Bonds!

[Dalal.Holdings]

1 hour ago, wabuffo said:

 

 

If the strongest and most powerful economy in the world that possesses the most powerful military and also controls a "printing press" isn't AAA, then nothing else is.

 

 

And if that strongest military power can no longer produce ships or process rare earths while its key rival can ?

 

It's amusing to see all the hand waving in the face of massive (WW2 level) sustained peacetime deficits

 

I guess the MMT folks won in the end and we're all going to have to deal with the consequences...

 

Edited May 19, 2025 by Dalal.Holdings

[Intelligent_Investor]

The country is run by economic illiterates. The sooner people realize that economics doesn't give a rat's ass whether you are liberal or conservative the better the long term outcomes will be economically

[Hektor]

3 minutes ago, dwy000 said:

It's been supported by immigration but current policies would curtail that support

Aren't the current policies against illegal immigration, not legal immigration?

[Dalal.Holdings]

5 minutes ago, dwy000 said:

 I said 10 years ago (i was wrong more like 15).  Japan's population peaked in 2010 and then started shrinking. The US has similar curve trend going on. It's been supported by immigration but current policies would curtail that support

 

Current policies which are likely to change within 3.5 years are not going to meaningfully change the demographics of the U.S. They are certainly not going to turn the U.S. into Japan or South Korea demographics wise.

 

Hence, comparing the U.S. to deflationary Japan is useless.

[Spekulatius]

1 minute ago, Hektor said:

Aren't the current policies against illegal immigration, not legal immigration?

They are actually against both. H1B, student visa etc. are all in the firing line.

Our birth rate is dropping too. We are just ahead of Japan but seem to go in the same direction.

[Dalal.Holdings]

Live shot of nation running massive deficits in peacetime with more than full employment:

 

 

Edited May 19, 2025 by Dalal.Holdings

[wabuffo]

Live shot of nation running massive deficits in peacetime with more than achieving full employment by running larger deficits.

 

Fixed it for ya!  You're welcome.

 

Bill

Edited May 19, 2025 by wabuffo

[Dalal.Holdings]

It's a wonder we ever had full employment without 7% deficits to GDP...

 

Like I said, the MMT folks have won...

 

...but the consequences of that may have yet to be revealed...

[wabuffo]

Like I said, MMT has won !

 

To be fair - I am more worried about the emerging trade policy of this administration than deficits or federal debt. 

 

The initial conditions of the US economy coming into 2025 were excellent -- set up by the rebuilt strength of household and business balance sheets.  I thought this was likely to be a golden decade of economic growth (Roaring 20's v2.0). 

 

But throwing sand into the gears of global trade is a quick way to short circuit all that goodness.

 

Is the US economy's strength and momentum formidable enough to take the blows from this global trade friction?  I don't know and don't want to find out.

 

That's the risk that worries me - not the Moody's downgrade or deficit.

 

FWIW.

 

Bill

[Dalal.Holdings]

Those trade barriers are being watered down by the day

[Blake Hampton]

3 hours ago, Spekulatius said:

Mr Bond isn’t concerned about defaults, he adjusts for higher future inflation.

 

I think this pretty much sums it up.

[rogermunibond]

Credit spreads haven't really moved though.

[Gregmal]

Yields soaring a whole couple percent, maybe not even, testing levels fairly common over past few years. But now it’s a big deal lol

[dwy000]

Citi CEO today: 

 

We are entering a new phase of globalization — one less defined by cooperation, and more by strategic self-interest. Long-held assumptions are being challenged, not just by tariff announcements but by a deeper confidence shock. The near-term impact is already being felt, and the long-term trajectory is being rewritten in real time. 

 

If you’re looking to markets for clarity, you might be a tad disappointed. But if you’re looking for signals, they’re everywhere. Treasury yields rose even as equity markets wobbled. The U.S. dollar, typically a safe haven, has weakened at moments when it used to rally. That tells us something deeper is going on — investors aren’t just pricing near-term risks; they’re reevaluating the credibility of long-held certainties.

It's showing up in how capital moves. Pensions and asset managers are tilting more towards Japan, India and parts of Europe. Hedge funds are being selective and didn’t chase the April equity bounce. Sovereign wealth funds are diversifying more aggressively. Hedging against the dollar is now at levels we haven’t seen in years.

[Eldad]

13 minutes ago, dwy000 said:

Citi CEO today: 

 

We are entering a new phase of globalization — one less defined by cooperation, and more by strategic self-interest. Long-held assumptions are being challenged, not just by tariff announcements but by a deeper confidence shock. The near-term impact is already being felt, and the long-term trajectory is being rewritten in real time. 

 

If you’re looking to markets for clarity, you might be a tad disappointed. But if you’re looking for signals, they’re everywhere. Treasury yields rose even as equity markets wobbled. The U.S. dollar, typically a safe haven, has weakened at moments when it used to rally. That tells us something deeper is going on — investors aren’t just pricing near-term risks; they’re reevaluating the credibility of long-held certainties.

It's showing up in how capital moves. Pensions and asset managers are tilting more towards Japan, India and parts of Europe. Hedge funds are being selective and didn’t chase the April equity bounce. Sovereign wealth funds are diversifying more aggressively. Hedging against the dollar is now at levels we haven’t seen in years.

But she makes like 6% ROE. I guess the wisdom of sticking to meat and potatoes and leaving macro to the big brains applies to bank CEOs as well as investors. 

[Munger_Disciple]

14 minutes ago, Eldad said:

But she makes like 6% ROE. I guess the wisdom of sticking to meat and potatoes and leaving macro to the big brains applies to bank CEOs as well as investors. 

 

It's called Shitty Group for a reason 

[Gregmal]

Yup. Lotta people selling stuff and more are buying it. Mainly doom, hysteria, new world order….the usual plus a little more edginess. Then there’s the “recession” that’s “already underway” that’s been happening since H2 2021….Oh yea and the “inflation” story which much like the oil boom that’s been destined to happen any month now for the past several years….is still….everywhere but in the numbers that matter lol $60 oil and 2-3% inflation..big ole yawn….and not gonna hold my breathe waiting for eternity for the forecasts to…never actually play out 
 

We all know who’s making money. 

Edited May 19, 2025 by Gregmal

[Spekulatius]

59 minutes ago, Eldad said:

But she makes like 6% ROE. I guess the wisdom of sticking to meat and potatoes and leaving macro to the big brains applies to bank CEOs as well as investors. 

It’s fun contemplating macro but time is better spent checking individual securities. But then on the other hand it’s useful to some extend to time entries.

[Marco Van Basten]

2 hours ago, dwy000 said:

Citi CEO today: 

 

We are entering a new phase of globalization — one less defined by cooperation, and more by strategic self-interest. Long-held assumptions are being challenged, not just by tariff announcements but by a deeper confidence shock. The near-term impact is already being felt, and the long-term trajectory is being rewritten in real time. 

 

If you’re looking to markets for clarity, you might be a tad disappointed. But if you’re looking for signals, they’re everywhere. Treasury yields rose even as equity markets wobbled. The U.S. dollar, typically a safe haven, has weakened at moments when it used to rally. That tells us something deeper is going on — investors aren’t just pricing near-term risks; they’re reevaluating the credibility of long-held certainties.

It's showing up in how capital moves. Pensions and asset managers are tilting more towards Japan, India and parts of Europe. Hedge funds are being selective and didn’t chase the April equity bounce. Sovereign wealth funds are diversifying more aggressively. Hedging against the dollar is now at levels we haven’t seen in years.

When Jamie Dimon speaks, I listen, but why should I listen to Jane?  Also, clearly hedge funds were wrong in selling in April rather than buying, at least in the short-run.  A 20% move is nothing to sneeze at.  Nobody knows what tomorrow will bring, but hedge funds are hardly, as the French would say, etalons of foresight.  Their long term performance as a group has been abysmal. 

 

[Dalal.Holdings]

I'm puzzled by the people who say we "need" 7% deficits in order to sustain full employment and our "wonderful" 2-3% GDP growth we've been having.

 

We are such a good economy after all with everyone working behind desks/trading stocks half the day, massive inequality, and incapable of building any ships or infrastructure or competitive cars. Let's just rely on our geopolitical rival to do all that for us...

 

Makes you wonder how America did well all those years when we weren't going full tilt on spending...absolutely makes no sense to support this level of deficits, but sure, let's try this dangerous experiment and see what happens I guess. I mean at least my stonks and crypto are going up, amirite ??

 

Edited May 19, 2025 by Dalal.Holdings

[james22]

49 minutes ago, Marco Van Basten said:

Nobody knows what tomorrow will bring, but hedge funds are hardly, as the French would say, etalons of foresight.  Their long term performance as a group has been abysmal. 

 

There are about 8,000 planes in the air and 100 really good pilots. Dalio

[Marco Van Basten]

1 minute ago, james22 said:

 

There are about 8,000 planes in the air and 100 really good pilots. Dalio

Or Buffett - there are more banks than good bankers.  Jamie Dimon today at JPM's investor day - I would NOT be a buyer of credit today.  

[wabuffo]

I'm puzzled by the people who say we "need" 7% deficits in order to sustain full employment and our "wonderful" 2-3% GDP growth we've been having.

 

I don't know if 7% is the right level - but the answer is that the USA is the reserve currency issuer in a world where the US is no longer running a fixed exchange monetary regime.  As such the US must run a deficit large enough to take care of both domestic and foreign demand for US safe monetary assets (ie, Treasuries, but also reserves and currency in circulation).

 

The US fiscal deficit = private sector surplus (savings) = domestic surplus + foreign surplus (ie, trade deficit).

 

Look what happened when the US Treasury ran a surplus in 1998-2001 just as China entered the WTO in 2001 and the US trade deficit exploded.   The US domestic private sector was forced into a deficit (ie - increase debt to maintain consumption).   Debt rose (mostly mortgage debt but other forms of consumer debt also) until it was no longer sustainable and the US experienced a debt panic in 2008.   (BTW - this mirrors the problem under a gold standard fixed exchange monetary regime where monetary assets were constrained to the rate of new gold supply entering the system - and the US would suffer a debt-panic/depression every decade or so just like the GFC - except there was no big fiscal response in those days).

 

It then took a decade (to 2019) of fiscal deficits to repair US domestic household (and business) balance sheets.  Then 2020 and the pandemic happened and the US Treasury rained cash on the domestic sector.   This accidental pushing of deficits to high levels produced a domestic sector that emerged from the pandemic in its best financial shape in over 70 years!   That's why I was so bullish on the US economy even as the Fed hiked 500bps starting in 2022 (and mostly remain bullish for the decade of the 2020s - tariffs being the wild card).

 

 

 

You may not like it - but this is what peak performance looks like. lol.

 

You want to run deficits back to 2-3% of GDP?  You then have to describe how the sectoral balances reset when the trade deficit is still sucking out the equivalent of 4% of US GDP in terms of US monetary safe assets created by the US Treasury.

 

I maintain that you have to place US deficits in the context of, not US GDP, but global GDP because of the USD as a global reserve currency.  So current deficits are a bit less than 2% of global GDP ($114T) at the moment.   What is the right level for US deficits as a % of GDP?  I don't know - but what I do know is that 2-3% is too low.   Maybe 7% is too high, maybe it isn't - I don't know.  But that should be the question - what is the optimal level to try to target, I say.  And I would also say - abandon the old paradigms of a fixed exchange monetary regime like when the US dollar was subordinated/pegged to gold.   We've seen that movie in modern times and it led to the GFC.

 

Bill

 

Edited May 20, 2025 by wabuffo

[dwy000]

3 hours ago, Marco Van Basten said:

When Jamie Dimon speaks, I listen, but why should I listen to Jane?  Also, clearly hedge funds were wrong in selling in April rather than buying, at least in the short-run.  A 20% move is nothing to sneeze at.  Nobody knows what tomorrow will bring, but hedge funds are hardly, as the French would say, etalons of foresight.  Their long term performance as a group has been abysmal. 

 

She's not making a market call or directional statement.  Her comment is related to the fact that things are not behaving like they normally do.  It could be nothing or, as she hints, it could be signs of something bigger and more long term. 

 

Even Jamie Dimon commented on the extraordinary amount of complacency. Everything is always meaningless until its not and then people trip over themselves to claim to be the one to have seen it coming. Both good and bad. 

[Blake Hampton]

9 hours ago, dwy000 said:

complacency

 

Complacency: a feeling of smug or uncritical satisfaction with oneself or one's achievements.