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the problem in the conservative investment arena is that those in their accumulation years that are conservatively invested may not know the harm they do themselves. because they have no interest in invest so they just pick something in the middle . ...
Some of these "conservatives" aren't necessarily risk-averse, or wary of SORR or even of their own psychological foibles. Instead they are doomsday prophets, enamored of the belief that 200 years of stock market history are bit a blip, and that the remainder of the 21st century might resemble the collapse of Rome and the ensuing Dark Ages. They don't want a hands-off portfolio that maximizes risk-adjusted return. They want beans and bullets, but are too timid to say so outright. For a less fanciful example, they think that this is Russia in 1888, so that in 30 years (1918), the stock market will be nationalized and taken to zero. They're not after some Permanent Portfolio that survives another Lost Decade... they want something to shield them from guaranteed (in their mind) impending 100% loss.
Some of these "conservatives" aren't necessarily risk-averse, or wary of SORR or even of their own psychological foibles. Instead they are doomsday prophets, enamored of the belief that 200 years of stock market history are bit a blip, and that the remainder of the 21st century might resemble the collapse of Rome and the ensuing Dark Ages. They don't want a hands-off portfolio that maximizes risk-adjusted return. They want beans and bullets, but are too timid to say so outright. For a less fanciful example, they think that this is Russia in 1888, so that in 30 years (1918), the stock market will be nationalized and taken to zero. They're not after some Permanent Portfolio that survives another Lost Decade... they want something to shield them from guaranteed (in their mind) impending 100% loss.
i wish them luck ….not sure if they should be in the dr phil forum or the preppers forum
Cash is always an option, earns ~ 5% these days. Watch Yul Brynner in the Magnificent Seven and sleep well at night while this bad debt burrito works its way through the financial system.
"bad debt burrito"
ahh the old reliable "there is too much debt" card. Literally been hearing this perma bear favorite since the late 1980s. Forecasters, economists, and newsletter writers have made fortunes over the decades pitching that narrative. Interestingly, when you pull the curtain back none of them actually manage money, but most importantly, especially now, is that our ability to service debt is actually better than it was in the 80s and 90s.
trying to avoid a bear market by darting in and out is a recipe for failure. We have a century of history , with hard data, that has proven that.
ahh the old reliable "there is too much debt" card. Literally been hearing this perma bear favorite since the late 1980s. Forecasters, economists, and newsletter writers have made fortunes over the decades pitching that narrative. Interestingly, when you pull the curtain back none of them actually manage money, but most importantly, especially now, is that our ability to service debt is actually better than it was in the 80s and 90s.
trying to avoid a bear market by darting in and out is a recipe for failure. We have a century of history , with hard data, that has proven that.
There is too much debt, systemically. However that argues for being invested in real assets since the government will be sorely tempted to inflate the debt away, not going into perma bear mode holding fiat currency.
There is too much debt, systemically. However that argues for being invested in real assets since the government will be sorely tempted to inflate the debt away, not going into perma bear mode holding fiat currency.
"there is too much debt"
what does that mean?
This is such a tired old argument. Interest payments on government debt is less that 10% of our total tax revenue. Zero chance of defaulting. It's the governments first obligation and that level has remained steady going back to WW2. It's a big number , but serviceability , which is what counts, is totally under control.
This is such a tired old argument. Interest payments on government debt is less that 10% of our total tax revenue. Zero chance of defaulting. It's the governments first obligation and that level has remained steady going back to WW2. It's a big number , but serviceability , which is what counts, is totally under control.
The first problem is commercial real estate. Offices have lost a lot of value due to work from home. Some of them have lost enough value to get through the equity layer which hits the financial system, and unfortunately a lot of the equity layer is owned by pension funds which is another problem. Other types of commercial real estate haven't been impaired in the same way but interest rates approaching cap rates could make things touch and go.
The second is government debt. We have had high interest rates and high debt burdens before but the combination is new. Interest is now roughly in line with total spending for Medicare, defense, or all non-defense discretionary spending: https://www.pgpf.org/blog/2024/02/wh...ebt-costing-us. That will get worse under current trends. We don't collect enough taxes to service it and only manage to pay for the interest and our primary deficit by printing money and issuing more debt.
I'm not a perma bear here, the opposite really my take away is stay invested in companies that can grow profits with or above inflation, avoid owning bonds with duration risk and financial companies with high duration or office debt exposure.
The first problem is commercial real estate. Offices have lost a lot of value due to work from home. Some of them have lost enough value to get through the equity layer which hits the financial system, and unfortunately a lot of the equity layer is owned by pension funds which is another problem. Other types of commercial real estate haven't been impaired in the same way but interest rates approaching cap rates could make things touch and go.
The second is government debt. We have had high interest rates and high debt burdens before but the combination is new. Interest is now roughly in line with total spending for Medicare, defense, or all non-defense discretionary spending: https://www.pgpf.org/blog/2024/02/wh...ebt-costing-us. That will get worse under current trends. We don't collect enough taxes to service it and only manage to pay for the interest and our primary deficit by printing money and issuing more debt.
I'm not a perma bear here, the opposite really my take away is stay invested in companies that can grow profits with or above inflation, avoid owning bonds with duration risk and financial companies with high duration or office debt exposure.
The link you included cites the CBO projections for dramatically higher interest costs. Like I noted before , economists are historically wrong in making projections/predictions. We have an almost 25 trillion dollar economy and it would take more than a few hundred billion in extra costs to crush the system. But, yes we do collect more than enough to service the debt. Again, same story of debt destroying economy has been around for decades.
The first problem is commercial real estate. Offices have lost a lot of value due to work from home. Some of them have lost enough value to get through the equity layer which hits the financial system, and unfortunately a lot of the equity layer is owned by pension funds which is another problem. Other types of commercial real estate haven't been impaired in the same way but interest rates approaching cap rates could make things touch and go.
The second is government debt. We have had high interest rates and high debt burdens before but the combination is new. Interest is now roughly in line with total spending for Medicare, defense, or all non-defense discretionary spending: https://www.pgpf.org/blog/2024/02/wh...ebt-costing-us. That will get worse under current trends. We don't collect enough taxes to service it and only manage to pay for the interest and our primary deficit by printing money and issuing more debt.
I'm not a perma bear here, the opposite really my take away is stay invested in companies that can grow profits with or above inflation, avoid owning bonds with duration risk and financial companies with high duration or office debt exposure.
Just spent the last 20 minutes looking at that site....its whole message is about how bad debt is lol
The link you included cites the CBO projections for dramatically higher interest costs. Like I noted before , economists are historically wrong in making projections/predictions. We have an almost 25 trillion dollar economy and it would take more than a few hundred billion in extra costs to crush the system. But, yes we do collect more than enough to service the debt. Again, same story of debt destroying economy has been around for decades.
Quote:
Originally Posted by FREE866
Just spent the last 20 minutes looking at that site....its whole message is about how bad debt is lol
I don't necessarily endorse the site as a whole / haven't read it, just was googling for data & graphs to illustrate where we are today vs the past, and from here where the trend line is heading if either deficits don't come down (unlikely) or interest rates don't (good chance they do in the short to medium term, although there is risk here).
Private and public debt act differently. Private debt when it goes bad risks either a recession or the government can bail the system out at the price of increasing public debt. You don't want to market time overall based on private debt but maybe avoid the epicenter (today, office loans) when there is a problem? Public debt in our own currency is not a short term economic risk, but it eventually has to be paid back through austerity or inflation and I wouldn't bet on austerity - the danger is more inflation and negative real interest rates, not choking the economy. The public debt burden is bullish for nominal (but not real) rates of return on stocks and bearish for real (but not nominal) returns on long duration debt.
The takeaway is if you go to sleep now holding VTI and VXUS and wake up in 2050 you are probably (as always nothing in life is certain) going to be happier with the result than if you go to sleep holding VTI / VXUS / TLT both because equities historically are better anyway as corporate profits go up and to the right and because we're at elevated risk for more inflationary periods over the coming decades.
ahh the old reliable "there is too much debt" card. Literally been hearing this perma bear favorite since the late 1980s. Forecasters, economists, and newsletter writers have made fortunes over the decades pitching that narrative. Interestingly, when you pull the curtain back none of them actually manage money, but most importantly, especially now, is that our ability to service debt is actually better than it was in the 80s and 90s.
Funny how U.S. GDP growth started to “moderate” in the late ‘80s as total debt began its exponential increases. Surely this is just an economic coincidence, because “our ability to service debt is actually better than it was in the 80s and 90s.” Party on Garth!
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