What is your outlook for the economy?

Well, in regards to investments: I assume we will in fact experience 3 more rate hikes this year, so I am 100% leaning toward short-duration fixed income

Well, what is the state of the economy? Do you read relevant literature? There really is no right answer to this question.

we are fucked.

"We are fucked" is good.

Just read WSJ and FT everyday and try to remember whatever bullshit comes to mind.

Unemployment at 8.5%. Discouraged workers included brings value to around 20%. Borrowing rates are at all time lows to at least 2014. Gold is at an all time high. Greece default threatens EU and world banking system. Banks are adjusting their balance sheets and operations to comply with dodd-frank and Basel III rules. Fed's actions have done little to bank lending.

Not to oversimplify or deglamorize the answer, but America is better off than any other country. Financial crises are a war of attrition, there are no winners only survivors.

GDP will be between last year and the long run average.

You're welcome.

Do you want a projection on treasuries? Cause I can do that too.

I was kind of trolling but I don't think long run average gdp is 3%, isn't it closer to 4? I'm not talking about estimates of "full capacity" I mean the real arithmetic mean over the last 20-30 years.

America has won the next 20-30 years, despite all the whining about america in millennial media.

thanks obaama

opsdude1:

America has won the next 20-30 years, despite all the whining about america in millennial media.

The optimism in this thread, now that the crisis is behind the US, versus the sentiment around 2009 when we were at the bottom of it, provides neat evidence of the correlation between what we hear and what we believe.

It's useless to look at figures such as GDP as the sole indicators of where a country is headed. Those measurements are for us as professionals, and for politicians who need an indicator of what kind of action to take. A better question might have been "how do you think the US economy will change over the next x years?"

To that, my answer is: our tech industry will provide new opportunities for entrepreneurs to grow their business (product, information, and education availability), and regulatory changes will make it more difficult to accumulate wealth without contributing to Uncle Sam. In 30 years, I'd say that the nation's "top-line" growth stagnates due to a potentially competitive market for large corporates that can squeeze profits, in exchange for an easier lifestyle for pretty much everybody.

In short, the Europeanization of America. This could all be wrong, however...

Asia slowing down? do you have an idea what progress India have made In the past couple years? It is expected to grow by 7.5% by 2016 (IMF) and acc to Modi, by 8.5% ( which I think is bullshit because its a stretch even though they changed the formula ). It already is the fastest growing economy of the world. Just do some research on whats going on or hit me a PM Sensex is up a whopping 30% from last year and is still expected to go up.

China's slowdown is about .5% and india's growth is a little less than 2.5%. Given that china's GDP is about 4.5 times of india's GDP, it should have a net result. overall, I do think asia's growth is gonna slowdown and im assuming you guys dont know much about india/china, more US oriented, so m not gonna get into details

Edit: Yes, asia's economy is gonna slow down, but not significantly. Prolly just a small dent.

Shit. Record low labor force participation, real unemployment is high, real income is stagnant/slightly decreased, public debt is fucking obscene, private debt is increasing, corporate profits are all going to M&A and buybacks (Not a good sign), entire financial market freaks at even the mention of the idea of a rumor of a tiny rise in rates, this is insanity and not normal in any way, shape, or form. Speaking of those rates, we've been at ZIRP for how long now? This is asinine. And what has it done....pumped the equities market? Driven some firms that can hardly make a dime in profit to be some of the most "valuable" companies in the world? College grads are facing near record levels of difficulty finding work, student debt is ballooning, and this of course also drags our public debt up even higher ostensibly since the fed. government is essentially on the hook for that in case of default. Record levels of regulatory burden, taxes, and incompetence at all levels of government. Massive chase for yield in all areas. Massive bubbles in many alternative asset categories that are simply insane and unsustainable.

I don't have a positive outlook.

US, EU, and Japan alongside the rest of the world will be growing normal again after a couple of years, altough CHina's double digit growth rates are done, Africa is the new Asia

Asia will continue to grow strongly. China is slower but still strong. Costs are rising but they are investing in lesser developed countries to reduce them. They're a heavy export reliant economy but they'll start to focus internally to support economic growth. Low debt. Lots of reserves. Fiscal headroom to support growth. Decent banks that are growing their international presence. Developing capital markets.

Europe is fucked.

The US is still a go to, even if it's due to lack of alternatives. Higher rates will attract more investment, perhaps from the emerging markets. This lessens their capital, but the strong dollar will support imports from the same. Hopefully the lower costs imports will translate to higher profits/cash flow to draw talent or catch up on deferred maintenance . I believe more Americans are increasing their global focus and hopefully will seek other countries to sell their products. The culture still fosters innovation which will be crucial for growth. To the extent capital is used for M&A, if the target companies are further down the totem pole, that's a good thing as it pushes capital further down the rung to the average joe. This encourages entrepreneurship, which is what we need instead of people looking just to get a job. We need creators.

Latin America has greater potential but needs political overhaul and probably greater attention from North America.

Africa is the next frontier. Benefits from proximity to Europe, the Middle East and Asia.

My .02

My opinion is that everyone was writing off the American economy in 08/09 as being dead but I'm an old timer and remember when everyone thought the Japanese and Germans were going to overtake us and buy up the US in parts until they had the sum in the 70's/80's. The Japanese bought Pebble Beach and Rock Center for a billion each and a few years later sold them for ~$300MM each (just examples) and went into structural decline/stagnation. West Germany basically bought GDR for historical reasons and got stuck with a couple of decades of integration costs then got stuck in the quagmire that is the EU. While I don't think the US perfect by any means and we have to carefully balance between too much and too little regulation, watching our overall debt, being careful of too much income inequality (completely different discussion but too much has historically resulted in bad things for those who have a lot: see Revolutionary France and Russia, and I'm not a socialist by any means, just a realist) and many other factors, but the sheer size of the US economy especially when weighed against our population makes us formidable unless something historically tragic occurs. We're also pretty good at new technologies and reinventing ourselves to adapt to changing climates. So US, yes, it's going to be here for the long term with the exception of a 800 lb black swan. Caveat: I'm obviously American but lived outside of the US for a while and have done business globally for a couple of decades and I don't wear rose colored glasses.

India: I think there's great promise, probably the best of the large emerging economies for non-domestic investors, but so many dollars have to be put into basic infrastructure (roads, electric, sewer, then higher tech rural telephony/internet access) then corruption needs to be addressed. I've spent more time in India than most westerners by far and I like the basics-Common Law and the legal ability to have title and IP rights (compared to China), a high place held for education but only a partially educated workforce (education is highly valued but only some of the population has access), and a massive and enterprising populace and a general feel while I've been there that an individual can actually work hard and make something of themselves, and that's if it's a guy selling aloo tikki chat at Khan in Delhi or someone starting a new software company. But the big thing is that the economy's coming from such an incredibly low gdp/capita, then the desires to fund infrastructure improvement and being able to do so over the myriad state and local governments (for example, I looked into electric gen and distribution projects 5-7 years ago but one of the big problems was that there was a 30% loss because people actually climbed up the pole and stole the electricity from the transmission lines and it was condoned by the municipal governments because it was a good reelection point for local politicians so there was no enforcement possible) and add a difficulty and just strangeness in FDI, and while it's been eased a bit, it's still a very byzantine system. I forget the intricacies but we bended (left the "l" out on purpose) equity and debt mixes and incurred so many legal dollars that if the project weren't as large as it was we would have blown so many legal dollars that it wouldn't have been worth it. But I like India. It just needs to solve its infrastructure, corruption and FDI issues. And the problem with India is that if you want to change anything it takes 10 years and there are 1.2B people so you're not swaying any one person.

China: Don't like it. On many fronts. Many other people can say why or why not quantitatively and I believe them to greater and lesser degrees but I don't think China can transition from this weird communism they believe to a post communism society as easily as they want to happen. Mao farmer X who went to the city to live a horrible life as a factory worker but has a tv will actually make cousin farmer Y jealous because X has a tv although their life sucks. I think we multiply that by 1.3-5B and there's just too much possibility for unrest. I also have hated doing business in the PRC. The distrust and the thought that as a non PRC citizen that we had any recourse was obvious: we had none. We could hold no title to anything in China whereas we could in India and other odd places, like Vietnam, a communist country. Getting money in and out of China was incredibly difficult, and in legitimate ways. I'll give anyone a post mba lesson on how to do that. @"SSits" can probably comment more on China than I though.

LatAm: I truly want for every economy there to be going legit because I love South America. This time Brazil happens (and last). Corruption between Petrobras and the govt and whatever. The last few times it was something else. 18 months ago we almost got involved in a big Brazil deal. I'm incredibly glad we didn't. I want LatAm to happen, I lived in Miami for a few years and that was my life but it's still sketchy.

Russia: fubar from every pov. Economically (way too dependent on fossil fuels for too large of a declining population) and I just hope they don't pull us into a conflict that can destroy all of us because Putin is a fucking Hitler wannabe.

I like Vietnam and Burma personally. And India.

The article seems a little amateur, he is not saying anything most of us have not heard yet. We already know we have tons of debt and need more actual job creation through producing actual "stuff."

The part where he lost me was the high speed rails. The reality is that the greatest export the US has and will have is human capital. If we were to somehow have diverted the AIG/Citi money it should've gone into early education investment in math and sciences. The USA's scores in math & science has continually slipped over time; the country's future is in high value-add products and services. Maybe the US doesn't produce most semiconductors anymore, but we still need to be the one leading the edge in developing the IP.

Care to enlighten me on the distinction you draw?

i see the UK and USA going down / Germany+Netherlands+France+Belgium etc forming their own monetary union that will hold the strongest currency / PIIGS going down as well / Asia stable growth

Dont throw monkeyshit at me this is ONLY a hunch

Specifically, where do you see the US economy going and give some support to your argument.

I get it- the interviewer wants to make sure you are literate and can stitch some sentences together generally related to the market.

But this kind of question gets thrown around banks all the time and it's useless.

Magnitude of outcome is greater than the frequency of result.

"I think the market will go up over the next week. But I am going to short it anyway because the magnitude of a drop would be far greater than any small uptick." [not actual prediction, just an example]

That is thinking probabilistically, not just regurgitating the crap that comes out of talking heads.

The south will rise again.

some of the costs of living and buying have decreased which will be nice for at least the short term.

retail consumption will cost a bit less since some mid-recession re-pricing at stores has stuck (assuming your income/purchasing power has not taken a hit)

gas prices are down 50% since their peak, always nice.

30 year interest rates are very, very low. I predict they will go down to 2.5%, as crazy as that sounds. Either way, corporations should really get in there and take advantage of this by issuing tons of long term debt at a ridiculously low rate.

Boomers will start hitting retirement soon. The boomer years started in 1946, and 65 years after that would be 2011. Many of these boomers are going to need to switch their investments into fixed income from equities once they hit retirement.

This has bubble potential. Boomers are used to competing and will need to get in before anyone else to lock in a better interest for 30 years (if they choose to invest in long-term debt like that, but lets face it, they need income, so their only options are long-term corporates or high-yielding stocks). Either way, its possible their will be a bubble in long-term debt within the next three years, and those that don't get out at the top will be crushed once the inflation monster kicks in (in 3-5 years, in my opinion).

Anyway, cheap, long term borrowing costs for companies will be a boon going down the line.

The new normal is setting in.

Opportunity cost of starting your own business is lower due to the employment climate. A good time to set up a freelance practice.