Weekly Round Up – January 31, 2014

Hostage of the debtBefore we get to the good reads!

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A Few Good Reads

Here are a few of my favorite reads from the past week.

1. The Three Reasons Why The Debt Ceiling Could Become A Nightmare Again: 

Congress will need to either hike or suspend the nation’s debt ceiling in February, and so far, senators on both sides of the aisle are predicting this fight will be much less climactic than previous squabbles in 2013 and 2011.

But there are a few reasons that the debt ceiling could again become another game of chicken. Chris Krueger, an analyst at Guggenheim Partners in Washington, has been adamant that it’s the largest potential macro tail risk on the economy coming out of Washington this year. Original source

2. Rising student debt burdens are a myth: 

Everyone talks about “rising student debt burdens” as if they’re real. But they are not. In fact, the burden of carrying a student loan has fallen significantly over the past decade.

Some of the confusion is understandable: student debt levels do tick up slightly every year, more or less in line with inflation. But a debt burden isn’t just about debt levels. A $20,000 debt is a lot easier when you’re paying 5% interest than if you’re paying 10%. And it’s a lot easier if you’re earning $60,000 than if you’re earning $40,000. That’s why when calculating how difficult a loan is to repay, you need to take things like graduate’s income, interest rates and tax rates into account. Original source

3. Margin Debt Soars To Record High; Investor Net Worth Now Doubly Negative From 2007 Bubble Peak: 

That margin debt kept rising into the last month of last year is no surprise: after all, with a market that was destined to follow the Fed’s balance sheet through thick and thin, there was “no risk” – just remember what David Tepper said: no taper is bullish, a taper is even more bullish as it means the economy is recovering and 20x P/E multiples are just around the corner. Sure enough as reported earlier by the NYSE, margin debt rose by another $21 billion in December to an all time high of $445 billion, and up 29% from a year ago – incidentally almost identical to the increase in the S&P. Original source

4. Don’t squander debt limit opportunity again: 

Is there a difference between the Democratic Party establishment and the Republican Party establishment?

Do Republicans really want to return to the constitutional principle of limited government?

Why do we have to wait for a Republican majority in 2015 before using the power that control of one house affords the GOP?

Will Republicans deserve majorities in both houses if they sit on their hands until it is given to them?

These are the questions going through the minds of many as Republicans squander the opportunities they have with control of the House of Representatives – a fact of life the establishments of both parties would sooner ignore. Original source

5. Latest Debt Limit Threats are Pure Political Theater: 

Republican leaders have got themselves stuck in a weird rhetorical position. Some in their base are still convinced the debt limit is a great leverage point, but it was only ever useful because President Obama was trying to come up with a clever way to get Democrats to betray their base in a grand bargain. Now that Obama has taken a firm “no negotiation” position the debt limit is not actually useful for Republicans and the smarter Republicans leaders know this.

So the Republican leadership must now keep their base happy by talking about how unreasonable it is that Obama is not going to negotiate over the debt limit, while also making it clear to they are not actually going to destroy the economy just to make some political point. Simply admitting they were idiots last time is not an option. Original source

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Thank you for the mentions last week. I really appreciate it. Have a great weekend!


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