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End of Golden Era for Investors Spells Troubles

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Re: End of Golden Era for Investors Spells Troubles

#81

Post by TheCoelacanth »

kabouseng wrote: post #29
cm2187 wrote: post #16

Earlier quoted context omitted.

The amount of debt that the baby boomers will leave behind is a very objective thing. This is the biggest accumulation of debt in peace time in the history of mankind (and objectively the parents indebting their children to buy a shiny new TV, a behaviour that would be universally unacceptable if it wasn't state wide).

Sorry this is taking your comment on a tangent, but it is not exactly peace time for the USA, nor has it been since the 1960's or arguably since WW2 if you take the cold war into account. The USA has been involved in one or another war for literally decades now...or does minor wars not count?

Post WW2 has been one of the most peaceful periods ever in human history. It might not be peace in the absolute sense, but it's about the closest humans have ever achieved.

Re: End of Golden Era for Investors Spells Troubles

#82

Post by [deleted] »

awakeasleep wrote: post #79
Amezarak wrote: post #70

Earlier quoted context omitted.

The US federal debt was even higher in the wake of World War II. The US government did not run surpluses and deleverage in the following decades. The economy grew, without hyperinflation, and the debt became irrelevant. The solution to high levels of debt is sustainable economic growth, not deleveraging. Mass deleveraging would be an economic catastrophe.

Wasn't the US's situation post-ww2 sort of unique? This sort of sounds like "just win the lottery again" type advice.

[deleted]

Re: End of Golden Era for Investors Spells Troubles

#83

Post by msandford »

RobertoG wrote: post #65
cm2187 wrote: post #63

Earlier quoted context omitted.

The sort of inflation we are talking about here is when the government will print money to pay their debt. This type of inflation will be wiping out savings and pensioners.

So, we agree that default is not an issue? If there is any doubt here is in the words of Alan Greespan: "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default" http://www.cnbc.com/id/44051683 Can we agree also that inflation is not a problem at the moment?

"Technical default" and "Effective default" are obviously different, but if the purchasing power of the dollars you're paid in are only 1% of the dollars you've loaned, that's effective default.

If the government practices effective default over a period of 50 years most people don't really get it. If the government practices effective default over 3-6 months, everyone will understand and it could be very destructive. It would definitely cause a lot of social unrest.

Re: End of Golden Era for Investors Spells Troubles

#84

Post by Retric »

Amezarak wrote: post #70
cm2187 wrote: post #14

I think it can get much worse than that. I don't know why people think the current levels of accumulation of debt are sustainable but there is a limit to what even the US can roll in term of debt. All developped nations are at around 100% debt to GDP, more than 200% if you include private debt, and growing at 3-5% per annum. Now does anyone really think that sometime soon any developped country will start making publ…

The US federal debt was even higher in the wake of World War II. The US government did not run surpluses and deleverage in the following decades. The economy grew, without hyperinflation, and the debt became irrelevant. The solution to high levels of debt is sustainable economic growth, not deleveraging. Mass deleveraging would be an economic catastrophe.

US still has a significant chunk of WWII debt after one of the greatest sustained economic booms of all time. Growth really is not the answer.

Inflation sounds great, just default without technically defaulting, until you actually see what it does to the economy. The real solution is to simply spend vastly less money accepting that pain now is better than letting the US become a failed state.

Re: End of Golden Era for Investors Spells Troubles

#85

Post by hibikir »

cm2187 wrote: post #14

I think it can get much worse than that. I don't know why people think the current levels of accumulation of debt are sustainable but there is a limit to what even the US can roll in term of debt. All developped nations are at around 100% debt to GDP, more than 200% if you include private debt, and growing at 3-5% per annum. Now does anyone really think that sometime soon any developped country will start making publ…

Of course we won't see deleveraging from countries. It's just not important at all for countries having their own currency, or a currency-issuing central bank that is committed to that country's health.

As far as debt levels, talking about debt/gdp ratios by itself is not meaningful. What is important is how expensive is debt servicing, and the current rates are about as low as they have ever been.

As far as inflation goes, look at TIPS spreads: they predict having very small inflation for many years. To expect high inflation is to think one is far better than the market at predicting the future: If you are the one person in the world that can really do that, riches await you.

And finally, savings won't be wiped out, even in that scenario you describe. There are plenty of ways to keep wealth safe to every risk you mention, if you really believe in it, in exchange of far worse performance if the fears are imagined. If they become more likely, we'll see a shift in assets. We'd need a world war, a zombie apocalypse or an alien invasion to wipe out the wealth accumulated by a generation.

Re: End of Golden Era for Investors Spells Troubles

#86

Post by randomgyatwork »

shrewduser wrote: post #12
SixSigma wrote: post #5

I really do dislike this style of reporting : A bold claim stated as fact. Claims report by X.

also the article says there's two ways it could go, low growth or similar growth compared to the past 30 years. given that these predictions are always wrong i'm going to say some big revolution in technology comes our way and we see higher than previous growth and everythings going to be great. put that in a headline.

Something like skynet?

Re: End of Golden Era for Investors Spells Troubles

#87

Post by jschwartzi »

neipfjin239 wrote: post #35
peteretep wrote: post #22

> "A coming collapse in investment returns" And yet McKinley are writing research about it, rather than liquidating the company to take short positions, which should tell you something about the pinch of salt required.

That would only make sense if McKinsey's main business was investing in the stock market. Actually their main business is selling management consulting, which as a source of profit is only weakly correlated to investment returns. Also note that they didn't say you should expect a negative return from investing in the stock market. In fact, they said that you should expect a 4-6% return over the next 20 years, rather…

So they're saying you should expect the rate of return that I've always been told to expect. Where's the news?

Re: End of Golden Era for Investors Spells Troubles

#88

Post by Nokinside »

sgt101 wrote: post #75
Nokinside wrote: post #45

Earlier quoted context omitted.

I didn't read this McKinsey's report but the expectation of lower returns have been around a long time and there are good reasons for it. Most analysis of lower expected returns in long term is not based on recent past or any kind of trend spotting. Its based on looking how the expected marginal product of capital and growth in economy are expected to change. 1. Expected marginal product of capital. For the past 30 y…

growth is also achieved by social progress - widespread education, the rule of law and expectations of a social safety net promoting risk taking as examples.

Yes, but those parameters are also past their rapid growth phase in the industrialized countries. Diminishing returns are still returns, but they don't increase overall growth rate.

Post industrial economies get less growth from investments in human capital than developing economies because they are already almost there.

Globally there is still lots of room for grwith but the rate of growth will be not the same as before. If Africa and Middle east follow the path of Asia (I very much dobut that) we might have decade or two.

Re: End of Golden Era for Investors Spells Troubles

#89

Post by curun1r »

cm2187 wrote: post #16
kabouseng wrote: post #11

Earlier quoted context omitted.

That is a very defeatist and ultimately useless world view. Every generation is mad at the generation before it about something, and argues the previous generation could have solved the problems but now the current generation is left with the problems. Your statement above about millennials being left with the bill, meanwhile gen x feels the baby boomers did them in like another comment here states, the baby boomers…

The amount of debt that the baby boomers will leave behind is a very objective thing. This is the biggest accumulation of debt in peace time in the history of mankind (and objectively the parents indebting their children to buy a shiny new TV, a behaviour that would be universally unacceptable if it wasn't state wide).

Debt doesn't exist in a vacuum. There's a reason that double-entry accounting exists. The other side of the ledger is wealth and it's held by someone. In some cases, it's foreign countries, but a lot of it is held by Americans. To say the boomers are only leaving behind debt is only looking at half the story. It's more apt to say they're leaving behind inequality.

Some gen x and millennials are being left considerable wealth. Some even multi-generational wealth.

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