[jyl]

I think there’s some major positives out there.

Manufacturing. Construction of and investment in new manufacturing facilities is booming, absolutely booming. Companies want to reduce dependence on China supply chain, CHIPS is driving huge growth in US semiconductor fabs and related facilities, IRA is driving huge growth in all types of renewable energy facilities and manufacturing (EV, batteries, solar, wind, power storage, you name it). Judging from the investment dollars, we’re on the cusp of a manufacturing resurgence in the US. It will be mostly high-tech manufacturing, lot of automation, also a lot of jobs. China will try its standard tricks of subsidizing and dumping goods to undercut the US production, but the US will block that with tariffs and import restrictions - the gloves are off. I suspect the challenge will be to staff the surge in manufacturing positions, with labor so tight. Eventually, all that new manufacturing should generate more tax revenue too.

Student loans. A non-issue overall, though there will be some vocal losers. US consumer spending is $57 trillion/year, so $100 billion in resumed student loan payments isn’t a needle-mover.

Downtown office buildings. A lot of buildings will be foreclosed, the rest will lose a lot of value, their investors will lose a lot of money. Banks will mostly muddle through as they hold only a small part (EDIT: looked it up, not that small, about half?) of office property debt, it is a fairly small part (EDIT: typically around 10% for small banks, much less for large banks) of their loan book (in most cases - there will be a few sad banks who bet big), and the loan to value is typically around 50-60% which means their loss will only be a small part of the loan. On the other hand, tenant companies will enjoy lower rents for better space and a small amount of the foreclosed office buildings will be be converted to apartments and condos. Basically, there will be winners as well as losers.

Tax base. Yes, local taxes from downtown office districts will decline and other taxes will rise, suburbs and exburbs will enjoy more revenue. Again, winners and losers.

Savings. Savers are doing better than they have for decades, with short term rates at 5% which is higher than CPI inflation. Is CPI inflation over or under-stated, it depends on the individual. Own your house with no mortgage or a fixed rate mortgage from before 2022, modest tastes, your personal CPI is lower. Rent and go out to eat all the time with lots of travel and a new car every few years, your personal CPI is higher. Most of us on PPOT should be on the lower side. Inflation is probably going to decline at least somewhat over the coming year (because housing is appx 36% of the CPI basket, both rent growth and house price growth have slowed to flattish over the past year, and that should start pulling CPI down - the housing inflation part of CPI actually looks to have peaked and started easing, over the past few months). But the Fed is probably going to hold short rates here for awhile, meaning money market funds and the higher yielding CDs will increasingly beat CPI. As for long bonds, well, I am still not a buyer, but hopefully before long it will be possible to lock in 5% or more in Treasury notes and recall that interest is exempt from state/local tax, so for residents in high tax areas that’s rather interesting.

Federal debt. I don’t think current deficits are sustainable, fortunately deficits are somewhat self-correcting. Eventually Washington raises taxes, closes loopholes, increases enforcement, slows spending, and - as always - there’s winners and losers. I hope the “losers” are the ultra-wealthy and the companies who have 80% of sales in the US but somehow report 70% of profits in Ireland and similar tax havens, but we’ll see. If it’s any consolation, China is way “ahead” of the US in total debt-to-GDP and you’re seeing the debt mountain starting to sag and crack there.