Major shift in sentiment on this board

[opihiman2]

I haven't been on here in quite awhile, and whenever I do pop on, I only manage to peak at a few posts.  However, I've noticed there seems to be a lack of any discourse on macroeconomic problems and issues.  Has sentiment shifted so much with the rising S&P?  I'm wondering what everyone on here thinks will be likely, in terms of macroeconomics, over the next five years.  

 

Thanks

[Myth465]

I haven't been on here in quite awhile, and whenever I do pop on, I only manage to peak at a few posts.  However, I've noticed there seems to be a lack of any discourse on macroeconomic problems and issues.  Has sentiment shifted so much with the rising S&P?  I'm wondering what everyone on here thinks will be likely, in terms of macroeconomics, over the next five years.  

 

Thanks

 

I think with the rebound in the markets so goes the macro. I also think we are just burned out on Macro. Those wanting Kraft, WMT, BRK, Target, and other top tier companies at 5 x FCF are still holding there cash waiting for armagedon. They will be right one of these days with a pull back, but I predict they will still  be holding cash waiting for all hell to break lose. The rest of us will probably buy low and sell high, or at least try to.

 

I dont think there is a shift, I just think the doom and gloomers are quiet for now. They have missed a massive rally, and have nothing to really brag about. They will return when something tips things back to being negative (muni bond, euro, us debt, state budget, other).

 

With that said the market is ahead of itself and we are probably borrowing from the future. Profit Margins are at an all time high, oil is going up which will squeeze the consumer, and the market is just generally way ahead of the economy with regard to a recovery. I expect a pull back followed by a rally followed by a pullback.

 

With regard to 5 years out. In 5 years I think everything will be gravy as long as the market doesnt get too far beyond mainstreet. We are 3 years into a 7 year process. I think we will continue to muddle through, going from crisis to rally and back again for a few more years.

 

Thats my 2 cents, overvalued as usual.

 

 

[Guest broxburnboy]

I for one don't buy the "recovery" thesis and if anything am more bearish than ever. I don't think you can interpret the silence on "macro" issues as acquiescence to a cheerier outlook.

Here's the annual commentary from Vertex One Asset management (I am a long time unit holder of theirs) that speaks to the sovereign debt reality as well as anyone:

 

http://www.vertexone.com/commentary/vertex-fund.html

 

[SharperDingaan]

 

The macro is still there, it's just that nobody wants to hear it.

http://www.theglobeandmail.com/report-on-business/top-business-stories/united-states-a-reclining-world-power-mark-carney-says/article1880471/

 

The good news is that the directions are becoming progressively more enevitable (euroland shrinkage, changes in reserve currencies, co-ordinated global write-off/re-structurings, Bretton Woods III, etc) & more binary. The bad news is that denial is worsening (US Muni's, US fiscal deadlock, Euroland budgeting, etc.)

 

We think the US will ultimately have to do an Icelandic type restructuring, but there will be a lot of company.

 

SD

 

 

[bmichaud]

"We think the US will ultimately have to do an Icelandic type restructuring, but there will be a lot of company."

 

aka the US federal government is at risk of default? Or do you mean the private sector is at risk of default, i.e. states and municipalities.

[shalab]

>changes in reserve currencies

 

Which is the alternate reserve currency? Is it the yuan or the indian rupee? Actually, I like the canadian dollar better than these alternatives  ;D. There may not be enough of it to go around.

 

 

[scorpioncapital]

i think people don't even know what they are doing is so psychologically cliche. First they panicked, then they got depressed, then they took money out of stocks, then they missed a massive rally (as always happens like day follows night after a business depression), then they went silent, then they are hoping for a drop, then they buy in, then they lose money again. What is important to realize is that these are all cycles we've seen before over and over and over again and people are impatient. The chatter is counter-productive if you listen to it and believe it.

 

I went to a metals conference recently, I remember 2 years ago in the depth of the crisis, the registration lineup was almost empty, nobody was interested at the bottom. Yesterday, when metal stocks and commodities have gone up 100%, the line-up was right up to the escalator! People in the aggregate behave very similar to sheep, it's beautiful to watch as long as you remain detached from the madness and take their money. The only constant is the predictability of human over-reaction - that and the pretty girls in business suits that usually show up at these shows :)

[goldfinger]

I think with the rebound in the markets so goes the macro. I also think we are just burned out on Macro. Those wanting Kraft, WMT, BRK, Target, and other top tier companies at 5 x FCF are still holding there cash waiting for armagedon. They will be right one of these days with a pull back, but I predict they will still  be holding cash waiting for all hell to break lose. The rest of us will probably buy low and sell high, or at least try to.

 

As some members justly noted in this thread the macro is still there even more threatening and sheeps are just who they are, changing of opinions along with promises from the FED and increasing markets. I was all in late 2008 early 2009 but at this level markets look frothy at best. Soon we will be close to 2006-2007 levels where the market was very expensive in the middle of one the biggest housing bubbles ever, when world imbalances really can make this recovery tip over on a dime.

 

By the way I have a decent bet on ATPG that I like at this time, so we are still partners in crime on some opportunities.

[Packer16]

The real macro question is are we at a sustainable demand level?  I would think we are but I am not sure.  The one thing I know for sure is that further "investment" spending by the gov't in theory is good but in practice is going to be a disaster.  Maintenance is fine but the large "investment" projects that billions is being spent on have dubious economnc rationale at best and appear to be a collasal waste of money. 

 

The direct transfer payment (tax custs) may help demand if they can be made permanent by cutting some of the wasteful "investment" projects like high speed rail in areas that cannot sustain a viable train link now (like upstate NY) and biofeuls, where the gov't is subsidizing the production cost to the tune of $1.00 per gallon, requiring mixture with gasoliine and the only way new plants are being built is with gov't guarenteed loans and grants.  For the biofeuls to be viable (in the open market) you need over $100 per barrel oil for a long time.  Why is the US subsidizing this uneconmic production?  I can understand R&D support but commercial production?  The amounts being spent are on the order of $15 billion per year for biofeuls alone with much more on other "alternative" sources.  This is the worse kind of malinvestment because it not only wastes taxpayer money but it also diverts resources from other engineering/science problems that have a higher economic value.

 

 

Packer

 

 

   

[Guest Bronco]

Maybe the value plays are gone, but we probably keep going up, forming the new bubble. 

 

If we had trouble in housing before, how will homeowners afford new homes in the future with higher rates?  How will government refi their debt?  Or maybe we just keep low rates and watch some form of inflation bubble be created. 

 

Not sure where next bubble is but it will be here in a couple of years.

[SharperDingaan]

 

Sovereigns don't default, they 'restructure'. Put a fed guarantee on 20-40% of all the entire agency, muni, state, & fed debt in the US - & reterm the entire thing out to 100yrs plus. Take the new note, or take a haircut - your choice.

 

2-3 major currencies for regional trade purposes, & SDR's between sovereigns only. Bretton Woods III to fix the rate. 3 yr renewable limitation on trading block admittance becomes commonplace. Automatic evictions triggering changes in government become a common occurrence. Play by the rules or lose your head - your choice.

 

SD 

[Guest broxburnboy]

The real macro question is are we at a sustainable demand level?  I would think we are but I am not sure.  The one thing I know for sure is that further "investment" spending by the gov't in theory is good but in practice is going to be a disaster.  Maintenance is fine but the large "investment" projects that billions is being spent on have dubious economnc rationale at best and appear to be a collasal waste of money. 

 

The direct transfer payment (tax custs) may help demand if they can be made permanent by cutting some of the wasteful "investment" projects like high speed rail in areas that cannot sustain a viable train link now (like upstate NY) and biofeuls, where the gov't is subsidizing the production cost to the tune of $1.00 per gallon, requiring mixture with gasoliine and the only way new plants are being built is with gov't guarenteed loans and grants.  For the biofeuls to be viable (in the open market) you need over $100 per barrel oil for a long time.  Why is the US subsidizing this uneconmic production?  I can understand R&D support but commercial production?  The amounts being spent are on the order of $15 billion per year for biofeuls alone with much more on other "alternative" sources.  This is the worse kind of malinvestment because it not only wastes taxpayer money but it also diverts resources from other engineering/science problems that have a higher economic value.

 

 

Packer

   

The very worst kind of gov't malinvestment is the military, particularly the wars started in 2003/4 in the Middle East. The costs to the taxpayer are so outrageous, the corruption so obvious, that they've had to impose a news laundering embargo on the whole sordid mess. They also sold the public on financing it with tax cuts!

So the accumulated deficits are blamed on social programs, the same kind (education, health,social infrastructure investment) that have propelled China, Brazil etc. into the forefront. Social Security in the US has been a net contributor to cash flows until recently, but it is being singled out as the most likely to be restricted. So the problem remains, the laundry list of new potential wars is publicly debated on the flimsiest of pretexes... Meanwhile the printing press runs overtime, deficits accumulate, unemployment worsens, the housing market "stalls". There is a liquidity driven rally in the stock markets, the bond markets are held aloft by massive government buying and inflation is officially denied. Ah for the "green shoots" of yesteryear.

[Guest Bronco]

Bronxburnout, I need posts like yours to keep me motivated.  I was getting depressed by the government taking 15% of my pay for social security and medicare.  But now I feel better that in 30 - 40 years I will get a small slice back of what I put in.

 

 

[Guest broxburnboy]

Bronxburnout, I need posts like yours to keep me motivated.  I was getting depressed by the government taking 15% of my pay for social security and medicare.  But now I feel better that in 30 - 40 years I will get a small slice back of what I put in.

 

Keep drinking the Kool-aide, it soothes the pain.

[Myth465]

broxburnboy - Its quite ironic that deficit hawks are also war hawks. Interesting times.

[beerbaron]

When I look at the cash in portfolio thread it seems to me the board sentiment is all over the place. Not even close to a normal bell curve. So there are no consensus on this!

 

BeerBaron

[stahleyp]

Buffett has said there are only a few times in someone's investment career where it's fairly easy to determine if the market is priced very high or very low. Otherwise, it's not good to worry about it much. That's the stand I'm taking because I can't time it (usually).

[Packer16]

I agree you on wars.  We need to decide where the US interest is trully at stake.  Usually when the gov't gets involved you get a central planning solution.  In some cases this is an advantage (running a war and developing infrastructure) but in most cases it results in waste.  I think the problem that most have with Obama is not his goals (although some do) but his central planning approach to problems.  He would be more succesful if he used a decentralized approach to solve problems versus central gov't approach so he is not fighting 2 battles at once.

 

Another point is that I think the success of China and Brazil has little to do with social spending and more to do with cheap manufacturing (China) and high natrual resource prices (Brazil).  The folks that have done most of the centralized spending (Japan and Europe) have the worst situations.  I think in part this is due to centralized approach to investing (which can work well on short problems and "catching" up to others) which has not created innovation outside of the planners scope, who usually are wrong.

 

Packer  

[Guest Bronco]

People realize Obama is a nice guy and a great orator but a complete neophyte.  It is hard to criticize Bush on Medicare D in comparison to this giant health care plan all but guarantees the death spiral of America.

 

The wars are unpopular and I won't argue the merits, but even their price tag will be tiny compared to this giant health care plan.

 

The unfortunate truth about health care is we want to provide unlimited health care benefits, care for everyone, and extend life to the max.  While this should be everyone's goal (we are all human and compassionate), it is not economically possible. 

 

I agree with some of the comments earlier about military spending, but so many areas need to get cut.  So many. 

 

[Guest broxburnboy]

Medicare and Social security will add to the coming deficits, but the problem now is the accumulated past deficits- the national debt. The main contributor to that is past military spending.  Revoking medicare and deindexing social security will only ensure that the downward trend flattens.

In order for a country to lift itself up from third world to second, from second to first it requires  A stable government with wealth enhancing policies, a minimum and increasing literacy rate, a minimum communications infrastucture, high standard of public health and security.

These are all public investments, so the process can be long with many setbacks, but some winners have emerged.

The opposite is true .. declining levels of education, dropping literacy rates, declining public health as reflected in birth mortality rates (as opposed to # of debutante's boob jobs), rise of internal public "security" and the marginalization of the middle class are all typical of economies going the other way.

[rmitz]

Buffett has said there are only a few times in someone's investment career where it's fairly easy to determine if the market is priced very high or very low. Otherwise, it's not good to worry about it much. That's the stand I'm taking because I can't time it (usually).

 

Agreed.  Also, I just thought we were all sick to death of talking about macro. :)

[SouthernYankee]

"Medicare and Social security will add to the coming deficits, but the problem now is the accumulated past deficits- the national debt. The main contributor to that is past military spending.  Revoking medicare and deindexing social security will only ensure that the downward trend flattens.

In order for a country to lift itself up from third world to second, from second to first it requires  A stable government with wealth enhancing policies, a minimum and increasing literacy rate, a minimum communications infrastucture, high standard of public health and security.

These are all public investments, so the process can be long with many setbacks, but some winners have emerged.

The opposite is true .. declining levels of education, dropping literacy rates, declining public health as reflected in birth mortality rates (as opposed to # of debutante's boob jobs), rise of internal public "security" and the marginalization of the middle class are all typical of economies going the other way."

 

I have not posted here often, in fact, this might be only the 2nd or 3rd time I have ever replied to a post.

I notice that whenever discussions take on political issues, there are a lack of links to go along with the facts? (opinion?) written on these pages. A link is always treasured, because I love to question the beliefs that I hold, to make sure I am being honest with myself. These political questions (military spending vs social programs?, is Social Security a government Ponzi scheme, etc, etc) are definitely questions  I have to  re-visit time to time to see if my beliefs can withstand some scrutiny.

 

[Myth465]

 

I notice that whenever discussions take on political issues, there are a lack of links to go along with the facts? (opinion?) written on these pages. A link is always treasured, because I love to question the beliefs that I hold, to make sure I am being honest with myself. These political questions (military spending vs social programs?, is Social Security a government Ponzi scheme, etc, etc) are definitely questions  I have to  re-visit time to time to see if my beliefs can withstand some scrutiny.

 

 

Its all opinion  based on ideology. These are the best 2 links I could give you.

 

Commentator's Disease - http://www.fredoneverything.net/Commentators.shtml

 

I often see victims of Commentator’s Disease arguing against the minimum wage on abstract grounds of economic theory. It is what commentators do—bandy abstractions, railing for or against Keynes, assaulting their ideological opponents with pointed phrases. They have never had to do the arithmetic of forty times the minimum wage minus taxes minus bus fare minus rent and gotta pay the cable because it is the only thing they have after work. They have never had to choose between the electric bill and a new coat as winter comes on.

 

The commentators don’t realize that not everybody is like them. Those with IQs of 140 and up (130 gets you into Mensa, I think) unconsciously believe that anything is possible. Denizens of this class know that if they decided to learn, say, classical Greek, they could. You get the book and go at it. It would take work, yes, and time, but the outcome would be certain.

 

They don’t understand that the waitress has an IQ of 85 and can’t learn much of anything.

 

Conservatives think in terms of merciless abstractions and liberals insist that everyone is equal. Not even close. Further, people with barely a high-school education and low-voltage minds regard any intellectual task with utter discouragement.

 

Some commentators urge letting people invest their Social Security taxes in the stock market. To them it is a question of abstract freedom and probably the Federalist papers. The commentators are smart enough to invest money. I’ll guess that at least half the population isn’t. Go into the tit bar (does it still exist) in Waldorf, Maryland, and ask the dump-truck drivers and nail-pounders what NASDAQ is.

 

Liberal commentators want everyone to go to college, when about a fifth of people have the brains. Conservatives think that people can rise by hard work and sacrifice as certainly many people have. Thing is, most people can’t. Commentators only see those who made it.

 

Good link, worth the read of the whole thing.

 

------

 

2nd link is more of a quote.

 

John Maynard Keynes - The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly

exaggerated compared with the gradual encroachment of ideas.

 

I believe this applies to us all. Most of the bad or great ideas out there that are being proposed can be tied back to 5-10 economists. Strange isnt it.

 

------

 

We are all just bloviating based on our political ideology / mindset. Buffet's dad was a raving conservative, him and gates are left of center. Its just personal choice. Its a great way to blow off a few hours of work, but I wouldnt take it too seriously.

 

There are an army of accountants, economist, and political hacks on both sides of the issue that one could argue almost anything. I would just go with the one that feels right, and try not to be so dogmatic about the whole thing.

[omagh]

Through all the fluff  ;) about macro, I haven't changed my discount rate -- have you?  I am not finding as many undervalued companies as when the markets were obviously underpriced.

 

-O

Buffett has said there are only a few times in someone's investment career where it's fairly easy to determine if the market is priced very high or very low. Otherwise, it's not good to worry about it much. That's the stand I'm taking because I can't time it (usually).

 

Agreed.  Also, I just thought we were all sick to death of talking about macro. :)

[Guest broxburnboy]

 

"We are all just bloviating based on our political ideology / mindset. Buffet's dad was a raving conservative, him and gates are left of center. Its just personal choice. Its a great way to blow off a few hours of work, but I wouldnt take it too seriously.

 

There are an army of accountants, economist, and political hacks on both sides of the issue that one could argue almost anything. I would just go with the one that feels right, and try not to be so dogmatic about the whole thing. "

 

Unfortunately there is more to this than an ideological dichotomy, with only 2 sides spinning their point of view, promoting  their own narrow interest. There are real and measurable consequences to obviously failed fiscal and monetary policies. If remedied..there are real and measurable benefits to the economy and the public good.  If continued the pain will be eventually greater.