And still the perma bulls haven't appeared on this thread to explain to us why there is reason for optimism on an exit plan.... I wonder if the plan was Gov take companies into public ownership. Inflate asset prices with tons of QE then privatise the companies again at a huge profit and use that to pay off some debt?
Case for equity bulls. I used to have an old engineer friend, he was fascinated with Germany/Austria/Switzerland's perfectionism, he used to tell me that what happened in Germany (hyperinflation) would later happen elsewhere on this planet.
You are confusing equity market sentiment with the US ( UK ? China ? ) economy. Common mistake made on here from 2009-2011. Equity markets will go up or down based on corporate profits. In 2010, there were numerous studies showing that the best Dow components were multinational companies not depending on depressed US consumer markets. The worst 5 performers were largely US based businesses. There is a case to be made that US policy encourages excellent corporate results at the expense of average to poor Americans. In that scenario, NA equity markets will still do well no matter how good or bad the domestic scene trends ( unless it's extreme ). Anyone wanting to share in that "prosperity" has to own the companies. Unfortunately, the media and some advisors/traders scared a lot of people out of equities in 2008/2009/2010 and many missed out entirely on the market recovery. I don't think doomsday predictions from you are helpful in that regard either. My opinion, once the short term corrective phase is over ( and I have no idea what is the right level; the TSX is starting to get somewhat cheap ), the bull will start again for 2-3 years roughly. Might be a very moderate gradual move, or be an impressive move that confounds some of you. The trick is defining the bottom now, and having the courage to buy that bottom. Anyone sharing your sentiment of the US economy going to collapse will never enter long, no matter how low the indexes go, because the economy will not tank as bad as you think the next 5 years. In fact, most analysts I followed here think the US economy is in decent shape now. If you want a solid case as to why the US won't collapse, look to Canada as an example. Things never get extreme on the good or bad side here. The TSX has traded a much more consistent and narrower range through all the US turmoil. The housing market has been a bull for 25 years. Interest rates never hit 0%. Personal tax rates have trended down for 15 years. History says the US system usually outperforms Canada corporately long term. Is this time really different ? I doubt it, US tends to be resourceful enough to take care of things.
No assumption was made, i just checked the figures that are public domain. To be blunt, almost nothing on this topic impacts me personally, I'm Canadian. If you and other Americans think your country is going to hell, well, so be it. Americans have underpaid on their personal taxes and failed to develop fair social systems for decades, and perhaps some pain is coming trying to rectify these ills. If all you see is nightmares coming, well, it's your own doing as Americans whatever happens good or bad.
I'm asking you to explain Greece, Italy, Portugal, Spain, Ireland and Iceland. And Argentina, for that matter. Those are recent examples where debt-to-GDP ratios mattered very much, and ultimately led to a catastrophic collapse in their Government bond markets, with grave social consequences. That said, the PIIGS were spared by the FED, ECB and IMF through monetization and swaps. So a full collapse never took place. I'm asking you to explain that phenomenon since it was you that said debt-to-GDP levels aren't that relevant in todays world? I am being polite and respectful here. I would love to hear your perspective. As for Canada, I am a Canadian too. Live outside of Toronto. 25% of Canadas GDP are exports to the United States. We benefit from one of the largest trade relationships in the world, as a net exporter. What happens if and when America falls out of bed? What happens to 1/4'er of our economy that is basically US consumption, when US consumption drops off a cliff? Meanwhile, Canadian real estate values are experiencing probably the biggest bubble in a 100 years? And we're in full agreement about US social programs funded through debt. Also reflects a shrinking tax base from offshoring. Export jobs, import debt to pay for growing social welfare programs to buy votes.
An American living in New York City has a higher tax burden than a Canadian in Ontario. Put that in your pipe and smoke it.
What is your point ? I clearly said that Canadian tax rates have dropped the last 15 years. However, if you would like to go back to the 1980s, when I first started working, the tax bite in Ontario on even a new graduate was massive. In fact, many new professionals in Ontario were considering moving to the US and tax levels were a factor. Of course, in the 1980s, Canadian mortgage rates went over 20% and the federal government ran huge deficits. Yet somehow a decade later there were surpluses for some years and interest rates normalized. When I see the young doomsday posters on here thinking the world has never had debt issues, I know from the past this is NOT the case, some "dire" forecasts existed before the boom period of the 1990s.
Canada's debt-to-GDP during the 1990's crisis was ~70%. America currently sits at ~101% debt-to-GDP.... Paul Martin slashed spending and raised taxes to balance the Federal budget and generate surpluses. That is not happening in America, anywhere. Deficits are still running high. QE is still being run up. Expenditures are not being cut, at all. ACA just heaped more fuel on the fire. http://news.nationalpost.com/news/c...-crisis-in-the-90s-can-and-cant-teach-the-u-s
September 28, 2015 Will it get worse before it gets better is addressed financially in the last paragraph which is the culmination of concepts laid out in the following paragraphs. I am certain, for all of us like frogs continuing to swim in the increasingly heating water --as it has been done in the last few decades--always getting acclimated to lower quality of life and satisfied to live in the always declining new normal, austerity will be talked about with increasing frequency and with more pucker factor seven to eight years from now. At that point, we will have lots of Greeks to ask the question, "How is that austerity thing working for you ?" I will explain more fully in the following. For those over 60, you may recall 25 to 35 years ago the bean counters in D.C. were warning the politiicans, and they in turn--many of them--either told us or at least alluded to for all those years, the need to make changes "now" because it will get harder the longer we wait to change. WHAT ?....35 years from now is forever. Plenty of time to procratinate. With 15 years remaining till budget becoming 50% interest on debt service, I am sure seven to eight years from now, the frequency of talk on the subject will be up....people will be talking with increasing excitement, no longer exclusively in the domain of Tea Party activists. Manifestations of austerity will no longer be lurking. Hot frogs will find it becoming more difficult to acclimate. My apologies to those of faith. The great Sataan--the great deceiver--was more or less since 1990 and will continue to be Technology and increased cultural diversions. The video is an hour long and for me plays much like a book you can't put down. A number of witticisms are spiced throughout. Technology--one edge of its sword-- and cultural diversions mask or divert us from the reality of what is decreasing quality of life and the pain to come. We have so many things in this arena--we surely will see more and bigger things to come--that has allowed us to take our eyes off the ball. Each of us sit somewhere on that spectrum between "minimum to tilt"--the latter in which probably most of the electorate resides IMHO. It certainly fits the description of the Soma that Aldous Huxley wrote about in the classic Brave New World: "I don't understand anything," she said with decision, determined to preserve her incomprehension intact. "Nothing. Least of all," she continued in another tone "why you don't take soma when you have these dreadful ideas of yours. You'd forget all about them. And instead of feeling miserable, you'd be jolly. So jolly." http://www.huxley.net/soma/somaquote.html Will it get worse before it gets better is more of a trader's question. Thinking like an investor, the trend is more significant. The magic of compound interest is a two edged sword, looking at it as a saver or a debtor, the latter going up vertically on an axis measured in money. Halting or even arresting that curve don't seem to be practical reality anymore than a dent on that plot. In just over a half dozen years, the clamor will come from the increasingly excited when even a dent can no longer be seen on the graph. There is hope for timely applied technology to be our saving grace. In trader talk, hope is not a strategy. At best, it is a participant in a race against capital capitulation, and declines in both liberties and quality of life. The finish line is relatively soon.