Where Does the Global Economy Go From Here?

[Gamecock-YT]

On 7/30/2022 at 1:35 PM, mattee2264 said:

Seems as though the assumptions are that:

 

a) Any "recession" will be mild and shallow 

 

 

Has there ever been a recession that hasn't been forecasted as 'mild and shallow'? Almost sounds like the line that any inflation will be 'transitory'.....

[Guest]

10 hours ago, changegonnacome said:

 

About five years

 

[changegonnacome]

2 hours ago, stahleyp said:

 

 

I hear you  

[Gregmal]

Isn’t the most interesting aspect in all of this that virtually none of this speculation about what the Fed will or won’t do matters or impacts one’s ability to invest or find companies of interest?

 

You can always be short term wrong or right but unless that’s the entirety of your “investment” strategy…IE gambling or trying to get rich quick….it doesn’t really mean jack. Focus on fundamentals, buy prudently across the cycle or specific time period your investment calls for…that’s all there is to it. The process of compounding becomes so much easier once you reduce it to the simplest fundamental pillars. Eliminate the noise. Realize that unless trading catalysts or events that what’s in the news today is largely just a distraction. I see it all the time and find it funny how people get consumed with what the headlines are TODAY! As if somehow they know something everyone else doesn’t. 
 

Think of your process like a bell curve of baseball prospects in a random country. The upper tier will be the upper tier. Some countries are better than others for producing baseball talents. But whether it’s sunny and 85 or rainy and 62, the best players, the far right outliers on the bell curve, will do their thing better than the rest regardless of how easy or tough the current situation is. So just spend you time looking for those type of companies. 

[Gregmal]

Like if everything stays the way it is, if you buy today you’re getting a good price. If it changes negatively and stuff goes down you get a better price. Both situations should be acceptable to any reasonably oriented investor.
 

Your only job is to make sure you buy good companies or assets. Otherwise, what the fucks the problem and why the need to vastly over complicate things obsessing over all this short term shit? 

[mcliu]

6 minutes ago, Gregmal said:

Like if everything stays the way it is, if you buy today you’re getting a good price. If it changes negatively and stuff goes down you get a better price. Both situations should be acceptable to any reasonably oriented investor.
 

Your only job is to make sure you buy good companies or assets. Otherwise, what the fucks the problem and why the need to vastly over complicate things obsessing over all this short term shit? 

[mattee2264]

Agree with you. On the other hand markets were 100% correct about the V shaped recovery from COVID while most economists and even Buffett were expecting a depression. 

 

But 2021 earnings were super juiced by extraordinary fiscal and monetary policy which went well above what was required so a bad hangover does seem like it could be a possibility. 

 

But I think with the Fed supportive markets will probably look through any recession and let the economy work through the "transition"  

 

7 hours ago, Gamecock-YT said:

 

Has there ever been a recession that hasn't been forecasted as 'mild and shallow'? Almost sounds like the line that any inflation will be 'transitory'.....

 

[changegonnacome]

3 hours ago, Gregmal said:

You can always be short term wrong or right but unless that’s the entirety of your “investment” strategy…IE gambling or trying to get rich quick….it doesn’t really mean jack. Focus on fundamentals, buy prudently across the cycle or specific time period your investment calls for…that’s all there is to it.

 

Exactly right @Gregmal  well said - I've held MSGE from $115 all the way down to $51 and everywhere in between.....as I know you have ......& thats WHILE holding the bearish view I have......why.....(1) cause I could be wrong (the future is unknowable) (2) I know what the rational private market value/replacement cost for MSGE's assets are.....the price the market decides to throw at me today is incorrect relative to reality. I also know from the past that dislocations & reversions back to 'fair value' happen in lumpy, unpredictable and rapid moves up. If you are not holding MSGE for example on days when these rapid moves up happen well you've opened the door to huge amount of psychological pain & opportunities to do (or as is often the case NOT do) stupid things.......ending up the poorer for it. I remain a fully invested bear with a slight tilt to my world view where if I'm wrong I miss out on a few 100bps of performance. 

Edited July 31, 2022 by changegonnacome

[Gregmal]

40 minutes ago, changegonnacome said:

 

Exactly right @Gregmal  well said - I've held MSGE from $115 all the way down to $51 and everywhere in between.....as I know you have ......& thats WHILE holding the bearish view I have......why.....(1) cause I could be wrong (the future is unknowable) (2) I know what the rational private market value/replacement cost for MSGE's assets are.....the price the market decides to throw at me today is incorrect relative to reality. I also know from the past that dislocations & reversions back to 'fair value' happen in lumpy, unpredictable and rapid moves up. If you are not holding MSGE for example on days when these rapid moves up happen well you've opened the door to huge amount of psychological pain & opportunities to do (or as is often the case NOT do) stupid things.......ending up the poorer for it. I remain a fully invested bear with a slight tilt to my world view where if I'm wrong I miss out on a few 100bps of performance. 

Yup. I’m 100% happy holding assets I want to own. I sometimes wonder what private market assets I own would look like marked to market lol. Wonder what a chart of Ripple Labs or Synthego would look like over the past 5 years. But I think one just wants to stay true to their framework and be a big boy. For instance I doubt Jimmy Dolan is worried about what the stock will do next quarter. Or Bruce Flatt pondering the market to market on his NYC office portfolio. I was recently debating an offer I got for a semi high end baseball card. Wouldn’t be a ton of money or anything but mid 5 figures. And between paying commission, taxes, and then having cash I was just like nah. Not worth it. Same with one of my rental properties.  Don’t want to deal with taxes or give up that 3.5% mortgage. 

Edited July 31, 2022 by Gregmal

[nafregnum]

On 7/29/2022 at 12:25 PM, changegonnacome said:

P.S:

 

as I type this I'm struck by all the noise mainly from the GOP side about the problems at the 'southern border'.......Yeah i like totally agree the problem down there is that there is NOT enough people coming across the border.............of course who are descent, smart & hard working but two lunatic parties cant figure out an immigration system to suck up the best and brightest and the most industrious from you know like the other 7.5 billion people who live on planet Earth and who'd move here tomorrow to take up an opportunity. Bonkers and shameful on the Dems and GOP & a lost opportunity, forget this bullshit inflation reduction bill....that would change the maths tomorrow.

 

This is definitely a factor, and seems to be an elephant in the room for the political parties.  I don't think either party is brave enough to say we NEED immigrants.  The Economist has a current article (the July 30 2022 issue) titled "Not coming to America" about recent declines in immigration.  An estimated 1.8m working age foreign migrants are missing relative to the post-2010 trend (graph below)  A lot of older migrant workers from Mexico have moved back, and the US hasn't been moving quickly enough to get through a huge backlog of H1B visa interviews.

 

 

...one quote:

 

"The Pew Research Center calculates that without new arrivals America's labor force would decline to 163m in 2040 from 166m in 2020.  If net immigration were to return to pre-pandemic levels, the labor force would instead grow to 178m by 2040."

 

...the conclusion paragraph:

 

"There is no shortage of sensible ideas.  Connecting migrants with employers before they reach America's southern border would reduce pressure on crossings and help businesses.  Marianne Wanamaker, who served as an  economic advisor in Mr Trump's White House, argues that getting rid of visa caps for specific occupations would also alleviate worker shortages.  "We have tools available to us to resolved labor issues that we don't appear willing to use," she says.  "That is the result of years and years of making immigration a third rail of American politics."  The conclusion is a dismal one: the headaches of the past year from worker shortages, far from being temporary, will be a recurrent problem in an ageing America that has forgotten how immigrants made the country what it is."

 

On 7/29/2022 at 12:25 PM, changegonnacome said:

PPS:

 

For all the talk of on-shoring/safe shoring thats supposed to happen in the West...nobody has been quite able to explain to me how literally millions and millions of jobs/factories are gonna come back to countries with shrinking populations (Europe) and horrible demographic trends that are already in most cases operating today at full employment. Now that, if it comes to pass, will be inflationary 

 

Add to this the demographics of China itself.  

https://www.reuters.com/world/china/chinas-population-expected-start-shrink-before-2025-2022-07-25/

 

Sam Harris recently interviewed Ian Bremmer about his new book, "The End of the World is Just the Beginning" ... he says China's one child policy had wrecked their demographics and undoing the policy was among the first changes Xi made when he came into power, but the demographic problem is unavoidable and will be impossible for them to fix without massive immigration (which isn't very common in China as far as I'm aware)

 

https://www.samharris.org/podcasts/making-sense-episodes/288-the-end-of-global-order

 

Here's a bit of the discussion where Ian mentions how the census data is worse than it appears, starting around 2m22s into it.  

 

 

 

Edited August 1, 2022 by nafregnum

[changegonnacome]

1 hour ago, nafregnum said:

Sam Harris recently interviewed Ian Bremmer about his new book, "The End of the World is Just the Beginning" ... he says China's one child policy had wrecked their demographics and undoing the policy was among the first changes Xi made when he came into power, but the demographic problem is unavoidable and will be impossible for them to fix without massive immigration (which isn't very common in China as far as I'm aware)

 

https://www.samharris.org/podcasts/making-sense-episodes/288-the-end-of-global-order

 

Very interesting thanks for sharing listened to a good chunk and will catch the rest later.......some very consistent themes re: the structural higher inflation/interest rates bias inherent in re-shoring an industrial base back to the United States from overseas......the last 40 years marked as it was by Globalization meant the demand for capital in the West was quite low.....when you offshore the capital intensive industrial activities of economy switching out for capital LIGHT services businesses  (Google/FB erc. ) the demand for capital falls and as such you then have structurally lower interest rates (the price of money) simply because the supply of capital exceeded the demand for capital the last 40 years- we can see this in the falling real interest rate going in a straight line from the 1980's bottoming as it did last year in 2021. The time period perfectly aligns with the 40 years of globalization and the DE-industrialization of the United States.

 

What we are likely seeing over the coming decade (s) is the re-industrialization of the United States (chips act, federal EV credits requiring batteries being made in the USA).......as well the greening of the grid, switching to renewables.....the demand for capital in this period will be much higher than the preceding 40 years and one would expect that higher demand will lead to higher price for money (interest rates). The only counterbalance in my opinion will be the baby boomers who en-masse are retiring now & switching out of equities into cash/bond-like investments, this is an avalanche of savings & they will help absorb a-lot of this incremental demand for capital investment.

Edited August 1, 2022 by changegonnacome

[Dinar]

There is a real cost to immigration that nobody talks about.  Lower wages, higher traffic, higher stress on environment, higher rent and housing prices, higher economic inequality which leads to all sorts of social problems.  Lower wages in our welfare state encourage people to stay on the dole with very negative consequence for the society as a whole.  I am all for welcoming Einsteins/Fermi/, but not millions of unskilled people with two grades of education who will have ten children that taxpayers will have to educate.  You want labor force growth?  Reduce welfare benefits (welfare, food stamps, section 8, medicaid, free phones & internet and the list goes on).  Fix public schools so that kids can get a good education rather than propaganda, so that middle class is comfortable having 2-3 kids rather than have one because they need to send him to public school.   

[Viking]

1 hour ago, Dinar said:

There is a real cost to immigration that nobody talks about.  Lower wages, higher traffic, higher stress on environment, higher rent and housing prices, higher economic inequality which leads to all sorts of social problems.  Lower wages in our welfare state encourage people to stay on the dole with very negative consequence for the society as a whole.  I am all for welcoming Einsteins/Fermi/, but not millions of unskilled people with two grades of education who will have ten children that taxpayers will have to educate.  You want labor force growth?  Reduce welfare benefits (welfare, food stamps, section 8, medicaid, free phones & internet and the list goes on).  Fix public schools so that kids can get a good education rather than propaganda, so that middle class is comfortable having 2-3 kids rather than have one because they need to send him to public school.   

It looks to me like both the US and Canada have built 2 very successful countries over the last +200 years. What was the secret sauce? A key ingredient was immigration. Immigration certainly was not a ‘cost’. Moving forward i can’t really talk to what is best for the US. For Canada i am all for immigration - too many positives to list. 

[rkbabang]

1 hour ago, Viking said:

It looks to me like both the US and Canada have built 2 very successful countries over the last +200 years. What was the secret sauce? A key ingredient was immigration. Immigration certainly was not a ‘cost’. Moving forward i can’t really talk to what is best for the US. For Canada i am all for immigration - too many positives to list. 

 

 

I agree.  The US birthrate isn't even at replacement levels and the Canadian birth rate is even lower.  With out immigration, and a lot of it, both countries are screwed in the medium to long term.

[Dinar]

1 hour ago, Viking said:

It looks to me like both the US and Canada have built 2 very successful countries over the last +200 years. What was the secret sauce? A key ingredient was immigration. Immigration certainly was not a ‘cost’. Moving forward i can’t really talk to what is best for the US. For Canada i am all for immigration - too many positives to list. 

The world has changed.  There is no need for unskilled labor anymore.  Just because something worked two hundred years ago does not mean it works today.  Cavalry was great for millenia until tanks and automatic weapons made it useless.  Interesting that you do not address the costs that I have outlined.  Or does the plight of the poor/unskilled in US and Canada not matter to you?

[Longnose]

35 minutes ago, Dinar said:

The world has changed.  There is no need for unskilled labor anymore.  Just because something worked two hundred years ago does not mean it works today.  Cavalry was great for millenia until tanks and automatic weapons made it useless.  Interesting that you do not address the costs that I have outlined.  Or does the plight of the poor/unskilled in US and Canada not matter to you?

I'm with @rkbabang & @Viking on this one.  To me its just like capitalism. Immigration may have consequences "Lower wages, higher traffic, higher stress on environment, higher rent and housing prices, higher economic inequality which leads to all sorts of social problems."  But to offset those there are many positives that end up balancing out in the end and tipping the scales in a positive direction. Immigrants often have more desire and hunger for success and opportunity and while they may require up front assistance they tend to be good overall. 

 

[Dinar]

4 minutes ago, Longnose said:

I'm with @rkbabang & @Viking on this one.  To me its just like capitalism. Immigration may have consequences "Lower wages, higher traffic, higher stress on environment, higher rent and housing prices, higher economic inequality which leads to all sorts of social problems."  But to offset those there are many positives that end up balancing out in the end and tipping the scales in a positive direction. Immigrants often have more desire and hunger for success and opportunity and while they may require up front assistance they tend to be good overall. 

 

Then why doesn't Canada or US hold a nationwide referendum and see if the masses agree with you?  Also what exactly are the positives of a Russian computer scientist depressing wages or Haitian construction worker destroying job prospects of African Americans?

[Gregmal]

Immigration is part of the answer however I’ve yet to see any credible plan from either side that would have enough legs to get through government.

[Viking]

1 hour ago, Dinar said:

The world has changed.  There is no need for unskilled labor anymore.  Just because something worked two hundred years ago does not mean it works today.  Cavalry was great for millenia until tanks and automatic weapons made it useless.  Interesting that you do not address the costs that I have outlined.  Or does the plight of the poor/unskilled in US and Canada not matter to you?

immigration policy is just like any other government policy. It should be well thought out and rational. What little i know of Canada’s immigration policy sounds ok to me. Like i said before, i do not follow the US. 
 

My views of immigration have been shaped by personal experience. My wife’s family came to Canada in the 1950’s from Italy. Talking to my mother in law - pretty much all the negatives about immigration you posted earlier were strongly felt by lots of Canadians in the 1950’s. My mother in law hated living in Canada for the first 5 years or so… why did she do it? She wanted a better life for her kids (than what was then available in Italy). So she and her husband worked their asses off to build a life for their 3 kids (2 were born in Canada). They succeeded in building a very good life. How? Work ethic. Thrift. Love of family. Value of education. Love of community and country (this last one took some time). Kids? One’s a nurse, another was a professional hockey player and the third (my wife) graduated from university and worked in HR. My mother in law laughs at the idea of moving back to Italy.

 

A second story: one of my best friend’s (who i have known since high school) family came to Canada in the 1970’s from India. Same story as my wife’s parents. Parents worked their ass off. Pretty much all the negatives about immigration you posted earlier were strongly felt by lots of Canadians in the 1970’s (especially in my rural home town) so my friends family had to deal with all of that. The parents passed on great set of values to kids: value of education, work ethic, thrift, importance of family etc. Kids all went to university and have built great lives for themselves and their families (two are senior administrators in education system).

 

I have been telling my kids for years that i am going to screw their lives up. Because i am going to do what many non-immigrant Canadian families do: they want to give their kids a better life. Free of hardship. So they spoil their kids. Who then grow up with an entitled attitude… they DESERVE a great live. Shitty work ethic. Shitty attitude. Scoff at education. Money morons. 
 

i tell my kids to talk to their grandmother. To hear the stories of growing up in Italy during the second world war. Coming to a country where you could barely speak the language and everyone hated you for ‘stealing’ jobs etc. Working in the mines in BC in the 1950’s. Working 2 full time jobs for close to 10 years to get a leg up. I want my kids to hear first hand what life is really like for most of the worlds population. I also tell my kids that living in Canada is a gift - one that they need to be thankful for and take full advantage of. I think immigration is important in part because it provides the next wave of parents who want to make a better life for their kids. Yes, just like parents of every generation going back hundreds of years. 

Edited August 1, 2022 by Viking

[rohitc99]

45 minutes ago, Dinar said:

Then why doesn't Canada or US hold a nationwide referendum and see if the masses agree with you?  Also what exactly are the positives of a Russian computer scientist depressing wages or Haitian construction worker destroying job prospects of African Americans?

and the son of one of those russian computer scientist started google , created 1.5 Tn of wealth and 100K+ high paying jobs

 

Anyway US is getting some of what you are wishing for. Look at the venture space outside of the US ...a lot of the brightest are starting companies in their home countries. I know a lot of such folks in India who have no desire to immigrate to the US considering the number of hoops they have to jump through. They have started companies in india and the ecosystem is now moving to places like bangalore

 

We just have to keep doing what we are doing in the US (make legal immigrants wait for 50+ years in the queue)  and we will achieve what you think the masses want

 

Edited August 1, 2022 by rohitc99

[changegonnacome]

3 hours ago, Dinar said:

Also what exactly are the positives of a Russian computer scientist depressing wages or Haitian construction worker destroying job prospects of African Americans?

 

Right now all thats happening in your limited model is that the lack of Russian computer scientist and Haitian construction workers is driving inflation which is stealing, in a meaningful way, the purchasing power of the least well off disproportionately. In terms of the software developer.........global companies have global choices.....difficult to source jobs in the US....simply becomes a job in a different country, they win the USA loses....GitHub doesnt give a shit where the code is coming from just as long as its coming in - a country willfully loosing productivity growth to other countries in a globalized digitized competitive economy is a moronic and self-defeating own goal. Indeed this incremental programer in the US needs good and services thats supplied by low skilled works.....the economy is not and never has been a zero sum game.

 

Immigration isn't a floodgate that opens up and cant be turned off.....it is a tool that can and should be utilized based on the macroeconomic environment........ultra low unemployment.....turn it on.......negative GDP growth and unemployment at 6%, turn it off.........somewhere in between target it at sector specific 'growth' areas.......the issue in the US is immigration has been weaponized in the never ending culture wars where one side says 'pro' and the other immediately rushes to the polar opposite view point....which then gets closed looped by whatever confirmation bias media machine vortex you happen to have been sucked into at birth.....Fox world or MSDNC.

Edited August 2, 2022 by changegonnacome

[Dinar]

3 hours ago, rohitc99 said:

and the son of one of those russian computer scientist started google , created 1.5 Tn of wealth and 100K+ high paying jobs

 

Anyway US is getting some of what you are wishing for. Look at the venture space outside of the US ...a lot of the brightest are starting companies in their home countries. I know a lot of such folks in India who have no desire to immigrate to the US considering the number of hoops they have to jump through. They have started companies in india and the ecosystem is now moving to places like bangalore

 

We just have to keep doing what we are doing in the US (make legal immigrants wait for 50+ years in the queue)  and we will achieve what you think the masses want

 

See your Sergei Brin and raise with tens of thousands of Russian immigrants on Brighton Beach collecting welfare/supplemental security income + food stamps + receiving Medicaid + receiving Section 8 housing.  Don't forget the massive home attendant fraud - nothing wrong with your 68 year old mother/father, but you get a sympathetic doctor to write a note that she/he needs 40 hours a week of home care, and voila - Medicaid pays you for forty hours of "work" + health insurance.   Indian immigrants like Satya Nadela & Sundar Pichai (and the list goes on) obviously add a great deal, however in many cases Indians in IT (just like Russians & Chinese immigrants) only hire their own, care to put a value on that?   We need a well thought out immigration policy - get people with the right skills, deal with negative externalities, exclude people with few skills, end chain migration, and limit it.  If we let 100MM Russians or Chinese or Indians or Africans or pick your favorite nationality/ethnic group in, we will turn the US into the same unpleasant place that these immigrants are fleeing from.  Small numbers of immigrants will assimilate, large numbers will change the country.  

[rkbabang]

13 hours ago, Dinar said:

Then why doesn't Canada or US hold a nationwide referendum and see if the masses agree with you?  Also what exactly are the positives of a Russian computer scientist depressing wages or Haitian construction worker destroying job prospects of African Americans?

 

This is why Democracy sucks as a way of making decisions. Be careful when you side with the masses as the "m" is usually silent.

 

[changegonnacome]

2 hours ago, rkbabang said:

 

This is why Democracy sucks as a way of making decisions. Be careful when you side with the masses as the "m" is usually silent.

 

 

Nice one - I'm gonna steal that  

[rohitc99]

12 hours ago, Dinar said:

See your Sergei Brin and raise with tens of thousands of Russian immigrants on Brighton Beach collecting welfare/supplemental security income + food stamps + receiving Medicaid + receiving Section 8 housing.  Don't forget the massive home attendant fraud - nothing wrong with your 68 year old mother/father, but you get a sympathetic doctor to write a note that she/he needs 40 hours a week of home care, and voila - Medicaid pays you for forty hours of "work" + health insurance.   Indian immigrants like Satya Nadela & Sundar Pichai (and the list goes on) obviously add a great deal, however in many cases Indians in IT (just like Russians & Chinese immigrants) only hire their own, care to put a value on that?   We need a well thought out immigration policy - get people with the right skills, deal with negative externalities, exclude people with few skills, end chain migration, and limit it.  If we let 100MM Russians or Chinese or Indians or Africans or pick your favorite nationality/ethnic group in, we will turn the US into the same unpleasant place that these immigrants are fleeing from.  Small numbers of immigrants will assimilate, large numbers will change the country.  

averaging 1 Mn per year or less than 0.3% per annum and dropping for last 5 years. i dont think we risk getting run over by any ethnic group any time soon