Great points as always, thank you, Sven. I haven't seen any other channel that covers macro in so understandable manner. Unfortunately, politicians don't care. They're rich enough already to survive any financial Chernobyl. Ordinary people will pay for everything, as always.
Love it, Sven. You know one thing that surprises me? How long the game keeps going. I do feel your perspective is close to the truth, and it's similar to mine, but the game just keeps going on and on. My theory is that, given how much vested interested there is in the game (wealthy elites, US government, etc.), they have found ways to keep the thing going even when it might seem impossible. It can't go on forever, IMO, but it does seem to be more resilient than I once imagined.
Im with you there. They just print and manipulate all data. Nobody in Europe is buying new cars, but that information they hide. They are hiding all bad information so people just accept it.
As long as the majority still doesn't understand that political (and accomplices) intervention is bad and we continue to demand and vote it we can't do other thing than getting worse and worse everytime... Has never worked well in all history. About time we learn... Aaaaand that *nothing* is free, someone pays for it! Anyway, we must be smart and take advantage of the opportunities... if politicians and their voters don't make us too poor for even that! Society needs financial knowledge urgently... Thank you.
In my opinion, the reason for the 50 bps rates cut is two fold: 1- the debt. If you add up debt + debt like obligations (healthcare and pensions) you get to 130 trillion and change. Rolling the upcoming expiring debt with high interest rates is a medium term problem. 2- recession. Anyone following the Bloombergs high frenquency economic indicator, sees the disinversion of the 2-10 yr spread and sees the FEDs remarks on the payroll must know the country is on recession and the FED is way behind the curve. If you take both the inflation/debt and the recession the FED seems to be between the sword and a hard place. And without room to print an additional 3 trillions of cash like in the pandemic. We are about to test the Modern Monetary Theory big time.
Thanks for your contributions. 1. Isn't debt rolling a constant problem? ie: since rates hit 4% each debt has to be rolled over at those rates. 2. Unemployment still isn't that high, and the yield inversion is a financial indicator, not an economic one (ie: it predicts, not confirms a recession), and GDP growth is positive, so do you conclude the country is actually on recession? I also have been waiting a proper recession since 2020, but it still doesn't seem coming, from actual economic data.
@@lainiwakura44 Debt rolling is a constant problem, but the higher the FED rates the worse the problem becomes in the medium term. My take is that is the main reason why countries such as the UK started lowering interest before the US (something unusual) and with a Taylor Rule still indicating it wasn't time to cut. I expect countries to fare better or worse in this cycle based on how manageble their debt is (how much they spent on their economies relative to GDP during the pandemic) and how long and efficiently they are able to keep inflation in check (able to keep interest rates higher).
Bro we are at under 2% inflation if you exclude everything that matters such as rent, groceries, car insurance, gas. So to the fed we are doing amazing
Finally someone adresses this. The budget on interest US has now grown bigger than defense budget. (Ref. US Dept clock). Projections in only 4 years is gonna be 4 times from now, being the absolute biggest budget. This is insane, and the world will collapse in a few years.
Sounds like a skeptical outlook on things then. With the rate cuts do you think it's best for us who are not conservative investors to focus on bonds or dividend stocks? I want to reallocate my 7-figure portfolio and I preferably want the assets with the best ROI.
Bonds are a safer bet. They offer good stable yields. But dividend stocks could make you a fortune if you know how to go about it. But it's always a good idea to work with a CFA. It streamline your strategy and help profit a lot.
I've been through the 'bonds are beating stocks' periods since the 90s with no bonds and with all aggressive stock mutual funds. At 66, my IRA and cash accounts are far more than I expected for my retirement. I can easily handle a worst-case 80% stock crash, Thanks to my CFA.
Mind if I look up your advisr please? I've worked in real estate for over 15 years and have neglected a major stock portfolio. This served me well when I was flipping and renting houses, however I need a different plan now.
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
What is the solution for the FED? How do you think our monetary system should be structured? Should the USA save money and repay its debts? Increase taxes?
Nice video - we live in interesting times that is for sure... system looks like it is near breaking point. Inflation will surely jump higher again with recent cuts...
Nice video. Fair enough. But what is your conclusion? All-in Gold? All-in Cash? Which Cash (CHF? Obviously not USD)? So far the video is only infotainment, no instruction for action. Thanks.
Rate cuts has nothing to do with the market the Fed has two mandates keep inflation down and unemployment down The market reacted in anticipation of rate cut and soft landing not the other way around
The Federal Reserve seems to be using many lagging indicators to determine inflation. It seems that inflation in the US is a lot lower at the moment than the reported. I think they did well to cut rates.
Hi Sven, what do you believe the best hedge is against inflation should it eventually go very badly with the debt? It seems the rest of the world, especially Japan is as bad or worse than the USA. I am assuming you don't think the answer is bonds.
Hello Sven, thanks for sharing and explaining the situation in an understandable manner. Common theme in your videos is that US government is running a Ponzi scheme. What does that mean to the investors? Are US securities more risky and overvalued? Should we give up on US dollar and switch to Crypto?
Hi Sven a question: if the federal bankruptcy happens, is it better to hold cash or S&P 500? When I look at a stock index in Turkey (BIST-100), under hyperinflation, it looks like it held the value much better than cash.
If the Fed is wrong, not only we will find out in a near future or within 6-8 months. For the Fed being wrong has dire consequences. However, if this gentleman is wrong, no body will remember it and he won’t face any consequences. Unfortunately, if those watching the video make a financial or investment decision based on the content of the video would face bad consequences. The moral of the story is not to listen to these expert’s opinions!
My opinion is that nothing will happen. Economy will keep going fairly well and debt wont be a major issue. However i agree thinking QE wouldnt cause inflation was stupid, and the inflation projections seem kinda stupid, and also we could have a bit more stubborn inflation going forward. However many countries like sweden already have low inflation again.
Hi Sven. Great to see you again. Can you share your opinion about Hermès? This is a great bussiness, as a machine make mooney and stable like a rock. Thank you a lot for this big channel.
Thank you very much. I gues the problem is more political than logical. By the way the core Inflation is excluding Food and Energy. So for me it is totaly worthless.
Well worthless I don’t know. They use a metric to make decisions it does not necessarily need to measure all inflation. As long as it works for decision making it is ok.
Good Dip-buying opportunities in the EV sector this week or larger Dip coming in Sept.? Nikola... Clean energy trucks North American leader . Rivian.. Polestar.. Frey.. Lucid.. Evtol Jets..( Lillium, Archer, Joby, Blade, more ) Thumbs Up video/ comments. Thanks.
Debt of USA gov is 35trillion dollars , the usa households hold a total net wealth/assets of 122 trillion. americans just dont like high taxes. but they can easely afford those debts if they increase taxes. But both partys prob will not do it
The debt and deficit spending are problematic for sure. Maybe the US government can solve it by lowering corporate and rich people taxes yet again... Or perhaps Warren Buffet is right about them increasing taxes so they can kick the can down the road.
Mr Sven, do you have an opinion as to which companies can continue to operate and provide some protection against out of control inflation? How can companies pay employees and suppliers and collect payments if the monetary system collapses around them?
Great economic video but there are non-strictly economic reasons why a country with a debt-to-GDP ratio of 120% might be in trouble while another isn't, and it is funny how to guarantee those non-economic reasons to keep debt sustainable might actually require further debt. It is a bet and it surely can go wrong but looking at Germany and other countries: it's better to win a war and have a lot of debt than vice versa.
@@Robert-fx3ng no, by vice versa I mean losing the war and having low debt/good finances. How low your debt/good your finances are make no difference in a peace negotiation. Enforcing an agreement (even peace) requires power, only the strongest can be sure to enforce its ruling. There's a recent example with the destruction of the North Stream pipe - if Germany and Russia were to make an alliance and win a war with US, Germany would sanction the US - sorry for the political fiction. If that doesn't happen, Germany cannot sanction US and it doesn't matter that German debt-to-GDP is ~60% and the US one is ~120%.
What the Fed is doing has nothing to do with 'experimenting in MMT' , the whole point of MMT is the government doesn't need t obrrow or issue bonds to create money in the first place and that the arbitrary interest on the debt is itself inflationary and therefore counter productive whe nthe Fed tries to tackle inflation by raising rates.
@@Dan16673 The US. Abraham Lincoln did it to win the civil war, creating 'Greenbacks' with no bond or gold backing. Really it's everywhere now by stealth, what is QE but one arm of government creating debt by creating interest bearing bonds whilst another nullifies it by purchasing those bonds? Greenbacks were honest, QE is just a way of maintaining the farce that governments need to borrow to spend. The real limit of government spending is inflation, always was.
Does the Fed pay nominal interest rate or the federal funds rate on the outstanding debt? If it's the nominal interest rates, then it would not matter much if the Fed decrease interest rates by 0.50% given that nominal interest rates may not decrease by the 0.50% decrease.
Didn't you project S&P 500 cumulative earnings for 2024 of 175$? You might check your own projections and assumptions in retrospect. For now, the exuberant Analysts that projected $260 earnings are way more accurate than you are
Trailing S&P500 Eps as of 3/31 were $193… Meanwhile analysts have been projecting $250 since 2021… Earnings are still roughly where they were 3 years ago.
When QE is implemented , essentially the FED buys government issued bonds. When the government pays interest on those bonds, it pays interest to the FED and eventually finds its way back to the Treasury. Interest expense on the US government side is interest income on the FED side. So when we talk about government debt, the real question would be who holds this debt not necessarily the amount of debt. If the FED holds government debt purchased by printing, they essentially cancel each other out.....correct?
Sure. That’s what they have done on/off the last 2 decades or so. The problem is that if the fed prints too much money to buy US bonds, we get inflation. Too much government spending =too much money printing =inflation; maybe hyperinflation. There is no free lunch.
Thanks for the video. I agree with this doomsday schenario. It's perhaps one of the worst schenarios. I hope it doesn't happen, but you never know. However, perhaps good to ask: is one investing in the US government's fiat money or in businesses?
@@Value-Investing then how do we invest, where do we put our money? How about offshore (legal) non dollar accounts like India or south east asia or outside US real estate and physical gold and/or Silver? This would be a good time to get out of market since this FED action has given us another mini rally in equities for now!!!
@@Value-Investing TL;DR I don't know. Berkshire has probably many reasons for their cash position. I would think this doomsday schenario is not a major one for them, similarly to a WW3 schenario is not. (Ajit and Warren discussed WW3 in a meeting, was it 2022?) I think you have perhaps a fallacy here in judging the people steering currencies (macro) similarly to people steering businesses (micro) -- because you are foremost a great business (micro) analyst and may think in this way. I don't know... Systems complexity of macro and micro are vastly different, and if they are confused, invalid conclusions can be easily reached through oversimplification. Regarding macro analysis, a realistic and experienced analyst should expect the macroeconomic predictions to be invalid (they are only made for show). (Read, Taleb.) This results that all macro actions have realistically both unpredictable primary and secondary outcomes. Nobody knows.
@@Value-Investing I think Berkshire has many reasons to have cash, and I'd guess this schenario is just one of them. I think they may see it like this: it's in the interest of the main players of the global financial system for the reserve currency (USD) to not meaningfully lose its position and value. I mean, the current players' incentives are aligned keeping the current reserve currency afloat and well. Finding an alternative reserve currency seems to be difficult, as even the crypto currencies don't seem to have a dent... The resilience indicates the system around the reserve currency is strong, and the current methods are working -- at least for now.
My original point in the comment was not to confuse macro to micro analysis when investing in stocks, i.e. businesses vs the economy. Macro doesn't really matter that much, because a great business, that is worthy of investment, is one that survives, and perhaps even grows, in any macroeconomic situation.
Evo te konacno natrag, falile su nam tvoje analize. Sjecas se kako ti je netko ukazao na KODT prije par godina 😜, vise nego ikad bi volio taj video ovdje iako znam da nema zanimanja za te dionice ovdje te da nece biti puno pregleda, ali bi ipak mogao 😊😊😊😊
"35B, sorry... Billion, Trillion; 35 Trillion" That was hilarious... when the big number is too small and you realize that 35B$ would be too easy to pay so something's not right... xDD
Yeah, the fact that Americans can't count to more than a 1000 million (a miiliard) is really making it difficult for the rest of the world when discussing big numbers.
So youtube deleted my previous comment. Wow. Anyway. Sven, how do we invest here? Real estate and gold outside USA? India? South east asia? Any safe haven't? Thank you.
If anything the FED is wrong because they cut rate too late, not too early or too much. The FED lags and you don’t wait until inflation is completely done to lower unless you really want recession.
For the last two years Sven has been wrong about a lot of things. I doubt his portfolio has beaten the SPY. His incessant prediction the market is going to crash so don't buy the SPY but instead buy individual stocks has been horrible advice. WIll it crash now? No one knows but the Fed is far smarter than Sven. We will see.
False. Cool yes not correct. Sven pointed this out but just like Warren buffet has said individual stocks can actually be less risky than the s&p at times.
Hi Sven, great video. I have a few questions: 1) Who is the USA borrowing the money from? 2) You show a correlation between inflation and FED policy, but others cite geopolitical factors as the reason for inflation (for example wars and protectionism, limiting access to cheap asian goods). Is that a factor or is it mostly monetary policy? 3) FED cites dual mandate of employment and price stability as guiding it's principle. Why are you not including the job market in your analysis?
Not Sven but good questions, I'll take a swing: 1. 20% is "intragovernmental debt", like money the government owes to social security trust funds. This is kind of hard to understand, but it's a small component. Between 20-30% is held by foreigners it seems - about half of which are governments, and the other half are private investors. Biggest countries we owe to are 1. Japan and 2. China. The rest is owed domestically to US investors, including but not limited to individual investors, mutual funds, pension funds, state and local governments, banks, etc. 2. Absolutely a factor. A big one. I would add that, keep in mind, these trends (protectionism, deglobalization) aren't going away any time soon. To what extent inflation is caused by that vs. monetary policy, it's hard to say. I'm not sure to be honest, but I think it's up for debate. I think there is solid argument that a lot of the money printing ends up in asset inflation, ie, higher stock and real estate prices, as opposed to higher prices for goods. But this is all hard to measure. Sven might have done more research than I have. 3. I think Sven has a way of viewing the world which is that the Fed is making a mistake and is more worried about propping up their "house of cards" than the job market. Given the Fed's behavior over the past 3 decades or so, there does seem to be a case for that. However, it's hard to say if they are fully aware of that and intentionally focused on that aspect, or if there's a more innocent motive of being preemptively worried about the job market. In short: ignoring the job market aspect is indicative of how Sven views the Fed's role and their motivations. It doesn't mean he's right, but his view does seem to be well-informed, so there is merit to it. With economics, it's hard to say. It's hard to pinpoint things - which is a big part of what Sven's calling out the Fed for here. Their projections are often wrong.
May be he accidentally forgot the role of supply chain and service disruption during the pandemic! The government issued stimulus checks to millions of Americans and businesses to sustain them. When people who benefited from free money blame the Fed or hate socialism, they conveniently forget the checks they received.
1. federal reserve - all money is created into existence by banks. for the usa government who borrows usa dollars the only banks that can create usa dollars is the 12 privately owned federal reserve Central banks of usa. whilst other countries and pension funds and banks can obviously buy usa government debt, they can only do so with usa dollars they already own. the only institutions that can create usa dollars out of thin air, to buy usa government debt is the 12 federal reserve privately owned banks. 2. inflation in the short term is geopolitical. but in the long term is monetary. what does that mean. imagine that usa only had 200 infinity stones as currency, no more. In such an economy can you ever have inflation? No. It is impossible. Why? because if a house cost 201 infinity stones how would anyone ever be able to buy it? it's impossible. Now imagine a house costing 400,000 infinity stones, or 1,000,000 in an economy where there's only 200 infinity stones as currency. Now imagine an economy in 1960 where there's only 140,000 billions dollars in usa that is all. And a house costs 2,000 in 1960. Now imagine those houses costing 500,000. Now imagine that same house costing 1,000,000. It is impossible for that to happen as there physically isn't enough money for prices to increase to that level. the total value of usa housing today is 50 trillion. In 1960 the entire usa economy had only 140 billion in money supply. Real Inflation is capped and determines by the money supply. And similarly real inflation is caused by increases in the money supply. If you increase the usa money supply in 1970 to 4 times as much by 1971, and the economic output stays same. Same number of houses and cars being built, same number of people working etc. Then the only result of increasing the money supply 4 fold, is a 4 fold increase in inflation of everything. This increase in inflation isn't equal. So asset prices like stock market, real estate, healthcare, education etc will increase at a faster rate than say the cost of bread. but the cost of living nonetheless will increase 4 fold. Ppl will be forced to move from 1 income to the 2 income, from 1 job to 2 jobs, from free education to expensive education etc. As this money is created and spent in the economy. the ownership distribution of the usa economy changes. Which is the real goal of expanding the money supply. To redistribute ownership wealth from you to the rich banking families. the rich people who get free access to this new money end up buying all these assets and becoming richer for free. Whilst everyone else becomes 4 fold poorer with their savings, pension, cost of living decreasing by 4 fold. That is the great scam. I call it theft and slavery by inflation. 3. fed is a private institution. Owned by the 12 privately owned federal banks. it works for the benifit of its rich banking family owners. who are rich bankers of the aipac kind. whose political agendas are simply the new world agenda of full privatisation of the world's economy and resources. Why? so that their privately owned family banks can print money and buy everything. Employment and inflation are just platitudes they throw around to fool the masses into thinking they are government agencies and not actually private family corporations. You can research this. It is all public knowledge.
So what is your solution? Waiting to cut to be sure that inflation is gone? In this way not only you pay huge interest on debt but you also deteriorate labour market, you have to try to move in advance. Easy to criticize without sharing a solution
Interest rates aren't the only way to control inflation. Sure it's the Fed's only way to control inflation (if you exclude rhetoric), but taxes are another method. Taxes are the preferred method in MMT. If MMT is correct then lowering interest rates should have a suppressing effect on inflation over the long run. With lower interest rates you have less money being pumped into the system from the government servicing its debt. Traditionally economics teaches that higher interest reduces inflation, but with the US government holding such a substantial amount of debt it flips that relationship on its head.
That's MMT nonsense, taxes DO NOT have a deflationary effect on prices, because the money the government taxes is not destroyed, it's spent by the government, so overall spending doesn't decrease it just changes who spends that, the government instead of the private sector
This guy doesn’t understand the first thing about MMT. Plea for the people in the comments: Don’t get your info on MMT from its critics without first understanding the underlying ideas, otherwise you will end up with BAD information just like this guy
May be you should know that in the last four decades, Reagan, G. W. Bush and Trump has added more debt and deficits than democrat. Let’s remember that, Obama and Biden inherited the economy in crisis. So supply side economics is no better. If you don’t believe that, you can do your own research by simply typing in “debt and deficit added by presidents!
One thing I think Elon did well was firing 80% of Twitter employees and the product only seemed to get better. That gives me hope that he can do the same with his full audit of the US Federal government, something that is LONG overdue. The USA is basically bankrupt and few want to talk about it, interest payments on the debt are now higher than spending on defense and Medicare for the first time ever. The number of government employees has ballooned, you know half of them can be eliminated and no one will miss them 😂. If it isn't done, we are going to have hyperinflation. This makes the upcoming election more important than any other election in modern times. Only one candidate has vowed to cut spending, I believe Trump will do what he says, only having one term is icing on the cake because he won't care about being re-elected and will just focus on doing the right thing for our country.
Finally you are back 👍👍👍
:-)))
@@Value-Investing "Why You Can't Afford Anything!" - How The Economy Became One Big Ponzi Scheme | Raoul Pal
Worth a watch!
Yes, he is back
@@Value-Investing Welcome back and looking forward to your next videos!
A voice of reason! Sven, I also told my friend who invests that I disagree with the rate cuts. You have taught me well!
I've missed your videos, thanks!
More to come!
@@Value-InvestingYeaaah!
Great points as always, thank you, Sven. I haven't seen any other channel that covers macro in so understandable manner. Unfortunately, politicians don't care. They're rich enough already to survive any financial Chernobyl. Ordinary people will pay for everything, as always.
thanks!
"Greed is good" - Gordon Gekko.
"Greed is good, until it's not" - FED
Good to have u back Sven.
:-)
Love it, Sven. You know one thing that surprises me? How long the game keeps going. I do feel your perspective is close to the truth, and it's similar to mine, but the game just keeps going on and on. My theory is that, given how much vested interested there is in the game (wealthy elites, US government, etc.), they have found ways to keep the thing going even when it might seem impossible.
It can't go on forever, IMO, but it does seem to be more resilient than I once imagined.
Yes, if you don't buy bonds, FED will buy. Then DXY goes down. Then, metals and stocks rise.
Im with you there. They just print and manipulate all data. Nobody in Europe is buying new cars, but that information they hide. They are hiding all bad information so people just accept it.
The game ended in 2008, what we are seeing now is its dwindling
Hey Sven,
Thank you for coming back :)
I missed your reality check these last weeks ahah
Nice to have you back 🙌
Awesome video Mr. Carlin! I love to see them back!
Welcome back Sven! 🎉
As long as the majority still doesn't understand that political (and accomplices) intervention is bad and we continue to demand and vote it we can't do other thing than getting worse and worse everytime... Has never worked well in all history. About time we learn... Aaaaand that *nothing* is free, someone pays for it! Anyway, we must be smart and take advantage of the opportunities... if politicians and their voters don't make us too poor for even that! Society needs financial knowledge urgently... Thank you.
Thank you!
thans Sven good to have you back and your analysis is spot on
In my opinion, the reason for the 50 bps rates cut is two fold: 1- the debt. If you add up debt + debt like obligations (healthcare and pensions) you get to 130 trillion and change. Rolling the upcoming expiring debt with high interest rates is a medium term problem. 2- recession. Anyone following the Bloombergs high frenquency economic indicator, sees the disinversion of the 2-10 yr spread and sees the FEDs remarks on the payroll must know the country is on recession and the FED is way behind the curve. If you take both the inflation/debt and the recession the FED seems to be between the sword and a hard place. And without room to print an additional 3 trillions of cash like in the pandemic. We are about to test the Modern Monetary Theory big time.
Thanks for your contributions.
1. Isn't debt rolling a constant problem? ie: since rates hit 4% each debt has to be rolled over at those rates.
2. Unemployment still isn't that high, and the yield inversion is a financial indicator, not an economic one (ie: it predicts, not confirms a recession), and GDP growth is positive, so do you conclude the country is actually on recession?
I also have been waiting a proper recession since 2020, but it still doesn't seem coming, from actual economic data.
@@lainiwakura44 Debt rolling is a constant problem, but the higher the FED rates the worse the problem becomes in the medium term. My take is that is the main reason why countries such as the UK started lowering interest before the US (something unusual) and with a Taylor Rule still indicating it wasn't time to cut. I expect countries to fare better or worse in this cycle based on how manageble their debt is (how much they spent on their economies relative to GDP during the pandemic) and how long and efficiently they are able to keep inflation in check (able to keep interest rates higher).
Bro we are at under 2% inflation if you exclude everything that matters such as rent, groceries, car insurance, gas. So to the fed we are doing amazing
😂
Bro? Lol
Finally someone adresses this. The budget on interest US has now grown bigger than defense budget. (Ref. US Dept clock). Projections in only 4 years is gonna be 4 times from now, being the absolute biggest budget. This is insane, and the world will collapse in a few years.
Sounds like a skeptical outlook on things then. With the rate cuts do you think it's best for us who are not conservative investors to focus on bonds or dividend stocks? I want to reallocate my 7-figure portfolio and I preferably want the assets with the best ROI.
Bonds are a safer bet. They offer good stable yields. But dividend stocks could make you a fortune if you know how to go about it. But it's always a good idea to work with a CFA. It streamline your strategy and help profit a lot.
I've been through the 'bonds are beating stocks' periods since the 90s with no bonds and with all aggressive stock mutual funds.
At 66, my IRA and cash accounts are far more than I expected for my retirement. I can easily handle a worst-case 80% stock crash, Thanks to my CFA.
Mind if I look up your advisr please? I've worked in real estate for over 15 years and have neglected a major stock portfolio. This served me well when I was flipping and renting houses, however I need a different plan now.
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
What is the solution for the FED? How do you think our monetary system should be structured? Should the USA save money and repay its debts? Increase taxes?
hm, that is a good question!
Thank you Sven for all your work! 🔥
Buying Vale @sub 10 can be lucrative in the future ;)
Nice video - we live in interesting times that is for sure... system looks like it is near breaking point. Inflation will surely jump higher again with recent cuts...
Nice video. Fair enough. But what is your conclusion? All-in Gold? All-in Cash? Which Cash (CHF? Obviously not USD)? So far the video is only infotainment, no instruction for action. Thanks.
Good point! The process of value investing is the answer, will discuss soon!
Inflation is a tax. And again, nice to see a new video!
no, inflation is theft.
As the rich bankers are stealing it. Not the government.
It's crazy to cut rates when market is all time high 😊
Rate cuts has nothing to do with the market the Fed has two mandates keep inflation down and unemployment down
The market reacted in anticipation of rate cut and soft landing not the other way around
The Federal Reserve seems to be using many lagging indicators to determine inflation. It seems that inflation in the US is a lot lower at the moment than the reported. I think they did well to cut rates.
Hi Sven, what do you believe the best hedge is against inflation should it eventually go very badly with the debt? It seems the rest of the world, especially Japan is as bad or worse than the USA. I am assuming you don't think the answer is bonds.
Hello Sven, thanks for sharing and explaining the situation in an understandable manner. Common theme in your videos is that US government is running a Ponzi scheme. What does that mean to the investors? Are US securities more risky and overvalued? Should we give up on US dollar and switch to Crypto?
it just means the value of the dollar will keep deteriorating, for the rest, all equal when it comes to investing: own value!
Hi Sven a question: if the federal bankruptcy happens, is it better to hold cash or S&P 500? When I look at a stock index in Turkey (BIST-100), under hyperinflation, it looks like it held the value much better than cash.
bankruptcy will not happen, but yes, in case of hyperinflation, stocks could hold in a way but not 100%!
Love your work.
I'm pretty sure that we will see it happening. But on other hand you and me really want to see what comes after that!
If the Fed is wrong, not only we will find out in a near future or within 6-8 months. For the Fed being wrong has dire consequences. However, if this gentleman is wrong, no body will remember it and he won’t face any consequences. Unfortunately, if those watching the video make a financial or investment decision based on the content of the video would face bad consequences. The moral of the story is not to listen to these expert’s opinions!
My opinion is that nothing will happen. Economy will keep going fairly well and debt wont be a major issue.
However i agree thinking QE wouldnt cause inflation was stupid, and the inflation projections seem kinda stupid, and also we could have a bit more stubborn inflation going forward. However many countries like sweden already have low inflation again.
thanks for sharing!
Hi Sven. Great to see you again. Can you share your opinion about Hermès? This is a great bussiness, as a machine make mooney and stable like a rock.
Thank you a lot for this big channel.
I think the luxury environment is not stable as a rock. But, might discuss.
I hope the vacation was good :) Cheers!
You are so right. Per Ray Dalio this will end with a big war.
as said, I hope not :-(
@@Value-Investing having world wide wars has become PROBLEMATIC since The Manhattan Project...
He’s incentivized to say so
@@Wrex327 Who is? One can see the deteriorating economy and dollar of we keep our eyes open!!!
Great analysis … 💎
Thank you very much. I gues the problem is more political than logical. By the way the core Inflation is excluding Food and Energy. So for me it is totaly worthless.
real inflation is 200 basis points higher than what the GOVERNMENT's data says :-)))
@@Value-Investing 😅
Well worthless I don’t know. They use a metric to make decisions it does not necessarily need to measure all inflation. As long as it works for decision making it is ok.
Great insights. Sitting on the sideline and waiting the big correction 😅
hm, maybe it will never come!
Can you make a video on the European car manufacturers pls? Stellantis, VW, Merc, BMW, all cheap rn when just looking at trail PE
check the PE ratio in 12 months, with sales slowing down it will look ugly!
Professor Steve Hanke from Johns Hopkin's predicting inflation is done due to flattening of M2
Thanks for the update
Keep us updated please
:-)
😂😂😂😂😂😂😂
Nice one Sven.
Please tell us the exact growth and inflation if you know better than the fed.
exactly, I know I don't know, the FED thinks they know - what is more dangerous?
@Value-Investing well I am sure that you more than anyone knows that when they f up, we (the patient investors) get wealthy.
Buy Gold
I missed you :)) Thanks for the new video
More to come!
Good Dip-buying opportunities in the EV sector this week or larger Dip coming in Sept.? Nikola... Clean energy trucks North American leader . Rivian.. Polestar.. Frey.. Lucid.. Evtol Jets..( Lillium, Archer, Joby, Blade, more ) Thumbs Up video/ comments. Thanks.
@@2023gainer Nikola is a scam, just look it up.
What will happen when its over?
Debt of USA gov is 35trillion dollars , the usa households hold a total net wealth/assets of 122 trillion. americans just dont like high taxes. but they can easely afford those debts if they increase taxes. But both partys prob will not do it
if every American pays israhelli owned federal reserve 1/3 of their entire wealth. America would collapse.
It would be an interesting video for you to cover how protect yourself in the scenario that MMT dies
yes!
Stock will go up. They have made economy addicted to money printing, there is no other way at this point.
most likely!
"Why You Can't Afford Anything!" - How The Economy Became One Big Ponzi Scheme | Raoul Pal
The debt and deficit spending are problematic for sure. Maybe the US government can solve it by lowering corporate and rich people taxes yet again... Or perhaps Warren Buffet is right about them increasing taxes so they can kick the can down the road.
thanks for sharing!
Mr Sven, do you have an opinion as to which companies can continue to operate and provide some protection against out of control inflation? How can companies pay employees and suppliers and collect payments if the monetary system collapses around them?
Great economic video but there are non-strictly economic reasons why a country with a debt-to-GDP ratio of 120% might be in trouble while another isn't, and it is funny how to guarantee those non-economic reasons to keep debt sustainable might actually require further debt. It is a bet and it surely can go wrong but looking at Germany and other countries: it's better to win a war and have a lot of debt than vice versa.
By ‘vice versa’ do you refer to negotiating peace?
@@Robert-fx3ng no, by vice versa I mean losing the war and having low debt/good finances. How low your debt/good your finances are make no difference in a peace negotiation. Enforcing an agreement (even peace) requires power, only the strongest can be sure to enforce its ruling. There's a recent example with the destruction of the North Stream pipe - if Germany and Russia were to make an alliance and win a war with US, Germany would sanction the US - sorry for the political fiction. If that doesn't happen, Germany cannot sanction US and it doesn't matter that German debt-to-GDP is ~60% and the US one is ~120%.
Where are you my fellow investor...? I missed you soοοοο much and your opening line that i listen to it on repeat ❤
What the Fed is doing has nothing to do with 'experimenting in MMT' , the whole point of MMT is the government doesn't need t obrrow or issue bonds to create money in the first place and that the arbitrary interest on the debt is itself inflationary and therefore counter productive whe nthe Fed tries to tackle inflation by raising rates.
So print and not borrow? And where has a place done that successfully?
@@Dan16673 The US. Abraham Lincoln did it to win the civil war, creating 'Greenbacks' with no bond or gold backing.
Really it's everywhere now by stealth, what is QE but one arm of government creating debt by creating interest bearing bonds whilst another nullifies it by purchasing those bonds? Greenbacks were honest, QE is just a way of maintaining the farce that governments need to borrow to spend.
The real limit of government spending is inflation, always was.
Very interesting
Glad you think so!
Does the Fed pay nominal interest rate or the federal funds rate on the outstanding debt? If it's the nominal interest rates, then it would not matter much if the Fed decrease interest rates by 0.50% given that nominal interest rates may not decrease by the 0.50% decrease.
Didn't you project S&P 500 cumulative earnings for 2024 of 175$? You might check your own projections and assumptions in retrospect. For now, the exuberant Analysts that projected $260 earnings are way more accurate than you are
Trailing S&P500 Eps as of 3/31 were $193…
Meanwhile analysts have been projecting $250 since 2021…
Earnings are still roughly where they were 3 years ago.
EPS of the SP500 have been declining for the past 3 years...
When QE is implemented , essentially the FED buys government issued bonds. When the government pays interest on those bonds, it pays interest to the FED and eventually finds its way back to the Treasury. Interest expense on the US government side is interest income on the FED side. So when we talk about government debt, the real question would be who holds this debt not necessarily the amount of debt. If the FED holds government debt purchased by printing, they essentially cancel each other out.....correct?
Sure. That’s what they have done on/off the last 2 decades or so. The problem is that if the fed prints too much money to buy US bonds, we get inflation. Too much government spending =too much money printing =inflation; maybe hyperinflation. There is no free lunch.
@@griesemermd Yes I understand but the interest payments cancel each other out. Essentially the US government is paying itself.
but the FED owns just a small part of the debt, they can't play too much with that
BANK stock is going up?
Thanks for the video. I agree with this doomsday schenario. It's perhaps one of the worst schenarios. I hope it doesn't happen, but you never know. However, perhaps good to ask: is one investing in the US government's fiat money or in businesses?
some businesses will survive, but think Berkshire with 25% of market cap in cash
@@Value-Investing then how do we invest, where do we put our money? How about offshore (legal) non dollar accounts like India or south east asia or outside US real estate and physical gold and/or Silver? This would be a good time to get out of market since this FED action has given us another mini rally in equities for now!!!
@@Value-Investing TL;DR I don't know. Berkshire has probably many reasons for their cash position. I would think this doomsday schenario is not a major one for them, similarly to a WW3 schenario is not. (Ajit and Warren discussed WW3 in a meeting, was it 2022?) I think you have perhaps a fallacy here in judging the people steering currencies (macro) similarly to people steering businesses (micro) -- because you are foremost a great business (micro) analyst and may think in this way. I don't know... Systems complexity of macro and micro are vastly different, and if they are confused, invalid conclusions can be easily reached through oversimplification. Regarding macro analysis, a realistic and experienced analyst should expect the macroeconomic predictions to be invalid (they are only made for show). (Read, Taleb.) This results that all macro actions have realistically both unpredictable primary and secondary outcomes. Nobody knows.
@@Value-Investing I think Berkshire has many reasons to have cash, and I'd guess this schenario is just one of them. I think they may see it like this: it's in the interest of the main players of the global financial system for the reserve currency (USD) to not meaningfully lose its position and value. I mean, the current players' incentives are aligned keeping the current reserve currency afloat and well. Finding an alternative reserve currency seems to be difficult, as even the crypto currencies don't seem to have a dent... The resilience indicates the system around the reserve currency is strong, and the current methods are working -- at least for now.
My original point in the comment was not to confuse macro to micro analysis when investing in stocks, i.e. businesses vs the economy. Macro doesn't really matter that much, because a great business, that is worthy of investment, is one that survives, and perhaps even grows, in any macroeconomic situation.
Evo te konacno natrag, falile su nam tvoje analize. Sjecas se kako ti je netko ukazao na KODT prije par godina 😜, vise nego ikad bi volio taj video ovdje iako znam da nema zanimanja za te dionice ovdje te da nece biti puno pregleda, ali bi ipak mogao 😊😊😊😊
Great video Sven but isn´t this done on purpose I mean name as long as the dollar is the world reserve currency you can´t not bypass it.
"35B, sorry... Billion, Trillion; 35 Trillion" That was hilarious... when the big number is too small and you realize that 35B$ would be too easy to pay so something's not right... xDD
:-))))
Yeah, the fact that Americans can't count to more than a 1000 million (a miiliard) is really making it difficult for the rest of the world when discussing big numbers.
???
Sven still doesn't know that debt is not taken into account when calculating GDP growth... how many times have they written to him about this.
explain please
I wonder if he did or didn’t know that’s interesting to know about.
So youtube deleted my previous comment. Wow. Anyway. Sven, how do we invest here? Real estate and gold outside USA? India? South east asia? Any safe haven't? Thank you.
2 year rates at 3.6%
Another dooms day video from Sven! Economists bark market goes up.
cut it back, then fu ck around and find out.
then raise rate as needed.
If anything the FED is wrong because they cut rate too late, not too early or too much. The FED lags and you don’t wait until inflation is completely done to lower unless you really want recession.
thanks for sharing!
In the meantime... buy gold and silver?
assets not producing much, all you can get is inflation protection at some moments in time.
Time to do a video on Lithium?
will do!
It really smells exactly like the 70s imo. I hope I'm wrong
I hope too!
For the last two years Sven has been wrong about a lot of things. I doubt his portfolio has beaten the SPY. His incessant prediction the market is going to crash so don't buy the SPY but instead buy individual stocks has been horrible advice. WIll it crash now? No one knows but the Fed is far smarter than Sven. We will see.
thanks for your concern, Sven is doing ok, no worries!
False. Cool yes not correct. Sven pointed this out but just like Warren buffet has said individual stocks can actually be less risky than the s&p at times.
Hi Sven, great video. I have a few questions:
1) Who is the USA borrowing the money from?
2) You show a correlation between inflation and FED policy, but others cite geopolitical factors as the reason for inflation (for example wars and protectionism, limiting access to cheap asian goods). Is that a factor or is it mostly monetary policy?
3) FED cites dual mandate of employment and price stability as guiding it's principle. Why are you not including the job market in your analysis?
watch this! - "Why You Can't Afford Anything!" - How The Economy Became One Big Ponzi Scheme | Raoul Pal
Not Sven but good questions, I'll take a swing:
1. 20% is "intragovernmental debt", like money the government owes to social security trust funds. This is kind of hard to understand, but it's a small component. Between 20-30% is held by foreigners it seems - about half of which are governments, and the other half are private investors. Biggest countries we owe to are 1. Japan and 2. China. The rest is owed domestically to US investors, including but not limited to individual investors, mutual funds, pension funds, state and local governments, banks, etc.
2. Absolutely a factor. A big one. I would add that, keep in mind, these trends (protectionism, deglobalization) aren't going away any time soon. To what extent inflation is caused by that vs. monetary policy, it's hard to say. I'm not sure to be honest, but I think it's up for debate. I think there is solid argument that a lot of the money printing ends up in asset inflation, ie, higher stock and real estate prices, as opposed to higher prices for goods. But this is all hard to measure. Sven might have done more research than I have.
3. I think Sven has a way of viewing the world which is that the Fed is making a mistake and is more worried about propping up their "house of cards" than the job market. Given the Fed's behavior over the past 3 decades or so, there does seem to be a case for that. However, it's hard to say if they are fully aware of that and intentionally focused on that aspect, or if there's a more innocent motive of being preemptively worried about the job market. In short: ignoring the job market aspect is indicative of how Sven views the Fed's role and their motivations. It doesn't mean he's right, but his view does seem to be well-informed, so there is merit to it.
With economics, it's hard to say. It's hard to pinpoint things - which is a big part of what Sven's calling out the Fed for here. Their projections are often wrong.
May be he accidentally forgot the role of supply chain and service disruption during the pandemic! The government issued stimulus checks to millions of Americans and businesses to sustain them. When people who benefited from free money blame the Fed or hate socialism, they conveniently forget the checks they received.
@@kevinswift8654 Thank you very much for your answer!
1. federal reserve - all money is created into existence by banks. for the usa government who borrows usa dollars the only banks that can create usa dollars is the 12 privately owned federal reserve Central banks of usa.
whilst other countries and pension funds and banks can obviously buy usa government debt, they can only do so with usa dollars they already own.
the only institutions that can create usa dollars out of thin air, to buy usa government debt is the 12 federal reserve privately owned banks.
2. inflation in the short term is geopolitical. but in the long term is monetary. what does that mean. imagine that usa only had 200 infinity stones as currency, no more. In such an economy can you ever have inflation? No. It is impossible.
Why? because if a house cost 201 infinity stones how would anyone ever be able to buy it? it's impossible.
Now imagine a house costing 400,000 infinity stones, or 1,000,000 in an economy where there's only 200 infinity stones as currency.
Now imagine an economy in 1960 where there's only 140,000 billions dollars in usa that is all. And a house costs 2,000 in 1960.
Now imagine those houses costing 500,000. Now imagine that same house costing 1,000,000.
It is impossible for that to happen as there physically isn't enough money for prices to increase to that level.
the total value of usa housing today is 50 trillion. In 1960 the entire usa economy had only 140 billion in money supply.
Real Inflation is capped and determines by the money supply.
And similarly real inflation is caused by increases in the money supply.
If you increase the usa money supply in 1970 to 4 times as much by 1971, and the economic output stays same. Same number of houses and cars being built, same number of people working etc. Then the only result of increasing the money supply 4 fold, is a 4 fold increase in inflation of everything.
This increase in inflation isn't equal.
So asset prices like stock market, real estate, healthcare, education etc will increase at a faster rate than say the cost of bread.
but the cost of living nonetheless will increase 4 fold. Ppl will be forced to move from 1 income to the 2 income, from 1 job to 2 jobs, from free education to expensive education etc.
As this money is created and spent in the economy. the ownership distribution of the usa economy changes. Which is the real goal of expanding the money supply. To redistribute ownership wealth from you to the rich banking families.
the rich people who get free access to this new money end up buying all these assets and becoming richer for free. Whilst everyone else becomes 4 fold poorer with their savings, pension, cost of living decreasing by 4 fold.
That is the great scam.
I call it theft and slavery by inflation.
3. fed is a private institution. Owned by the 12 privately owned federal banks. it works for the benifit of its rich banking family owners.
who are rich bankers of the aipac kind. whose political agendas are simply the new world agenda of full privatisation of the world's economy and resources. Why? so that their privately owned family banks can print money and buy everything.
Employment and inflation are just platitudes they throw around to fool the masses into thinking they are government agencies and not actually private family corporations.
You can research this. It is all public knowledge.
So what is your solution? Waiting to cut to be sure that inflation is gone? In this way not only you pay huge interest on debt but you also deteriorate labour market, you have to try to move in advance. Easy to criticize without sharing a solution
there is no solution!
This is the guy who said Nike was going to $40
Tell us how you are going to pay the $35 trillion you owe?
He never said thay
Interest rates aren't the only way to control inflation. Sure it's the Fed's only way to control inflation (if you exclude rhetoric), but taxes are another method. Taxes are the preferred method in MMT.
If MMT is correct then lowering interest rates should have a suppressing effect on inflation over the long run. With lower interest rates you have less money being pumped into the system from the government servicing its debt.
Traditionally economics teaches that higher interest reduces inflation, but with the US government holding such a substantial amount of debt it flips that relationship on its head.
That's MMT nonsense, taxes DO NOT have a deflationary effect on prices, because the money the government taxes is not destroyed, it's spent by the government, so overall spending doesn't decrease it just changes who spends that, the government instead of the private sector
Yep, she's a Ponzi. I've been getting into gold for this reason.
thanks for sharing!
This guy doesn’t understand the first thing about MMT. Plea for the people in the comments: Don’t get your info on MMT from its critics without first understanding the underlying ideas, otherwise you will end up with BAD information just like this guy
thanks for sharing your wisdom!
Bidenomics
May be you should know that in the last four decades, Reagan, G. W. Bush and Trump has added more debt and deficits than democrat. Let’s remember that, Obama and Biden inherited the economy in crisis. So supply side economics is no better. If you don’t believe that, you can do your own research by simply typing in “debt and deficit added by presidents!
One thing I think Elon did well was firing 80% of Twitter employees and the product only seemed to get better. That gives me hope that he can do the same with his full audit of the US Federal government, something that is LONG overdue. The USA is basically bankrupt and few want to talk about it, interest payments on the debt are now higher than spending on defense and Medicare for the first time ever. The number of government employees has ballooned, you know half of them can be eliminated and no one will miss them 😂. If it isn't done, we are going to have hyperinflation. This makes the upcoming election more important than any other election in modern times. Only one candidate has vowed to cut spending, I believe Trump will do what he says, only having one term is icing on the cake because he won't care about being re-elected and will just focus on doing the right thing for our country.
fired and then rehired at higher wages 😂
Bitcoin is the solution to this
Crypto is also a Ponzi. There can be unlimited cryptos
@@johnbrion4565 agree, however that does not apply to bitcoin
All the doomers and gloomers are always wrong