Forum Topics Brave New World
Rapstar
Added 5 years ago

I stumbled across this speech from the IMF managing director, Kristalina Georgieva.  She is advocating for a "New Bretton-Woods Moment" .

In the speech. she says:

"We expect 2021 debt levels to go up significantly – to around 125 percent of GDP in advanced economies, 65 percent of GDP in emerging markets; and 50 percent of GDP in low-income countries.

The Fund is providing debt relief to its poorest members and, with the World Bank, we support extension by the G20 of the Debt Service Suspension Initiative.

Beyond this, where debt is unsustainable, it should be restructured without delay. We should move towards greater debt transparency and enhanced creditor coordination. I am encouraged by G20 discussions on a Common framework for Sovereign Debt Resolution as well as on our call for improving the architecture for sovereign debt resolution, including private sector participation."

Intersted to hear thoughts on this....

 

   

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Bear77
Added 5 years ago

It sounds to me like they (the IMF) are trying hard to AVOID "Sovereign Defaults". With interest rates so low - and negative in some places, it's the ideal time to restructure debt, particularly for countries who might be at risk of defaulting on their debt if they do not restructure it. Same principle as moving your home mortgage to a lender with lower interest rates, but obviously on a much bigger scale. Not sure how that "private sector participation" might work. Perhaps Apple could provide some refinancing and potentially end up with an even better tax haven than Ireland or the British Virgin Islands down the track?? Or am I being too cynical...?

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learning123
Added 5 years ago

I think there is still some uncertainty to the outcome of the US elections. The senate majority is still yet to be determined I think. Georgia has 2 seats which needs to be voted on again as the results were too close apparently. So if the democrats gets the control of the senate as well, then Biden policies will be easier to pass.

Results will be bigger stimulus and higher taxes, more money spent on the environment. From what I read the market likes the situation now because of the projected Republican control of the Senate for now. If it turns out that the democrats gets the "Blue Wave", the market might puke.

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Dealsmate
Added 5 years ago

I don't know what the market will do but there is plenty to think about.

I think we can all agree that the historically high earnings multiples are underpinned by globally low interest rates.

1. Regarding the rates, I think it's worth calling out that we are in an experiment. We have never seen interest rates this low. We do not know if this will lead to inflation but history tells us that low rates yields inflation. If there is inflation, interests rates will have to rise at some point. But we can't raise interest rates? No it would not seem so, with the level of corporate and personal debt, the effects could be catostrophic. So if indeed inflation occurs, where do we go?

2. The rise and increase in passive investing. This creates a number of questions: 1. Stocks being held up at higher multiples than they maybe should be 2. Is there an ETF bubble? 3. There is likely more opportunities for active investors with more choosing to passively invest.

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Rapstar
Added 5 years ago

Hi Dealsmate, On item 1. I have one point to make. Interest rates do not have to go up if inflation goes up. History tells us that whenever governments have huge debt burdens, at a time of low interest rates, inflation is allowed for rise. This occurred in WWII, and in the post Vietnam War era.

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Rapstar
Added 5 years ago

Dealsmate, The government around the world have three choices to reduce their burgeoning debt burden: 1) Repay the debt. This is hard because it will require more taxes and less spending - Austerity. 2) Restructure the debt. Defaulting will cause a great deal of pain, sending rates up, and the economy down. Not a pleasant option, and will likely occur only after the economy tanks. 3) Inflate debt away. Print money, keep interest rates artificially low, and let inflation creep up. Least painful solution and the path we are on, with the RBA announcing a $100 BN QE packages, and tapering long term interest rates. However, for it to work requires the economic growth to exceed growth in debt. Jobkeeper/jobseeker expenditure and tax cuts are unlikely to improve economic productivity over the medium long term, so it is unclear whether the economy can outgrow the growth in debt.

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Icarus
Added 5 years ago

Coming off the back of a US election Democratic win markets have soared as Pfizer may be the first to demonstrate a working COVID vaccine (still a long road ahead to rolling out internationally). Travel and leisure stocks soared, Netflix and Zoom sank and the Dow Jones is closer to 30,000 than it ever has been. Wether we are already in, or this is the beggining of a Bull market it looks like the Bear's will be heading into hibernation for the forseeable future.

I'm interested in people's opinions on the current market climate and the year ahead. Will we see a continious Bull run untill the vaccine is rolled out internationally or could this be corrected if there if speed bumps along the way? What's your personal view or opinion on the next year ahead? Do you see any depressed industries or stocks on the ASX that will benefit from this? (WEB, FLT come to my mind)

Looking forward to hearing your thoughts and ideas

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