Charlie Posted December 20, 2016 Posted December 20, 2016 Interesting reflections on the Trump Presidency: https://finance.yahoo.com/news/dalio-trump-could-ignite-animal-spirits-and-it-could-be-huge-for-markets-104253070.html Cheers!
Guest Posted December 20, 2016 Posted December 20, 2016 He may very well be right. However, I'm not so sure. When Reagan came into office we were in a long, drawn out bear market and valuations were very low and interest rates were quite high. Wealth inequality was also much, much lower in 1980 than it is now. I'm surprised Dalio didn't mention valuations at all in his article (unless I somehow missed it). Pessimism while somewhat high now, was higher then too. http://eml.berkeley.edu//~saez/saez-UStopincomes-2012.pdf
TwoCitiesCapital Posted December 20, 2016 Posted December 20, 2016 I'm just having trouble rationalizing all of the bears throwing in the towel: It was just a few months ago that Dalio was calling monetary policy ineffectual and compared it to "pushing on a string" while suggesting we were at the end of the mother of all debt cycles. It was just a few months ago that Prem Watsa was concerned about deflation and corporate valuations and had his equity portfolio 100% hedged, a portfolio exposure that was largely cash and long duration bonds, and abundant deflation protection. It was just a few months ago that Jeremy Grantham was still thinking that equity valuations were excessive and that forward looking return would be substantially negative to achieve his outlook for 7-10 year equity returns in the low single digits. I am just having a hard time reconciling all of this to an about face in the wake of a Trump victory. I get the potential impact of tax reform, but can I really be missing how momentous of a presidency it could be if all these guys are throwing in the towel on being bearish? Or is his victory just a convenient excuse to for them to capitulate?
rogermunibond Posted December 20, 2016 Posted December 20, 2016 Reagan had Volcker defeating the inflation bugaboo. So he cut taxes, deregulated, ran a deficit, and Volcker lowered the cost of borrowing and quashed inflation. A pretty potent brew for economic growth.
rkbabang Posted December 20, 2016 Posted December 20, 2016 Interesting reflections on the Trump Presidency: https://finance.yahoo.com/news/dalio-trump-could-ignite-animal-spirits-and-it-could-be-huge-for-markets-104253070.html This is a report on an article, but the actual article is much better reading than this report. https://www.linkedin.com/pulse/reflections-trump-presidency-one-month-after-election-ray-dalio I think he sums up the hopes and fears of what a Trump foreign policy will look like well: "Regarding foreign policy, we should expect the Trump administration to be comparably aggressive. Notably, even before assuming the presidency, Trump is questioning the one-China policy which is a shocking move. Policies pertaining to Iran, Mexico, and most other countries will probably also be aggressive. The question is whether this administration will be a) aggressive and thoughtful or b) aggressive and reckless. The interactions between Trump, his heavy-weight advisors, and them with each other will likely determine the answer to this question. For example, on the foreign policy front, what Trump, Flynn, Tillerson, and Mattis (and others) are individually and collectively like will probably determine how much the new administration’s policies will be a) aggressive and thoughtful versus b) aggressive and reckless. We are pretty sure that it won’t take long to find out."
wisdom Posted December 20, 2016 Posted December 20, 2016 Druckenmiller, Icahn and tepper have also changed their views.
scorpioncapital Posted December 20, 2016 Posted December 20, 2016 In this investment letter, the author argues that Hoover and Nixon are better comparisons to Trump than Reagan - http://www.myrmikan.com/pub/Myrmikan_Research_2016_11_25.pdf Also wouldn't tax decreases imply an increase in another invisible tax: inflation? After all, numbers must balance to some degree. If lower taxes occur for everyone, then inflation goes up hence the possible about face of some of these market prognosticators.
rkbabang Posted December 20, 2016 Posted December 20, 2016 In this investment letter, the author argues that Hoover and Nixon are better comparisons to Trump than Reagan - http://www.myrmikan.com/pub/Myrmikan_Research_2016_11_25.pdf Also wouldn't tax decreases imply an increase in another invisible tax: inflation? After all, numbers must balance to some degree. If lower taxes occur for everyone, then inflation goes up hence the possible about face of some of these market prognosticators. I agree, tax decreases need to be accompanied by spending decreases or the piper will need to be paid in other ways. I hope he decreases both.
Guest Posted December 20, 2016 Posted December 20, 2016 I do wonder if Reagan would been held in the same esteem if two things didn't occur - lowering of interest rates and proliferation of computing power (neither of which he had a direct hand in). Volker came in under Carter. I think most give him too much credit.
rb Posted December 20, 2016 Posted December 20, 2016 I do wonder if Reagan would been held in the same esteem if two things didn't occur - lowering of interest rates and proliferation of computing power (neither of which he had a direct hand in). Volker came in under Carter. I think most give him too much credit. Add to that the fact that the economy didn't really grow much faster under Regan. 3.6% average under Regan 3.3% average under Carter. On top of that the the US economy doesn't actually have the ability to grow faster than it is right now. So yea I do think that these guys are either looking for something to justify changing their views or they really are creating some narrative in their heads that is not there. If it's the latter it's pretty scary.
DTEJD1997 Posted December 20, 2016 Posted December 20, 2016 I do wonder if Reagan would been held in the same esteem if two things didn't occur - lowering of interest rates and proliferation of computing power (neither of which he had a direct hand in). Volker came in under Carter. I think most give him too much credit. Add to that the fact that the economy didn't really grow much faster under Regan. 3.6% average under Regan 3.3% average under Carter. On top of that the the US economy doesn't actually have the ability to grow faster than it is right now. So yea I do think that these guys are either looking for something to justify changing their views or they really are creating some narrative in their heads that is not there. If it's the latter it's pretty scary. The economy can't grow faster than what it is growing now? Whut whut? Back in Texas, the local economy is hurting...certainly they could grow more than what they are now. Here in the frozen hinterland of Detroit, the economy, while not being terrible, could certainly grow. Oh my, could it grow. There are still millions of UNemployed, and UNDERemployed in the industrial heartland. Detroit is in DESPERATE need of tens of thousands of buildings that need to be demolished. Move outside of Detroit and almost all of the surrounding suburbs are in DESPERATE need of road & infrastructure repair. I've never, ever seen roads as bad as those in Michigan. The infrastructure problem is not as bad in the rest of the country as it is in Michigan, but it can certainly be fixed up/expanded. Public sentiment is also a very important thing. For the past eight years, a lot of people have been in "bunker" mode. There is a tremendous amount of energy, talent, and capital waiting to be unleashed. This is kind of like a wound up spring. America can once again have a growing, vibrant economy. We'll see!
Jurgis Posted December 20, 2016 Posted December 20, 2016 So yea I do think that these guys are either looking for something to justify changing their views or they really are creating some narrative in their heads that is not there. If it's the latter it's pretty scary. Yeah, but even with the latter there is some reflexivity. I.e. "we are optimistic that things will be good, so we'll invest in businesses, spend more and things will be good". Not saying that reflexivity will win, but it could.
rb Posted December 20, 2016 Posted December 20, 2016 Well is there economic slack in the US economy? Yes. But a lot less than has been in the past. Even at current growth rates the US economy is chewing through the slack pretty well. This means that current growth is larger then potential GDP growth. The latest GDP growth print was around 3% even that is unsustainable for the US over more than a relatively short period. The idea that growth will accelerate from here and be sustainable for some period of time is just not based on facts.
rb Posted December 20, 2016 Posted December 20, 2016 Surprisingly I have some free time this afternoon so I went to pull some data for you guys to build on my previous post about the economy. Here's prime working age participation rate. It's about 1-1.5 points of previous peak. It has actually been slightly declining for since the late 90s so max participation may actually be lower than previous peak. But of course we can't know that for sure. https://fred.stlouisfed.org/series/LNU01300060#0 Regarding underemployed etc. Here's U6. It is also about 1 point away from it previous low. https://fred.stlouisfed.org/series/U6RATE Here's NLF Want a job now. It's about 1,000,000 people off the lows which is also about 1% of unemployment. https://fred.stlouisfed.org/series/NILFWJN And of course the headline unemployment - 4.6% https://fred.stlouisfed.org/series/UNRATE Basically if you look the data is pretty consistently telling the whole story. The US is basically at a point where it still has some slack but not that much. At current growth rates it is chewing through the slack and it's not far off from full employment. As an aside by looking at other data not posted here. I'd say that where there appears to be a problem is young people. Actually younger people may be a large chunk of whatever weakness there is in the aggregate employment numbers. Can't say more right now because I need to do more research on that. Just a mental note.
wisdom Posted December 20, 2016 Posted December 20, 2016 How has productivity been over the last 15 years?
investor-man Posted December 20, 2016 Posted December 20, 2016 "animal spirits" implies irrationality. I think Dalio's past bearish story is still valid, he's just now saying, "we might see some crazy shit!"
Aberhound Posted December 20, 2016 Posted December 20, 2016 Trump is the capitalist hammer and Bitcoin is symbolic as the technological anvil destroying the power of the socialist nation states. Capital is concentrating in the US creating a boom and technology is making the boom possible. I pick Bitcoin as the symbol of technology because it allows brings trust as the "third ledger" of accounting equally revolutionary as the creation of double entry accounting in Venice 500 years ago. Trust of strangers is the greatest advantage of Western Civilization over the Oriental and its decline due to the thieving parasites is the central cause of Western Civilization's apparent weakness in the past few decades. Who cares about full employment when you have robotics? Who cares about peak oil when solar is cheaper. Who cares about cartels when the blockchain and light regulation ensures they will be dismantled? Add animal spirits thanks to restraining the thieving parasites and everything is changed. Globalists are on board as their dream of destroying the nation state will be achieved. Human potential has been restrained and now the feeling is that there are great possibilities. This is the same feeling that was needed to replace royalty with nation states.
flesh Posted December 21, 2016 Posted December 21, 2016 He may very well be right. However, I'm not so sure. When Reagan came into office we were in a long, drawn out bear market and valuations were very low and interest rates were quite high. Wealth inequality was also much, much lower in 1980 than it is now. I'm surprised Dalio didn't mention valuations at all in his article (unless I somehow missed it). Pessimism while somewhat high now, was higher then too. http://eml.berkeley.edu//~saez/saez-UStopincomes-2012.pdf He doesn't include welfare, food stamps, unemployments , disability.... which is consequential.
rkbabang Posted December 21, 2016 Posted December 21, 2016 Trump is the capitalist hammer and Bitcoin is symbolic as the technological anvil destroying the power of the socialist nation states. Capital is concentrating in the US creating a boom and technology is making the boom possible. I pick Bitcoin as the symbol of technology because it allows brings trust as the "third ledger" of accounting equally revolutionary as the creation of double entry accounting in Venice 500 years ago. Trust of strangers is the greatest advantage of Western Civilization over the Oriental and its decline due to the thieving parasites is the central cause of Western Civilization's apparent weakness in the past few decades. Who cares about full employment when you have robotics? Who cares about peak oil when solar is cheaper. Who cares about cartels when the blockchain and light regulation ensures they will be dismantled? Add animal spirits thanks to restraining the thieving parasites and everything is changed. Globalists are on board as their dream of destroying the nation state will be achieved. Human potential has been restrained and now the feeling is that there are great possibilities. This is the same feeling that was needed to replace royalty with nation states. Interesting comments thanks for posting them. It reminds me of something I read (and can't remember where or I'd post it). It was something to the effect that the election of Trump was a repudiation of the political machine in the U.S. federal government. A way of saying "enough!". The point of the article was that Trump doesn't represent the beginning of anything (populism, racism, nazism, etc) as the left is saying, but the end of something. What's next is change, and that could be good or bad depending on how it plays out.
Spekulatius Posted December 22, 2016 Posted December 22, 2016 Trump is the capitalist hammer and Bitcoin is symbolic as the technological anvil destroying the power of the socialist nation states. Capital is concentrating in the US creating a boom and technology is making the boom possible. I pick Bitcoin as the symbol of technology because it allows brings trust as the "third ledger" of accounting equally revolutionary as the creation of double entry accounting in Venice 500 years ago. Trust of strangers is the greatest advantage of Western Civilization over the Oriental and its decline due to the thieving parasites is the central cause of Western Civilization's apparent weakness in the past few decades. Who cares about full employment when you have robotics? Who cares about peak oil when solar is cheaper. Who cares about cartels when the blockchain and light regulation ensures they will be dismantled? Add animal spirits thanks to restraining the thieving parasites and everything is changed. Globalists are on board as their dream of destroying the nation state will be achieved. Human potential has been restrained and now the feeling is that there are great possibilities. This is the same feeling that was needed to replace royalty with nation states. Let us know what your are drinking or inhaling, I want to get some of the same stuff too.
dyow Posted December 22, 2016 Posted December 22, 2016 Trump is the capitalist hammer and Bitcoin is symbolic as the technological anvil destroying the power of the socialist nation states. Capital is concentrating in the US creating a boom and technology is making the boom possible. I pick Bitcoin as the symbol of technology because it allows brings trust as the "third ledger" of accounting equally revolutionary as the creation of double entry accounting in Venice 500 years ago. Trust of strangers is the greatest advantage of Western Civilization over the Oriental and its decline due to the thieving parasites is the central cause of Western Civilization's apparent weakness in the past few decades. Who cares about full employment when you have robotics? Who cares about peak oil when solar is cheaper. Who cares about cartels when the blockchain and light regulation ensures they will be dismantled? Add animal spirits thanks to restraining the thieving parasites and everything is changed. Globalists are on board as their dream of destroying the nation state will be achieved. Human potential has been restrained and now the feeling is that there are great possibilities. This is the same feeling that was needed to replace royalty with nation states. Let us know what your are drinking or inhaling, I want to get some of the same stuff too. He is misunderstood, like all true artists, or arteest if you will, i see exactly what he is saying.
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