Fiscal cliff

[AlphaQuant]

looks to me like fiscal spending will not be reduced from the little that was ultimately passed by senate and the house so far.

i wonder how much bigger a bazooka bernanke has.

[cfa]

Fiscal Cliff” in perspective.


Lesson # 1:

* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let's now remove 8 zeros and pretend it's a household budget:

* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts so far: $38.50

Got It ??..... OK now,



Lesson # 2:

Here's another way to look at the Debt Ceiling:

Let's say, You come home from work and find
there has been a sewer backup in your neighborhood ...
and your home has sewage all the way up to your ceiling.

What do you think you should do ...
Raise the ceiling or remove the Sh**?

[specuvestor]

Interesting analogy but I think we also have to look at the other perspective:

1) As I posted prior, this bill is more about tax hike than budget cut. The big battle is coming end Feb with the debt ceiling debate. The real sequestration cuts are detailed here:
http://www.businessinsider.com/10-devast...en-2012-12
The Sequestration has been delayed:
http://www.defensenews.com/article/20130...y=nav|head
Sequestration is a fancy term I have never heard of until 2 years ago:
http://www.auburn.edu/~johnspm/gloss/sequestration
2) Taking out 8 zeros the total budget cuts so far should be $385 not $38.50. (I can't verify this $38.5b figure though, kindly provide links. neither can I quantify the US$14.27tr national debt.. .did you include the GSEs?)
3) One of the man opposition to the Buffett tax is that it is a drop in the ocean.
http://www.theatlantic.com/business/arch...ue/245404/
Problem is that with $14tr economy, EVERYTHING feels like a drop BUT IT ALL ADDS UP when you incorporate the tax increases with budget cuts across different institutions. That's how ANY prudent financial planning will suggest even for individuals. And like "companies with large sales", you just need to increase the "margin" a bit, the flow to bottom line changes the whole picture.

Nonetheless I think your analogy puts up a good point which I think many people missed: Commentators always talk about debt to GDP. But when one looks at debt to income then we will realise how bad the fiscal picture is ACROSS the globe. Anyone looking at company leverage based on debt to sales??

But then there is a big difference: US is THE reserve currency of the world. There are 2 implications: when the fed eases, it is like the whole world's central banks ease. Secondly this means the US can print massive amounts of IOUs. Put in another perspective, if Japan spends like US, they would deplete their US$ foreign reserves in a year (not totally correct because Japan can also print Yen and locals been ardent buyer, which is effectively why they can be 250% debt/GDP, but you get the idea)

Our global economy works this way because of the fiat currency system. This works AS LONG AS people have FAITH in the US$. These two reasons contribute partly to why Eurozone wanted to have their own currency to challenge US$, and why RMB would eventually be internationalised. Russia suggesting at the peak of the 2008 crisis to price oil in EUR rather than US$ and to dump US treasury and MBS (which they did, without China's support) has much more serious implications than most people realise.

The cliff is not over yet. Markets need time to digest the headlines. The bill is mainly about taxes. The fiscal spending is pushed to end Feb together with the debt ceiling debate. Mark that date

[Temperament]

Interesting analogy but I think we also have to look at the other perspective:

1) As I posted prior, this bill is more about tax hike than budget cut. The big battle is coming end Feb with the debt ceiling debate. The real sequestration cuts are detailed here:
http://www.businessinsider.com/10-devast...en-2012-12
The Sequestration has been delayed:
http://www.defensenews.com/article/20130...y=nav|head
Sequestration is a fancy term I have never heard of until 2 years ago:
http://www.auburn.edu/~johnspm/gloss/sequestration
2) Taking out 8 zeros the total budget cuts so far should be $385 not $38.50. (I can't verify this $38.5b figure though, kindly provide links. neither can I quantify the US$14.27tr national debt.. .did you include the GSEs?)
3) One of the man opposition to the Buffett tax is that it is a drop in the ocean.
http://www.theatlantic.com/business/arch...ue/245404/
Problem is that with $14tr economy, EVERYTHING feels like a drop BUT IT ALL ADDS UP when you incorporate the tax increases with budget cuts across different institutions. That's how ANY prudent financial planning will suggest even for individuals. And like "companies with large sales", you just need to increase the "margin" a bit, the flow to bottom line changes the whole picture.

Nonetheless I think your analogy puts up a good point which I think many people missed: Commentators always talk about debt to GDP. But when one looks at debt to income then we will realise how bad the fiscal picture is ACROSS the globe. Anyone looking at company leverage based on debt to sales??

But then there is a big difference: US is THE reserve currency of the world. There are 2 implications: when the fed eases, it is like the whole world's central banks ease. Secondly this means the US can print massive amounts of IOUs. Put in another perspective, if Japan spends like US, they would deplete their US$ foreign reserves in a year (not totally correct because Japan can also print Yen and locals been ardent buyer, which is effectively why they can be 250% debt/GDP, but you get the idea)

Our global economy works this way because of the fiat currency system. This works AS LONG AS people have FAITH in the US$. These two reasons contribute partly to why Eurozone wanted to have their own currency to challenge US$, and why RMB would eventually be internationalised. Russia suggesting at the peak of the 2008 crisis to price oil in EUR rather than US$ and to dump US treasury and MBS (which they did, without China's support) has much more serious implications than most people realise.

The cliff is not over yet. Markets need time to digest the headlines. The bill is mainly about taxes. The fiscal spending is pushed to end Feb together with the debt ceiling debate. Mark that date

"It's not about who is right. It's about who is left. "

Ha! Ha! i like. It's about who survives (even prospers) in the Market, till now. Even when i were and most probably will be "off-centre" in future in the Market. Hopefully less and less "off-center" as i learn and learn from my and people's mistakes; and of course people's knowledge too.

Wish you many more "GOOD YEARS".
And who said that? (Hint: what's the joke about "GST"?)
Shalom.
Amen.

[specuvestor]

I've seen people who got it totally wrong but made money nonetheless... I've also seen people totally right lost money because the market stays irrational longer than he can stay solvent/ convicted.

Sometimes it is really not so easy to know who is really right, unless the person has a long track record. Through the years I've heard so many people claiming to be the next Buffett, and almost always flop within 3 years. Even a stopped clock is right TWICE a day.

Absolute return basically ensure that at least you will be "left" to play the game

[Musicwhiz]

Yeah I think probably at least 7-8 years are required to see if a person truly can invest or if it was pure dumb luck.

For myself, I am still learning every single day and am waiting for the next bear market to judge if I have assessed valuations and margin of safety correctly.

In investing, you can never learn enough!

[specuvestor]

yes most are dumb luck like companies making certain announcements which nobody was expecting But I've also seen people totally wrong, reverse position and DOUBLED it. This takes hard core discipline and acumen. And obviously he doesn't talk about him being wrong, but that he made $

The dangerous thing IMHO about dumb luck is that it deceives a person into thinking they found the holy grail. So I would encourage people get into investing when young rather than old because the damage ie school fees is limited, but the damage can be irreversible for a person in the 50s or 60s.

[Temperament]

"The dangerous thing IMHO about dumb luck is that it deceives a person into thinking they found the holy grail. So I would encourage people get into investing when young rather than old because the damage ie school fees is limited, but the damage can be irreversible for a person in the 50s or 60s."

It's really true in what you say above. i also like to encourage people who are older maybe 30+ who have never invested in the stock market before to read up on books on stock investment from our NL before taking the plunge. By reading you may find that you are either "suitable or not suitable" to invest in stock.
i started investment at the age of 40 and i have been surprised by many people starting older than me.

One advice: The click saying:- "It's better late than never". But it's only true if you really know what you are doing. The trouble is you won't know until you put into practice. So start little and slowly.
Me? i did not follow some of what have written here.
i fall in love investing in SGX EX. i still do. but i have pull-back because of i'm in my "de-accumulating" phase.
Shalom.

[felixleong]

luck comes and goes, skill stays forever