Maybe the Sub-Prime Triggered It, But...

[mrplunkey]

Is there a bigger picture? Are we simply deleveraging as a society?

Does it really make sense that hedge funds could maintain such ridiculous ratios? Wasn't consumer debt out of control anyway? Is it possible that instead of debt becoming a transient ailment, had it simply become a way of life?

The sub-prime is a great example, but are there dozens of analogues out there that are correcting now?

 

[javaguru]

Is there a bigger picture? Are we simply deleveraging as a society?

Does it really make sense that hedge funds could maintain such ridiculous ratios? Wasn't consumer debt out of control anyway? Is it possible that instead of debt becoming a transient ailment, had it simply become a way of life?

The sub-prime is a great example, but are there dozens of analogues out there that are correcting now?

I heard somewhere that US credit card debt has quadrupled since 1990. I remember when government deficit spending was a bad thing...Now, a trillion dollar deficit is nothing.

 

[the_alcatraz]

I thought north america thrives on debt. everyone in canada is on debt. isnt that what credit cards are for?

 

[the_alcatraz]

This is a great thread btw.

 

[PICK3]

Yep ... tripped up by the old Sub-Prime Trigger

 

[mrplunkey]

I think it was the debt bubble that burst -- a comprehensive deleveraging of society.

This could be a good thing.

 

[PICK3]

I think it was the debt bubble that burst -- a comprehensive deleveraging of society.

This could be a good thing.

Yep ... tripped up by the old Sub-Prime Trigger & the old debt bubble bursting maladies

 

[superqt4u2nv]

I think it was the debt bubble that burst -- a comprehensive deleveraging of society.

This could be a good thing.

I agree I think most people started spending way more then they made to appear as if they could live a certain lifestyle. I have to admit I had very bad spending habits in my early 20's still not the greatest. I am really trying to work on it as I am fairly successful at my job and really have little to show for it. I still rent and likely will for another few years tell I build up the nest egg to buy. My friend that works in the market sees thing picking up around end of Q2 thank the lord this guy first told me it wouldn't be tell 2010. I was like wtf are we suppose to do for a whole year? LOL

 

[mrplunkey]

But even when things bounce-back, are we done seeing ordinary companies trading at 15-18x earnings? That's part of de-leveraging too. Investors will build more risk into those earnings flows and companies will have less leverage on which to generate those earnings too.

 

[rsnoble-im-back]

Combination of crap. Supposedly commercial real estate hasn't even taken full effect yet. Not looking good.

See......we were in this position a few years ago and the solution was home equity lines of credit. Now that everyones spent all that there's nothing left. All the problems that created this mess in the first place are ironically being promoted to save us again. Easier to get loans and credit. LOL. I don't know if things will collapse this time around........but if and when they do it's not going to be pretty.

 

[PICK3]

But even when things bounce-back, are we done seeing ordinary companies trading at 15-18x earnings? That's part of de-leveraging too. Investors will build more risk into those earnings flows and companies will have less leverage on which to generate those earnings too.

You’re just a plethora of good news and cheer.

I just want my stimulus check, and then I’ll play it from there.

 

[mrplunkey]

You’re just a plethora of good news and cheer.

I just want my stimulus check, and then I’ll play it from there.

I just wonder if I could score some poon with the word "plethora".

 

[Metasomatized Ijolite]

The country no longer makes actual goods. 25% of the GDP is in the finance "industry". All they do is move money around.

 

[PICK3]

I just wonder if I could score some poon with the word "plethora".

Didn't work so well for me last time, butt I was throwing it around at my last trip to the trailer park.

Ya always gotta to know your audience.

just sayin'

 

[EnderJE]

Blame the Jews. Or the Marketing executives.

 

[needtogetarmy]

Is there a bigger picture? Are we simply deleveraging as a society?

Does it really make sense that hedge funds could maintain such ridiculous ratios? Wasn't consumer debt out of control anyway? Is it possible that instead of debt becoming a transient ailment, had it simply become a way of life?

The sub-prime is a great example, but are there dozens of analogues out there that are correcting now?

The leverage ratios of hedge funds is not a problem. It all boils down to risk management. When I traded actively I had a short-term trading portfolio I managed using 100% margin for every trade. I didn't self-implode like hedge funds though because I managed my money properly.

Debt is a way of life for every society, without it we would not have a market based economy, but the magnitude of debt varies by a great deal among countries. Sustaining too much debt has become a way of life for Americans. It needs to change. It will eventually, when the dollar crashes and foreign countries stop buying US debt.