Economy is Great: Do Not Believe Leftist Lies

[Toro]

"sub-prime business"

That's my little term for it. Earlier this year I wrote a book that touched (a little bit, just one chapter) on how businesses can get funding. As part of my research I stumbled onto a shitload of these online lenders, and their tactics and offers were a REAL flashback to the insane mortgage offers of 2004-2007. Talk about deja vu. It just didn't feel good.

I'm trying to find some decent data sources on it. I may be overestimating this, but I'd sure like to know more about it.
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I don't think that small businesses are over-leveraged. In fact, I think the restrictions that were put on small banks after the GFC restricted credit into the local economies. Trump has helped alleviate that.

We are seeing deterioration starting in the lower-middle market. These are businesses with $15-$30 million in EBITDA. It's here that lending standards are weakening. It's bleeding in from the larger markets. In the middle and upper-middle market, there are virtually no covenants anymore, and deals are getting done with ridiculous pro-forma adjustments to EBITDA. Leveraged loans are now a $1 trillion market, triple what it was a decade ago, and equaling the high yield market. Most of those are sitting in CLOs where credit analysis is often spotty.

Bonds have deteriorated to the point that the BBBs are now half the IG market at $3 trillion. Companies have levered up to buy back stock. In fact - and this is pretty stunning - almost all the net buying of stocks over the past decade has been by corporations buying their own stock. If we are going to see a slowdown or recession over the next 18-24 months, you are going to see some real fireworks in the corporate credit markets.

 

[Mac1958]

"sub-prime business"

That's my little term for it. Earlier this year I wrote a book that touched (a little bit, just one chapter) on how businesses can get funding. As part of my research I stumbled onto a shitload of these online lenders, and their tactics and offers were a REAL flashback to the insane mortgage offers of 2004-2007. Talk about deja vu. It just didn't feel good.

I'm trying to find some decent data sources on it. I may be overestimating this, but I'd sure like to know more about it.
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By the way, speaking of mezzanine financing, another thing that got me wondering was the proliferation of non-traded BDCs like Inland and CION - they specialize in the mid market, those things are mostly illiquid, BUT they pay a huge rip so younger advisors cram everyone they can into them. I wonder what piece that plays in this, because I'm sure they're bringing in some money.
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[DBA]

Only a fool would start a Trade War in a strong economy

Shut up stupid, American workers are fed up with China ripping us off. You bunch of dumb asses on the left really don't get why you lost in 2016.

The trade war is stupid

All it does is see who can hurt the other guy the most. Nobody ends up the better for it

The Chinese aren't stupid. They do things that they feel will benefit them. Currency manipulation and theft of intellectual property have benefited them in the past so they continue to do both. Trump has put them on notice that behavior needs to stop by imposing tariffs on their goods. He does so at a time when the Chinese economy is not doing well and ours is rather strong...which is the perfect time to do so. Now it's a question of how much damage the Chinese are willing to take before they see it's in their best interest to play fair.

It comes down to.....we hurt them more than they hurt us. Then we win

Better off keeping existing trade deals

This is a great example of the kind of short-term thinking liberals for which liberals are known. In the long-term, a better trade deal with China will most certainly serve the US better. We ALL know that. The problem is, China is likely willing to wait it out until after the next election. If one of the dimwits on the left is elected, we will cave and China will be thrilled. If Trump wins again, look for long-term benefits from a deal...that is, until another Democrat gets elected and starts "negotiating" again.

 

[Mac1958]

We are seeing deterioration starting in the lower-middle market. These are businesses with $15-$30 million in EBITDA. It's here that lending standards are weakening. It's bleeding in from the larger markets. In the middle and upper-middle market, there are virtually no covenants anymore, and deals are getting done with ridiculous pro-forma adjustments to EBITDA. Leveraged loans are now a $1 trillion market, triple what it was a decade ago, and equaling the high yield market. Most of those are sitting in CLOs where credit analysis is often spotty.

This is exactly what I'm talking about with those BDCs. As they compete for investments, they HAVE to be dropping their standards.
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[Toro]

All forms of debt have been leveraged for many times their value by a banking system that seems intent on magnifying the damage caused by any sort of widespread default.

The banking system today is stronger than it has been at any time in the last 40 years.

The banking system isn't going to collapse.

Of course not, they know that if they really fuck up their Uncle Sam will be there to bail them out while everyone else gets to eat it. I'll never have faith in the economy again after what happened in 2008. Am I wrong to be entirely cynical about the motivations and ability of the finance industry to manage the economy responsibly?

I think it's always good to be skeptical.

However, laws were passed after the GFC which forced banks to increase equity in their balance sheets. Bank equity allows banks to absorb more losses from defaults and makes the banking system more stable. Bank equity has risen from something like 6% of total capital 10-12 years ago to something like 12% today. This doesn't mean banks won't go broke again. But under current laws, it's unlikely that whatever systematic risk there is in the economy isn't in the banking system.

The systematic threat to the economy isn't actually in the US IMHO. I believe it is in China, where leverage has exploded over the past decade, and in the structure of the euro, which may or may not survive.

 

[busybee01]

164,000 jobs is nothing to brag about

It is when you're already at almost perfect employment numbers you stupid shit-for-brains.

Trump promised us 3%. Now that he has failed, it is okay.

Also oil prices have dropped even with rising tensions in the Mideast. That means traders are expecting slower growth or a recession.

 

[Toro]

We are seeing deterioration starting in the lower-middle market. These are businesses with $15-$30 million in EBITDA. It's here that lending standards are weakening. It's bleeding in from the larger markets. In the middle and upper-middle market, there are virtually no covenants anymore, and deals are getting done with ridiculous pro-forma adjustments to EBITDA. Leveraged loans are now a $1 trillion market, triple what it was a decade ago, and equaling the high yield market. Most of those are sitting in CLOs where credit analysis is often spotty.

This is exactly what I'm talking about with those BDCs. As they compete for investments, they HAVE to be dropping their standards.
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BDCs are a small part of the market. And they're reflecting standards in the market. Often times, the lender has a BDC and other businesses such as institutional funds, CLOs, etc. Lending standards have collapsed all over the place.

The question we are looking at is whether synthetic CDOs are a systematic risk. Synthetic CDOs receives CDS premiums on a tranche of CLOs. We're trying to figure out how big this market is and who is exposed. It's nowhere near as big as the mortgage market, but is it big enough to create a cascade of selling in the credit markets? We don't know.

 

[Mac1958]

The question we are looking at is whether synthetic CDOs are a systematic risk. Synthetic CDOs receives CDS premiums on a tranche of CLOs. We're trying to figure out how big this market is and who is exposed. It's nowhere near as big as the mortgage market, but is it big enough to create a cascade of selling in the credit markets? We don't know.

Holy shit, not exactly nice to see those words again.
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[Oldstyle]

Only a fool would start a Trade War in a strong economy

Shut up stupid, American workers are fed up with China ripping us off. You bunch of dumb asses on the left really don't get why you lost in 2016.

The trade war is stupid

All it does is see who can hurt the other guy the most. Nobody ends up the better for it

The Chinese aren't stupid. They do things that they feel will benefit them. Currency manipulation and theft of intellectual property have benefited them in the past so they continue to do both. Trump has put them on notice that behavior needs to stop by imposing tariffs on their goods. He does so at a time when the Chinese economy is not doing well and ours is rather strong...which is the perfect time to do so. Now it's a question of how much damage the Chinese are willing to take before they see it's in their best interest to play fair.

It comes down to.....we hurt them more than they hurt us. Then we win

Better off keeping existing trade deals

Trade deals that don't deal with either currency manipulation or theft of intellectual property? Why is that good for us? The Chinese are hoping that we go back to the status quo! They've been kicking our ass for the past twenty years with that!

 

[Terri4Trump]

ME: We all know why the Left is screaming "Nazi" and "Racist" every day, its because they cannot touch Trump on the economy. Greatest jobs numbers in 50 years for God's sake!! Here is a great article on Economic points to look at:

How Is the US Economy Doing?
Six Facts That Tell You How the Economy Is Really Doing
BY KIMBERLY AMADEO Updated August 02, 2019
6 Facts That Tell You How the Economy Is Really Doing

There are six facts that tell you how the economy is doing. Economists call them leading economic indicators because they measure the early influencers on growth. In July 2019, they report that the economy is doing well. It has steady growth, low unemployment, and little inflation. That's called the Goldilocks economy because it's neither too hot nor too cold

1) 164,000 Jobs Added In July 2019 = Strong
In the Non-farm Payroll Report, the Bureau of Labor Statistics surveys how many workers businesses added to their payroll each month. It doesn't count farm workers because farming is seasonal. A healthy economy will create 150,000 jobs on average. Companies will only add workers when they have enough demand to keep them busy.
Manufacturing jobs are an especially important indicator. According to the National Association of Manufacturers, the 12.75 million Americans who work in manufacturing earn an average $84,832 a year, including benefits. When manufacturers start laying them off, it means the economy will be heading into a recession. For example, manufacturers hired fewer workers starting in October 2006 when compared to the prior year.
The unemployment rate is also reported. It's a lagging indicator and so isn't as useful a statistic. Companies usually wait until a recession is well underway before laying off workers. It also takes a while to reduce the unemployment rate, even after hundreds of thousands of new jobs are being created.

Number 2 is coming up in my next post. Read them all: CLICK HERE

2) In Second Quarter 2019, GDP Growth Was 2.1% = Ideal
The economy is measured by gross domestic product. That's the dollar value of everything produced in the last year. The most important indicator is GDP growth, which compares this quarter with the last. If the economy is healthy, then GDP growth will be between 2-3%. If it's above 3%, then it could be overheating. When it's below 2%, then it's in danger of contraction. If it's below zero, then it's in a recession.

3) Durable Goods Orders Rose 2% in July 2019 = Good
Durable goods are machinery, equipment and raw materials that businesses use in their operations. Think of steam shovels, tanks, and airplanes. In fact, commercial planes are the largest component of durable goods.
To be considered a durable good, the equipment must last at least three years. They are expensive, so businesses put off buying them until they really need them. As a result, they are a great indicator of economic health. Businesses only buy them when they feel confident about the future.

4) YOY Core Inflation Was 2.0% = At Target
Inflation measures rising prices. The Federal Reserve monitors the core inflation rate because it leaves out volatile food and gas prices. It also prefers the year over year inflation rate because it removes the impact of seasonal variations.
The Fed sets a target rate of 2% year-over-year for the core rate. That level of inflation is healthy because then consumers expect prices to rise. That makes them more likely to buy now, rather than wait. The increased demand spurs economic growth. The Fed uses the inflation rate when deciding whether to raise the fed funds rate.
The Fed's inflation gauge is the PCE Price Index. It also says inflation is increasing. That normally means the Fed would be more likely to raise rates at the next FOMC meeting. But the Committee is worried about slowing growth. It said it wouldn't raise rates through 2021.

 

[Terri4Trump]

As usual, the Leftwing shit-for-brains Democrats come into a thread like this screaming and crying and acting like imbeciles and spewing out fake news and crap stats, and again, as usual, my OP stands as fact, truthful and unassailable: The economy is great:


How Is the US Economy Doing?
Six Facts That Tell You How the Economy Is Really Doing
BY KIMBERLY AMADEO Updated August 02, 2019
6 Facts That Tell You How the Economy Is Really Doing

There are six facts that tell you how the economy is doing. Economists call them leading economic indicators because they measure the early influencers on growth. In July 2019, they report that the economy is doing well. It has steady growth, low unemployment, and little inflation. That's called the Goldilocks economy because it's neither too hot nor too cold

1) 164,000 Jobs Added In July 2019 = Strong
In the Non-farm Payroll Report, the Bureau of Labor Statistics surveys how many workers businesses added to their payroll each month. It doesn't count farm workers because farming is seasonal. A healthy economy will create 150,000 jobs on average. Companies will only add workers when they have enough demand to keep them busy.
Manufacturing jobs are an especially important indicator. According to the National Association of Manufacturers, the 12.75 million Americans who work in manufacturing earn an average $84,832 a year, including benefits. When manufacturers start laying them off, it means the economy will be heading into a recession. For example, manufacturers hired fewer workers starting in October 2006 when compared to the prior year.
The unemployment rate is also reported. It's a lagging indicator and so isn't as useful a statistic. Companies usually wait until a recession is well underway before laying off workers. It also takes a while to reduce the unemployment rate, even after hundreds of thousands of new jobs are being created.

Number 2 is coming up in my next post. Read them all: CLICK HERE

 

[Terri4Trump]

 

[Mac1958]

164,000 jobs is nothing to brag about

It is when you're already at almost perfect employment numbers you stupid shit-for-brains.

Trump promised us 3%. Now that he has failed, it is okay.

Also oil prices have dropped even with rising tensions in the Mideast. That means traders are expecting slower growth or a recession.

The consensus (at the moment) is for a slowdown (or more) in early to mid 2020. There are some factors that could either mitigate or exacerbate the slowdown, such as consumer and business debt (see posts above). It's not expected to be severe, but there are opaque data points that make it iffy.
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[Jitss617]

164,000 jobs is nothing to brag about

It is when you're already at almost perfect employment numbers you stupid shit-for-brains.

Trump promised us 3%. Now that he has failed, it is okay.

Also oil prices have dropped even with rising tensions in the Mideast. That means traders are expecting slower growth or a recession.

The consensus (at the moment) is for a slowdown (or more) in early to mid 2020. There are some factors that could either mitigate or exacerbate the slowdown, such as consumer and business debt (see posts above). It's not expected to be severe, but there are opaque data points that make it iffy.
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You think maybe democrats should allow some manufacturing jobs to come in the urban cities? Or maybe have less regulation on contractors so people can work

 

[Terri4Trump]

You think maybe democrats should allow some manufacturing jobs to come in the urban cities? Or maybe have less regulation on contractors so people can work

Who would want to invest the money to build them there

 

[Jitss617]

You think maybe democrats should allow some manufacturing jobs to come in the urban cities? Or maybe have less regulation on contractors so people can work

Who would want to invest the money to build them there

Well let’s address that then.. if we have uncivil people here we can’t keep paying for them. Shot or get off the pot

 

[Terri4Trump]

Well let’s address that then.. if we have uncivil people here we can’t keep paying for them. Shot or get off the pot

How do you address it? Would YOU spend millions of dollars to build a facility in a gang infested shithole area? That would require serious tax incentives. That has been tried.

 

[Norman]

GDP is down to 2.1%..

No shit Sherlock. Look at post number two. The rate is rated as "Ideal" by economists for the current circumstances.
You're so fucking stupid its unbelievable.

Holy crap, so now 2.1% is "Ideal", after we were promised twice that.

So tell me, expert:

• Why are Treasury yields near record lows?
• Why did market want a 50bps rate drop?
• Why was Trump begging the Fed for a rate drop?
• Why isn't economic activity driving inflation?

Go ahead, expert. Lay it all out for us. Get as specific as you would like. Blow us away.
..

Economic activity doesn't drive inflation, bank lending does, since they print money when they give out loans.

The banks have been in a shitty position since 2008. Thus treasuries are selling, which also explains the low rates. Further US has a very high amount of private debt, it's difficult to loan more. The FED needs to pick up the tab in a fcked up situation like this. This was all clear during Obama's time, but now for some reason because of Trump... some people have difficulty with it.

 

[Mac1958]

GDP is down to 2.1%..

No shit Sherlock. Look at post number two. The rate is rated as "Ideal" by economists for the current circumstances.
You're so fucking stupid its unbelievable.

Holy crap, so now 2.1% is "Ideal", after we were promised twice that.

So tell me, expert:

• Why are Treasury yields near record lows?
• Why did market want a 50bps rate drop?
• Why was Trump begging the Fed for a rate drop?
• Why isn't economic activity driving inflation?

Go ahead, expert. Lay it all out for us. Get as specific as you would like. Blow us away.
..

Economic activity doesn't drive inflation, bank lending does, since they print money when they give out loans.

The banks have been in a shitty position since 2008. Thus treasuries are selling, which also explains the low rates. Further US has a very high amount of private debt, it's difficult to loan more. The FED needs to pick up the tab in a fcked up situation like this. This was all clear during Obama's time, but now for some reason because of Trump... some people have difficulty with it.

Wrong. Believe what you will. And it's never Trump's fault, always Obama. I know.
.

 

[Norman]

GDP is down to 2.1%..

No shit Sherlock. Look at post number two. The rate is rated as "Ideal" by economists for the current circumstances.
You're so fucking stupid its unbelievable.

Holy crap, so now 2.1% is "Ideal", after we were promised twice that.

So tell me, expert:

• Why are Treasury yields near record lows?
• Why did market want a 50bps rate drop?
• Why was Trump begging the Fed for a rate drop?
• Why isn't economic activity driving inflation?

Go ahead, expert. Lay it all out for us. Get as specific as you would like. Blow us away.
..

Economic activity doesn't drive inflation, bank lending does, since they print money when they give out loans.

The banks have been in a shitty position since 2008. Thus treasuries are selling, which also explains the low rates. Further US has a very high amount of private debt, it's difficult to loan more. The FED needs to pick up the tab in a fcked up situation like this. This was all clear during Obama's time, but now for some reason because of Trump... some people have difficulty with it.

Wrong. Believe what you will. And it's never Trump's fault, always Obama. I know.
.

Which part is wrong?

Isn't it easy to just deflect and not explain.