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HeloDude

Taxes, the Deficit/Debt, and the Fiscal Cliff

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36 minutes ago, herkbier said:

So what’s a potential defense here? Short financials and reits? Buy gold and bitcoin? 

I wish I knew the answer. I have a conservative amount of physical precious metals (about 5-10%). If nothing else, it feels good to have some physical assets that will always retain value under your own roof. Gold backed crypto-currency sounds promising, but I haven't done the homework on that yet. I've always been a passive investor and shorting seems like a lot of work, so I haven't gone that route.

30 year mortgages on investment rental properties is another idea. You can raise the rent to keep pace with inflation, but your locked in principle and low interest rate may hold value better than market investments. I've pulled the majority of my non-401K market investments out to go with this strategy. Only time will tell if that's the right move.

Edited by torqued

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1 hour ago, torqued said:

30 year mortgages on investment rental properties is another idea. You can raise the rent to keep pace with inflation, but your locked in principle and low interest rate may hold value better than market investments.

I keep thinking about this.  But when this shit tanks again...who's going to pay that rent?  My brother was almost 30 living in a house w/4 other dudes after the Great Recession.  Not by choice.

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I was texting with some friends who were happy that our TSP was doing well this past year.

Here's a few articles I've found the past few days:

Over 1700 announced of possible 12,000 expected major retail stores closing in 2020
https://www.businessinsider.com/stores-closing-in-2020-list-2020-1

2019 Auto Sales lowest in 5 years
https://www.pymnts.com/news/retail/2020/us-2019-auto-sales-were-lowest-in-five-years/

Auto Sales supported by sub-prime lending while delinquencies rise
https://seekingalpha.com/article/4315102-auto-sector-will-continue-to-decline-2020s

Auto Dealers falsifying buyer’s income on car-loan applications
https://www.wsj.com/articles/an-809-car-payment-a-660-income-how-dealers-make-the-math-work-11576924201?mod=searchresults&page=1&pos=3

Baltic Dry Index largest drop since 2008
https://capital.com/baltic-dry-suffers-largest-drop-since-2008

ISM Manufacturing Index 10 year low
https://finance.yahoo.com/news/etfs-suffer-ism-index-drops-210709628.html

US Rail Traffic down %5.1% since last year
https://www.freightwaves.com/news/us-rail-traffic-starts-off-new-year-in-a-slump

Nine States are experiencing a contracting economy
https://www.philadelphiafed.org/research-and-data/regional-economy/indexes/leading

So why is the Market going up?

Lots of reasons, but here is one biggie: The Federal Reserve bank has been pumping (printing) hundreds of billions into the repo market since September as posted about earlier. More announced just a few days ago. The four biggest primary lenders (JP Morgan, Citi, B of A, and Wells Fargo) need that cash to keep hedge funds afloat.

These massive hedge funds are borrowing money to buy equities, which drives the market up. Hedge fund purchases and corporate buybacks are masking the real business values.  If hedge funds have trouble making these loan payments, they stop buying. If they don’t keep buying, stock prices stagnate. If they liquidate to make payments, prices decline.

In short, the US government is printing money for the purpose of allowing banks and hedge funds to gamble borrowed money in a rigged game, and you are assuming the risk.

The Market is following the increasing Fed Balance Sheet and little else. We can’t print money indefinitely while the government runs a $1 Trillion dollar per year deficit. So, when we stop printing, no repo market funds, hedge funds liquidate to pay bills, stocks decline, a panic and rush for the exit ensues. Wall street will be the first to the exit and they’ll be taking the bulk of the cash with them. Passive investors like you and I will be at the back of the line. Don’t fall in love with your TSP gains and I feel bad for anyone signed up with BRS.

Keep an eye on this link:

https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements/repurchase-agreement-operational-details#monthly-summary

 

Edited by torqued
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In case there is any question about whether or not the whole system is fucking rigged. And yes I'm just bitter that my fund doesn't do anything that would get us free money from the Fed.

"One potential solution is to lend cash directly to smaller banks, securities dealers and hedge funds"

https://www.wsj.com/articles/hedge-funds-could-make-one-potential-fed-repo-market-fix-hard-to-stomach-11578997801?reflink=e2twmkts

Image

Edited by MilitaryToFinance
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