part of that 47% comment Romney got crucified for speaking about!! http://cbsn.ws/YHvMCM
I attended a Medicare/Social Security Conference recently that spoke about how "broke" the disability system was. The word "broke" here meaning dysfunctional. That said, the speakers seemed to think it was an easy fix if someone wanted to actually fix it!
the largest holder of UST securities is actually the social security and medicare trust funds. you can read more about them here..http://1.usa.gov/VqIhlz
Bd4: I had originally included a comment about preciously this but the fine editors at SA thought it was too political. We haven't tackled the problem because it would mean alienating a huge segment of the voter base. AARP has over 40M members and if you go to OpenSecrets.org ( http://bit.ly/GLXogl ) last year AARP ranked 14th spending some $15m+ on lobbying efforts. We are the worst can-kickers..
Murmuru: Folks are working longer for a variety of reasons: Longer life expectancy, '08/09 stock and housing market crash wiping out a huge slug of wealth it took a lifetime to build, continued poor fixed income returns from low interest rates and I just heard this one staying in to keep healthcare benefits..at least until medicare kicks in!
But working more efficiently doesn't mean you are growing it just means you can squeeze more output per unit of input. Which is good for resource utilization but it doesn't lead to "growth" off an already efficient baseline.
Neutrinoman: thanks for the reco. I'll look into it.
Chatlos: thanks for sharing that bit of evidence. That's really interesting actually. Kind of echoes Philip Mause's point about not counting old people down and out and the way our society has evolved productivity comes from exercising brain and not brawn.
Dixie: Thanks for your comment. The Social Security Act was signed in 1935 on an unfunded basis and collections/distributions were first made in Jan 1937, so technically the first generation of folks in America actually got it for free! Lucky them. It's not our promises that are bankrupting the country its the ballooning costs of honoring them. The way social security and medicare are structured today is simply unsustainable. We can play around with the actuarial assumptions for a few more years but ultimately we have to either reign in the costs or haircut the amount people will receive. Personally I know I am paying into an insolvent system and if it wasn't tax evasion I'd pass on the safety net.
Philip: That's a fair point actually, but I'd be interested in seeing productivity figures and/or innovation/ingenuity by age group. (Maybe sort patent filings by age?) This is speculative but I'd venture to guess that the middle bracket (25-40) are the innovators in a society; the folks that work hard and think of new ways of growing their own businesses. It's that group that will drive growth going forward. The older population, having already established themselves, might be more complacent in the status quo.
Birdman: thanks. I thought those pictures really did drive the point home so I am glad you agree! They've come so very far in such a short period of time. Really quite astonishing but honestly this kind of skyward momentum is not as good as one might think. They need to slow it down and create a sustainable model.
I think people get confused by what investments means. Investments (which is 48.9% of the economy) includes more than just real estate and property construction. Only 25% of China's fixed asset investment is real estate. The rest is composed of inventories + infrastructure like the ones you cited (railways, public facilities). When you express property construction alone as a % of GDP that's how you get 13%.
Investment is not inherently bad and the ones Bee Gee cited China actually needs. Electrical capacity, water, sewage and garbage processing facilities. It's like a giant game of SimCity!
MH001: I'll read that article you suggested, and I agree with you that hindsight is 20/20 but there are a lot more China bears out there. Not many are outright short today (most see it as a medium/long term problem), but honestly it only takes an absence of buying for prices to fall. Your comment on recycling dead money is an interesting one. And you are right: I've heard close to 40% of local government revenue comes from land sales. And LG's account for the vast majority of the infrastructure spending in China.
What's really scary about this situation is developers can't sell off their units so they won't buy the land from the local governments. So how do the local governments raise capital to meet their LGFV obligations? LG debt + LGFV's = $8.5T number. 1.4X China's GDP. That's where the real problems lay.
Bee Gee: Remember there were buyers of the Nikkei at 40K and NASDAQ at 5K. You never know when you've hit the top.. or bottom for that matter. At the end of the day we are all price takers. We wake up every morning and have a choice: we can either accept the earnings multiple of the day or not. In my mind, there are plenty of other 'opportunities' in capital markets so if it doesn't make sense its probably not.
Logical Thought: I feel exactly the same about a lot of the IPO's that came out this year. The types of valuations put on Pandora/Groupon/Facebook are built of membership counts not cash flow. Remember MySpace? Valued at 500M in 2005, NewsCorp sold in 2011 for $35M! What's worse about china is they are cooking their books so how do you even start to trust any of the numbers?
Levin: I've heard that argument before but more tilted toward the fact that China has no social safety net so that inherently forces its citizens to watch out for themselves and save for things like health care, education, and basic living expenses. I find that ironic given their communist origins.
All, thanks for your comments. China is perhaps one of the most peculiar economies I've seen (save for Japan). China is one part laissez-faire, one part planned so none of the traditional mechanisms that governed a particular economic "brand" apply. The real estate market is undoubtedly fatigued but the PBC has already shown a willingness to step in and reflate the bubble. But there is a mountain of bad debt: the only thing that saves the government is the fact that down payments are close to 50%: that's a healthy amount of cushion/subordination!
Guike: I'm simply pointing to a structural problem with how they've grown their economy. The real problem is they have no choice but to continue down this path which means their big problem becomes an even bigger one down the road. Eventually the music stops and someone will be holding the bag. So make hay while the sun shines my friend.
And instead of carrying a short I'd much rather just buy a cheap hedge from a China bull. Do you know where I can find one of those?
Thanks for your crass post Guike. Glad you drank the cool aid. But you missed the point. They will do just fine over the next decade but you'd be ill-advised to believe you are not in an unsustainable asset bubble. Music stops and you'll be caught holding the bag. Next time just take your chips to Macau: you'll have a lot more fun.
The Silent Bid For Oil: Real Yields [View article]
Hi American, Thanks for your question/comment. I am using 10Y US Treasury yields as my benchmark and I actually use core CPI to try and isolate 'persistent' inflation. Headline is volatile and especially back in the 70's commodity prices drove a lot of the inflation spikes. And this article is more geared toward describing the relationship rather than the absolute level. Honestly, you can substitute in nominal yields and the crux of the argument remains the same. Start out with a bigger pot of money and the coupon payments mean less. Let me know if that answers your question. All the best to you in the new year! - Filip
Why Old People Still Matter [View article]
http://cbsn.ws/YHvMCM
I attended a Medicare/Social Security Conference recently that spoke about how "broke" the disability system was. The word "broke" here meaning dysfunctional. That said, the speakers seemed to think it was an easy fix if someone wanted to actually fix it!
Why Old People Still Matter [View article]
Why Old People Still Matter [View article]
Murmuru: Folks are working longer for a variety of reasons: Longer life expectancy, '08/09 stock and housing market crash wiping out a huge slug of wealth it took a lifetime to build, continued poor fixed income returns from low interest rates and I just heard this one staying in to keep healthcare benefits..at least until medicare kicks in!
But working more efficiently doesn't mean you are growing it just means you can squeeze more output per unit of input. Which is good for resource utilization but it doesn't lead to "growth" off an already efficient baseline.
Neutrinoman: thanks for the reco. I'll look into it.
Chatlos: thanks for sharing that bit of evidence. That's really interesting actually. Kind of echoes Philip Mause's point about not counting old people down and out and the way our society has evolved productivity comes from exercising brain and not brawn.
Why Old People Still Matter [View article]
Philip: That's a fair point actually, but I'd be interested in seeing productivity figures and/or innovation/ingenuity by age group. (Maybe sort patent filings by age?) This is speculative but I'd venture to guess that the middle bracket (25-40) are the innovators in a society; the folks that work hard and think of new ways of growing their own businesses. It's that group that will drive growth going forward. The older population, having already established themselves, might be more complacent in the status quo.
On China's Punch Bowl [View article]
I think people get confused by what investments means. Investments (which is 48.9% of the economy) includes more than just real estate and property construction. Only 25% of China's fixed asset investment is real estate. The rest is composed of inventories + infrastructure like the ones you cited (railways, public facilities). When you express property construction alone as a % of GDP that's how you get 13%.
Investment is not inherently bad and the ones Bee Gee cited China actually needs. Electrical capacity, water, sewage and garbage processing facilities. It's like a giant game of SimCity!
On China's Punch Bowl [View article]
What's really scary about this situation is developers can't sell off their units so they won't buy the land from the local governments. So how do the local governments raise capital to meet their LGFV obligations? LG debt + LGFV's = $8.5T number. 1.4X China's GDP. That's where the real problems lay.
On China's Punch Bowl [View article]
On China's Punch Bowl [View article]
On China's Punch Bowl [View article]
On China's Punch Bowl [View article]
On China's Punch Bowl [View article]
And instead of carrying a short I'd much rather just buy a cheap hedge from a China bull. Do you know where I can find one of those?
On China's Punch Bowl [View article]
The Silent Bid For Oil: Real Yields [View article]