It's terrifying to me to watch it because of you're talking about these fanciful notions are really gaining
traction
It's the boomer generation
That is going to be the trigger for this because they're the guys owed all the money until the Millennials
They were the biggest generation that the world had ever seen
But the boomers are also the ones in power at the moment, you know
We have this situation where you have the Millennials. I spoke with Neil habilis. Recently. He said, you know the Gen X generation basically
Skip politics the basis didn't take an interest in it
So you have this tug-of-war for power in politics with?
IOC, and and these young Democrats coming through with all these ideas which
whilst you and I are fanciful and and
Our decades of experiences tell us that it won't work
They don't know anybody. They've their entire lives they've been witness to the state will will use that pejorative term
But the state funding everything and printing money and everything's been fine. So you can totally see how they think that this is the solution
But I just wonder how that resolves itself not so much from the money point of view, but from this
battle between the guys who have power and who are essentially voting on whether to pay themselves an annuity and
The people coming through we're gonna say no grandpa. That's that's not going to fly
How do you see that battle plane? Oh, wow, I mean
it's terrifying to me to watch it because
You're talking about these fanciful notions are really gaining
Traction in a way that you know as you mentioned
Mmt is a serious proposal a year ago. I
Wouldn't even you know, I thought it was a cage match
Why are we even wasting the breath talking about this because there's no chance
Anyone would do something so asinine?
Except maybe Japan
Right well, but so that's interesting because that's always held up as the example
You see it can work and there's it's the perfect crime, you know, no one loses its what could go wrong
well there happen to be some pretty important differences between the US economy in Japan and
the most obvious to me is that they're
Internally financed they don't rely on the rest of the world to finance themselves
So as we sit here running dollar bills off the printing press, you know
We're trying to Japan and Russia and all these people and I say oh, yeah, that's goodbye. Yes. No problem. You can you know
completely inflate away all the obligations that you know you always
so it's very
difficult for me to wrap my head around it and see how it plays out, but I will confess to being
scared at how much traction it's gaining and that I really need to start to figure out how
This could possibly happen
Because you know talking about how this is a long-term problem that we might have the luxury of not addressing
Right away. I think the catalyst for this whole pension crisis becoming immediate
is going to be the bursting of the corporate debt bubble because obviously
You know, if you can't make eight percent in a zero percent risk-free world
You've got to load up on all of the most toxic
Claims you can out there so we know that the pensions have massive exposure to this corporate debt bubble
and
you know, it wouldn't take much of an increase in rates to really
Wreak havoc in that corporate market
I mean, I think there's an appreciation now about the increasingly low quality of corporate debt
Even in the investment-grade sphere where half of the investment grade debt now is one one run, right?
I like to call it pre junk pre jump
and then of course, you know
You've got another one point two trillion an actual junk and then you've got one point two trillion in levered loans. Yeah with no covenants
So you've got about five trillion dollars in?
Corporate debt of the nine point five trillion out there so more than half of it
that's really vulnerable to any increase in rates and
We're gonna really find out who can withstand an increase in rates because we've got almost 800 billion of that
Rolling this here and another 900 billion next year. So there's no relief in sight
You know, it's not like oh if they could just make it to the end of this year
So this is really gonna be an issue I think moving forward and be interesting to see how it unfolds
over the course of the year, but it will certainly
reveal
the degree to which the
Averages that everyone looks at in terms of the health of the corporate sector in terms of corporate profits
Really don't tell you anything
Yeah
It's so much like the consumer where you've got the top that have all the assets and none of the debt
And then you've got the bottom that obviously were in the reverse situation and frankly
I think the numbers in the corporate sector even more dramatic than they are in the consumer side
I was just looking at with the fourth quarter numbers in for S&P earnings the top
20% of companies accounted for 75% of the earnings that's in the sp500
Those are the largest 500 companies out there
If you looked at those government profit numbers that I like to look at, you know
it's the skew is even more dramatic obviously and then when you look at cash positions
It's even more profound the top 20 percent have 80 percent of the cash
In fact, if you add up the cash of the top three companies in the ESPY the biggest cash holders
They have more cash than the bottom
450 companies so just three companies so I mean it's remarkable the
complacency
around the corporate sectors ability to service all of this debt because really
Outside those top 20% There is no ability to service any
increase in you know, there is no ability to withstand any increase in debt service and who knows if they can even
Handle what they've got already depending on what happens with economic activity and where that profit growth number actually goes this year
You