At MarketWatch Jessica Marmor Shaw outlines the developments about which investors should be most concerned in 2018. They are:
- Bitcoin crash
- End of easy-money policies
- NAFTA
- Record corporate debt
- Stock valuations
- FAANG pullback
- VIX spike
- Robert Mueller
- North Korea
- Geopolitical risks, in general
- More weakness for the dollar
I’ve mentioned the risks associate with the Bitcoin bubble before, particularly in the context of how much has been borrowed to purchase Bitcoins. The issue of high corporate debt is something about which I hadn’t been aware. How to reconcile that with very high corporate holdings of cash and cash equivalents? Maybe they aren’t the same companies and some are borrowing too much while others are sitting on their earnings.
Did she miss anything?
1) Spread of a major contagious disease, like the Spanish flu. The response to Ebola was handled spectacularly well, but we were also lucky. Given how interconnected things are, it likely gets harder to stop pandemics.
2) War in areas that have been simmering, but ignored because of our focus on Iran and NK. Pakistan and India probably near the top here.
3) Nationalism outbreak in Eastern Europe leading to civil war, war spreading in the area.
4) Israel changes the name of the Western Wall to the Trump Wall and puts a big golden T on it. In appreciation, the guy does love walls, Trump initiates war with Iran.
Steve
Steve, we had a pandemic flu a few years ago — it turned out not to have the mortality rate people feared*, so it has mostly faded from public consciousness. Off the top of my head, I cannot remember whether it was a bird flu or a swine flu.
What it did do, however, is spread very quickly across the globe exactly as predicted, despite all efforts to slow it. It also caused a much larger number of people to go to the doctor, and put a fairly big strain on our medical resources (it was a worse than average flu, which hit more people).
It was a dry run for the very bad killer pandemic that could happen. The CDC learned a lot, and none of it was good. We are in a pretty bad spot if a more deadly pandemic starts.
On the plus side, most Americans have some exposure to that flu variety now, so we have a greater resistance. And the CDC has updated their protocols (which may or may not have helped with Ebola).
*: Estimating the mortality rate of a new flu is hard, as you don’t know how many people haven’t gone to the doctor and just got better, and they tend to emerge in places with less access to health care and less reporting.
I’ll add one: Republican threats to blow up the world economy by defaulting on the debt get carried out.
Less likely they would do it to a Republican President, but still quite possible. They do like to use the debt limit as a negotiation.
I suppose “the end of easy money policies” is relative and subject to different interpretations, but its already started, if you look money supply growth, Fed debt sales and the effects on the yield curve.
Also, I see no reason to focus solely on corporate debt as opposed to including government or personal debt. Its all a drag. But one should note its been that way for quite some time.
“Maybe they aren’t the same companies and some are borrowing too much while others are sitting on their earnings.”
That’s exactly it. I seem to recall reading that a handful of accompanies account for something like 40% of the balances. Companies like Apple and Microsoft. And just for the record, “they” may be “sitting” on it, but it’s really recycled through the capital markets to those who want to pay for the use of it.
Been thinking on this for some time. I’m not sure personal debt is a drag, may be an incentive to earn more, encouraging more productive work. Carrot and stick, you know.
Yes, a pandemic is long overdue, especially since no one really knows why black plague or Spanish flu burned out without killing everyone. Most likely a virus that kills all its hosts has evolved some undetermined weakness. That’s an end story we do not prefer.