This is so crazy complex. As a lay person I had to look up each acronym and term. I had to do the same thing as well in 2008 while trying to understand what went wrong. Your point about how Buffett has info we don't regarding the insurance industry makes sense to me. If I recall correctly, he got out of anything derivative related well before 2008 blew up. Seems reasonable to follow his lead in this instance as well.
Do you guys have prudential regulators? They were MIA during the GFC in the US and Europe, and don't get a mention here. How is an insurer permitted to make it's balance sheet so risky?
The definition of the Ponzi Scheme is a blurred line. That is how debt works. You borrow time from the future to invest and hope the productivity gain can repay the debt. It works until it doesn't hence credit cycles.
I think a point you've overlooked is the original author's point that debt origination allows more insurance products which in turn allows for more financed consumption from consumers as they move away from saving. This insurance-financed consumption will allow further economic activities, support the influx of debt, and hopefully increase productivity. Therefore, in this sense, it'd be somewhat different to 2008 when the debt is pumped into an unproductive part of the economy aka housing whereas this insurance-led debt is being allocated to all sectors of the economy and also enabling consumer consumption.
Sure, there could be arguments about whether this can translate to productivity growth and sustain the debt load. But that's a more nuanced discussion and the result is not immediately clear that it will lead to a massive financial crisis.
Yes, I suppose I was going less for "get in your bunkers now" and more just shocked that such identical conditions as those behind the GFC could be replicated again. The perverse incentives creating systemic risk in such a similar form is real, the CDO bust happened largely due to complexity as well.
This is so crazy complex. As a lay person I had to look up each acronym and term. I had to do the same thing as well in 2008 while trying to understand what went wrong. Your point about how Buffett has info we don't regarding the insurance industry makes sense to me. If I recall correctly, he got out of anything derivative related well before 2008 blew up. Seems reasonable to follow his lead in this instance as well.
Appreciate the effort! If you want any clarification on anything here, feel free to drop a comment.
I can give a much simpler account of where the next financial crash will be: https://backseatpolicycritic.substack.com/p/ai-is-a-scam
I'm not sure this is *the* catalyst, but the match certainly checks out, and this is one more reason I'm glad I shifted gradually to cash lately.
Do you guys have prudential regulators? They were MIA during the GFC in the US and Europe, and don't get a mention here. How is an insurer permitted to make it's balance sheet so risky?
Hi, you may find some insight in the discussion here. Basically it isn't an issue until you combine private credit, which isn't equally regulated: https://www.reddit.com/r/ValueInvesting/s/IyARORaVdw
The definition of the Ponzi Scheme is a blurred line. That is how debt works. You borrow time from the future to invest and hope the productivity gain can repay the debt. It works until it doesn't hence credit cycles.
I think a point you've overlooked is the original author's point that debt origination allows more insurance products which in turn allows for more financed consumption from consumers as they move away from saving. This insurance-financed consumption will allow further economic activities, support the influx of debt, and hopefully increase productivity. Therefore, in this sense, it'd be somewhat different to 2008 when the debt is pumped into an unproductive part of the economy aka housing whereas this insurance-led debt is being allocated to all sectors of the economy and also enabling consumer consumption.
Sure, there could be arguments about whether this can translate to productivity growth and sustain the debt load. But that's a more nuanced discussion and the result is not immediately clear that it will lead to a massive financial crisis.
Yes, I suppose I was going less for "get in your bunkers now" and more just shocked that such identical conditions as those behind the GFC could be replicated again. The perverse incentives creating systemic risk in such a similar form is real, the CDO bust happened largely due to complexity as well.
Sorry didn’t read the whole thing but I would say is t Apollo is doing great/okay ? + there is still too much “free” money around
Yes this is more with regards to systemic risks rather than Apollo's fundamentals