond holders. When the household allocation % to equities rises, it's not from money moving from bonds to equities, it's (it has been essentially at least before the GFC) from revaluation (higher multiple) of the underlying equity earning power. As such, when markets go down, money is not leaving equities, it's just that new owners come to equity and pay less for the same underlying assets. Anyways. i wonder if this 'money' aspect is not related to the breakdown of the above mentioned correlation because, since the GFC, money creation has been no longer tied to the growth of loans and leases at commercial banks (which held quite constant versus underlying economic activity) but has been mostly driven by quantitative easing and commercial banks' expansion of their balance sheets with government debt (their asset a government debt security matched with a private deposit liability) effectively financing directly the federal government and in reality creating money (for investments and the related effect on multiples and valuation and for consumption and the related effect on inflation). Anyways. From a basic down-to-earth perspective, it always struck me that household equity allocation was one of the ultimate counter-cyclical indicators and well done surveys have showed that household investors at cyclical peaks have (before) always felt that equities were to continue to deliver higher returns (with lower volatility?) but with the government so 'involved' in counter-cycle resistance is this time different for real?

In a way, that's what Mr. Graham was saying in 1955. Dollar cost averaging makes some sense from a math point of view (not always) but it's primary a psychological tool and who knows what happens when it matters most? dollar cost averaging benjamin graham - Google Search

Here's a summarized version with slightly modified text from Mr. Buffett's partnership letter released towards the end of 1969. ----- For the first time in my investment lifetime. I now believe there is little choice for the average investor between professionally managed money in stocks and passive investment in bonds. If correct. this view has important implications. Let me briefly (and in somewhat oversimplified form) set out the situation as I see it...vs taxation vs expectations... Purely passive investment in tax-free bonds will now bring about 6-1/2%. This yield can be achieved with excellent quality and locked up for just about any period for which the investor wishes to contract... The ten year expectation for corporate stocks as a group is probably not better than 9% overall. say 3% dividends and 6% gain in value. I would doubt that Gross National Product grows more than 6% per annum - I don't believe corporate profits are likely to grow significantly as a percentage of GNP - and if earnings multipliers don't change (and with these assumptions and present interest rates they shouldn't) the aggregate valuation of American corporate enterprise should not grow at a long-term compounded rate above 6% per annum. This typical experience in stocks might produce (for the taxpayer described earlier) 1-3/4% after tax from dividends and 4-3/4% after tax from capital gain, for a total after-tax return of about 6-1/2%. The pre-tax mix between dividends and capital gains might be more like 4% and 5%, giving a slightly lower aftertax result. This is not far from historical experience and overall, I believe future tax rules on capital gains are likely to be stiffer than in the past. Finally, probably half the money invested in stocks over the next decade will be professionally managed. Thus, by definition virtually, the total investor experience with professionally managed money will be average results (or 6-1/2% after tax if my assumptions above are correct). My judgment would be that less than 10% of professionally managed money (which might imply an average of $40 billion just for this superior segment) handled consistently for the decade would average 2 points per annum over group expectancy. So-called "aggressively run" money is unlikely to do significantly better than the general run of professionally managed money... The rather startling conclusion is that under today's historically unusual conditions, passive investment in tax-free bonds is likely to be fully the equivalent of expectations from professionally managed money in stocks, and only modestly inferior to extremely well-managed equity money. A word about inflation - it has very little to do with the above calculation except that it enters into the 6% assumed growth rate in GNP and contributes to the causes producing 6-1/2% on tax-free bonds. If stocks should produce 8% after tax and bonds 4%, stocks are better to own than bonds, regardless of whether prices go up, down or sidewise. The converse is true if bonds produce 6-1/2% after tax. and stocks 6%. The simple truth, of course, is that the best expectable after-tax rate of return makes the most sense - given a rising, declining or stable dollar. All of the above should be viewed with all the suspicion properly accorded to assessments of the future. It does seem to me to be the most realistic evaluation of what is always an uncertain future - I present it with no great feeling regarding its approximate accuracy, but only so you will know what I think at this time. ----- Here's a photo of the BRK insurance subs' balance sheet (1971) showing the investment allocation: ----- Of course, in the decade following 1969, the future revealed itself in a relatively unexpected way and Mr. Buffett adjusted the allocation accordingly, at a time when bonds became an institutional favorite. ----- As of now, the Aaa Corporate Bond Yield is at 4.95% and Treasury yields look like this: As for expected general stock index return for the next 10 years or so, who knows but it's reasonable to suggest that a reasonable investor may be facing some alternatives and then is there still room for the prudent investor ("prudent" in the sense of the prudent investor rule)? As for the aggressive investor, the markets need to reflect a wide variety of perspectives including optimistic ones and that's great again. Given a certain perspective about prospective returns, it's possible that the future will be different than the past but an optimistic stance requires, to some degree, to think like Pangloss: "It is demonstrable that things cannot be otherwise than as they are; for all being created for an end, all is necessarily for the best end."

Thank you @RichardGibbons for your contributions in this thread. The topic is concerning but i'm slowly getting around to a very optimistic outlook based on (still unseen in what appears to be very static) significant productivity gains to be achieved over time.

Well, the "current" regime (whatever it has been and evolving into for the last 25 years) has been easy for the average person with some assets. Then what do i tell three members of my growing clan (who have burgeoning earning power and growing intent of buying assets, housing, securities and otherwise) when they wonder about prices of assets versus general levels of earning power? Then, in a stoic way, what do i tell them when it's being shown that the post-Covid tightening phase induced by the Fed has been (at least temporarily) tempered by the ultimate fiscal stimulus? i recently watched: Watch MADOFF: The Monster of Wall Street | Netflix Official Site The short series leaves a lot to desire in terms of art in the making but still is quite fascinating in some respect. For example, the semi-documentary shows that the principal character always had, deep inside his psyche, the Ponzi potential. And it took a while to figure out even in retrospect. A key revelation (opinion) is that the biography of the man shows what can happen when insufficient restraints are in place. ----- Any relevance to investing? In the distant past, Fairfax used to have this macro mean-reversion risk-aversion mentality and, more recently, this has cost them a fair bit. But they no longer carry this unreported asset and this has prevented me to go all-in, wise decision? -----) Back to regional banks, any relevance? Like JPM complains these days, it (eventual mean reversion) may mean requirements to hold more capital and to operate with more constraints, eventually? when?

The Fed's programs have gotten to be very large and (not unlike the Florida insurance market (!) as discussed elsewhere) they now have to deal with many priorities (liquidity, solvency, stability) including affordability (moral hazard risk) which may involve contradictory stances (some of the stuff they do (simultaneously) eases and some others tighten). For a while, the Fed has embarked on a scheme of doing more and more. It's interesting to note that since mid-2022, the Fed has started to unwind its balance sheet but has only reduced their assets by less than 10% at this point, a process which, on its own, would have had about a zero effect on interest rates so in order to artificially raise rates, the Fed has had to pay interest on excess reserves. That didn't matter when rates were near the zero bound but now the Fed's largesse has become a high contributor to commercial banks' return on assets. i appreciate your opinion about the 'stimulation' part but it appears (opinion) that, on a net basis, the Fed has been tightening overall. An aspect that supports that is the correlated trend in commercial banks' tightening of credit in general: Anyways, that's what USB had to say on the matter: Federal Reserve Focuses Monetary Policy on Fighting Inflation | U.S. Bank (usbank.com)

This thread is fed just in case banks start to look 'interesting', when? FDIC just released their recent bank profitability/stability report: FDIC: PR-72-2023 9/7/2023 In a nutshell, what happened in early 2023 (apart from 'abnormal' banks) was mostly noise. Still, there seem to be many misconceptions about some aspects: deposit growth, funding costs, healthy private balance sheets etc 1-Deposit growth Despite the widespread notion about deposit flights to safety, deposits' levels are now mostly determined by central tools (QE/QT and commercial banks expansion or de-expansion of government debt held as security (asset)) and deposits' levels remain above pre-pandemic trend by a lot. Of note: real growth in main street all loans and leases has become anemic/negative lately. 2-Deposit cost Despite the notion of exploding deposit cost and the flight of capital to MMFs, real data does not show this rise in cost. 3-Weird notion of bank hoarding 'money' as mentioned in: US banks hoard $3.3 trillion in cash amid fears of an economic slump (msn.com) Of course, the 'money' is there: But it's not a result of 'hoarding' as banks are forced-fed 'money' as interest-bearing reserves: To suggest that private decisions about savings/deposits haven't been influenced by command-and-control factors or that obvious supply-side issues were the main factor at play is, at the very least, quite intriguing.

^i guess 'we' could spend all day 'discussing' the 'political' aspects and i wonder if switching theme to "public governance issues" would make us all relatively more intelligent (or the same level of brightness with less contamination?). One could venture to say that Florida is a great State (i do, for many reasons) but that the governance has been extremely poor for the socialization of risk in the homeowners' segment. Can the tribe live with that statement? The retention of wind risk by the public 'residual' (not so residual anymore) entities means that there is a high likelihood of unusual 'redistribution' patterns going forward. That's all. ----- Now, maybe a more interesting question is why has BRK recently entered into a giant agreement to backstop this mess? https://www.reinsurancene.ws/berkshire-gets-giant-1bn-share-of-florida-citizens-reinsurance-renewal/ The following is an attempt at an answer. First, reinsurance prices have gone up +++. Second, BRK has carefully chosen the layers of participation staying away from 'coastal' accounts. Third, in a contrarian way (profitability in the property segment has been dismal lately), BRK has invested to potentially benefit from the political attempts recently enacted to improve the legal context (part of the social inflation theme) which has been dismal in Florida.

Capital is there, Berkshire is there but, under present circumstances (various 'incentives'...), progress will be slow. Somehow, progress will become more rapid eventually and this is related to the WW2 reconfiguration question mentioned above thread. In any case, BRK will likely be ready. Buffett on clean energy push: This country should be ahead of where it is (cnbc.com)

Hawaï is very interesting (for many reasons in excess of insurance moral hazard issues) but isn't the topic of this thread the state of the insurance market in a state where a government-owned not-for-profit entity (charging less than private rates) representing Citizens holds the largest market share (18%) of the home insurance coverage and where a government-sponsored and only partially funded catastrophe fund is responsible for 87.4% of the reinsurance coverage?

Biased and potentially misleading addition on my part here. Off-topic but quite interesting and relevant? to BRK? others? On a personal level, one of the most interesting aspects of the period is how war efforts were financed (the war was publicly financed) but this is a 'story' for another day. ----- Freedom's Forge is an interesting reference but is quite uni-dimensional and focuses mostly on some aspects of corporate contribution. For a more balanced review: For a more diverse view with a focus on individuals (the book is based on the underlying assumption that the 'secret sauce' (some kind of semi-collaborative context balancing key participants) was in place): Another useful reference (most likely to meet your limited-time-availability expectations) is: Mobilizing U.S. Industry in World War II: Myth and Reality (ethz.ch) The book describes how the US process to get involved in the war was 'messy' but demonstrates that the US was able to eventually get ahead while balancing military and civilian needs. The book describes the 'team' effort. It goes through the various institutions (War Production Board, Office of War Mobilization etc) that were (semi-strategically) put in place and the people who led the team efforts (Sidney Weinberg was a player in the team; it was a time when public office was held in high esteem..). And now here 'we' are and this too shall pass.

What a disturbing movie which shows extremes of pleasure as well as extremes of hardship (maybe not a totally balanced view with even some tendency to glorify drug use?). The toilet scene/metaphor is...interesting, even enough to have an olfactory hallucination with nausea just from watching... Anyways, it's not clear what you mean by history repeating itself (heroin overdoses as an essential cause of death has come down lately with deaths for 'synthetic' opioids, especially fentanyl showing a rising trend with no signs of slowing down). US data: ----- Anyways, lately, it's been possible to come up with synthetic alternatives that are highly potent (both ups and downs) and that seem to connect very strongly with pleasure/fun brain centers which derive from a long evolutionary process (to survive, reproduce etc) which did not 'forecast' such an option in nature. i guess 'we' will eventually adapt. ----- Anyways most people posting in this thread seem to go for more measured forms of fun.

i sense that you want to conclude this sub-discussion in a decent way but your last comment underlines that fun activities are a form of compromise. You may find interesting that there is data that help to quantify the "price" paid for fun. There is that recent Veteran study that suggests (along the line of basic lifestyle changes that you mentioned earlier) that combining 8 lifestyle changes at age 40 could result (likely overestimated to some degree because of study methods) in a close to 25-year increase in lifespan (also healthspan to a large degree). So this kind of data can be used to estimate the 'price' of periodic hangovers. For example, using the following graph, the third line from the bottom (in purple) corresponds to the potential incremental gain in years (lifespan) if periodic binge drinking does not occur. Of course, hangovers can occur with 'reasonable' drinking (quantity and frequency) so that the number of years lost from periodic moderate hangovers after 40 is about 1-3 and, after 60 about 1-2 and maybe the pleasure of occasional alcohol relative over-consumption is worth it?

You are correct. Even if a peripheral issue, i apologize for the potentially misleading part of the graph (for the topic discussed) as i did not appropriately look at all aspects before putting the graph as a reference. There was no conscious intent and, as explained, there are potential reasons for the part of the graph that can be found distracting and less intuitive. Many people studying this issue ((dis)ability component of health) have an interest in sports physiology and training. Typically when looking at performance, you get something like this (here is long jump but you get a similar phenomenon in all athletic sports, especially those with a large aerobic component ie long distance running): As you can see, the shape of the curve is similar to the one i had included in the initial response. This additional info does not negate the fact that you pointed out correctly that there was an inadequate part in the info i provided. PS One of the things in life that brings me the most fun is to be proven wrong, thank you.

The graph is derived from more solid data starting from age 40 and older. The slope of the graph line for those aged 40 and less is sometimes depicted as horizontal. For the younger age groups, the line is more conceptual than factual and depends on definition and the way data is collected (surveys, longer term follow-up etc). For example, if healthspan is defined as disease- and disability-free and if you include walking speed and the amount of weight one can carry for the ability component, one can reasonably conclude that the score would tend to increase during development (early years). Anyhow, i think it's a moot point. ----- Anyways, the idea of this thread is to have fun and, if high levels of physical activity, strict diets and living like a monk are not your thing, it's been shown that increasing step counts in increments of 500 is associated with a significant reduction in cardiovascular mortality both in men and women, particularly in older age groups. To each, his/her own. ----- Personal note. It's also been shown that moderate to high intensity exercise can be useful although the health benefit is less clear. Then it's a matter of personal taste. This AM, i went for a 214-minute intense activity and my wife just invited me to go play tennis which is likely to be intensely fun, although slightly less physically demanding.

Yes, there is a lot of data that confirms this: -Simple things can make large differences over longer periods, especially on a cumulative basis (similar to compounding of retained earnings) -The return on basic lifestyle change investment very likely shows a diminishing return on incremental effort/focus and it's unclear if going into 'fancy' methods does any good, as an independent variable An interesting aspect is that not only is lifespan lengthened by 10 to 15 years but this longevity gain likely correlates strongly with healthspan too. Simplified graph supported by good data, peer-reviewed and reproduced in different contexts etc: There is a 'natural' experiment going on now that also supports these conclusions. Cancer rates in younger cohorts are rising which is too bad because cancers occurring in younger people tend to be more aggressive. The rise in cancer rates is linked to many variables but adverse lifestyle changes very likely have been contributing to this unfortunate development. So i guess there are at least some areas where being a contrarian is a good investment strategy but sometimes one has to be patient? The human brain is so much geared towards immediate satisfaction. ----- Personal note: i played a softball game tonight and was the oldest person on the field (excluding umpires). There is also a building amount of data showing that spending too much time in front of a screen is negatively correlated with healthspan so let's call this mental gymnastics?

Thank you, some kind of thirst for conspicuous status i guess. Interesting. Frankly, i don't have a clue how a more sustainable course will happen and this forum (or most online forums) may not be the ideal place for such discussions. Also, i did my fair share (mostly elsewhere on the net) of patient/polite opposition to people calling names without substance when dealing with referred 'facts' such as Alex Berenson's pieces about covid. Anyways. ----- The main idea of recent posts in this thread (which may be relevant to you?) is a framework i have to set up within the next 5 to 10 years whereby, after some kind of amount is left aside (for others; no conspicuous virtue signaling here ), i wonder what number to use as a quasi-automatic safe withdrawal rate as i believe this should be a dynamic number, not the typical 4% used. i'm trying to find out a way to make it easy to adjust the rate up or down depending on market conditions.

@james22, your references are interesting but it's unclear what you're getting at. If applicable, can you add a sentence or two like if you'd try to explain to a five-year old which is basically my potential level of reasoning? ----- The following is not (necessarily) about doom and gloom and it's impossible (opinion) to forecast the economy but if one uses the 'healthy' balance sheet of main street consumers as an underlying assumption, there are factual aspects that suggest an unsustainable trajectory. Short version: For some time and accelerating peri-covid, money/deposit growth has uncoupled from underlying fundamentals. Real loan growth (as a source of money/deposit growth) has been coming down since the GFC (negative for some months now) and has been supplanted by 1-QE and 2-commercial banks expanding their balance sheets with government debt securities with a pattern, since 2020, that is quite comparable to what happened to finance WW2 (think about that for a minute). The deposit levels have grown (especially the uninsured kind) mostly as a result of the Fed-Treasury coordination, ie they effectively put (printed) the deposits in the 'savings' accounts. ----- Longer version The above is simply what our great wabuffo pictured but with a longer term perspective and dissected into income/wealth groups. There is out there (opinion) some kind of misunderstanding concerning 'savings' even from the stuff coming out of highly educated Fed 'studies'. Because of the way savings is measured, it is felt and often implied that people spending less will then save more, which is obviously true at the individual level, but at the aggregate level, this does not happen. If people spend more, the money does not disappear, it just appears elsewhere as someone else's savings. Anyways. The graph above does not imply that people have been saving more (in the sense of spending less now in order to spend more later; quite the contrary in fact), the graph (once dissected) just shows that money was printed as deposits as a result of non-bank QE and as a result of the effective financing of government debt by commercial banks (asset=government debt, liability created deposit for the private crowd). So, basically, the US government went into debt ++ or 'dis-saved' (in a disproportionate way (opinion)) in order for the mass to 'save' more than needed (opinion) and make them richer. Now if this not a real-life representation of Friedman's helicopter money experiment, i don't know what is. ----- So where did the money/deposit growth come from? QE to non-banks helped garnish higher worth (money-wise) people's 'checking' balances. And commercial banks' financing of government debt filled lower worth (money-wise) (lower 40-60% especially). The excess savings concept has been circulating and the following picture (updated since then) shows the evolution of the excess savings which has started to reverse (not because people have been 'spending' their excess savings but because QE has been reversed and commercial banks' balance sheet expansion has reversed (process only starting). Now, to link with the inequality aspect (and the potentially relevant unsustainable growth aspect): And remember that the 'wealth' created is not from productive loans but from centrally planned measures used in an almost unprecedented way (except for world wars) and the private mass is richer because of borrowed money (not distributed evenly, higher worth holding (directly and indirectly) more government debt as an asset and more money as a deposit asset). ----- People may get tribal with the stimulus check debate so here's an example that may reach some kind of bipartisan nod? The PPP program was used to 'stimulate' the economy and to trickle down to the average worker and common (wo)man. The 800B program was deemed a success. More than 90% of loans were forgiven (remember that those loans were financed with government debt just like stymmie checks etc etc). It's been estimated that 75% of the funds went to the top quintile.. https://www.nber.org/papers/w29669 Personal note: In 2020, for the looking-for-profit private projects that i have going, i was able to qualify for various Canadian 'grants' (different than the PPP stuff in some ways but essentially the same underlying money-creation principles involved). These grants went pretty much to my bottom line (and my pockets!) so perhaps i shouldn't waste my time complaining here but the underlying sustainability is nagging. Especially nagging for the productive part when i think of the time spent recently on the phone (20-30 min) with a tax agency 'director' who audited an aspect of the eligibility, finally concluding (in a separate letter) that i had correctly kept the parental leave absence deduction for a specific month and for a specific employee (total amount: 3.54 $ CDN)!

The title of the thread is about a top and a recent sub-topic is the growing difference between the top and bottom (inequality). Is there a link? Is this relevant for a post here? I will venture a yes to both questions. Inequality, like greed, is good but there gets to be a certain point when marginal returns on inequality diminish and even get negative. ----- The trigger for this post was reading some CBO material for fun (!?) quantifying that the expected federal deficit for the next fiscal year was projected to be 6-7% of GDP (incredibly unusual in ‘peace’ time, especially when economy is above its potential and when employment has reached record highs?!) and when recent budgetary details (recent but pretty much a bipartisan thing for some time) included items such as 1-the provision for $80,000 luxury sedans to qualify for $7,500 taxpayer-funded credits and 2-the notion that the Fed no longer provided large remittances from seigniorage to the US Treasury but growing a deferred asset instead. !? ----- Growing inequality is a thing. Numbers can be twisted depending on method, inclusion of transfers etc but, overall, it’s become clear that inequality has been on the rise and significantly so. Data below shows longer term trends since the WW2 up to 1989 and the trend in the last 20-30 years is basically more of the same so that now (level of inequality now) compares to the Gilded Age period (late 20th century) and the Roaring 20s. Comparison by historical analogy is a relatively weak form of analysis and can be countered by rational arguments [take the preceding post from James22 about? the expectation of a rebound in inflation based on a historical comparison (compared to the 70s), apart from basic fact-checking and reference source, Alex Berenson, ouch!] so that key underlying conditions (key ingredients) must match when comparing periods. ----- -During the Gilded Age, tremendous value/wealth was created and inequality widened with large fortunes (and associated power) on top but, for the bottom even including unskilled workers, real wages grew very very significantly. Large-scale industrialization combined with urbanization gave way to an obvious discrepancy concerning the ‘sharing’ of the wealth created but the whole pie was growing. Productivity growth was very significant. The changes were simply happening too fast. The mass formed some kind of homogenous class and, somehow, in the following decades, a better balanced growth was achieved in part due to reasonable ‘populist’ policies and a moderately rational approach from a governance point of view. Of course, wars can ‘help’, especially if on the winning side and with limited domestic damage. Still, the US came out (transformed) of the Gilded Age with still an amazing growth potential, continued to show great productivity progress and thereby was able to integrate a huge influx of immigrants to support the growth. -Another period when inequality reached today’s level was in the Roaring 20s. This was another period when productivity growth was very strong (note: this was a secular trend and, contrary to what is often thought, productivity continued to grow significantly in the 1930s). However, most of the huge wealth created accrued to the top and the wealth divide was compounded by the huge paper wealth that was recorded as a result of rising asset values (ahead of underlying economic activity). As for the period after the Gilded Age, the potential pie continued to grow significantly and another war eventually ‘helped’. Even if the root causes of the Great Depression are still widely debated, inequality in income and wealth was a key ingredient leading to the boom/bust episode. The transition period was relatively long and painful but, after some ‘experiments’ useful mostly to let market forces achieve a more balance growth, the table was set for 30 years of glorious (and balanced) growth which revealed sustainable growth in real earnings for all groups, with an additional huge positive being that private actors started the post-1945 baby boomer era with relatively minuscule debt (the rise in private debt compounded the rise in consumption that happened in the following decades). The war-time debt that the US government accumulated to finance the war became a non-issue mostly because of the overall growth of the economy as a result of the more sustainable and productive nature of the growth with also a small component of financial repression. The now period is now back at a similar level of income inequality. Key differences from the two previous periods are the lagging productivity growth and the significant rise in government debt in relation to underlying fundamentals in peace time. Since 2000, government-sponsored reflation policies have been provided in larger and larger doses and more and more pre-emptively to smooth things up with the latest covid-related episode reaching new heights. Numbers reveal that the fiscal/monetary coordination of money creation ahead of underlying economic activity has greatly contributed in shoring up the balance sheet of lower income/wealth groups but how sustainable is that? As an example of the post-2020 fiscal/monetary coordination of reflation (becoming excess reflation) as a magnified manifestation of the growing assistance done more and more pre-emptively, most of the wealth created was not from productive measures but from paper wealth linked to ultra-easy money (‘revaluations’) and the excess private savings was essentially due to the government issuing debt with the debt securities ending up at the Fed and on commercial banks’ balance sheets and with the printed deposits ending up accounts of all income/wealth groups in a bread and circus fashion. For interest the following book is an interesting read. It was published around the time of the 2000 bu**le, showing that secular timing is not an exact science. The author lays out facts, helps analyzing the inequality issue through an historical lens and mostly stays away from reptilian arguments. ----- Anyways, this too shall pass, somehow. Typically, empires get destroyed when inequality takes over but the US has tended to, somehow, go back to a more sustainable trajectory. Obviously in this kind of cycle, when times are good, the rich get richer faster than the poor (in absolute/relative terms) and when the going gets tough, the rich get poorer faster than the poor. Let the good times roll. The next transition phase may be quite interesting?

This (new derivative) seems to be related to a World Bank issue (of cat bonds and catastrophe swaps) to help Chile deal with its own issues. The cat swap seems to pay a 4.75% per year risk margin in exchange for payout risk to Chile (through the Bank). Case-Study-Chile-2023-CatBond.pdf (worldbank.org) ----- Personal note. i'm in the middle of renewing various personal insurance contracts including home insurance. During quite a lengthy conversation, i included most things in the home contract tentative agreement but somehow declined the coverage related to direct damage from an earthquake. Now seeing this picture, i'm no longer sure. Also, it reminds me that it can be a pain to hold (re)insurers when the hurricane season is about to start. Think long term, they say.

1-Factual aspect for Japan (Japan's course of monetary events is fascinating) From Flow of Funds data released by BOJ, end Q4 2022): Not that it terribly matters (43% vs 52%) and an interim report (end Q1 2023) mentions north of 53% but then it's become hard to guess when non-linear changes will occur (recent trend in exchange rates?) 2-Link to China? The debt intensity concept (more and more debt necessary to 'produce' a unit of GDP) has been developing in developed and developing nations for some time, including in China, in a big way, and, more recently, some sources suggest that progressively higher levels of capital are necessary to 'produce' a unit of GDP:

Somehow, there seems to be relevance to this quote from the Book section and "Outlive", in a post written by @wondering, and this section: "Attia's editorial on the current medical system is spot on in my opinion. There is not nearly enough done for preventative care. Health care is really sick care. Once you you have heart disease, it is really hard to restore you back to your original healthy self. It's much better to do testing (eg early extensive lipids tests) and interventions when a person is in their 20s, 30s, and 40s, rather than waiting until they are 70 and their arteries are totally clogged." ----- It's not clear if Fitch has any insight in coronary artery disease but it's been shown that there is a threshold of %blockage and risk of a myocardial infarct and maybe the rating agency is wondering about the Character aspect of credit and the %level (per GDP) of federal spending: Updated Classification System Captures Many More People at Risk for Heart Attack - 01/11/2017 (hopkinsmedicine.org) ----- Investment implication? i'm not sure but, on a net basis, it's likely to be negative? ----- Yesterday, at a soccer game (watching my youngest daughter, aged 16), a father came to see me ("Hey! Are you...long time no see etc etc"), we knew each other from high school, last time we talked was about 40 years ago). Several aspects struck me. He probably noticed my hair loss? One of the aspects i noted was the waist circumference. Of course, in such a slow and progressive process, it's mostly obvious to outsiders with perspective. Should i have been frank with him? No way! So, i wrote this anonymous post, FWIW.

Can you provide an explanation (fundamental or sentimental) for the bubble that you describe? A bubble, if such thing exists, usually means high prices, what is highly priced in MMFs?