*Investors Blog*
- Thread starter Warstud
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I don't think we agree. Which is OK, takes 2 sides to make a market.
My simple premise is that if we print $2.3T but get only $800B of growth, all this with the fed having $7T of monetization on their balance sheet, its not a healthy economy. Its jacked up on coke. The hangover comes eventually.
The world has $400T in debt on $100T in GDP. Blame whomever you want - every leader and central banker on earth for the last 40 years are candidates.
Doesn't mean you can't have good growth and even good employment. It simply means those will be accompanied by cyclical inflation - for years or decades. If you don't get inflation we can't handle the debt. I don't think we can handle another deflationary bust like 2008. No China to export our inflation to. There trying to export their deflation to us currently, as there going through their own balance sheet recession.
We can get temporary "soft landing" conditions, but it will be fleeting.
They will need to inflate it away. Can't grow our way out of it - too much population decline. Can't default, TPTB won't allow it as they wouldn't be in charge anymore. This is my long term lens on "macro". Doesn't mean my short term trades can't buck that view - but I know there short term.
Unless you have a 4th option I am not seeing?
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My point is, the US economy was hit with a once in a lifetime, or more, event, the pandemic.
This was a Joe Frazier left hook flush on the chin.
So where are we?
The inflation rate that continues to trend downward toward 2%.
Economic growth that's still holding up.
A labor market that continues to show signs of stability. Strong signs, in fact.
We are witnessing a soft landing. Guaranteed? Nothing is.
Is this economy bullet proof? Ask the rest of the world.
This was a Joe Frazier left hook flush on the chin.
So where are we?
The inflation rate that continues to trend downward toward 2%.
Economic growth that's still holding up.
A labor market that continues to show signs of stability. Strong signs, in fact.
We are witnessing a soft landing. Guaranteed? Nothing is.
Is this economy bullet proof? Ask the rest of the world.
I dont want to speculate on the soft landing or the stock market. Many much smarter people than me have been wrong but I do know about inflation and we are just seeing the beginning. The numbers the govt gives us have very little to do with what the average person sees. In my case a 450% increase in Pat D coverage, 30% increase in part F, 25% increase in Homeowners, 22% increase in Auto, an estimate to replace my roof 2 years ago at 14,000 was 20k this year, my grocery bill grows every week even though I started buying generic. Inflation rate may be coming down but that just means its still going up just slower. The thing that has propped up this economy is all the free money that was being handed out and that is running out but people have not cut their spending, they just transferred it to credit. We may have delayed paying the piper but he will be payed eventually.
Older affluent folks doing very well and not worried about money.
28 year old male, married with 2 kids struggling to keep head above water with crazy inflation, unaffordable care act family insurance plan, exponential increase in everything you need to live a basic lifestyle.
Stagnant wages hurt everyday people and they worry how they can keep up supporting a family, not everyone doing good because the media says inflation trending downward.
28 year old male, married with 2 kids struggling to keep head above water with crazy inflation, unaffordable care act family insurance plan, exponential increase in everything you need to live a basic lifestyle.
Stagnant wages hurt everyday people and they worry how they can keep up supporting a family, not everyone doing good because the media says inflation trending downward.
The short answer is, a lot of cryptocurrency liquidity has creeped into legitimate markets. Again, simplification here, but liquidity has a tendency to prop up markets, vis-a-vis the liquidity aspect.
Legitimate institutions are now holders of crypto or crypto derivatives, and those institutions are very much "backed" by the Federal Reserve, indirectly or otherwise. Ergo, some coins are definitely "backed" by the Fed. Maybe not literally, directly or explicitly, but not trivially either. Hence why I said "not entirely true".
Also, I wouldn't be surprised if the Plunge Protection Team was buying Bitcoin at every opportunity. Since the Fed is privately held and never audited, we'll have to continue to guess. However, given their penchant to buy up everything else under the sun, I think it's a safe assumption to make that crypto is part of their portfolio.
Soft landing isn't really an economic term. To the extent it is, I'm not sure anyone need celebrate the fact that the free-money policy of the last 16-ish years survived maybe 2-ish years with rates at any meaningfully positive levels.
As of now, we are in a rate-cutting cycle - an emergency 50 bps to start, with several more on the way. Another 50 bps are projected for this year, and another 100 bps for 2025.
That's more like rocket fuel for takeoff, not so much for landing.
One would guess the near term reductions will not be so large with the jobs numbers.
Interest rates are the Fed's (poor) tool to cool off the economy and slow the rate of inflation.
With the strong employment numbers, I would not expect another large rate reduction in the near term. Maybe a qtr point vs 1/2 point.
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Not sure I'm following, friend.
I wrote it wrong! Ha! Thanks; will edit.
1. Agree on the numbers we are given but all things equal they have always been that way, so it is a real measurement over the decades.
2. Medicare I love this subject, so much, self taught over hundreds of hours of reading/research that I wish I would have the drive to get licensed and help people because I know I can. I am going to start a new thread on this soon.
What you are seeing in Medicare right now and this is also affecting the Advantage C plans is contained in the Inflation Reduction Act (no politics please) is the reduction of the donut hole in medicare drug plans from $8000 to $2000. For those who will benefit from this it is a wonderful thing, for everyone else, well, guess what? Money has to come from someplace and that means everyone else. Hence much more cost in these plans now. There are also some other changes for those in the "C" plans driving up cost.
I was not aware of the 30% cost increase in Part F. I am going to start a thread one day on this. I am passionate about this subject and I have REALLY educated myself, I would stress to others to also look into Medigap plans A, F, N, G that use community pricing instead of age attained pricing. United Health Plans offer community pricing in all the plans from them I have seen. You can verify by checking on medicare.gov
3. Homeownsers will have me concerned when it renews next year, not sure what to expect. So far my auto insurance is still stable. I am one to check different companies MANY times a year for better prices. I switch on a dime for better pricing and do not wait until the current insurance expires.
4. Yeah, free borrowed money, well, that is what we still are running on, just look at the national deficit on www.usdebtclock.org
5. Bottom line, inflation is a symptom of way too much money floating around in the economy and unless people stop borrowing and spending it will stay that way until it crashes.
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I am not aware that they are held by either FDIC or OCC banks, or SEC or CFTC registered entities (eg broker dealers, FCMs, swap dealers). They may be in affiliates of these entities but that is so the parent or affiliate can walk away if it explodes. It may be in state banks that engaged in regulatory arbitrage / race to the bottom, but reputable counterparties know better than to deal with a state chartered trust. Again I am not going to argue the merits of crypto, but it does not have (reputable) central bank backing, and it would be misplaced to think regulators or central banks would act to prop it up if it falls precipitously in value. This is why the regulators have not allowed it in theregulated entities, they do not want to be responsible for it because there are significant risks of theft and loss.
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Well unfortunately the market did not see it that way, and is still overwhelmingly pricing in 4.00-4.25% target rate come January 2025 (69.8% chance, per the "29 Jan25" tab).
If this happens, it will be a boon for small companies because they depend on credit. It will also drive up home prices, at least around here.
JHZR2
Staff member
They are expecting lies and manipulation of data for speaking points, versus the reality that peoples’ real costs on most everything are going up and up, while real wages and take home is being reduced.
That most likely means the 30% or less will be right. I go with the flow and dont make predictions but in my corner of the country, boots on the ground, unscientific it seems way too strong still.
I'm obviously not saying that your local retail bank like BOFA is allowing mom and pops to deposit Bitcoin.
However, to my knowledge, CFTC registered entities eg. can hold cryptocurrency. In fact, the CME lists and allows trading of both ETH and BTC futures for exactly this purpose.
As well as now SIPC-insured accounts can hold crypto ETF's. If Bitcoin goes to zero, those Bitcoin ETF's go to zero, and those SIPC-insured accounts could be in trouble depending on their margin requirements. The option is certainly there.
Whether there are cryptocurrency swaps I have no idea. Probably not. I don't believe crypto options exist on the CBOE, either.
Edit: now that I think about it, there are even instances of FDIC Insured accounts being made whole as as result of crypto contagion.
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It's not a predictions market like Predictit.org, it's literally based on Fed Funds Futures and how the settlement price is calculated. I haven't checked the current Open Interest on those contracts but the number in dollars is staggering...
The ETF is not the underlying security, it is a separate thing. If you read the prospectus for those products, the creations and redemptions cannot be done directly by the broker. This is different than a traditional etf where you can show up with the basket of the underlying and get the shares.
As far as the FDIC goes bitcoin is NOT insured. If the bank held it, like a wine collection, the FDIC will seize it as part of the estate to be liquidated or otherwise sold to recoup its costs. But like the wine collection, other assets are not insured. They are owned by the bank pre liquidation and the FDIC comes to possess and dispose of those assets as receiver. That is NOT insuranc. In SVB, the FDiC used its systemic risk exception to insure over the limit accounts because many of those accounts were corporate accounts that for instance held payroll money. The companies using SVB unfortunately did a poor job of managing their exposure to a single institution. More prudent firms, when they have over the limit cash, will either hold treasuries, engage in overnight treasury repo with the big institutional dealers or banks, or sweep it. Point is insuring only up to the limit with SVB would have had knock on effects, that was the argument. But the FDIC insured all the cash in the accounts, period. Similarly if the broker failed SIPC would return your security, the ETF. But if it was worthless because bitcoin had gone to zero or the custodian had the bitcoin stolen from it, you now have a worthless security that would be returned. SIPC is not insuring the bitcoin directly or the value of the bitcoin.
Again, I don’t want to tell people what to invest in. But crypto of any sort is generally not going to be directly held by a federally regulated or insured institution and it is not going to be insured. Go in with your eyes open in this respect.
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Some ETF's do actually hold the coins. Some hold futures contracts. I think that is what you are inferring? Although letting wall street hold your bitcoin is an oxy moron, but I digress.
