@TSTRMPro
Aug 10, 2021 | 03:15 PM EDT DOUG KASS
Is It All a Ponzi Scheme?
* An afternoon rant!
* Expanding on this morning's Bloomberg interview
Webster defines a Ponzi scheme as "an investment swindle in which some early investors are paid off with money put up by later ones
Aug 10, 2021 | 03:15 PM EDT DOUG KASS
Is It All a Ponzi Scheme?
* An afternoon rant!
* Expanding on this morning's Bloomberg interview
Webster defines a Ponzi scheme as "an investment swindle in which some early investors are paid off with money put up by later ones
in order to encourage more and bigger risks."
As I suggested in this morning's Bloomberg Surveillance interview, our economic policy is beginning to look that way.
Currently massive government spending - to benefit Americans - is being financed by taking on enormous amounts of
As I suggested in this morning's Bloomberg Surveillance interview, our economic policy is beginning to look that way.
Currently massive government spending - to benefit Americans - is being financed by taking on enormous amounts of
debt with which future citizens will be burdened.
That debt emanates from unprecedented budget deficits resulting from spending well in excess of tax receipts. Public borrowing has vastly increased private savings at the expense of a soaring national debt. As a result, despite
That debt emanates from unprecedented budget deficits resulting from spending well in excess of tax receipts. Public borrowing has vastly increased private savings at the expense of a soaring national debt. As a result, despite
the pandemic, savings are at an all-time high.
Such borrowings would normally lead to higher interest rates to finance them but not this time because the Federal Reserve has largely neutralized them by purchasing $120 billion of Treasury and mortgage-backed securities a month
Such borrowings would normally lead to higher interest rates to finance them but not this time because the Federal Reserve has largely neutralized them by purchasing $120 billion of Treasury and mortgage-backed securities a month
- vastly increasing the national debt. These purchases have kept nominal rates low making financing the deficit less of a burden.
Clearly much of the spending has been necessitated by the pandemic but prior tax cuts and future spending plans are responsible for a very
Clearly much of the spending has been necessitated by the pandemic but prior tax cuts and future spending plans are responsible for a very
meaningful part.
As a result, we live in a world where economic health is to a larger and larger degree, an artificially created illusion and both the stock and bond markets have soared as a result. The question is whether this is sustainable and what the consequences are if
As a result, we live in a world where economic health is to a larger and larger degree, an artificially created illusion and both the stock and bond markets have soared as a result. The question is whether this is sustainable and what the consequences are if
it is not...
It is generally recognized that markets have moved steadily higher because of the support of the Federal Reserve with the markets only experiencing very short periods of decline when it looked like that support might be withdrawn. The belief in a Fed "put"
It is generally recognized that markets have moved steadily higher because of the support of the Federal Reserve with the markets only experiencing very short periods of decline when it looked like that support might be withdrawn. The belief in a Fed "put"
protecting the downside has led to a massive growth in riskier investments like SPACs, IPOs, junk bonds, cryptocurrencies, etc.
The Fed's policy has resulted in a massive increase in income inequality. Those seeking to invest the savings occasioned by the federal policies
The Fed's policy has resulted in a massive increase in income inequality. Those seeking to invest the savings occasioned by the federal policies
are faced with the option of traditional fixed income securities which yield almost nothing or investing in an admittedly expensive stock market or in other tangible assets. Many/most have chosen asset purchases. Those already wealthy have enjoyed enormous gains as stocks and
homes have risen dramatically while those with modest savings have watched returns from fixed income assets virtually vanish. First time home buyers have been priced out of the market as housing has risen by +20% in the last year. Those with modest or no savings are experiencing
real income declines as inflation outpaces nominal wage gains.
As I have noted in the past, the Fed seems more politically motivated than in the past. Years ago, a Fed chairman stated that the Fed should take away the punch bowl when the party was getting too good. We are
As I have noted in the past, the Fed seems more politically motivated than in the past. Years ago, a Fed chairman stated that the Fed should take away the punch bowl when the party was getting too good. We are
arguably at that place but this Fed seems to have abandoned this view and has made no real recognition to the substantial recovery of the economy and the financial markets.
In essence, there has been no effort to restrain market enthusiasm and to reintroduce risk into the
In essence, there has been no effort to restrain market enthusiasm and to reintroduce risk into the
investment equation.
Time will tell whether the current policy was sound. At some point in the not too distant future, Fed support will end and the correction in the markets could be severe given how expensive they have become by virtually any historic standard. Were this to
Time will tell whether the current policy was sound. At some point in the not too distant future, Fed support will end and the correction in the markets could be severe given how expensive they have become by virtually any historic standard. Were this to
happen it would risk the savings of the nation and undermine the soundness of pension programs which have become dependent on the market. Rising interest rates will demand a greater portion of the national budget, restricting other spending options which could benefit the
majority of Americans.
So, in a sense, we could be witnessing the biggest Ponzi scheme in history.
This risk, especially at current valuations, is extraordinary, and it seems that, with a substantial economic recovery underway, the Fed should immediately begin to reduce its
So, in a sense, we could be witnessing the biggest Ponzi scheme in history.
This risk, especially at current valuations, is extraordinary, and it seems that, with a substantial economic recovery underway, the Fed should immediately begin to reduce its
artificial support which has so distorted the economy and our capital markets. @tomkeene @jimcramer @ferrotv @WilfredFrost @SquawkCNBC @cnbcfastmoney @ScottWapnerCNBC @andrewrsorkin @rebeccaquick @saraeisen @riskreversal @convertbond @EpsilonTheory @lizclaman @JohnFMauldin
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