Another Great Pimco Article

As I said a few days ago, when the collapse finally comes, a lot of people are going to be pointing fingers and credit default swaps (CDS). This article from Pimco gives a provides a good synopsis of the perils facing the economy as well as why the CDS market will add to volatility.



“Today, however, the stimulus from tax cuts is fading, consumer debt is at record levels, personal saving rates are stretched, and the size of the U.S. budget deficit makes future tax cuts unlikely. Housing valuations appear stretched, virtually ensuring low single-digit returns on consumers’ balance sheets. Consumers’ income is limited by real wage growth that is barely positive due to rising inflation. In addition, the Fed is normalizing short rates, which will negatively impact mortgage refinancing.”