> The entire world (including the US federal government) has taken a short position on the US dollar
I read this as a prediction of some type of crisis.
Anyway, wrt the US Federal Government, having government debt is not that same as having a short position. For one, the US Fed govt's revenue (i.e. tax collection) is denominated in the same USD as the debt. So if USD goes up, tax collection go up.
Name 1 example of a currency crisis where the debtor nation had debt denominated in their own currency.
I'll save you the time. There are no examples.
Every currency crisis has debt denominated in a foreign currency.
- Germany in the 1930 (WW1 reparations were gold marks)
- Argetina (foreign borrow and currency peg to USD).
- Thailand.
- Turkey (now, borrowed in Euro).
"The price index for used vehicles rose 0.2% in July, after having risen at least 7.3% in each of the previous three months. The category was one of the few, along with hotel rooms and airfares, that drove recent inflation, the economist Paul Krugman pointed out on Twitter. “Combined, these three sectors account for…more than 1/2 [half] of inflation over the past three months,” Krugman wrote. In May, in fact, a full third of the overall price rise was due to the surge in used car prices."
> Donald Trump declared a national emergency so he could bypass Congress and raid the military budget to build a wall.
your argument is that Obama should be more like Trump? Declaring a fake national emergency and raiding the military budget is dubious action. Obama was never going to do ish like that and we should all be happy about that.
Also as Obama pointed out in his medium posts, policy positions get converted into action through electoral wins.
I'm old enough to remember that Trump was elected in part due to Obama backlash.
I'm also old enough to remember the backlash when Obama said Cambridge police acted stupidly (the police arrested a Harvard professor in his own house when he had to go through a window bc he lost his keys)
I know people are disappointed Obama didn't accomplish more. Obama is such an impressive person you just assume he can work magic. But Obama was constrained by the system of democracy and that limits what is possible.
I'm sad this comment hasn't been upvoted higher. The comment explain how the mutation could be possible.
The key is that the mutation would prevent reproduction. If you never age, you never reproduce.
You can think about different cancers. A mutation that causes fatal childhood cancer doesn't get passed on. A mutation that causes prostate cancer can spread.
The incentives in capitalism "crash the economy". Yes, there was bad behavior. However focusing on individual behavior misses the forest for the trees.
Here's how it works.
Banks start off conservative. Banks only offer loans that pay themselves off. There's a run of good years. The incentive in capitalism is to make more money, and based off the recent history of good years, Bank A realizes they can offer more aggressive loans (e.g. interest only), take market share, and make more money. So Bank A does that.
Bank B now has the choice of matching Bank A, or losing market share (and maybe their business). So Bank B matches and maybe also offers less money down. This cycle continues with progressively more aggressive loan offerings until there's a run of bad years and things and people are stuck with too aggressive financing.
Warren Buffet is on the phone for you ... He says when the intrinsic value of a company is greater then the price implied by the stock, buybacks benefit the shareholders .. And when the intrinsic value is less than the price implied by the market price of the stock buybacks are bad for shareholders.
You have to keep in mind the source. Let me put it this way. A VC's job is to buy X (where X is equity in a startup). Of course every VC would love for X to go on 50% sale ... or even better 75% sale.
You saw this with hedge fund managers and the stock market as well. Lots of hedge fund managers went on and on about how irresponsible Bernanke was because he kept interest rates low which raised asset prices.
To be clear, I don't think this is a nefarious or even conscious process. However, I think if someone really wants a particular scenario it tends to color their thinking.
Also the actual claim made isn't as sensational as the headline. Just says that 90% might take a lower valuation. All that requires is a general market decline.
I don't know why your comment is being down-voted. George Soros based his entire career on this dynamic and even coined the term 'reflexivity' to describe it.
Here's where and why I think the disconnect happens. Most of our possessions in day to day life tend to have a relatively stable value. Your iPhone 6 is worth $600 dollars, oranges are $2/lbs, a t-shirt is $20. Markets for non-capital goods (i.e. goods that are consumed with 1 yr or so) are very efficient most of the time. However, the claim that 'markets are efficient' (and the kinda-corollary that there's some stable intrinsic price) gets applied to all markets all the time. But markets for capital goods are not efficient all the time (by capital goods I mean something where the lifetime is greater than 1 year ... e.g. houses, airplanes, financial investments like stocks & bonds). Because most things in our everyday life have some 'true' value its seems wrong that there are assets that don't have an 'intrinsic' value or whose value is determined by perception.
However value is determined by perception. A great example of this is GE. A little history ... up until the early 90's GE used to fund itself almost entirely with short term debt. GE was able to do this because everyone considered GE a AAA credit risk. This 'AAA' expectation from the market actually meant huge additional profits for GE because GE could continually borrow short term debt at short term rates (say 1%) and turn around and lend their customers money at longer term rates (say 5%) picking up spread. In the early 1990's Bill Gross came out and basically said 'this is crazy ... there's no way a company that is financed almost entirely with short term debt is a AAA credit'. Subsequently, GE was forced to term out their debt and this coincided with GE no longer outperforming the market (I haven't followed that closely but I think that GE has slowly been winding down GE Finance). The point here is that expectations (specifically that GE was a AAA credit) had a huge impact on the 'intrinsic' value of the company.
The other interesting aspect is that Dalio is an adherent of Transcendental Meditation and IIRC the principles really sprang his study of TM and Buddhism.
Meditation has also transformed the corporate culture at Bridgewater. Dalio pays for half of the fees for any employee who's interested in learning TM, and the office features meditation rooms and group sessions. The company is also known for its "brutally honest" meetings, and Dalio says meditation helps his employees to adopt an attitude of calm equanimity that helps them to engage in a productive dialogue without reacting emotionally.
I see the Broken clock right twice a day. sentiment expressed in a couple places in this thread.
I think it warrants mentioning that Michael Burry had a very successful career before nailing the credit swaps trade. I think the sentiment that he's a perma-bear that just happened to get lucky is very unlikely. First, Michael Burry manufactured the credit swap trade that he is known for. What I mean by that is that Burry didn't trade options regularly. Rather, somewhat like Elon Musk, he reasoned from first principles. Burry started from the fact that certain housing markets were deteriorating and loan standards had been massively relaxed. Then figured out exactly what loans were in which CDO's and which tranches would be impacted by bad loans. Then he went out and bought credit default swaps against those specific tranches. There was very little luck involved.
In addition to that, prior to the credit default swaps trade, Burry had been running Scion very successfully using a value strategy (wikipedia quotes Michael Lewis as follows in his first full year, 2001, the S&P 500 fell 11.88 percent. Scion was up 55 percent. The next year, the S&P 500 fell again, by 22.1 percent, and yet Scion was up again: 16 percent. The next year, 2003, the stock market finally turned around and rose 28.69 percent, but Mike Burry beat it again—his investments rose by 50 percent. That is amazing performance.
Burry really is worth listening to. I went back and read his Scion Capital letters and IMO he actually is a genius wrt investing. I don't know quite how to express it other than its got the same feel as Warren Buffett's letters. He doesn't get swayed by fear or greed, he's just incredibly logical.
Bodies are like machines, if you use them a lot they will wear out because of over-use.
This is a poor analogy. Bodies can heal (i.e. regenerate tissue). Machines cannot. If this analogy was true, ultra-marathoners would be wearing out their joints rapidly. That's not what is being observed though.
What is true is that you can injure joints by increasing the workload too fast. Joints can strengthen and adapt to increased loads but it happens slowly. So don't go from running 5 miles per outing to running 10 miles. Limit yourself to a gradual increase.
Don't most airlines work through a 3rd party that actually purchases and owns the planes?
this is driven by the fact that airlines don't consistently have taxable income. If you have net operating losses, which airlines often do, you can't fully take advantage of the tax shield provided by depreciation. Airplanes are big capital assets, hence they provide a large tax shield. That's why you often see financial entities (e.g. banks, insurance companies) who have regular taxable income have leasing arms.
If they raise interest rates, they will have to service their $18 trillion national debt and expose a lot of malinvestment in the private sector.
1. I think the Fed wants to "expose malinvestment". There's some debate about whether avoiding bubbles (i.e. malinvestment) should be a formal part of the Fed's mandate. IIRC, as it currently stands avoiding bubbles isn't a formal part of the Fed's mandate but it would certainly be a desirable policy goal (i.e. the Fed wants to prevent malinvestment from running to far). Also, wrt to servicing debt, the article was about how interest rates are likely to remain low.
If they don't raise interest rates, their only tool to fight the next recession will be to print money, which could cause the currency to collapse.
2. Your claim implies that the Fed raises rates so they have a tool to fight economic slowdowns. That's wrong. The Fed has 2 mandates: stable inflation and full employment. The Fed is raising rates to avoid inflation. You also claim that the Fed will "print money" which could cause the currency to collapse. Its astounding that we literally just went through this scenario, the Fed printed money, the currency didn't collapse. However people haven't re-examined their beliefs. We've now had 2 episodes where major economies resorted to "printing money" (Japan in the 1990's, US in 2000s) ... no currency collapses. In fact, as far as I'm aware, there's no precedent for a country that issues their debts in their own currency having a currency "collapse".
Assume someone makes 50K and they want to give their entire 50K to charity. Do you think that person should be able to give 50K to charity and not pay tax or only 32.5K (50k x 35% tax rate) and have to pay 17.5K in tax?
1. "A stable company might have a price/earnings ratio of 5x"
You're way off on PE's.
The Shiller PE is 26* right now. P/E moves inversely with interest rates. With rates around 1% (i.e. driving up P/E's) only distressed companies trade at 5x P/E ratios.
2. "AirBnB takes a 3% cut on transactions"
You overlooked 2/3 of their revenue.
"Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from guests"
3. "for them to have a $25 billion valuation, that's $5 billion in revenue or $167 billion in bookings"
The relevant data is in the article. Note they made $340 on $2.2B of bookings (about %15 of bookings).
"Airbnb generated $340 million of revenue in the third quarter, on bookings of $2.2 billion". You can just annualize that. Current run rate revenue is ~$1.4B. Current run rate bookings are ~$8.8B.
I don't have an opinion on the valuation but I can understand how they could be worth $25B. Airbnb's incremental cost for processing customers is probably close to zero. If they double bookings again, they'd double top line revenue ~$3B. I could easily see $1B of that flowing to the bottom line.
Also there are network effects/customer captivity at play that bode well for the long term. What do I mean? It would be hard to create a competitor to Airbnb because no one wants to establish their reputation on more that 1 platform (same under-appreciated advantage Ebay has).
not really
https://www.federalbudgetinpictures.com/do-the-rich-pay-thei...
https://taxfoundation.org/research/all/eu/taxing-high-income...