Global Default

It’s going to hurt really bad when that $152 TRILLION in global debt comes due (225% of global GDP), one big fat global “oops we f@#$d up” default. And I bet there is A TON MORE they are not counting in that number.

http://www.bloomberg.com/news/articles/2016-10-05/a-record-152-trillion-in-global-debt-unnerves-imf-officials

just move to mars - no one will come after you

yawn your doom and gloom posts are getting old

That’s what the subprime holders told me 2003-2007. wink

When this trend ends, it’s going to be like the fist of god smashing into the Earth, directly where the insignificant country known as the USA is positioned. Bigtime ouchie.

Oops no more social security, no more medicare, no more interest payments to Chinese, the dollar who knows what that will be worth, global asset prices 1/2, all that made up money poof gone. What we need is a good old fashioned global recession to kick it off…

I mean, PA is right although the current leverage time bomb has plenty of room to run (could be a decade or two). Borrowing today is by it’s simplest definition current consumption subtracted against future consumption. It’s a temporal swap and people seem to have forgotten this lesson because in this structural shift which has been rising leverage in an above trend growth environment the principal feels free… or at least cheap with interest taken into account (low rates in low growth, historically mid-level rates in high growth over the past 30 years). And as long as it’s perpetually maintained through lender willingness the debt principal will be “free”. But when the next credit cycle turns as they inevitably do, likely in a low growth backdrop, the effect will likely be extremely painful. From an outstanding debt perspective we are in unprecedented times. The biggest reversals are often the result of people forgetting the simplest lessons under the guise of believing we have entered a new regime.

Edit: I’m not agreeing with his second post regarding magnitude or immanence.

I’m just having fun typing with my morning coffee. I called subprime in 2003 and waited. When subprime was blowing in 2008 I was busy calling US default (subprime triggered more debt). Now it’s 2016 and this is getting ready to blow, and thinking about what comes next.

I do not pretend to know timing or magnitude, but it seems obvious magnitude will be big. The US is going to default (mathematical certainty), and there’s no way that’s not a global quake. But central banks and fiscal spending could inflate the bubble for another decade or two for all we know. But the more pressure builds, the larger the eventual quake.

Astute, and bonus points for saying “temporal swap”.

I’m not sold on a US default though. May have to fire up the presses at some stage.

did you call the tech bubble in 1992 as well?

^ Nope, I was not in markets, before my time.

I think 32X SPX P/E would not have been hard to notice by 2000 or whenever.

i was pointing out that you were an entire cycle early in your call. hardly something worth bragging about and/or even mentioning.

I was early in my understanding that the problem was coming, then sold everything Q4 '07. Just like I still hold assets now, yet know this is coming, and have puts in place.

There’s nothing more worth bragging about , that’s the pinnacle of investment calls; saw it from the start and timed it. cool

Goldman guy states obvious. Why would this global slow down suddenly reverse? Companies haven’t been doing anything to prepare for the future for years, just buybacks with all their earnings. Revenue next year, comes from actions in prior years. There’s nothing on the growth horizon except sideways or down…unless you get some wacky global fiscal policy push, which just means more debt, bigger bubble.

“I don’t see this changing,” Cohn said Friday during a panel discussion at the Institute of International Finance meeting in Washington. “We keep saying we’re getting closer to the end, but I don’t think we’re getting closer to the end."

http://www.bloomberg.com/news/articles/2016-10-07/global-economy-shows-few-signs-of-growth-goldman-s-cohn-says

Okay, so are the central banks now saying they are out?

There seems to have been a change in mood. They had to give up on their market manipulation schemes eventually. Is it basically “okay Obama is out now, he saved the economy or whatever, now we can take the props out, and maybe try fiscal props”?

Greenspans says “there’s only one way rates can go, and that’s up”, and that means defaults, because revenue sure has hell isn’t there…

Obama’s Successor Inherits Bond Market at Epic Turning Point

I’m not sold on a US default either; however, I do worry about another credit crisis in the next few years. I do inter-corporate investing at a large corporation and have to also do credit analysis on several hundred companies a year. What we’re seeing is that balance sheets for private companies and quite a few public companies are becoming very leveraged due to low interest rates. Many companies are now pushing their maturity dates out to Late 2017-Early 2019 because they don’t have the capacity to pay back their debt.

Been calling for defaults for the longest time. CDS data show no signs of that happening. Ignore noise… research, project, and invest.