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Comment by partiallypro | Hacker News Reader

I think the biggest voice to say there is a debt problem, at least in high yield and junk bonds, is Carl Icahn. It seems that the biggest problem is that the underlying debt market is very illiquid and people are using ETFs and other financial instruments to create liquidity. This is why Icahn called BlackRock a dangerous company. Icahn is not a man I'd want to bet against. Though, this so called bubble could go on for years.

I think the market will have a minor "taper tantrum" but I don't know if that will be the needle or not. As the housing market of 2001-2008 showed, this can go on for a lot longer than people expect. People were sounding the alarm in 2005, but it didn't take full fruition until late 2007.

IMO, the bubble will pop in the private market before we even see it pop in the public markets.

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At this point, I think it's pretty obvious that these cycles track with a subliminal fear of U.S. Presidencies that reach their term limits.

There's this sort of instinctual dry-up, right before the eight-year mark on an incumbent president, sort of like geese flying south for the winter. No one says anything to one another, but the angle of the sun changes, the summer weather is gone, and all the birds hit the road at the same time.

Regardless of the parties and there representation in whichever offices, and under whatever titles, everyone knows that different people will be sitting in different chairs when the dust settles, for some, there will be a new-car smell, and for others there will be painful hours stepping through a debugger, converting data from one format to another. Either you'll be comfortable while the bugs shake out, or you'll be in for a cold winter in a drafty house, but since the immediate future is up in the air, everyone stocks up for a harsh winter.

Other than a few top posts, our bureaucracy is non-partisan and doesn't change with the whims of the White House.

Human behavior is not precisely rational. Take Iraq as an example. Would you have predicted such things in 1999?

Conditional on a Republican presidency and some national disaster happening? Conditional on the son of the first Gulf War's President getting elected President? Some people were certainly speculating in that direction.

As reflected in this classic Onion article of January 2001, "Bush: 'Our Long National Nightmare Of Peace And Prosperity Is Finally Over'" http://www.theonion.com/article/bush-our-long-national-night... "During the 40-minute speech, Bush also promised to bring an end to the severe war drought that plagued the nation under Clinton, assuring citizens that the U.S. will engage in at least one Gulf War-level armed conflict in the next four years."

This is demonstrably untrue.

Yes and no. You are true that the bureaucracy is non-partisan and bureaucrats are not necessarily beholden to political leaders or process.

However, leadership (in a company, in a country, whatever) will set the priorities and tone of any group under them. Even if that leadership is in some ways going against the current of the bureaucracy, it's certainly possible for a dynamic leader (or group of leaders) to change the direction of an organization. And if there's one thing most people in politics must be exceptionally good at, it's getting people to agree that their plan or policies is the best plan or policies.

There's also a lot of power in being able to say "These are the criteria upon which all of you will be evaluated for raises and promotions", too. I'd expect the US bureaucracy is a little more ossified than most large corporations, but not so much so that appointing leadership doesn't change the direction of the bureaucracy.

I suspect that the 2016 presidential election will come down to sanders vs trump, and Wall St will not like that choice....one of those candidates threatens their cheap labor, and the other one threatens to tax them and regulate them more....

Heh heh....seeing wall st and the corporate media sweat is gonna make 2016 the best election ever....

Trump? I'd love to see the odds on that bet. Mere name recognition alone does not a successful candidate make. In fact, he's already proven his loose lips will sink his primary ship long before it sailed. He successfully angered Latinos and veterans--two groups that any Republican candidate will need to win at the polls.

Sanders has no better chance than Trump. We're deep into decimal digit territory here.

Trump almost seems to just be trolling at this point and not seriously trying to win the Presidency (or the nomination), the McCain remarks which he keeps doubling down on are just insane.

FWIW, I wouldn't put a lot of money on Sanders either, not because I think he'd be a bad choice (IMO he is the only rational choice of the credible and currently announced candidates) but just because he's not particularly charismatic (which matters, unfortunately), he's pretty old and he's easy to label a socialist, which is still sadly about the worst thing you can be labeled as (short of being an "ISIS terrorist") in the minds of a lot of the demographics in America that actually show up to vote.

Some of the latest polling data shows Trump at or leading Bush. If anything, Republican primary voters will really respond to his rhetoric. They eat up the Only True Conservative vs RINOs narrative.

Polling data in the July before an election has close to zero predictive power. Last time around, Herman Cain and Newt Gingrich had similar periods of being the front runner before they were dismissed by voters.

Neither Sanders nor Trump will come within a mile of the nomination.

There has been a relative correlation with recessionary activity and lameduck presidencies, but I think this is largely coincidence. The world market as of now is largely trading on China and Europe's new, not the U.S.'s. Of course that could shift with a Fed rate hike in September, but 25 basis points on a move as I said would probably just cause a minor taper tantrum and not really be part of the bubbling undercurrent.

It's truly the case that the bubbles will pop later than sooner as there incentive and ways to delay the inevitable. But when it does pop, you have ran out of options to catch the falling knife, so to speak.

Like forest fires, recessions are natural to capitalistic market and any attempt to prevent it only adds kindling.

> It seems that the biggest problem is that the underlying debt market is very illiquid and people are using ETFs and other financial instruments to create liquidity. This is why Icahn called BlackRock a dangerous company.

But the ETF liquidity is real, right? Is a crisis ever going to get so deep that there won't be people willing to buy the ETF at 20.5, sell the physical at 19.5, and take a free profit?

What's the threat model here? A run of redemptions on BlackRock?

This makes perfect sense. The reason why debt/fixed income products were stable in the past is because of the lack of liquidity. But now with the advent of structured product and ETFs, a lot of bonds are behaving more like publicly traded equity and being speculated upon, thus increasing their volatility.

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