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New York, 3:43 AM
Sun Nov 8
10 posts in the last 24 hours
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11/05/09
11/05/09
11/05/09
11/05/09
anyway, all these low rates around the world have allowed folks to rack up additonal debt that they might not have otherwise been able to afford... be it mortgage debt in some markets, lines of credit, other loans etc. this has provided the desired support in the housing market, as well as provided cash for clunke...i mean cash for spending. great depression averted.
so, historically low interest rates have led to much higher debt loads, though the cost of carrying that higher debt load is cheap. so the cash flow situation in the household is quite all right.
but, when inflation kicks in at some point in the next 18 to 24 months, and rates begin to rise...all that super high debt load that was very affordable isn't affordable anymore (hey wait, i think we've heard this record before)... kaboom. large scale economic problems could once again abound.
policymakers are hoping the recovery in the economy 18 to 24 months from now will be strong enough to absorb this second shock to the system...
at that stage, your wise diversification into goats and projectile weaponry will be awfully handy! #moneymatters
11/06/09
So it's another bubble-popping/passed buck, with greater hell to pay later, analogous to what happened with adjustable-rate mortgages in the larger subprime Cluster F. #moneymatters
11/04/09
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11/02/09
"Selfless conservatives"...
My mottled brain immediately thinks of well-to-do folks who give to charity or spend a day every year at a soup kitchen or pass out brochures at community events.
There are those that call themselves conservatives who do work tirelessly for their community... but how large is their community? For many, it doesn't go beyond themselves, most others, beyond their families and circle of friends. For some, it might extend to an entire nation... Are there "global selfless conservatives?" Those who are compassionate about all people, and still maintain conservative values?
Just trying to reconcile the words, I guess, and sharpen my understanding of "conservative." I can't get beyond the idea that people who describe themselves as conservatives are just people living in a bubble, trying to maintain some sense of order in a vicious, chaotic world.
zzzzzz.... #nourielroubini
11/02/09
11/02/09
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11/02/09
Friedman also authored one of my favorite statements of all times: "If you want to see capitalism in its purest iteration, go to Hong Kong." Having lived in Hong Kong, I still want to high-five him for that. History has steamrolled Hong Kong, but his description still holds true. #thatvisionthing #nourielroubini
11/02/09
And I never came across that Friedman quote re: Hong Kong, but wow.
11/02/09
Milton Friedman's rhapsodizing Hong Kong as the ultimate capitalist haven is true:
[www.hoover.org] #nourielroubini
11/02/09
11/02/09
11/02/09
Don't pretend like you can't remember which biopic I mean, Oliver. The one where you had Val Kilmer sing the Doors songs on film and tasked Meg muthaflippin' Ryan to play Pamela Morrison. For that one you're going to hell, "beautiful friend."
11/02/09
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11/02/09
What if dollars suddenly became scarce, or were perceived as such? The whole thing just stops. Markets crash, banks stop lending, consumers stop spending, the whole shebang. That's what a sudden carry trade reversal would do - send investors flooding out of assets back into cash. It's the credit crisis redux, the consequence of unbelievably irresponsible financial management at the Federal Reserve. Again! Simply substitute the equity market since March for the housing market in 2005/2006 and you have an idea of the potential consequences.
And it looks inevitable. Happy Holidays! #nourielroubini
11/02/09
Dollars getting scarce? Maybe relative to 2008 levels, but not in absolute terms. Isn't inflation still more likely than deflation? #nourielroubini
11/02/09
I'm thinking just a step ahead of you - the sudden reversal of massive monetary stimulus after the runup in asset prices percolates into the real economy. Take the other side of the bet in the short run with the carry traders if you like, but "crowded" doesn't begin to describe it. #nourielroubini
11/02/09
11/02/09
Actually, This Time It's Exactly The Same.
Hyperinflating economies running large fiscal deficits lose access to credit markets. This forces currencies to devalue. But at the same time, everything's being issued in dollars! The gun fires both ways. Short-run I'm with you on the inflation trade, but make sure you're the first guy in line during the stampede out of it.
Zerohedge is doing a better job of explaining this than I ever could by the way - check out this morning's bit. #nourielroubini
11/02/09
What would worry me is a lack of demand for dollars -- for instance, if assets with large worldwide markets (debt, petroleum) stopped being denominated in US$. I suspect that's the source of some of the US "exceptionalism" you describe. No doubt that demand has cushioned a lot of questionable macro financial practices by the US, and there's also no doubt that eventually it's going to go away. But I propose that the current crisis has actually pushed that reckoning back by several years, by increasing worldwide demand for dollar-denominated assets.
In the meantime, yes, some dollar shorts are going to get squeezed, and some offshore instos are going to suffer epic writedowns which will have measurable contractionary effects. But I still haven't seen a convincing explanation of why holding dollars will be such a bad strategy going forward, unless you think unmanageable inflation is inevitable.
I don't follow the headline-grabbing economists, but the boring academics I read tend to phrase their predictions like this: <10% chance of mild deflation, ~ 30-40% chance of mild inflation, and the remainder is your basic up-and-down muddling-through until stability reasserts itself again. That has sounded approximately correct to me for a while now.
11/02/09
I continue to question the capabilities of central banks to manage monetary policy with the degree of care required. Suffice to say that the downside risk of a short-squeeze-induced panic is understated in my view. There are market risks to policy decisions, not vice versa.
Of course, if any of us could speak with certainty about market direction we'd be too busy investing to speak. #nourielroubini
11/02/09
The fact that we interpret these unknowns differently isn't surprising. My view is that they're indistinguishable from the background noise of a struggling but haltingly improving economy -- yours is that they have the potential to seize the wheel and crash us into the rocks. I offer that as a brief concluding summary of where we differ on this. #nourielroubini
11/02/09
This seems like a fair distinction. Place bets accordingly. And, as ever in a volatile/uncertain environment, buy deeply out-of-the-money hedges. #nourielroubini
11/02/09
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10/29/09
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10/28/09
#printingtheseout
#tapingabovemybed #jamiedimon