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The Economy

Discussion in 'Sports and News' started by TigerVols, May 14, 2020.

  1. wicked

    wicked Well-Known Member

    There were predictions of a retail apocalypse before this... you will see entire malls shut down. They will be massive suburban ghettos. The ones best positioned to survive are a.) those who have a grocery store on the property (which used to be a death knell if a mall rented to a grocery store) and/or b.) those who have added residential to the mix. One mall near me is converting into a “power center” and will have a popular supermarket chain opening next year.
     
  2. LanceyHoward

    LanceyHoward Well-Known Member

    I think malls will be redeveloped pretty quickly. They usually are in locations that are located in high traffic areas and have good transportation hookups. Where else is a developer going to that much land in the middle of a metropolitan area to develop?
     
  3. GilGarrido

    GilGarrido Active Member

    Might depend on the area. Our small city of 200K had two big malls when I was growing up. As the upper middle class moved to the north part of town, crime got to be a problem in the one in the middle of town, and it was closed and torn down about 20 years ago, eventually to be replaced by a complex of government buildings - school district, library, aquatic center, arts school, etc. Took a while, though. The somewhat more northerly mall is seeing the same thing happen, with one or two shootings in the parking lot most years and the mix of stores going downscale. Even before the virus, the busiest shopping area for several years has been a mile+-long strip of big boxes and smaller stores on the far north side of town.
     
  4. swingline

    swingline Well-Known Member

    Same ... if you replace 22 with 27 and middle with lower.
     
  5. Oggiedoggie

    Oggiedoggie Well-Known Member

    Somebody please tell me that the stock market isn’t just some sort of pyramid scam through which insiders will continue to make butt tons of money as long as they can continue the ruse, then vanish to other pastures when the whole thing collapses.

    I’m enough of a geezer to remember when some seemingly insignificant event could send stock prices tumbling. How could values be rising today in the middle of this total shit show?

    Pandemic, riots, China backing away from trade deals, unemployment raging, threats of U.S. military occupation... any one of those, by itself, should cause a tumble, yet the ticker climbs on.
     
    Last edited: Jun 2, 2020
    Jssst21 and Inky_Wretch like this.
  6. Michael_ Gee

    Michael_ Gee Well-Known Member

    As a very wise and wildly successful financier told me almost 40 years ago when I asked how the market could react to a then decades-high unemployment rate by going up, "the money's gotta go somewhere." The accumulation of capital at the top of the pyramid means it is constantly searching for return, and in a non-existent inflation, non-existent interest rate environment, stocks are almost the only asset offering returns, returns that have been close to guaranteed by Federal Reserve and Congressional/Trump administration policies.
     
    Jssst21 likes this.
  7. Noholesinone

    Noholesinone Active Member

    As Jim Cramer said yesterday, "The market has no conscience."

    The market 's current position is ridiculous.
     
  8. Michael_ Gee

    Michael_ Gee Well-Known Member

    If he'd said "no memory and no attention span" he'd have been more accurate.
     
  9. goalmouth

    goalmouth Well-Known Member

    We had a ghost strip mall up the road after Circuit City went bust in the recession, it took about six years to re-rent the half-dozen stores. There's a Simon mall on the other side of town built in the late Sixties and anchored by Macy's and Sears that is closing; that makes it a situation exponentially worse than 2009, I expect it will be bulldozed and redeveloped but not for at least a decade. It's a double-hit, since we'll lose some tax revenue as well as the stream of fines assessed on the shoplifters passing through our court.
     
  10. The Big Ragu

    The Big Ragu Moderator Staff Member

    One day, people will start to understand.

    This is the Federal Reserve's balance sheet. fredgraph.png

    That is the tool they are using to distort the debt markets. The mispriced debt they enable = leverage. The rationale for that somehow is that it is "stimulus." The reality is that it is a visual representation of moral hazard. From that period in 2008 until this year, when the Fed took its balance sheet as high as $4.5 trillion, monetizing debt to essentially price fix yields at artificially low levels, forcing savers to make riskier and riskier loans to get the return they were being robbed of, companies borrowed billions upon billions of dollars and used it like you would expect when someone gets "free money" and is led to believe they won't bear the consequences of their decisions. A lot of it was loading up on debt and buying back their own stock to drive the price higher, mostly in the face of an economy that was stagnant and earnings that went nowhere.

    See that period heading into 2020 on the graph, where the balance sheet came down a bit? The Fed was pretending that they could unwind the mess they made, but just with that halting attempt to try to undo the mess they had gotten themselves into, the stock market buckled every time. Think of it like a heroin dealer. You take away the smack, and the junkies go through a nasty withdrawal. What we are still facing.

    They had already panicked and begun to pump in more liquidity via their "repo operations" that began in 2019 (where the balance sheet started to expand again), and that was what had stocks making new highs into February of this year.

    Of course, with unemployment where it is, with the economy having fall off a cliff, with earnings having collapsed, with credit defaults picking up despite the Fed now buying up corporate debt and even junk bonds to prop up everything, if the stock market wasn't being artificially fixed by them, it would have collapsed way farther than it did and it would be in the doldrums.

    But all that matters right now is that the Fed doubled the size of that balance sheet in just a few months (compare it to how little they unwound it before they woke up to the fact that they are trapped), and have pumped $3.5 trillion into the banks they operate through, which are treating that money like chips at a casino table. Frankly, the fact that the insane amount of credit they have created has given the market only that much lift, is what should tell people how bad things really are.

    As for stocks grinding higher in this environment, of course it is fucked up. But it's actually not irrational. The money doing this (this is largely not individual investors, it is being driven by computers that are programmed to trade on those money flows) is essentially betting on moral hazard. That because the Fed has created an environment where there can be no failure, you are safe to ignore everything else and bet on no failure.

    The problem is that when it collapses again, and it is going to, the devastation they are going to leave behind in the real economy is going to be worse than it would have been every step of the way if they had just stopped. They have been reduced to answering a self-created debt bubble with schemes to enable more and more debt lopped on top, in order to keep a credit crisis from happening. The longer they can do that, the worse the credit crisis -- which is inevitable.

    Regardless, if you want to know what is going on in the stock market right now, there is no nuance to it, despite the Jim Cramers of the world. It's the vertical line in 2020 on that balance sheet graph. They are conjuring trillions of dollars out of thin air and buying junk bonds, for Christ's sake. In that kind of "prop up everything" environment, one could argue it makes more sense not to fight the wizard of oz until someone finally pulls away the curtain.
     
    Last edited: Jun 2, 2020
    misterbc, Jssst21 and Inky_Wretch like this.
  11. The Big Ragu

    The Big Ragu Moderator Staff Member

    Here is Mohamed El-Erian talking about it this morning. FWIW, there were plenty of people pointing this out in the years after the financial crisis, when they put us on the lose-lose-lose path he is talking about. Most people remain clueless, others rationalized it in political, instead of rational, terms. We're our own worst enemies, but we give institutions like this a lot of power over our lives, and they create most of the disparties that I believe we are now seeing in the protests and riots. There are no free lunches. By trying to have them, we have really hurt ourselves.

     
    TigerVols likes this.
  12. 2muchcoffeeman

    2muchcoffeeman Well-Known Member

    Ragu, can I get a TL;DR?
     
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