[quote=gandalf]Hey davelj, on a more balanced note, thanks for creating this thread.
I’m a cautious optimist by nature, but my numbers are bigger (much bigger) than yours, and my outlook more pessimistic. Speaking as a former analyst on an MBS trading desk, the marked positions never matched the underlying long-term revenue streams. Patterns in ABS markets are observable in other markets.
The number in my mind is $70T. That’s the amount of global wealth that’s in the process of going away. I might be low. The true extent, performance and risk associated with the underlying economic activity has been overstated by innovations in FIRE. What remains of the real economy is contracting harshly from the wicked de-leveraging brought on by the systemic failures in FIRE industries.
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I just read that we’ve seen $50T in wealth destruction so far globally. So if we “only” go to $70T, I’ll consider that a victory.
I think we’ll find out in a few years that there were enormous opportunities in a number of different financial and RE-related assets, but that they weren’t in the “obvious” places – like big bank securities, or buying A-rated MBS at 10% of par – but rather in the seams and cracks of some of the illiquid markets that are way off the grid. But I suspect these “good” opportunities will be dwarfed by the landmines that are still out there in terms of total dollar value. But, we shall see.
