Trapped on the third rock from the sun with billions of people suffering from Dunning-Kruger effect.
New York, USA
Joined December 2018
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Must be a Dalio disciple. This is a stupid a measurement. We are a global economy. And, what is the value of Americas equity?
THE LONG-TERM DEBT CYCLE IS UPON US!
What is the long-term debt cycle, you ask? Read this and don't say I didn't warn you!
Here's how governments run this cycle:
1. Fuel economic growth by incentivising private sector to take on debt. Debt brings spending forward, stimulates the demand, funds investment.
2. Keep calm and keep going until private sector is drowning in debt.
3. Once private debt becomes crippling, bail out the private sector. Convert private debt into government debt by putting it on the government's balance sheet via fiscal deficits and monetary policy.
4. Well done, comrade! Private sector has more capacity to take on more debt. This is the start of another business/credit cycle, also known as the short-term debt cycle.
5. Once the private sector reaches the debt limit again, convert its debt into taxpayers' debt. Again.
6. Keep going and continue incentivising the private sector to borrow more, occasionally putting its debt onto a government's balance sheet. With every cycle, private and public debt reaches higher highs and higher lows and the total debt keeps growing.
7. To slow the pace of these short-term debt cycles, run a mild level of inflation in the background and structurally decrease interest rates to make debt servicing more affordable.
8. Once rates hit zero and the government capacity for debt is reached, inflate the debt away via currency debasement. Force domestic holders (banks, pension funds) to own your bonds, run large budget deficits, increases spending, supported by central bank debt monetization. Hold rates below inflation and below nominal growth. Debt to GDP drops. Job well done.
9. Start the cycle again.
The chart below shows the intricate dance between private sector and government debt in the US.
You can see the end of the previous long-term debt cycle in 1930's. Private debt peaked via a combination of modest deleveraging, gold revaluation, and nominal GDP growth.
The Federal debt exploded shortly after via massive fiscal deficits that were monetised by the Fed. The debt was then deflated away via a combination of low rates, high inflation, and high nominal growth.
Over the last 50 years, you can also see how private debt reductions are accompanied by public debt growth, most notably in 2008. While we passed a recent peak in private debt, the government debt keeps on rising with no end in sight for deficit spending.
😂 @grok what is the definition of gaslighting?
I don’t get why coaches don’t take the free field goal early in the game against a good defense. Washington could just kick a field goal now and be tied.
I’m on the Drew Lock bandwagon. Get rid of Darnold. Terrible. Led the league in turnovers last year and he’s on his way this year. We just need someone that knows how to not turn it over
Masters of Fintwit retweeted
So umpires are getting scrutinized and lambasted for missing pitches an 1/8” of an inch to an inch off the plate that really isn’t the plate as MLB only counts the back half of home plate. Imagine being told you are wrong by a computer that the pitch you called a strike because it caught the front half of the plate is actually a ball. Then getting crap from all the younger, nerdy generation because it’s so EZ to tell if a pitch is a strike at 100 mph or a ball from your fucking couch. Get a grip people. They won’t call the real zone because hitters would struggle more than they do now. Imagine that.
Masters of Fintwit retweeted
To visualize what I mean:
Here’s a simulated market where valuation has zero predictive power by construction.
Yet persistent valuations and overlapping 10-year windows can still produce a strikingly high in-sample R².
357 dots is not the same as 357 independent experiments.
These are some wild bs flags. Roughness penalty on a punt. The guy junked the first guy and got hit by the second. How is that possible?
If you’re doing retirement planning how do you account for long term care? It is expensive and eats into your estate is the argument.
The premiums for LTC are expensive. The average cost for a couple starting at 65 for policy benefits starting at $165,000 is $7,000 a year with the woman being significantly higher. The average age when someone enters into a home is 83.
This means you will have paid $7,000 a year for 18 years before needing it. If invested at 8% a year that equals $262,000.
Your benefit at $165,000 compounding at 3% a year is $280,000.
Not much difference.
Entering into retirement planning, if I assume my expenses are going to be $70,000 a year to cover food, water, shelter and entertainment I am expecting those expenses to be paid from my social security, pension and retirement planning distributions and savings. Essentially, the $70,000 with inflation is what I am going to consume if I live through the end of the plan.
What happens if I end up in assisted living or FT memory care?
Do I all of a sudden have an ADDITIONAL expense of $6500-$8,000 a month?
28% or people need to be in care for more than 90 days.
If I move into the assisted living facility, what is the net new cost for me?
I don’t need entertainment, Netflix, eating out, food, utilities, property taxes. I’m living in all-inclusive resort.
When you plan vacation and compare an all-inclusive resort to a resort where you have other costs, you compare the net cost. You don’t add all those costs to your all inclusive vacation.
If I didn’t go into assisted living I was going to consume the money anyways. It isn’t going to change my balance sheet.
Let’s assume right off the bat I have to have expensive care at $8,000 a month. I’m spending $5,833 a month to begin with. The net expense is going to be $2200 a month. This will be more for a period of time as I transition to the home- Does my family sell the home? Rent it out? How long does it take to go through my stuff and get my house ready?
$2200 a month is a lot. But, now I have a lifestyle asset that converts to an asset that can now fund my needs. Letting a home sit empty for years is a waste. You’re going to rent it out or sell it, invest the proceeds. Most likely this will offset the difference.
No one buys insurance though based on statistics. I have homeowners insurance because if my home burned down it would be catastrophic and the small payment is insignificant versus the cost to self insure. Same with car insurance or an umbrella. Are there cases where LT care insurance is needed?
Could I need greater care for a long period of time and earlier than expected? Absolutely.
Will some people not be able to afford care? Absolutely. But are these same people able to cover the $3,000 to $7,000 annual premium?
However, when I look at the premium, the net effect to my expenses, the FV of the premium payments, the capped benefits, the delta between the self invested premium payments and the capped benefits, I find it very difficult to want to pay. Maybe if I was active, fit mobile and my spouse led a very different lifestyle would I consider it. I would not want to be someone that could live to 95 and have to fund my spouses care. I’d also take care of them for as long as humanly possible because that’s what we do for the people we have made commitments to. In this case, my expenses would go up.
LTC if structured differently could better product. Like you covered the majority of the expenses first, like the first $150 a day and that it then pays for the excess.
A common heuristic/mental shortcut is mental accounting and it shows up in dividend investing and causes investors to underperform buying 🐕 💩 companies that pay a high dividend
In 25 years I’ve never had a client need LT Insurance. Yes, many have them have ended up in LT facilities at some point-up to a decade.
It’s an all inclusive resort. Other expenses are gone. Sell your house, rent it out, cover the payments. You’ll be fine.
Studying Representative Bias. Amazing how often people- publicly, in the media share their views and no one ever mentions it. This period looks like 2000, private credit looks like 2008, interest rates were at x before 08. The entire financial media is built on this framework
I just got upset at the roofer for doing it wrong because if CharGPT. Turns out Chat was wrong and now I look like an idiot