Zeihan says that is at least a 1% rate increase down the line. He thinks it may require a 3% increase. That would drive the prime interest into double digits.
The only problem with his EV ideas are pushing for mass manufacturing of EVs now means economies of scale sooner.
I think his focus on the next recession is accurate. His ideas on the winners and losers is accurate but generic. The problem is the upside is much higher than this missive of his is stating.
I agree it is about quality going forward. We are the new Germans.
I find the data that he is using to support his conclusions to be little more than guesses - and not very good ones.
For example:
And when you retire, you take your money out of more prospective investments with higher velocity of capital, things like stocks and bonds. And you put them into T-bills and cash…
There is no evidence of that fact.
Data is difficult to find on this point but various sources suggest that retirees still have a significant percentage invested in stocks.
Quick guess, how many retirees on TMF cashed in their stocks and bonds upon retirement and dumped the money into T-bills and cash? My guess is not very many.
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I’m not dumping anything, but I am starting to buy US bonds, as things look a little shaky to me right now.
Very few retirees moved their money into T-bills or cash … that would be absurd because for many years those options produced nearly ZERO income, and retirees need income to spend on their expenses.
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I really did move a large chunk of money - nearly 1/3 of my financial assets- into cash at the end of 2021 and talked about it here at tmf. It was hard psychologically to earn near zero interest in an inflationary environment but better than leaving it all in stocks and bonds. Now I am earning about $3K a month in interest and forcing myself to average some of that money back into stocks.zig when the crowds are zagging.
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I know of several doctors who did that. Moving their investments further and further with a bigger jump into short term or cash in the last two years. The reason is age. Those who are 80 and up most definitely have backed off any investing at all in equities. The expectations of sound informed judgement have dropped. Their needs for gains do not exist. They have all the money they need to be retired into their mid 90s.
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Doctors are notorious for being bad investors. You have provided yet another example of that.
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I have never seen an actual quote from any Federal Reserve official, including Jerome Powell, that the Fed wants to shrink its balance sheet to zero at any time, much less the next few years. That would require an extremely fast dump of Treasury and mortgage bonds. The Fed has no intention of upending the bond and stock markets.
If you can link to an actual quote I will believe this. Otherwise I will think it’s just silly click-bait by a typical doom-saying financial analyst seeking attention.
In fact, the Fed has a plan to very gradually shrink its balance sheet. It has been transparent. It’s following its plan.
I began to listen to the video. Within a couple of minutes, Zeihan had said at least two falsehoods. That Jerome Powell said that he would shrink the Fed balance sheet to zero in 2 years – FALSE! And that the Fed had bought all kinds of debt during the Covid crisis, including credit card debt – FALSE!
I turned it off at that point. I don’t believe in spending time listening to anyone whose blatherings are so corrupted by lies.
Wendy
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Fed is shrinking it by about $90B/mo. Balance sheet is currently about $8.4T. At $90B/mo, it’ll take about 94 months to drop to zero. That’s almost 8 years.
BUT, that isn’t likely to happen, they will probably leave something on their balance sheet all the time.
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You do not know that. You are generalizing about people you have never met.
Age is the factor. Most of the shifts in investing happening as yields have risen.