10-02-26 Merlino
| Carib, Tks for the MS post |
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10-02-26 carib
FWIW:
“Iran will imminently be resolved,” Gorka said in an interview with The Jerusalem Post, while declining to disclose details of the Trump administration’s plans.
Gorka is US counter-terrorism boss. |
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10-02-26 carib
as predictable:
Israel’s top court has overturned a ban on the country’s two main Arab parties taking part in this month’s election |
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10-02-26 spal
Cyber-Schpal on Tanker Rally:
Yes, the tanker rally will continue, though it will transition from an explosive, sentiment-driven spike into a structural, cash-flow-rich consolidation at elevated levels.
While short-term headline risk (like temporary ceasefire rumors) causes periodic pullbacks, the structural fundamentals supporting VLCCs, Suezmaxes, and product tankers (MR/LR2) remain intact.
Perplexity
Four core drivers explain why this rally has structural legs:
1. The Tonne-Mile Multiplier Is Structurally Locked In
The rally is not purely about raw barrel demand; it is driven by distance and transit time.
Rerouting around the Cape of Good Hope, the closure or extreme risk of key choke points (Hormuz, Bab-el-Mandeb, Black Sea), and Russian/Iranian sanction-driven trade re-alignments have permanently lengthened global trade routes.
Moving a barrel of crude or refined product 40% further consumes 40% more ship capacity to move the exact same volume. Even if global oil demand flattens, tonne-mile demand remains near historic highs.
2. Historical Supply Scarcity (The Fleet Age & Orderbook Defense)
Unlike prior shipping cycles where sky-high dayrates triggered massive overbuilding, the supply side today remains constrained:
Near-Zero Deliveries: The global orderbook-to-fleet ratio for crude and product tankers hovered near multi-decade lows. Because global shipyards were choked with LNG carriers and container ships ordered years prior, new tanker capacity cannot enter the market in volume before late 2027/2028.
MB Capital Strategies
Aging Global Fleet: Over 15% of the active tanker fleet is older than 20 years (the traditional scrapping age). Furthermore, the fragmentation and shadow-market isolation of dark-fleet vessels removes real, legitimate capacity from Western-insured commercial routes.
3. Asymmetric Product Mismatches (The Refined Fuel Crisis)
While raw crude logistics get the headlines, clean product tankers (LR2s, LRs, MRs—e.g., TORM, Scorpio, Hafnia) hold immense pricing power. Ukrainian strikes on Russian refining infrastructure and Middle Eastern regional refining disruptions have forced global importers to source diesel, jet fuel, and naphtha from much further distances (e.g., India and East Asia to Europe).
4. Free Cash Flow Generation & "Floor Raising" Time Charters
Top-tier operators (Frontline FRO, DHT Holdings DHT, Okeanis ECO, TORM TRMD) are using record spot earnings to lock in multi-year fixed time charters at historically high dayrates.
MB Capital Strategies
For example, locking in VLCC time charters at $100,000/day for 3-year periods against operating costs of ~$10,000/day guarantees massive cash flow baselines.
Perplexity
These companies are returning 80%–100% of net income directly to shareholders as variable dividends, creating double-digit dividend yield backstops that floor equity valuations even during temporary spot-rate dips.
MB Capital Strategies
Key Risk to Watch: The "Diplomatic Air-Pocket"
The primary near-term threat to equity prices is headline volatility. Any brief diplomatic breakthrough, truce signal, or rumor of choke-point reopenings triggers immediate profit-taking by short-term paper traders.
However, because physical ship availability cannot be manufactured overnight and global trade routes cannot un-wind instantaneously, dip sessions represent buying opportunities for high-yield, logistics-backed cash flows rather than the end of the bull cycle. |
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10-02-26 spal
If the crisis is driven by severed supply routes and transport friction rather than a deficit of raw crude, capital appreciation will not accrue evenly across the energy sector:
The strategic trade shifts decisively from owning the molecule to owning the corridor.
In an environment defined by persistent logistical bottlenecks, hydrocarbon transport, midstream infrastructure, and product-tanker equities command the ultimate structural pricing power—capturing outsized rents while upstream producers bear the brunt of local discounts and rising operational costs. |
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10-02-26 spal
| Adding to tanker positions. |
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10-02-26 spal
As the regime sees its financial runway shrinking toward zero, its willingness to take catastrophic geopolitical risks increases rather than decreases.
This is why the danger of extreme, un-attributed infrastructure attacks peaks in the final stages of economic exhaustion—the regime attempts to force a global economic crisis before its own internal security apparatus fractures.
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10-02-26 carib
| Third carrier on the way.. |
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10-02-26 spal
| Panas - yes - as we discussed. |
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10-02-26 panasonic
Spal, Iran entering desperate zone, from what I read China has widely limited withdrawals from their banks.
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10-02-26 spal
BREAKING: Iran has just struck an oil tanker conducting an outbound transit of the Strait of Hormuz under US escort in the US-backed southern Omani corridor, with a fire and a blackout on board, per UKMTO.
Holy Houthi van Toothi! |
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10-02-26 carib
| AI agents can burn through tokens — the units of information a model processes — with little human oversight. One Amazon project ran 860 per cent over budget after incomplete tasks worked in the background for five months, costing more than $1mn, according to multiple people familiar with the matter.FT |
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10-02-26 carib
| SPAL: good summary.. but a society of differently embarrassed capitalists, I guess, would be much more effective and stable if a majority actually had capital (in different amounts, of course) |
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10-02-26 carib
By Nicolle Yapur, Vinícius Andrade and Maria Elena Vizcaino
(Bloomberg) -- Morgan Stanley emerged from a series of
meetings in Washington with a positive view of Venezuela’s debt
restructuring, citing signs that parties want to advance the
process quickly and that US officials are unlikely to force
creditors to accept a predetermined recovery.
Public remarks from Secretary of State Marco Rubio and
private comments from State Department officials suggest the
restructuring talks are “unofficially on” even as investors
await for a long-delayed debt sustainability analysis, the
bank’s emerging-market trading desk wrote in a note to clients
seen by Bloomberg. That is expected to give a clearer picture of
the size of the economy and how much debt it can sustain.
“We do not anticipate a ‘cram down’ of terms,” desk analyst
Raul Gallegos wrote in a Thursday note following the bank’s
meetings with officials from the International Monetary Fund and
World Bank, US government officials and other experts. “We came
away with a reinforced, credit-positive view of the Venezuela
debt restructuring.”
A representative for Morgan Stanley declined to comment.
The bank still expects the debt restructuring, one of the
biggest in modern financial history, to be completed by June
2027. Centerview, Venezuela’s financial adviser, should come up
with with a macro framework and a debt sustainability analysis
“very soon,” while a license by the US Treasury’s Office of
Foreign Assets Control allowing bondholders to engage in
negotiations would be issued concurrently, Gallegos wrote.
The note comes amid recent speculation around the delays in
the process, which has been putting pressure on the nation’s
bond prices. An article in local media last week reinforced
investors’ jitters by saying the Venezuelan government was
putting debt talks on hold for now to focus on oil projects,
sending dollar notes slumping. A broader rout in global markets
is also pushing Venezuela bonds due in 2027 — some of the most
liquid — below 50 cents on the dollar for the first time in more
than a month.
Venezuela started to default on its dollar bonds in 2017.
Unpaid interests accumulated since have taken the nation’s
financial debt to over $100 billion, but total commitments,
including bilateral loans and arbitration judgments, are
estimated to reach as much as twice of that. The lack of
official data makes the debt assessment by Centerview key to
understand the size of the restructuring and estimate potential
recovery scenarios. The so-called DSA was initially expected for
June.
Investors have also been gauging potential involvement by
the IMF in the process, but Gallegos is skeptical that they
would take the lead.
Read more: IMF Mulls Opening Caracas Office as Venezuela
Engagement Deepens
“We do not expect a material delay to the process, despite
recent news coverage to that effect,” he wrote. “We think the US
government wants to get this process finalized during the life
of the Donald Trump and Delcy Rodriguez administrations, as has
been our base case.”
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10-02-26 spal
| Tankers remain on the rise |
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10-02-26 spal
Unemployment rate 4.2%, Exp. 4.1%
Participation rate 61.8%, Exp. 61.6%
Average hourly earnings 0.1% MoM, Exp. 0.3% |
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10-02-26 spal
"I guess the trouble was that we didn't have any self-admitted proletarians. Everyone was a temporarily embarrassed capitalist."
Steinbeck reflecting on the Great Depression |
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10-02-26 spal
| That exists already in some markets. But it will not be a generalized trend yet IMO and there are way around in or to deal with it. |
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10-02-26 carib
Spal: I cannot disagree with you on facts.
;-)
The political corollary of that fact, however, is that is not impossible to imagine that one day the votes of the 50% without capital will bring about some obnoxious policies such as.. rents control... |
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10-02-26 spal
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10-02-26 spal
| Being a landlord is the functional equivalent of being a high yield lender. |
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10-02-26 spal
3.
This is 50% of all Americans.
End of story. |
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10-02-26 carib
Spal: I think the issue of rent vs purchase can occasionally be an issue of individual preferences, but fundamentally remains an issue of finance. If renting costs you 12% of purchase price, it makes sense only in three cases:
1) you are staying short term, and buying would not be a reasonable option
2) your capital yields much more than 12%
3) you have no capital
I tend to believe tenants who accept to pay 12% moslthy fall under case 3.
Am I mistaken? |
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10-02-26 spal
I never liked US real estate because of all the tax.
===
Hann - what tax? Property taxes are passed on. Income taxes are sheltered. Capital gains taxes are avoided.
Did I miss any? |
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10-02-26 spal
Savo - it is not that complex or demanding.
Hann - what you outline is fair and happens a lot. I have never bought into anyone else's RE deal and I do not work with partners - except banks. |
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10-02-26 panasonic
France's CDS rising sharply, doubled in the last 6 months.
Oh là là |
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10-02-26 spal
Spal: congrats.
But, if rent is 12% of value, I would certainly buy rather than rent.
===
Yes - you would, but this is actually how the market works so what you would do is simply an isolated preference. |
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10-02-26 spal
Carib - I did - I did a refi and cash out. These are commercial loans and you - normally 3 or 5 year fixed.
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10-02-26 carib
| SPAL: PS. may I ask why you did not refinance the entire asset when mortgage rates were at 3% or lower? |
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10-02-26 hann
US CRE
A friend of mine got offered 20% yield by a US property fund gp. As I understand they've done ok, multi fam + retail.
Automatically felt iffy. Running it through Gemini, typically 5-10 year loans. If u have to refi in this environment even w only minor rental softness, capital values can decline precipitously so lender demands instant equity top up or default. Gemini says best approach for GP is to separate into assets u can save and assets u can't. 20% is band aid and will blow up eventually.
I never liked US real estate because of all the tax.
Is this a fair, correct interpretation?
Tx |
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10-02-26 carib
Spal: congrats.
But, if rent is 12% of value, I would certainly buy rather than rent. |
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10-02-26 savo
spal...just curiosity... do you enjoy the complexity and admin demand of that kind of business?
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10-02-26 spal
Spal, that is what I call a conviction trade.\
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Either that or I am mad - which is always a possibility.
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10-01-26 spal
gifts is my wife's department...
clearly she and my wife have had a conversation!! |
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10-01-26 spal
i am fed up of dinners too ! :-)))
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Likewise and I have become a pretty good cook - which should be taught as a compulsory subject in schools. |
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10-01-26 spal
On the back of an envelope, could we say in the US nowadays real rates are 3% and net rental return to unleveraged owners is 2%?
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Amateur - it is hard for me to compare to averages. I run my RE as a business. I have a special tax status as a "real estate professional" which allows me to write off many kinds of expenses (for example my companies write off my health insurance premiums).
I hold everything via a trust and thus all levels (including future generations) are protected from capital gains.
I am highly selective, self manage and can do most repairs myself (although I do selectively pay others for some work - the trick of doing it yourself is that it is what is called an enclosed economy).
I can still almost now obtain what is known as the 1% rule. This means that total monthly rents must be 1% of the total cost.
Thus if it costs 100,000 then monthly rents must be 1000. That means they are 12,000 per year.
Now to insure 100,000 worth of RE in my market would cost 500 a year and property taxes on 100,000 would be max 2000 p.a.
So net operating income would be 12,000 minus 2,500 - call it 3500 including a buffer for lawn care and maintenence.
That leaves 8,500 which is 8.5% of 100,000.
That 8.5% is your cap rate (this is what commercial brokers throw around).
If financing costs are 7% it means that an 8.5% deal must be cash flow positive even at 7% interest costs.
I like to start always with positive cash flow otherwise I do not do the deal. This kind of thing is not available in many markets.
I currently expect 3-4% total appreciation. It has been greater - most things I have doubled in value since Covid.
So if you have 3/1 leverage your annual appreciation is 4 times 3.5% or 14%. You also pick up a bit on debt paid down and remember that all my deals are cash flow positive.
Recall also they are tax protected and that I am writing off expenses.
Jokes aside but I do not get out of bed for anything less than 20% p.a. Otherwise sleeping is just too pleasurable.
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10-01-26 savo
pana... i am fed up of dinners too ! :-)))
gifts is my wife's department... she seems to think that apple "pays" ! |
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10-01-26 panasonic
"In this scheme of things... medical insurance is a number."
Seems that your expenses are cut dramatically.
My biggest expense is trips/dinners/gifts with kids and grand-kids, second housing and health care.
Housing is kind of optional, could sell and rent similar at a fraction if sell and allocate at current interest rates.
Most people in USA have mortgage rates locked below 4%, so they are not in a hurry to move out. |
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10-01-26 panasonic
Carib, my mother is 95 but in clinical bed :-(
Grand-grand kids jumping all over her place, watching TV programs and eating chocolate ice-cream, call it a day. |
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10-01-26 panasonic
| Spal, that is what I call a conviction trade. |
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10-01-26 savo
amateur... could we say in the US nowadays real rates are 3%
what rates are you referring to? |
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10-01-26 amateur
"ILLEGALLY"
Journalists tend to believe war is a legal contest... |
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10-01-26 amateur
Spal, if you have leverage its another story. Rents could eventually grow lower than interest charge.
Not for ever, though. Landlords will not keep expanding assets that yield below real interest cost.
On the back of an envelope, could we say in the US nowadays real rates are 3% and net rental return to unleveraged owners is 2%?
Each market is different, but what I see in Miami condos is RE taxes and HOA dues and insurance and broker fees consume > 60% of gross rent. Income tax nobody calculates because they think it will be deferred forever...
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10-01-26 spal
LOCAL SOURCES: SUPERTANKER WITH A CAPACITY OF 2.5 MILLION BARRELS, ILLEGALLY TRANSITING THE STRAIT OF HORMUZ, STRUCK APPROXIMATELY 8 KILOMETERS OFF THE COAST OF OMAN, CURRENTLY ON FIRE - MEHR NEWS
Whoops |
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10-01-26 carib
| The 30-year fixed-rate mortgage averaged 7.28 per cent as of October 1, an increase of 0.25 percentage points from a week ago, Freddie Mac said on Thursday. |
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10-01-26 spal
Spal, "rentals are still fully occupied"
Sleep like a baby. Full occupancy as far as the eye can see. Renting is much cheaper than buying nowadays.
===
My loans are now resetting in the 6.5% range, but I am not over extended and rent increases are still out running this effect. I am still open to deals and did one in June. I am still spending on improvements and put in a few new driveways this year.
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10-01-26 spal
| ALVOF ... my advice to management ... giddy-up. |
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10-01-26 spal
Update on ALVOF position according to Gemini:
At your position size, you are not treated like a casual retail trader by management.
You can request direct 1-on-1 Q&A calls with Investor Relations or management (such as CEO Corey Ruttan or CFO Patrick B. Ward) to discuss capital allocation, dividend sustainability, well-completion timelines (like the 183-H2 results), or Western Canadian growth plans.
LOL |
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10-01-26 carib
Renting is much cheaper than buying nowadays.
As it should be, I guess.. |
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10-01-26 amateur
Spal, "rentals are still fully occupied"
Sleep like a baby. Full occupancy as far as the eye can see. Renting is much cheaper than buying nowadays. |
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10-01-26 carib
Accenture shares surged 22 per cent on Thursday after the world’s largest publicly traded consulting group said its revenues could accelerate this year, confounding fears that AI would destroy demand for its services.
Interesting...
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10-01-26 carib
“Reality is catching up with us,” French Prime Minister Sébastien Lecornu warned this week on the eve of presenting the 2027 budget.
Hope it catches up fast.. |
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10-01-26 carib
| I thought those toilets were on The Gerald Ford.. |
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10-01-26 savo
The USS Theodore Roosevelt
did they repair the toilets ? |
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10-01-26 carib
% of income is subjective.
actual cost is objective.
As long as health costs less than 3% of income, it's sustainable very long term, I guess... |
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10-01-26 carib
The Trump administration has decided to deploy a third aircraft carrier to the Middle East, along with a second Marine division, a US official told The Jerusalem Post on Thursday.
The USS Theodore Roosevelt and an additional division of US Marines will deploy to US Central Command's area of operations. |
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10-01-26 savo
pana... what percentage of your yearly expenses goes to health insurance?
don't know... but i can say that we have changed our way of life radically... we spend most time alternating between two locations plus the occasional visit to children where they live.
I do not like to travel anymore... whenever I am out of home all I want is to be back... not interested in tourism... the benefit of knowing some other town does not compensate the hassle of the airplanes, airports, driving... ubers..etc...
I do not have to pay schools or universities anymore... ... don't have to pay for housing other than maintenance... given the weather where I live I have enough shorts and short sleeve shirts for the next 200 years
I ve been asked to change our cars and find the task absolutely appalling.. so I refused... they took me the other day to a car dealers tour... and the only car that I liked is the one I already have... but newer... why do i need a new car that looks exactly the same but with Bluetooth? I do not listen to music in the car so i do not need Bluetooth.
In this scheme of things... medical insurance is a number. |
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10-01-26 carib
| PS: when you are 100, your "kids" might be approaching 80.. |
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10-01-26 carib
Panas: wise choice.
My impression is there are many places that beat the USA, in that respect. |
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10-01-26 panasonic
Spal, seems that in USA hospice can be covered via insurance, and of course, during last tranche of life decision of one's destiny in hands of kids.
The luck component is important, my sister & me decided which option was best for my mother, she is now living in Malaga where her saving's income surpasses her cost of life. |
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10-01-26 carib
| Spal: my, limited and indirect, experience with US health services and insurance.. is that they are essentially a scam, compared with similar services in several other countries. |
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10-01-26 spal
| I have no intention of moving abroad, but again I "understand" this system - for what that is worth. |
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10-01-26 spal
Carib - when you hit 65 here you transition automatically to a state supported system that it much less expensive than private health insurance - called Medicare (it is not substantially means tested). You also set aside a reserve for long term disability (as I have).
It is foreseeable and manageable. But only if you have resources and good planning.
If you fall through the cracks then you go into Medicaid - you get help and are bundled into a cheap hospice for long term care as you fade out ... but first you must have no assets.
I know how this system works. Many simply find out. But as in life planning and prep help. Unfortunately luck also.
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10-01-26 carib
SPAL: IMHO it make sense for a US person, upon retirement, to move abroad exactly for the said reason..
US medical costs are a large multiple of non-us ones. |
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10-01-26 panasonic
"their allocation in UST is probably packed and resold"
Sorry I meant their mortgage portfolio... |
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10-01-26 panasonic
About banks, their allocation in UST is probably packed and resold.
If not, the mortgage rate they charged has been paired with a same term UST, so they make money on the spread independently of rate.
Most personal loans are with rates 13% and above (after fees and hidden tricks), so yes its a very profitable biz. |
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10-01-26 panasonic
| Savo, what percentage of your yearly expenses goes to health insurance? |
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10-01-26 spal
Question to Colores: is medical insurance worth its cost?
===
No - I have been to the doctor twice in about 45 years ... but if you have a serious issue in the US they will bankrupt you ... so you have to have it.
It is about the worse system anyone can design.
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10-01-26 savo
amateur... i understand the banks can hold loans at par if qualified as held to maturity...
but i think that is only for banks... not for funds...
these loses could wipe out the entire regional banking sector.... |
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10-01-26 amateur
Savo, big issue. "where are all those low rate mortgages... there must be somewhere... some entities are losing big"
Government entities like Fannie and Freddie and Xxxxie own aa lot of it. but still, a) another lot must be sitting in fixed icome funds, so the loss passes to old savers and holders of 60/40 portfolios; and b) anothe lot mus be in the books of some banks and hedgefunds that made the wrong bet, someone will crash eventually.
And long duration UST issued at 2, 3 and 4% are also sitting someplace...
Remember when the first leg of rising rates came, BofA was caught holding some billions of long paper, hidden in the books as "held to maturity" and therefore not adjusted to market in their financials...then came Sillicon Valey crash, and that was 2023.
We might see the corpses of this wave any time... |
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10-01-26 savo
but also they increase premium by age
yes pana... but i have to pay it... |
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10-01-26 panasonic
| I definitely need medical insurance in USA, one event can cost millions. |
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10-01-26 carib
| Maybe insurance for the very old.. should be paid by the heirs, in self-interest.. |
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10-01-26 carib
Savo: in a way.. it's a sort of win-win.
That said, I remember once discussing the issue with a top US economist, and he said that 50% of total medical costs for the average US person occurs during the last 6 months of life of the said person.. implying that 50% is not really worth it, on average.
It depends on jurisdictions, of course, but it is possible (outside of the USA) that only insurance covering major surgery or serious accidents is worth its cost.
Opinions welcome. |
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10-01-26 panasonic
| Savo, insurance is tricky bcz part is inflation, but also they increase premium by age. |
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10-01-26 savo
if medical insurance is not worth the cost means one is healthy...
i am happy for medical insurance not to be worth the cost! |
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10-01-26 carib
Question to Colores: is medical insurance worth its cost?
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10-01-26 spal
--Danaos Raises Quarterly Dividend to $1 a Share From $0.90 a Share; Declares Special Dividend of $5 a Share, Both Payable Oct. 22 to Holders of Record on Oct. 13.
$5 special ... Tankers go BRRRRRR |
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10-01-26 carib
| Most respondents opted for meat grinder. |
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10-01-26 carib
We asked the other day whether hopping into bonds now would represent a savvy bit of dip-buying or the investment equivalent to jumping into a meat grinder.
Ft |
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10-01-26 savo
pana.. next month i get the bill for my 2027 annual medical insurance.. i use that as a proxy.
last year it went up 10.8%. |
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10-01-26 savo
at what levels will G7 rates peak?
we need to know first at what level will inflation peak |
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10-01-26 panasonic
| Spal, how much is yearly hike in rents? |
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10-01-26 panasonic
Savo, let's wait and clip on the meantime.
What's your personal inflation YoY?
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10-01-26 leopardo
| Gilts above 6% free risk(duration excepted) above 6% not bad. |
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10-01-26 carib
UK gilts 6%..
question is: at what levels will G7 rates peak?
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10-01-26 savo
| pana. i am a bond holder so i hope you are right...but i am much more pessimistic than you on the inflation front. |
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10-01-26 spal
ex-Wisconsin of course :-)
===
LOL ... My rentals are still fully occupied - gracias a dios. |
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10-01-26 savo
UK Is First Big Economy With 6% Bond Yield Since Euro Crisis
By George Nixon
October 1, 2026 at 9:26 AM GMT+2
The UK’s long-term borrowing costs hit 6% for the first time in almost three decades, making it the first Group of Seven economy to pay a rate that high since the euro crisis was raging in 2012.
The moves that took 30-year gilt yields to their highest since March 1998 coincided with a fresh slump in global bond markets, driven by concern spiking oil prices will reignite inflation. The rate on 30-year gilts rose as much as seven basis points to 6.02% on Thursday before paring the increase.
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10-01-26 panasonic
"the issue for us is what to hold in the meantime"
100%, my approach to that is "gradually" deploy cash, seems to be a good idea unless we expect rates to go higher for more than 2 years.
At current rates I'm well covered on my personal rate of "inflation". |
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10-01-26 carib
Savo: the short answer is.. TIME WILL TELL.
the issue for us is what to hold in the meantime.
The rule that unsustainable trend eventually do not continue still stands. |
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10-01-26 Merlino
I wonder if all this matter of US fiscal deficits, ballooning gov debt, etc. more than a sign of decadence and anarchy was/is something somehow deliberately done so to facilitate several objectives. One may be the future purchased at good prices of federal assets such as land, etc. by local large holders of the debt, wealthy private persons in the end, on the excuse of reducing the burden.
The stock mkt is not signaling any weakness or decadence of the country. Exuberance and (imho) irrationality, Yes it does, but not decadence
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10-01-26 savo
| 6)the US housing market ( ex-Wisconsin of course :-) ) is frozen with all the consequences is has for spending and jobs. |
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10-01-26 savo
carib..
1) who will contain the deficit?
2) Trump will be history in a few weeks time.
3) The budget is set by congress and the US congress is all pork, fraud, waste.
4) I see things the other way around... not what real rate the US can sustain but what inflation the US needs to keep debt stable in real terms as a % of GDP given the rate at which the debt grows.
5) 60% of the S&P is in bear market territory... the whole equity market is currently sustained by energy and AI spending.
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10-01-26 carib
Savo: IMHO the question is what REAL interest rate on UST can the USA sustain. And the issue to address is the fiscal deficit.
With REAL GDP growing 2%, a REAL rate up to 2% is sustainable, if the deficit is contained. Otherwise, the interest bill balloons the deficit and it grows exponentially.
If cutting the deficit brings about a recession, then rates will fall, helping to solve the problem.
All that said.. with Trump.. one never knows. |
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10-01-26 savo
merlino ... i imagine the situation in france and other EUs is as bad or worse.
But the repercussions are different because the US is the reserve currency.
The reserve currency has to be invested in something...can't be idle... that used to be USTs.
If people require higher and higher rates to buy and hold USTs... the US budget collapses.
At 5%, debt service consumes 35% of US tax collection... think 6%..7..8... not viable.
I wonder what are central banks buying with the USTs they are selling... more AI stocks?.. gold?... what?
Of course the FED can monetize all debt payments... but then inflation will explode in which case those that sold UST first were smart.
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10-01-26 Merlino
but then there is the debt problem... which the US budget can not service
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I am not sure this is much of a problem for USA at least for the next decade or couple of decades....may be I am wrong
"Why is this (the debt) more of a problem for France and the UK? Beyond their deficits, they also shoulder much higher tax burdens than the US. Tax revenues are 25.2% of GDP in the US, the lowest of the major developed economies - but 35.3% in the UK and 43.9% in France."
Of course the situation looked much more stable a couple of decades ago, before bail outs and QEs |
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