Recessions are always the result of a confluence of events that feed back on one another.

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by NoReally

I see a handful of things coming together

1 – intra-institution repurchase of CLOs stops, resulting in corporate debt default that can’t be dismissed by the covenant light hand waiving

2 – The impending 4% draw down begins to materialize as the wave of boomer retirement hits the shores of the financial system

3 – home prices top out, limiting consumer ability to roll-over their credit card debt using home equity refinancing

4 – someone does the math as interest rates continue to rise and realizes that, even with government protections, student loan repayment will fail to keep up with the ever mounting interest owed on five and six digit quantities of per-student debt (over 50% of whom will never graduate with the credentials required to allow them to obtain jobs that pay well enough for them to be able to discharge their debt)

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5 – the unfortunate reality, that no company in their right mind is going to repatriate overseas cash from a <5% tax environment to one where the tax owed is 20%, begins to become apparent at the end of tax year 2018

6 – an extended trade war is embarked upon with China, Japan, Europe and any other country our insane clown president doesn’t like on any particular day.

7 – The fed capitulates; bond auctions being to fail again, forcing the Fed to resume adding treasuries to their balance sheet while simultaneously raising interest rates, resulting in a coffin corner for US treasury repayment of just interest on debt owed

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8 – corporate stock buy-backs stop juicing share price, resulting in dividend issuance exceeding valuation and the inevitable “revaluation” (crash) of a large number of stocks widely held in large numbers of indexes and ETFs

9 – market makers in the US equities and derivative markets lose control of volitility causing foreign investor returns seeking to receive multiple margin calls, eventually resulting in that returns seeking going elsewhere

 

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