The Nation's Financial Condition

[dislaxxic]

Gee, let's watch the Dems implode so we can get back to Republic rule so they can get back on track with all their peachy-keen "policy" initiatives that'll make our country SO much greater!

Just what we need...more rightwing loon judges and more jackboots on the borders. What else is there? Oh yeah, tax cuts for the wealthy and WAY less regulation!! Great direction for our country. BOO yeah.

..

[Farfromgeneva]

Or this from Ian Millhiser on Twitter a few minutes ago:

Imagine there are two political parties. The first party is playing a game called "let's randomly fire machine guns into the air." The other party has the power to take these guns away from the first party, but refuses to do so.

That's the debt ceiling fight in a nutshell.

Also Ian...

If the debt ceiling is breached, the economy plunges into a deep recession, Biden is discredited, Republicans win supermajorities, and the light of democracy goes out in the United States -- possibly forever.

But I'm sure Dems have a good reason to delay fixing this problem.

and another:
Jesus FXXXing Christ this is reckless.

Senate Dems are literally betting the world economy -- and the future of democracy -- on whether McConnell won't gleefully plunge the US into a recession and let Biden take the blame for it.

Just pass the damn reconciliation bill!

It’s funny because the ones blaming it all on the republicans have it only partially correct. Watching the circus from last Sunday and the leftist wing of the democrats (progressive is such a bogus term they’ve appropriated for marketing purposes) and it’s clear they’re fighting for the sake of fighting and not legislating as well calling people in their party Republicans in a pejorative manner and Pelosi not following through with her commitment to her own democratic problem solver caucus.

Sorta feels like a JV version of the cannabilization that has already occurred in the Republican Party which would be par for the course as they’ve whine for my lifetime about what the republicans have done only to adopt the same practices 5-10yrs later over and over again. Not taats, so please stay away from this trips, but I can think of heroes examples from using reconciliation in abusive ways to the money machine of pacs.

My prediction.....Dems blow up the filibuster on a carve out for debt ceiling. Both Manchin and Sinema go for it and Veep casts the deciding vote. If they are smart, the will raise it so they don't have to deal with it until after the 2022 mid-terms at the earliest.

And then they whine when republicans do the same in a few years and round and round we go.

too late....but yes, round and round we go.
Dirty Harry Reid paved the way with the filibuster, dems love to trip over their own dck...then when R's used it they complained.

"To imitate someone is to pay the person a genuine compliment — often an unintended compliment."

I know that’s basically the ACA playbook.

I just think we’re seeing the beginning of the Democrat populist implosion-will be funny to see their version of trump-Alec Baldwin?

You can certainly sense that they are trying to play and then pander to the multiple sandboxes of their side...in the end they will likely lose many of those independents. For the sake of the party, I think they should tell the that fringe left to GTFOH, and move back center.

Gottheimer-at least be adults and compromise.

The complaint about 1-2 holding hostage the whole group is absurd. It’s short sightedness at its worst; “Jam this huge massively consequential thing through, lose control and/or potential for a larger coalition of the country on your side and hope the unintended consequences and externalities we were honest and transparent about don’t blow the country up”

It reminds me of when people say that last play, last drive, last inning, last quarter lost us the game but basic kiddie math is they are all independent and equal votes/incidents within the market equilibrium. They just took the easy path and dealt with the far left first while knowing all along these two were critical and waited to the last second to try to shame them and bully them left. I don’t dislike manchin, he’s in a very tough state to exist as a dem. Sinema I think is fraudulent even if I’d take her behind a dumpster at the nearby W hotel bar and “drop it like it’s hot” on her back.

[Farfromgeneva]

Wasn't sure where to put this (or put it at all given the disinclination to read from "lefty" sources). But this is an interesting and alarming piece, IMO:

https://www.nytimes.com/2021/10/05/opin ... clear.html

"Every so often the tectonic geopolitical plates that hold up the world economy suddenly shift in ways that can rattle and destabilize everything on the surface. That’s happening right now in the energy sphere.

Several forces are coming together that could make Vladimir Putin the king of Europe, enable Iran to thumb its nose at America and build an atomic bomb, and disrupt European power markets enough that the upcoming U.N. climate conference in Glasgow could suffer blackouts owing to too little clean energy.

Yes, this is a big one.

Natural gas and coal prices in Europe and Asia just hit their highest levels on record, oil prices in America hit a seven-year high and U.S. gasoline prices are up $1 a gallon from last year. If this winter is as bad as some experts predict — with some in the poor and middle classes unable to heat their homes — I fear we’ll see a populist backlash to the whole climate/green movement. You can already smell that coming in Britain.

I am a fan of the financial newsletter Blain’s Morning Porridge, written by a smart, irreverent market strategist in London, Bill Blain. Last Thursday he bluntly summed up the energy situation for the U.K. and Europe this way:

'This winter — people are going to die of cold. As the price of energy goes higher, the costs will fall disproportionately upon the poorest in society. Income inequalities will be dramatically exposed as the most vulnerable in society face a stark choice: heat or eat. … This winter the U.K. is likely to be on its knees, begging energy from wherever it’s available. Europe will be in as much trouble. The Middle East will be charging whatever they can get away with, and the capacity to deliver is limited. … And Vladimir Putin can’t wait. … He will invite each European leader to plead their case individually, menacingly asking each leader why he should open the gas taps to their nation specifically. … Make no mistake, this winter is going to be shocking. Be aware.'

How did we get here? In truth, it’s a good-news-bad-news story.

The good news is that every major economy has signed onto reducing its carbon footprint by phasing out dirtier fuels like coal to heat homes and to power industries. The bad news is that most nations are doing it in totally uncoordinated ways, from the top down, and before the market has produced sufficient clean renewables like wind, solar and hydro.

If you don’t have enough renewables but you want to go green, the next best thing is natural gas, which emits about half as much C0₂ as coal (as long as methane is not released in the extraction process). But there is not enough of this transition fuel to go around. So, everyone is scrambling to get more, which is why the European Union’s biggest pipeline gas supplier — Russia — is now in the catbird seat and prices are skyrocketing along with blackouts.

As Bloomberg Businessweek reported on Sept. 27, when it comes to natural gas, “inventories at European storage facilities are at historically low levels for this time of year. Pipeline flows from Russia and Norway have been limited. That’s worrying as calmer weather has reduced output from wind turbines, while Europe’s aging nuclear plants are being phased out or are more prone to outages — making gas even more necessary. No wonder European gas prices surged by almost 500 percent in the past year and are trading near record.”

But it’s not just Europe. This energy crunch could pinch ceramics, steel, aluminum, glass and cement suppliers in China, the story added, while it presents households in Brazil with eye-popping power bills because low river water flows have slashed hydropower output. And pandemic-related supply chain problems for coal are making the problem worse.

But how did the bad-news side of this story emerge so fast?

Blame Covid-19. First, the pandemic erupted and signaled to every major economy that we were headed for a deep recession. This sent prices of all kinds of commodities, including oil and gas, into downward spirals.

This, in turn, led banks to choke off investment in new natural gas capacity and crude wells after seven years of already declining investments in these hydrocarbons because of lousy returns.

But the economy snapped back — thanks to government stimulus programs — far faster than anticipated. And so, too, did demand for energy. But this industry does not ramp up quickly. So, there was not enough natural gas, let alone renewables, to fill in the gap.

America has enough oil and natural gas to meet its own needs for now, but its ability to export liquefied natural gas to help others is limited, especially when every utility in Europe and Asia is trying to meet newly minted environmental, social and governance standards for clean energy and therefore is desperate to import natural gas.

When every country jumps in at once, the price goes crazy. Or the lights go out.

Don’t get me wrong. I am as green as ever. But I’m not a nice green. I am a mean green. Achieving the scale of clean energy that we need requires not only wind, solar and hydro, but also a carbon tax in every major industrial economy, nuclear power and natural gas as a bridge. If you oppose all those, you’re not serious about what scientists tell us needs to be done right now — put in place enough noncarbon-emitting fuels to manage the destructive aspects of climate change that have become unavoidable, so we can avoid those that would be unmanageable.

Sadly, in an overreaction to the Fukushima nuclear accident, Germany decided in 2011 to phase out all of its nuclear power by 2022 — nuclear power stations that in the year 2000 generated 29.5 percent of Germany’s power generation mix. All of that has to be replaced by wind, solar, hydro and natural gas, and there is just not enough now.

As Bill Gates points out in his smart book “How to Avoid a Climate Disaster,” the only way to reach our climate targets is to shift production of all the big heavy industries, like steel, cement and automobiles, as well as how we heat our homes and power our cars, to electricity generated from clean energy. Safe and affordable nuclear power has to be part of our mix because, Gates argues, “it is the only carbon-free, scalable energy source that’s available 24 hours a day.”

Meanwhile, though, this energy crisis is coinciding with the stalemate in the talks between the U.S. and Iran about restoring the nuclear deal that Donald Trump recklessly tore up in 2018 — without any alternative plan to curb Iran’s nuclear program. To pressure us, Iran has resumed enriching uranium to levels such that U.S. officials now believe it could be only a few months, or less, away from having enough fissile material for a single bomb.

It would take much longer for Iran to build a warhead and delivery system, but some U.S. officials believe that Iran just wants to make itself a threshold nuclear power, like Japan, where it would stay just a few turns of the screw away from actually having a bomb. This would give it all the deterrence it needs. Both Israel and America have vowed not to let Iran get that close to the doorstep of a nuclear weapon. Alas, we are entering crunchtime.

But what if the U.S. or Israel feels it has to strike Iran’s nuclear program in the middle of what could be the worst energy winter since 1973? And what if Iran responds by firing at U.S. or Western oil tankers in the Persian Gulf, where Qatar, the world’s largest exporter of liquefied natural gas, resides? Oil and gas prices will go into the stratosphere. So, Iran suddenly has new leverage: Hit us and you bankrupt the world.

If I can figure that out, the Iranians can.

Little darling — it’s gonna be a long, cold, crazy winter."

NYT is ok, I have specific personal issues from the Anna/Hobart story and know they ignored facts provided and mis-stated their evidence in ways to drive an agenda and we have to acknowledge the guy (Jason something) who wrote fake stories or stole them and got awards, etc as to what the business is and isn’t today. Seems like the periodicals that have always presented a view do better on objectivity over the ones that have been forced to write with a view due to the change of the business

The economist and New Yorker would be solid examples of the above IMO.

Seacoaster, you should really read the Fifth Risk by Michael Lewis if you can find the time. Think you’d enjoy it.

https://www.npr.org/2018/10/02/65256390 ... interested

[Farfromgeneva]

If the Dems are smart they deal with the problem by taking it away permanently - either make the ceiling high enough to render it moot, or make the ceiling scale with the authorized budget needs...

Just because the republicans have become dumb doesn’t make the Dems smart.

Warren is a one truck pony still talking about the crisis 12yrs ago-and fighting

Bernie-old Jewish hippy still fighting wars from Vietnam

Schumer/Pelosi-fighting down days in the market for their pocketbook

Mayor Pete is where it’s at but they stuck him in transportation

I agree on Mayor Pete, but I wouldn't write off Warren as an ongoing lion of the Senate...she's much too smart.

From the most recent roster, I was rooting for a Klobuchar/Pete combo.
The Dems are fundamentally right that they need to deliver tangible benefits of their leadership to the rural, factory town, working class voters that migrated to Trumpism.

But I think the Dems writ large underestimate how toxic those folks find the big city, coastal elite values the rest of the party espouses. The social media networks and bi-modal media world have amplified enormously this sense of estrangement, fostered by some truly evil con artists and anti-democracy forces, but this estrangement is a reality right now.

So, that makes the delivery (and sale) of tangible difference in the lives of these folks all the more imperative...fast. Else, we really could see the anti-democracy forces take more absolute control and create even more strife. We think it's ugly now?

This sounds generally “right” (to me). And I’ve lived in DC (proper not the burbs except a few months sit between Centreville and McLean/Tyson’s), Manhattan (the real NYC f the other boroughs if you have to cross water it ain’t the city!) and now ITP (opposed to OTP) Atlanta for the last approx 20yrs now. Also having spent the better part of the prior decade in small bank towns like Salisbury MD, Timberville/Abingdon/Floyd/Martinsville/Salem etc VA, Greenville/Newton/Hickort/Mt Olive/Troy NC, Kosciusko/Jackson/Tupelo MS, Dothan AL, Mansfield PA, and on and on I’ve seen how these smaller towns and cities are in close detail (community banks mirror their local economies) and the disconnect is more extreme than I think more siloed people even realize already. Twilight zone level differences.

But again, they could do a pretty substantial $1.5Tn on top of $1.1Tn which is record breaking, in one shot, or knock out the $1.1Tn and save some room to govern for the rest of this stretch or so this all or none, “full or kill” approach that is antithetical to leadership and governing.

[Farfromgeneva]

Gee, let's watch the Dems implode so we can get back to Republic rule so they can get back on track with all their peachy-keen "policy" initiatives that'll make our country SO much greater!

Just what we need...more rightwing loon judges and more jackboots on the borders. What else is there? Oh yeah, tax cuts for the wealthy and WAY less regulation!! Great direction for our country. BOO yeah.

..

Keep on fighting. The world needs fighter and poets. Just like they need two parties that RE-learn how to be adults and govern to represent the fighters and the poets.

[MDlaxfan76]

If the Dems are smart they deal with the problem by taking it away permanently - either make the ceiling high enough to render it moot, or make the ceiling scale with the authorized budget needs...

Just because the republicans have become dumb doesn’t make the Dems smart.

Warren is a one truck pony still talking about the crisis 12yrs ago-and fighting

Bernie-old Jewish hippy still fighting wars from Vietnam

Schumer/Pelosi-fighting down days in the market for their pocketbook

Mayor Pete is where it’s at but they stuck him in transportation

I agree on Mayor Pete, but I wouldn't write off Warren as an ongoing lion of the Senate...she's much too smart.

From the most recent roster, I was rooting for a Klobuchar/Pete combo.
The Dems are fundamentally right that they need to deliver tangible benefits of their leadership to the rural, factory town, working class voters that migrated to Trumpism.

But I think the Dems writ large underestimate how toxic those folks find the big city, coastal elite values the rest of the party espouses. The social media networks and bi-modal media world have amplified enormously this sense of estrangement, fostered by some truly evil con artists and anti-democracy forces, but this estrangement is a reality right now.

So, that makes the delivery (and sale) of tangible difference in the lives of these folks all the more imperative...fast. Else, we really could see the anti-democracy forces take more absolute control and create even more strife. We think it's ugly now?

This sounds generally “right” (to me). And I’ve lived in DC (proper not the burbs except a few months sit between Centreville and McLean/Tyson’s), Manhattan (the real NYC f the other boroughs if you have to cross water it ain’t the city!) and now ITP (opposed to OTP) Atlanta for the last approx 20yrs now. Also having spent the better part of the prior decade in small bank towns like Salisbury MD, Timberville/Abingdon/Floyd/Martinsville/Salem etc VA, Greenville/Newton/Hickort/Mt Olive/Troy NC, Kosciusko/Jackson/Tupelo MS, Dothan AL, Mansfield PA, and on and on I’ve seen how these smaller towns and cities are in close detail (community banks mirror their local economies) and the disconnect is more extreme than I think more siloed people even realize already. Twilight zone level differences.

But again, they could do a pretty substantial $1.5Tn on top of $1.1Tn which is record breaking, in one shot, or knock out the $1.1Tn and save some room to govern for the rest of this stretch or so this all or none, “full or kill” approach that is antithetical to leadership and governing.

I think they'll land on a # lower than the $3.5 for the reconciliation, primarily by changing the number of years, some eligibility requirements etc, but the key for the Dems is for the benefits of these packages to be discernible in the lives of these folks, soon, well in advance of 2022 election much less 2024. so, dawdling is problematic.

[seacoaster]

Wasn't sure where to put this (or put it at all given the disinclination to read from "lefty" sources). But this is an interesting and alarming piece, IMO:

https://www.nytimes.com/2021/10/05/opin ... clear.html

"Every so often the tectonic geopolitical plates that hold up the world economy suddenly shift in ways that can rattle and destabilize everything on the surface. That’s happening right now in the energy sphere.

Several forces are coming together that could make Vladimir Putin the king of Europe, enable Iran to thumb its nose at America and build an atomic bomb, and disrupt European power markets enough that the upcoming U.N. climate conference in Glasgow could suffer blackouts owing to too little clean energy.

Yes, this is a big one.

Natural gas and coal prices in Europe and Asia just hit their highest levels on record, oil prices in America hit a seven-year high and U.S. gasoline prices are up $1 a gallon from last year. If this winter is as bad as some experts predict — with some in the poor and middle classes unable to heat their homes — I fear we’ll see a populist backlash to the whole climate/green movement. You can already smell that coming in Britain.

I am a fan of the financial newsletter Blain’s Morning Porridge, written by a smart, irreverent market strategist in London, Bill Blain. Last Thursday he bluntly summed up the energy situation for the U.K. and Europe this way:

'This winter — people are going to die of cold. As the price of energy goes higher, the costs will fall disproportionately upon the poorest in society. Income inequalities will be dramatically exposed as the most vulnerable in society face a stark choice: heat or eat. … This winter the U.K. is likely to be on its knees, begging energy from wherever it’s available. Europe will be in as much trouble. The Middle East will be charging whatever they can get away with, and the capacity to deliver is limited. … And Vladimir Putin can’t wait. … He will invite each European leader to plead their case individually, menacingly asking each leader why he should open the gas taps to their nation specifically. … Make no mistake, this winter is going to be shocking. Be aware.'

How did we get here? In truth, it’s a good-news-bad-news story.

The good news is that every major economy has signed onto reducing its carbon footprint by phasing out dirtier fuels like coal to heat homes and to power industries. The bad news is that most nations are doing it in totally uncoordinated ways, from the top down, and before the market has produced sufficient clean renewables like wind, solar and hydro.

If you don’t have enough renewables but you want to go green, the next best thing is natural gas, which emits about half as much C0₂ as coal (as long as methane is not released in the extraction process). But there is not enough of this transition fuel to go around. So, everyone is scrambling to get more, which is why the European Union’s biggest pipeline gas supplier — Russia — is now in the catbird seat and prices are skyrocketing along with blackouts.

As Bloomberg Businessweek reported on Sept. 27, when it comes to natural gas, “inventories at European storage facilities are at historically low levels for this time of year. Pipeline flows from Russia and Norway have been limited. That’s worrying as calmer weather has reduced output from wind turbines, while Europe’s aging nuclear plants are being phased out or are more prone to outages — making gas even more necessary. No wonder European gas prices surged by almost 500 percent in the past year and are trading near record.”

But it’s not just Europe. This energy crunch could pinch ceramics, steel, aluminum, glass and cement suppliers in China, the story added, while it presents households in Brazil with eye-popping power bills because low river water flows have slashed hydropower output. And pandemic-related supply chain problems for coal are making the problem worse.

But how did the bad-news side of this story emerge so fast?

Blame Covid-19. First, the pandemic erupted and signaled to every major economy that we were headed for a deep recession. This sent prices of all kinds of commodities, including oil and gas, into downward spirals.

This, in turn, led banks to choke off investment in new natural gas capacity and crude wells after seven years of already declining investments in these hydrocarbons because of lousy returns.

But the economy snapped back — thanks to government stimulus programs — far faster than anticipated. And so, too, did demand for energy. But this industry does not ramp up quickly. So, there was not enough natural gas, let alone renewables, to fill in the gap.

America has enough oil and natural gas to meet its own needs for now, but its ability to export liquefied natural gas to help others is limited, especially when every utility in Europe and Asia is trying to meet newly minted environmental, social and governance standards for clean energy and therefore is desperate to import natural gas.

When every country jumps in at once, the price goes crazy. Or the lights go out.

Don’t get me wrong. I am as green as ever. But I’m not a nice green. I am a mean green. Achieving the scale of clean energy that we need requires not only wind, solar and hydro, but also a carbon tax in every major industrial economy, nuclear power and natural gas as a bridge. If you oppose all those, you’re not serious about what scientists tell us needs to be done right now — put in place enough noncarbon-emitting fuels to manage the destructive aspects of climate change that have become unavoidable, so we can avoid those that would be unmanageable.

Sadly, in an overreaction to the Fukushima nuclear accident, Germany decided in 2011 to phase out all of its nuclear power by 2022 — nuclear power stations that in the year 2000 generated 29.5 percent of Germany’s power generation mix. All of that has to be replaced by wind, solar, hydro and natural gas, and there is just not enough now.

As Bill Gates points out in his smart book “How to Avoid a Climate Disaster,” the only way to reach our climate targets is to shift production of all the big heavy industries, like steel, cement and automobiles, as well as how we heat our homes and power our cars, to electricity generated from clean energy. Safe and affordable nuclear power has to be part of our mix because, Gates argues, “it is the only carbon-free, scalable energy source that’s available 24 hours a day.”

Meanwhile, though, this energy crisis is coinciding with the stalemate in the talks between the U.S. and Iran about restoring the nuclear deal that Donald Trump recklessly tore up in 2018 — without any alternative plan to curb Iran’s nuclear program. To pressure us, Iran has resumed enriching uranium to levels such that U.S. officials now believe it could be only a few months, or less, away from having enough fissile material for a single bomb.

It would take much longer for Iran to build a warhead and delivery system, but some U.S. officials believe that Iran just wants to make itself a threshold nuclear power, like Japan, where it would stay just a few turns of the screw away from actually having a bomb. This would give it all the deterrence it needs. Both Israel and America have vowed not to let Iran get that close to the doorstep of a nuclear weapon. Alas, we are entering crunchtime.

But what if the U.S. or Israel feels it has to strike Iran’s nuclear program in the middle of what could be the worst energy winter since 1973? And what if Iran responds by firing at U.S. or Western oil tankers in the Persian Gulf, where Qatar, the world’s largest exporter of liquefied natural gas, resides? Oil and gas prices will go into the stratosphere. So, Iran suddenly has new leverage: Hit us and you bankrupt the world.

If I can figure that out, the Iranians can.

Little darling — it’s gonna be a long, cold, crazy winter."

NYT is ok, I have specific personal issues from the Anna/Hobart story and know they ignored facts provided and mis-stated their evidence in ways to drive an agenda and we have to acknowledge the guy (Jason something) who wrote fake stories or stole them and got awards, etc as to what the business is and isn’t today. Seems like the periodicals that have always presented a view do better on objectivity over the ones that have been forced to write with a view due to the change of the business

The economist and New Yorker would be solid examples of the above IMO.

Seacoaster, you should really read the Fifth Risk by Michael Lewis if you can find the time. Think you’d enjoy it.

https://www.npr.org/2018/10/02/65256390 ... interested

Thanks FFG, I read the Fifth Risk and told folks here to read it too. When I finished the book, I had to stay in bed for a week.

[Farfromgeneva]

If the Dems are smart they deal with the problem by taking it away permanently - either make the ceiling high enough to render it moot, or make the ceiling scale with the authorized budget needs...

Just because the republicans have become dumb doesn’t make the Dems smart.

Warren is a one truck pony still talking about the crisis 12yrs ago-and fighting

Bernie-old Jewish hippy still fighting wars from Vietnam

Schumer/Pelosi-fighting down days in the market for their pocketbook

Mayor Pete is where it’s at but they stuck him in transportation

I agree on Mayor Pete, but I wouldn't write off Warren as an ongoing lion of the Senate...she's much too smart.

From the most recent roster, I was rooting for a Klobuchar/Pete combo.
The Dems are fundamentally right that they need to deliver tangible benefits of their leadership to the rural, factory town, working class voters that migrated to Trumpism.

But I think the Dems writ large underestimate how toxic those folks find the big city, coastal elite values the rest of the party espouses. The social media networks and bi-modal media world have amplified enormously this sense of estrangement, fostered by some truly evil con artists and anti-democracy forces, but this estrangement is a reality right now.

So, that makes the delivery (and sale) of tangible difference in the lives of these folks all the more imperative...fast. Else, we really could see the anti-democracy forces take more absolute control and create even more strife. We think it's ugly now?

This sounds generally “right” (to me). And I’ve lived in DC (proper not the burbs except a few months sit between Centreville and McLean/Tyson’s), Manhattan (the real NYC f the other boroughs if you have to cross water it ain’t the city!) and now ITP (opposed to OTP) Atlanta for the last approx 20yrs now. Also having spent the better part of the prior decade in small bank towns like Salisbury MD, Timberville/Abingdon/Floyd/Martinsville/Salem etc VA, Greenville/Newton/Hickort/Mt Olive/Troy NC, Kosciusko/Jackson/Tupelo MS, Dothan AL, Mansfield PA, and on and on I’ve seen how these smaller towns and cities are in close detail (community banks mirror their local economies) and the disconnect is more extreme than I think more siloed people even realize already. Twilight zone level differences.

But again, they could do a pretty substantial $1.5Tn on top of $1.1Tn which is record breaking, in one shot, or knock out the $1.1Tn and save some room to govern for the rest of this stretch or so this all or none, “full or kill” approach that is antithetical to leadership and governing.

I think they'll land on a # lower than the $3.5 for the reconciliation, primarily by changing the number of years, some eligibility requirements etc, but the key for the Dems is for the benefits of these packages to be discernible in the lives of these folks, soon, well in advance of 2022 election much less 2024. so, dawdling is problematic.

Stretching the cost and amortization (really this debt is all I/O no deleveraging ever, we’re expected to continue to grow into it with declining demographics).

That’s the kind of idiocy (not you that type of action) that’s going to lead to a blow up in auto finance. Avg loan term stretched out to make it affordable with used pickup trucks going off north of $50k…(was trying to pull something quick from FDIc, Kroll Bond etc on auto loan terms but it’s mostly qualitative I saw quickly but it’s a g term of 72-84mo on new originations I see now on data tapes. However this pull on AI used large in consumer finance is pretty cool for anyone inclined - https://www.fdic.gov/resources/regulati ... -c-031.pdf)

[Farfromgeneva]

Wasn't sure where to put this (or put it at all given the disinclination to read from "lefty" sources). But this is an interesting and alarming piece, IMO:

https://www.nytimes.com/2021/10/05/opin ... clear.html

"Every so often the tectonic geopolitical plates that hold up the world economy suddenly shift in ways that can rattle and destabilize everything on the surface. That’s happening right now in the energy sphere.

Several forces are coming together that could make Vladimir Putin the king of Europe, enable Iran to thumb its nose at America and build an atomic bomb, and disrupt European power markets enough that the upcoming U.N. climate conference in Glasgow could suffer blackouts owing to too little clean energy.

Yes, this is a big one.

Natural gas and coal prices in Europe and Asia just hit their highest levels on record, oil prices in America hit a seven-year high and U.S. gasoline prices are up $1 a gallon from last year. If this winter is as bad as some experts predict — with some in the poor and middle classes unable to heat their homes — I fear we’ll see a populist backlash to the whole climate/green movement. You can already smell that coming in Britain.

I am a fan of the financial newsletter Blain’s Morning Porridge, written by a smart, irreverent market strategist in London, Bill Blain. Last Thursday he bluntly summed up the energy situation for the U.K. and Europe this way:

'This winter — people are going to die of cold. As the price of energy goes higher, the costs will fall disproportionately upon the poorest in society. Income inequalities will be dramatically exposed as the most vulnerable in society face a stark choice: heat or eat. … This winter the U.K. is likely to be on its knees, begging energy from wherever it’s available. Europe will be in as much trouble. The Middle East will be charging whatever they can get away with, and the capacity to deliver is limited. … And Vladimir Putin can’t wait. … He will invite each European leader to plead their case individually, menacingly asking each leader why he should open the gas taps to their nation specifically. … Make no mistake, this winter is going to be shocking. Be aware.'

How did we get here? In truth, it’s a good-news-bad-news story.

The good news is that every major economy has signed onto reducing its carbon footprint by phasing out dirtier fuels like coal to heat homes and to power industries. The bad news is that most nations are doing it in totally uncoordinated ways, from the top down, and before the market has produced sufficient clean renewables like wind, solar and hydro.

If you don’t have enough renewables but you want to go green, the next best thing is natural gas, which emits about half as much C0₂ as coal (as long as methane is not released in the extraction process). But there is not enough of this transition fuel to go around. So, everyone is scrambling to get more, which is why the European Union’s biggest pipeline gas supplier — Russia — is now in the catbird seat and prices are skyrocketing along with blackouts.

As Bloomberg Businessweek reported on Sept. 27, when it comes to natural gas, “inventories at European storage facilities are at historically low levels for this time of year. Pipeline flows from Russia and Norway have been limited. That’s worrying as calmer weather has reduced output from wind turbines, while Europe’s aging nuclear plants are being phased out or are more prone to outages — making gas even more necessary. No wonder European gas prices surged by almost 500 percent in the past year and are trading near record.”

But it’s not just Europe. This energy crunch could pinch ceramics, steel, aluminum, glass and cement suppliers in China, the story added, while it presents households in Brazil with eye-popping power bills because low river water flows have slashed hydropower output. And pandemic-related supply chain problems for coal are making the problem worse.

But how did the bad-news side of this story emerge so fast?

Blame Covid-19. First, the pandemic erupted and signaled to every major economy that we were headed for a deep recession. This sent prices of all kinds of commodities, including oil and gas, into downward spirals.

This, in turn, led banks to choke off investment in new natural gas capacity and crude wells after seven years of already declining investments in these hydrocarbons because of lousy returns.

But the economy snapped back — thanks to government stimulus programs — far faster than anticipated. And so, too, did demand for energy. But this industry does not ramp up quickly. So, there was not enough natural gas, let alone renewables, to fill in the gap.

America has enough oil and natural gas to meet its own needs for now, but its ability to export liquefied natural gas to help others is limited, especially when every utility in Europe and Asia is trying to meet newly minted environmental, social and governance standards for clean energy and therefore is desperate to import natural gas.

When every country jumps in at once, the price goes crazy. Or the lights go out.

Don’t get me wrong. I am as green as ever. But I’m not a nice green. I am a mean green. Achieving the scale of clean energy that we need requires not only wind, solar and hydro, but also a carbon tax in every major industrial economy, nuclear power and natural gas as a bridge. If you oppose all those, you’re not serious about what scientists tell us needs to be done right now — put in place enough noncarbon-emitting fuels to manage the destructive aspects of climate change that have become unavoidable, so we can avoid those that would be unmanageable.

Sadly, in an overreaction to the Fukushima nuclear accident, Germany decided in 2011 to phase out all of its nuclear power by 2022 — nuclear power stations that in the year 2000 generated 29.5 percent of Germany’s power generation mix. All of that has to be replaced by wind, solar, hydro and natural gas, and there is just not enough now.

As Bill Gates points out in his smart book “How to Avoid a Climate Disaster,” the only way to reach our climate targets is to shift production of all the big heavy industries, like steel, cement and automobiles, as well as how we heat our homes and power our cars, to electricity generated from clean energy. Safe and affordable nuclear power has to be part of our mix because, Gates argues, “it is the only carbon-free, scalable energy source that’s available 24 hours a day.”

Meanwhile, though, this energy crisis is coinciding with the stalemate in the talks between the U.S. and Iran about restoring the nuclear deal that Donald Trump recklessly tore up in 2018 — without any alternative plan to curb Iran’s nuclear program. To pressure us, Iran has resumed enriching uranium to levels such that U.S. officials now believe it could be only a few months, or less, away from having enough fissile material for a single bomb.

It would take much longer for Iran to build a warhead and delivery system, but some U.S. officials believe that Iran just wants to make itself a threshold nuclear power, like Japan, where it would stay just a few turns of the screw away from actually having a bomb. This would give it all the deterrence it needs. Both Israel and America have vowed not to let Iran get that close to the doorstep of a nuclear weapon. Alas, we are entering crunchtime.

But what if the U.S. or Israel feels it has to strike Iran’s nuclear program in the middle of what could be the worst energy winter since 1973? And what if Iran responds by firing at U.S. or Western oil tankers in the Persian Gulf, where Qatar, the world’s largest exporter of liquefied natural gas, resides? Oil and gas prices will go into the stratosphere. So, Iran suddenly has new leverage: Hit us and you bankrupt the world.

If I can figure that out, the Iranians can.

Little darling — it’s gonna be a long, cold, crazy winter."

NYT is ok, I have specific personal issues from the Anna/Hobart story and know they ignored facts provided and mis-stated their evidence in ways to drive an agenda and we have to acknowledge the guy (Jason something) who wrote fake stories or stole them and got awards, etc as to what the business is and isn’t today. Seems like the periodicals that have always presented a view do better on objectivity over the ones that have been forced to write with a view due to the change of the business

The economist and New Yorker would be solid examples of the above IMO.

Seacoaster, you should really read the Fifth Risk by Michael Lewis if you can find the time. Think you’d enjoy it.

https://www.npr.org/2018/10/02/65256390 ... interested

Thanks FFG, I read the Fifth Risk and told folks here to read it too. When I finished the book, I had to stay in bed for a week.

Don’t know when it cane out but know I read it late summer of 19. How about the gutting of DOE????

Only got maybe 50 pages into his book on Kahneman but had plenty of exposure to behavioral finance in grad school so got bored about his background and seemed tedious for a Lewis written book.

[youthathletics]

Just ordered The Fifth Risk....thanks for the recommendation. I need a reason to lay in bed for a week.

[Farfromgeneva]

Just ordered The Fifth Risk....thanks for the recommendation. I need a reason to lay in bed for a week.

Isn’t your wife a hottie? That should be reason enough!

[youthathletics]

Just ordered The Fifth Risk....thanks for the recommendation. I need a reason to lay in bed for a week.

Isn’t your wife a hottie? That should be reason enough!

Too much work

[Farfromgeneva]

Just ordered The Fifth Risk....thanks for the recommendation. I need a reason to lay in bed for a week.

Isn’t your wife a hottie? That should be reason enough!

Too much work

Let me teach you about my go to move known as “the Two Pump Jump” TM - FFG

[Farfromgeneva]

Still an important topic if seemingly essoteric to boots on the ground life non financial professionals. It will impact loan and credit pricing big picture, on the margin but could be meaningful in the aggregate.

LIBOR Transition: FAQs
October 5, 2021

By Meredith Coffey

Print This Page

When is LIBOR ending?
The UK’s Financial Conduct Authority (“FCA”) – the regulator of the ICE Benchmark Administration, the administrator of LIBOR – has said that all sterling, Swiss franc, euro and Japanese yen LIBOR settings will cease or no longer be representative after year-end 2021. The FCA also said that the settings for one-week and two-month USD LIBOR will also cease or will be non-representative after year-end 2021. The remaining USD LIBOR tenors will cease or be non-representative after June 30, 2023. Importantly, while USD LIBOR will continue to exist after the end of 2021, this is only for pre-existing “legacy” contracts. The U.S. banking regulators have said that banks should not originate new LIBOR contracts after the end of 2021.

What have the U.S. banking regulators said about LIBOR cessation?
In an announcement of a “Supervisory and Regulatory” letter[1]from November 30, 2020, the U.S. banking regulators stated that they “believe entering into new contracts that use USD LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks and will examine bank practices accordingly. Therefore, the agencies encourage banks to cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021, in order to facilitate an orderly—and safe and sound—LIBOR transition.” In addition, the U.S. banking supervisors have delivered informal messages reiterating the importance of starting non-LIBOR originations ASAP. They have generally indicated that they prefer SOFR for most contracts, but acknowledged that credit-sensitive rates (CSRs) may have a role to play in traditional lending products. They have indicated that they are interested in an orderly transition and minimizing systemic risk. They do recognize that there are instances where banks have a pre-existing contractual obligation to fund in LIBOR after December 31, 2021 – such as draws on pre-existing revolvers – but they also want to see LIBOR exposures decline significantly after year end.

What are the possible replacement rates?
For most products in most jurisdictions, the major replacement rates typically are Risk Free Rates (“RFRs”). The U.S. RFR is the Secured Overnight Financing Rate (“SOFR”), which is based on overnight Treasury Repo Rates. SOFR is large (nearly $1 trillion of underlying Treasury repo transactions occur daily) and hard to manipulate. Because it is an overnight rate, the market has developed mechanisms to create a rate with tenor by calculating an average SOFR rate (in advance or in arrears). The CME also is publishing forward-looking Term SOFR; loans were included in ARRC’s scope of use of Term SOFR in Summer 2021. Other jurisdictions are using “Daily Compounded RFRs” and thus the LSTA and the ARRC also have worked to operationalize a “Daily Compounded SOFR”, though this is not expected to be used broadly in the U.S.

In addition to risk-free RFRs, the U.S. has been developing Credit Sensitive Rates (“CSRs”), which include a credit risk component and generally behave more like LIBOR than do the RFRs. CSRs include Bloomberg’s BSBY, AFX’s Ameribor, IBA’s Bank Yield Index, Markit’s CRITR and SOFR Academy’s AXI. In general, these are term rates (CRITR and AXI also are published as spreads to SOFR) that are built from bank funding markets, including rates on bank deposits, CP, CD and traded bank bonds.

What are the economic implications of SOFRs vs Credit Sensitive Rate (CSRs)?
There are two major differences economically between SOFR and the CSRs generally. First, SOFR is a risk-free rate and the CSRs are credit sensitive rates, so CSRs should generally be higher than SOFR. As an example, the five-year historical median difference between 3M LIBOR and 3M SOFR is +26 bps.

While CSRs are typically higher than SOFR, the rates also should behave differently in a financial disruption. When markets are disrupted, SOFR – a secured, risk-free rate related to monetary policy – will tend to drop. In contrast, a CSR – which includes a component for bank credit risk – may well widen. While rare, this behavior was seen in the 2008 financial crisis, as well as in the March 2020 Covid-19 crisis. Because CSRs provide some protection for lenders in a market disruption, particularly for undrawn loans with an option to draw at any time, some banks would prefer to use them for bank-held loans.

Importantly, both CSRs and Term SOFR are known in advance of the interest period and are documented and operationalized nearly exactly the same way as LIBOR. For this reason, parties who are not interested in credit sensitivity and instead are concerned solely with the systems/operations changes of shifting from LIBOR should be able to easily work within a Term SOFR world.

What is a “multi-rate” environment?
Today, U.S. leveraged loans almost universally use LIBOR as a reference rate. This means that all loans are operationalized and documented similarly and, from a return perspective, parties focus primarily on a loan’s spread, not its reference rate.[2] In the coming months and years, leveraged loans are likely to reference a number of rates – many of which will have different economics and operational constraints.

Recall that no new LIBOR loans can be originated after year-end 2021, but legacy LIBOR loans have until June 30, 2023 to switch to a replacement rate. This means that, at a minimum, there will be loans outstanding both on LIBOR and a replacement rate. (And at least initially, there’s a good chance that multiple replacement rates will coexist.) Because the economics – and sometimes the operations – of LIBOR and its replacements differ, lenders, investors and traders must be cognizant of both the spread and the reference rate of every loan.

How might loans transition from LIBOR to a replacement rate?
There are several ways that a loan might transition from LIBOR to a replacement rate. The surest method is simply to refinance the loan directly into a replacement rate (like SOFR or a CSR) prior to June 30, 2023. This approach removes all uncertainty and places all control in the hands of the counterparties.

However, some companies may wait until USD LIBOR ends on June 30, 2023 and “fall back” through the provisions set forth in their loan documents. There are two types of LIBOR fallback language: amendment approach and hardwired approach. If a company has an amendment fallback, it and its agent typically will agree to a new reference rate (and spread adjustment, where appropriate, to compensate for the economic difference between LIBOR and the replacement rate); “Required Lenders” typically have a five-day negative consent period. If they do not object, the replacement rate amendment passes and LIBOR is replaced. If “Required Lenders” do object, the loan switches to Prime and the amendment process begins anew. While the amendment approach offers flexibility, it lacks certainty and is more onerous to execute than hardwired fallback language.

Alternatively, a company might have ARRC (or substantially similar) hardwired fallback language. In that event, after LIBOR ceases or is determined to no longer be representative, the loan would fall back to a replacement rate determined using a “waterfall” of potential replacement rates, along with the ARRC fallback spread adjustment. If Term SOFR exists and is formally recommended by the ARRC – which will almost certainly be the case – then the loan would fall back from LIBOR to Term SOFR+ARRC spread adjustment. If Term SOFR does not exist or is not recommended by the ARRC, then the loan would fall back to Daily Simple SOFR+ARRC spread adjustment. If that too does not exist (which would be highly unlikely), then the replacement rate and adjustment would be determined via the amendment process described above. The ARRC spread adjustments are the five-year historical median difference between each USD LIBOR tenor and the corresponding compounded average of SOFR; they were set on March 5, 2021 with the one-month adjustment set at 11 bps and the three-month adjustment set at 26 bps.[3]

Finally, many sets of fallback language – amendment and hardwired – include an early “opt-in” feature. Generally, the early opt-in becomes available when syndicated loans are being amended or executed to reference an alternate benchmark. This feature allows for interested parties to transition away from LIBOR avoiding any potential disruption of the simultaneous transition of multitudes of loans.

Can replacement rates be hedged?
Replacement rate loans are hedgeable, albeit with varying degrees of liquidity and “perfection”. The most liquid hedging scenario is one where the loan uses Daily Compounded SOFR. This rate likely will be the most liquid for hedging and may allow the borrower to approach a perfect hedge. However, the Daily SOFR rates are not known in advance of the interest period, something borrowers strongly desire. End users also may hedge CME Term SOFR, though those hedges are likely to be less liquid than Daily SOFR hedges. Likewise, CSRs should be hedgeable, though their hedges might not be as liquid as SOFR hedges.

What should I be doing now?
In many ways, we are in the last days of the LIBOR transition. Banking supervisors have made clear that LIBOR originations must stop by the end of the year. Given this looming deadline, focus should be squarely on non-LIBOR originations and the remediation of any credit agreements impacted by the cessation of the other LIBOR currencies, i.e., multicurrency facilities. Moreover, market participants need to be prepared for living in a multi-rate environment – whether that be just LIBOR and SOFR or LIBOR, SOFR and CSRs. Once originations are up and running by the end of the year, market focus should swiftly shift to the remediation of legacy loans and CLOs. We have been given the gift of time on legacy transactions – but only 18 months! – and market participants should take care not to squander it.

[1] Available at https://www.federalreserve.gov/supervis ... SR2027.htm.

[2] Admittedly, there can be arbitrage between one-month and three-month LIBOR when the LIBOR curve is steep. Moreover, the widespread use of LIBOR floors means that the distance between LIBOR and a loan’s floor can impact trading and investing dynamics.

[3] Admittedly, those hardwired spread adjustments appear to be “off market” with interest rates hovering near zero in late 2021. As a result, borrowers may choose to refinance those loans directly into SOFR with market level spread adjustments prior to June 30, 2023.

[Farfromgeneva]

An example of cost/benefit transfer from flo-rida to everyone else

National Flood Insurance Is Changing. Some Homeowners Face Huge Premium Increases
New pricing system that begins Friday considers distance from body of water, cost of rebuilding and other factors

By Arian Campo-Flores | Photographs by Octavio Jones for The Wall Street Journal
Updated Oct. 1, 2021 6:53 pm ET

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Chris Dailey and his wife are building a new home in coastal St. Petersburg, Fla., that will sit 7 feet above the flood level expected during a major storm. So he was stunned to learn that under the federal flood insurance program’s revamped pricing, his annual premium is slated to soar to $4,986 from $441.

“It’s absolute insanity,” said Mr. Dailey, 52 years old. “This rate makes no sense.” He said he plans to go through with the project, which is about a block and a half from a canal that leads to Tampa Bay, but worries about the ability to sell it in the future.


Chris Dailey and his wife are building a new home in coastal St. Petersburg, Fla. He worries about the ability to sell it in the future.
The National Flood Insurance Program—the main provider of flood coverage in the U.S., with more than five million policies—is rolling out an overhauled pricing method starting Friday in an effort to reflect more accurately the flood risk that individual properties face. The issue has gained importance with climate change, which scientists say is fueling sea-level rise and contributing to more-severe weather.

Under the new system, dubbed “Risk Rating 2.0,” some policyholders in especially vulnerable areas will face big premium increases while others in less-exposed spots will see smaller increases or even decreases. Homes in high-risk flood zones with mortgages from government-backed lenders must have flood insurance, and private carriers also provide coverage in some areas.


The changes could present some homeowners in floodprone areas across the U.S.—especially along the Gulf Coast and Eastern Seaboard—with difficult decisions about whether they can afford to live there, insurance and real-estate specialists say. Some buyers may find mortgages unattainable, making waterfront living increasingly the preserve of wealthy people. Developers may rethink where they build, and coastal real-estate markets could take a hit.

THE WALL STREET JOURNAL GOOGLE YOUR NEWS UPDATE
New Flood Insurance Pricing Could Bring Higher Premiums

00:00 / 07:04

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“There is no greater risk-communication tool than a pricing signal,” said Roy Wright, president of the Insurance Institute for Business and Home Safety, an industry research group, and former head of the federal flood insurance program. “For middle-income neighborhoods, this will become a real consideration,” he said.

Under the program’s decadeslong pricing system, the main variables considered were a property’s location on a flood map and its elevation. The new system considers a larger set of factors, including a property’s distance from a body of water, its first-floor height and the cost to rebuild it.

The previous method led to imbalances in pricing, with policyholders in lower-value homes often subsidizing those in higher-value homes, according to the Federal Emergency Management Agency, which runs the program.

SHARE YOUR THOUGHTS

If you live in a coastal area, how will changes to the federal flood insurance program affect you? Join the conversation below.

“Risk Rating 2.0 fixes this injustice,” said David Maurstad, senior executive of the program.

Groups including the Association of State Floodplain Managers and Taxpayers for Common Sense support the changes, saying the updated pricing will encourage property owners to pursue mitigation measures, such as elevating homes or adding flood vents, to reduce flood risks.

Starting Friday, new policies will adjust to the full new rate. For existing policies, the changes kick in on April 1, 2022, with annual increases capped at 18% until they reach the full rate.

Based on a FEMA analysis, 23% of policyholders will see decreases in their premiums in the first year, 66% will have increases of up to $10 a month, 7% will see increases of $10 to $20, and 4% will have increases of more than $20.


A meeting on the federal flood insurance program’s pricing system on Treasure Island, Fla., Thursday.
Jake Holehouse, president of HH Insurance in St. Petersburg, said that analysis led him to believe homeowners could absorb the impact. But after getting access to the new system a month ago and deriving quotes, he found many examples of steep rate rises. Exactly why is unclear because the new pricing algorithm isn’t public, but Mr. Holehouse thinks a key reason is the inclusion of the cost-of-replacement variable.


His client Tyler Payne, the mayor of nearby Treasure Island who lives on a canal, currently has a policy with the federal flood insurance program with a $2,710 annual premium. Come renewal time, that is poised to start climbing to a full rate of $5,415, Mr. Holehouse said.

“When you buy a home, you factor in all these costs,” said Mr. Payne, 31. “For one of them to potentially double over the next several years is a game-changer.”


Treasure Island Mayor Tyler Payne, who lives on a canal, expects his annual flood insurance premium to start climbing to a full rate of over $5,000 upon renewal.
Carl Schneider, an insurance agent in Mobile, Ala., said he doesn’t believe the new pricing method will prove overly disruptive. Among the clients for whom he has run the numbers, some are seeing jumps, but many are set for reductions.

“It’s a mixed bag,” he said. “You are going to see the majority of consumers very happy with the way the program more accurately rates their home.”

Ida Flood Damage Leaves Homeowners Reeling; Insurance Won’t Cover Many
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Ida Flood Damage Leaves Homeowners Reeling; Insurance Won’t Cover Many
Ida Flood Damage Leaves Homeowners Reeling; Insurance Won’t Cover Many
From New York City to Louisiana, residents in areas pummelled by Hurricane Ida and its remnants surveyed damage to their properties. Most home policies don’t include flood coverage and President Biden asked insurance companies to not deny assistance to those who were forced to evacuate. Photo: Adrees Latif/Reuters
Some members of Congress, mainly from coastal states, are urging a delay in implementing the new rating system. Senators including Chuck Schumer (D., N.Y.) and John Kennedy (R., La.) wrote a letter last week to the FEMA administrator expressing concern about sharp premium increases that could become unaffordable for property owners.


The new system could affect the decisions of home buyers and builders. WinWay Homes, a custom-home builder in South Pasadena, near St. Petersburg, canceled a property purchase a few weeks ago because it is in a flood zone and could be harder to sell as a result of the flood-insurance changes, said owner Matt Carr. He said property prices outside flood zones are increasing rapidly while those inside flood zones that aren’t on the water remain flat.

“Even if I pay more money outside a flood zone, I’m more comfortable that I can sell it to someone,” Mr. Carr said.


Homes in St. Petersburg, Fla., this week. Under the federal flood insurance program’s new system, policyholders in some coastal areas could face big premium increases.
Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared in the October 2, 2021, print edition as 'Steep Insurance Rates Kick in for Flood Zones.'

[Farfromgeneva]

Just a reminder this is where you can find the first Friday of each month economic data (8:30est) for those interested in cutting through the CNBC/Bloomberg*/WSJ noise.

https://www.bls.gov/mobile/

*If you have ATT and related this is not an option at the moment

[Farfromgeneva]

Aug. 31, 2021 | Press Release | 3-minute read
Americans are spending more on subscriptions and are less aware of their spending, says West Monroe poll



West Monroe, a national business and technology consulting firm, today released a poll, “The State of Subscription Services Spending.” The results show that consumers are continuing to spend more on subscription services in an increasingly digital economy. While consumers are less aware of their total monthly expenses on subscriptions compared to three years ago, certain services—including those that gained prominence during the pandemic—are very top-of-mind for buyers.

The poll, based on a survey of 2,500 U.S. consumers in June 2021, is a follow-up to the firm’s 2018 published poll, “America’s relationship with subscription services.” Respondents were asked to tally up their monthly spend on subscription services across 21 categories, how satisfied they are with the services in each category, and how “aware” they are of their subscription expenses.

The results: On average, consumers are spending $273 a month on subscription services, up from $237 in 2018. Despite the increase, consumers estimated they were spending less than in 2018 and 100% of respondents were unaware of their actual spend.

“It is evident that U.S. consumers are choosing to spend more on subscription services than in years past, but they aren’t truly grasping how much they are actually spending. This disconnect has only increased from our survey in 2018,” said Dhaval Moogimane, a partner in West Monroe’s high-tech & software practice who works with companies on their subscription services strategy.
Subscription services and brands have become even more sticky by prioritizing the customer experience that they appear to blend into consumer’s daily lives and may not even register as subscription expenses at all.
As companies seek to become more digital, many are developing recurring revenue models based on new apps and changing consumer preferences. Subscriptions for products and services that transcend digital and physical experiences are increasingly popular: Peloton’s subscriptions for its fitness equipment and programs grew from 543,000 in Q1 2020 to 1.2 million in Q1 2021, for example. The key for companies is keeping their customers “hooked” and “happy” with subscription services to maintain and grow revenue.

Key findings of the poll include:

Consumers are spending an average of $273 on subscription services per month, up from $237 in 2018. This 15% increase is the equivalent of an additional $430 per year. Despite the increase, consumers estimated they were spending less than in 2018 and 100% of respondents were unaware of their actual spend.
Subscription services that have gained prominence include products and services related to wellness, pets, and dating, demonstrating how the pandemic has changed how people spend their time and money.
When asked to estimate their monthly spend on subscriptions, consumers were off by an even wider margin than they were in 2018: 66% of consumers were off by more than $200 with their guess, compared to 24% of consumers in 2018

Read the full poll results
The State of Subscription Services Spending

READ MORE
“The pandemic has changed how consumers are choosing to spend their time and money,” said Neil Jain, a partner in West Monroe’s high-tech & software practice.
We are seeing this especially with subscriptions and services that are adapting to the change in consumer preferences. The pandemic has highlighted that services like paid wellness and dating apps are gaining increased favorability compared to 2018.
West Monroe is a market-leading advisor for high-tech and software companies. As market demand and attractive economics continue to drive strong growth in SaaS subscription services, West Monroe continues to guide many leading companies through successful SaaS transformations. West Monroe previously published a poll on subscriptions in 2018, “America’s relationship with subscription services.”

[youthathletics]

I wonder how much of that is that free trial regret. My wife is famous for late night free 14 or 30 day offers, then forget to cancel them. Can make a man come unglued trying to get them cancelled and then having to follow up to make sure they indeed are cancelled.

[Farfromgeneva]

I wonder how much of that is that free trial regret. My wife is famous for late night free 14 or 30 day offers, then forget to cancel them. Can make a man come unglued trying to get them cancelled and then having to follow up to make sure they indeed are cancelled.

Yep. I’ve drilled it into my wife’s head for years though when being at a lenders presentation from the company of weight watchers and watched them brag about how people never cancel their subscriptions and they are sticky - around 05-06. Was concern back then about tech disintermediation their core business.

Rent the runway is a newer one that’s trying to ipo. Revenues decreased-such a stupid idea for a business

[Farfromgeneva]

Looks like an interesting book-interview related to Michael Dells new book


Michael Dell is trying to be nice
By Jason Karaian and Sarah Kessler
Books about deal making are the thrillers of the business world. There is conflict. There are high stakes. There is bluffing, bragging and bullying. There are “Barbarians at the Gate.”

Michael S. Dell’s new book, “Play Nice but Win: A CEO’s Journey From Founder to Leader,” isn’t necessarily a book about deal making. But in many of its most vivid passages, Mr. Dell recounts buying, selling, listing and delisting companies over the course of his career.

He has a lot of material to work with. Most notably, the 2013 buyout of the Texas-based computer giant that bears his name, in which he and the investment firm Silver Lake took Dell private in a $25 billion deal, ending its 25-year run as a public company. Mr. Dell’s role as chairman of the same board that would assess the fairness of his bid added an extra layer of complexity to the deal.

Carl Icahn made it even more complicated.

The activist investor tried to disrupt the deal, pushing for a higher price using a series of maneuvers that the book chronicles in detail from Mr. Dell’s less-than-sympathetic perspective. This bitter, long-running saga often strains the author’s titular advice to “play nice” in business dealings, with Mr. Icahn serving as a foil for Mr. Dell’s account of how his own management style took shape.

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Once he prevailed in taking Dell private, more deals followed, including a complex $67 billion takeover of EMC in 2016. Two years later, an even more complicated transaction brought Dell back to the public markets — via another tussle with Mr. Icahn. (We told you it was a book heavy on deal making.)

“Real candor is scary,” Mr. Dell writes, describing how his latest book goes deeper than 1999’s “Direct From Dell” on “the many ups and downs” he felt as he built his company. He spoke with DealBook about what it takes to “win” as a company leader, and about the decisions, dramas and — yes — deals that have defined his career. The interview has been edited and condensed.

Your dealings with Carl Icahn, which form a big part of the book, don’t seem very “nice.” How do you square that with the advice of the book’s title?

There came a point where it was pretty clear I needed to fight back, and that’s what I did. And it turned out to be a lot more of a battle than I ever anticipated. But in the end, the result was a great one. I think it’s important to expose him for what he is. I don’t have any ill will toward the guy other than he attacked me.

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I didn’t roll over and play dead and let him run over us and destroy the company. I open the book with this fairly dramatic moment where I go to his house and I’m having dinner with him. And I confront him and say, “What’s your plan?” And it turns out he has no plan.

So, in the end, you feel like you were able to “play nice” with him?

Let’s not forget the full title of the book. There’s also the “winning” part.

Shareholders were paramount around some of your big transactions, but the end of the book talks a lot more about broader concerns: stakeholders, diversity, climate change. Does this reflect your evolution as a leader?

Continue reading the main story
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Stating the obvious, companies are now asked to participate in a much wider set of issues. I think some of the issues were natural ones for Dell even 30 years ago. I talk a lot about clean materials and recycling. And I mean, we’ve sold like 800 million-plus PCs. That’s a lot of things out there with my name on it. And if they all end up in a ditch somewhere destroying the environment, that’s going to give me nightmares.

Also, if you look at our world today, there’s a massive shortage of talent, particularly the advanced skilled talent in technology. That’s an economic opportunity, but it’s also an equality opportunity.

You were one of the first heads of a major company to speak out about voting rights in Texas. What motivated that?

If you’re not going to stand up for voting in a democracy, that doesn’t feel right. Voting is the most fundamental part of a democratic society.

Would you have done the same if this sort of legislation was happening back in the 1990s?

I think 30 years ago it probably wasn’t as common for companies to be involved in environmental, social and governance-type issues.

Not nearly as many companies have spoken out about the new abortion law in Texas as on voting rights. Is that something that’s been discussed in the boardroom?

We’ve weighed it with our employees and the team members in Texas, and I believe that our team members should have more health care in the future, not less. And so we’re going to take whatever steps we need to make sure we have our team members taken care of. I think there’s a lot that we don’t know about this legislation, and there are various challenges to it, how it’s going to impact our business. But we’re being clear with our employees.

The book recounts a lot of travel, meetings, dinners and the like. Can deals as big and as complicated as the ones you’ve done with Dell now happen over Zoom?

I think a lot of it can happen. When consummating enormous consequential transactions, people are still getting together for the most critical things, but there’s certainly a lot of work that can be done in a connected way. We’ve all had that shared experience over the last 18 months, and ultimately I think that’s a huge positive, not just for balance but also for the environment and productivity.

I always get a great seat on Zoom Airlines, and I can move across three or four continents in one day. And that’s fantastic.

Will Dell employees continue to work remotely when offices fully reopen?

I think hybrid work is here to stay. Work is something you do; it’s not a place. There will be times when it makes sense for people to get together physically. But I think we’ve proven to ourselves that we can get lots of work done from anywhere with the right tools and technology. A lot of it is our technology. That’s also been great for business.

You’re part of a distinguished group of tech founders who dropped out of college to start their companies. Is that something you would advise young entrepreneurs to do?

I don’t think it’s good generic advice. The overwhelming majority of people who drop out of college probably don’t go on to start very large companies. So your mileage may vary. Proceed with caution.

Time for the lightning round. Tell us, briefly, whether these things are overrated, underrated or properly rated …

5G?

Properly to maybe even underrated.

Bitcoin?

I think blockchain is probably underrated. Bitcoin, I’m going to pass on that. I don’t really know.

SPACs?

I think SPACs are here to stay, but I think there’s a winnowing and quality process.

Overrated, then?

I think some are overrated. But the phenomenon is a real, legitimate way for companies to access capital markets.

Do you wish SPACs were around in the late ’80s when you were thinking about listing Dell for the first time?

If a company is trying to access capital, you would like to have more options, not fewer options. We only had one option then.