Dow hits new record high

[-p.tiddy-]

http://money.cnn.com/2013/03/05/investing/stocks-markets/index.html?hpt=hp_t1

:applause:

good stuff


now I am sure many of you will come in here to let me know the country is still fcked and we are doomed, go right ahead...

[rufuspaul]

http://money.cnn.com/2013/03/05/investing/stocks-markets/index.html?hpt=hp_t1

:applause:

good stuff


now I am sure many of you will come in here to let me know the country is still fcked and we are doomed, go right ahead...



:party: Back to 2007 levels! We only lost 6 years.

[netsfan549]

WHy is Dow going up so high? jw dont know much about this

[DCL]

now watch them trash the market.

redo another round of QE.

market rallies hard.

repeat.

:lol

[KevinNYC]

WHy is Dow going up so high? jw dont know much about this
http://www.ritholtz.com/blog/wp-content/uploads/2013/03/graphiccccc.jpg

Corporate profits are up. Way up compared to Salaries. Employers can fill jobs without raising salaries. Productivity is up even without raising salaries.

http://www.nytimes.com/2013/03/04/business/economy/corporate-profits-soar-as-worker-income-limps.html?ref=business&_r=1&

With the Dow Jones industrial average flirting with a record high, the split between American workers and the companies that employ them is widening and could worsen in the next few months as federal budget cuts take hold.

That gulf helps explain why stock markets are thriving even as the economy is barely growing and unemployment remains stubbornly high.

With millions still out of work, companies face little pressure to raise salaries, while productivity gains allow them to increase sales without adding workers.

“So far in this recovery, corporations have captured an unusually high share of the income gains,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “The U.S. corporate sector is in a lot better health than the overall economy. And until we get a full recovery in the labor market, this will persist.”

The result has been a golden age for corporate profits, especially among multinational giants that are also benefiting from faster growth in emerging economies like China and India.

These factors, along with the Federal Reserve’s efforts to keep interest rates ultralow and encourage investors to put more money into riskier assets, prompted traders to send the Dow past 14,000 to within 75 points of a record high last week

[JohnnySic]

Good to see.

[-p.tiddy-]

it's still good news though Kevin

these are publicly traded companies that are gaining value...meaning the ones profiting off this are the American public, not just the big wigs

most of the US workforce does have some form of retirement fund that is composed of stocks...

[KevinNYC]

If you look at the the graph corporate profits as a share of national income are at levels from the 1950's and 60's when we had nearly two decades of economic expansion and where you support a family on a single income.

This is what people are talking about when they talk about wealth in equality. Income is not going to salaries it's going to be people who own companies/lots of stock. I'm not talking about your 401K or a small business, I'm talking the highest levels of income. The income growth of the top .1% of earners is way higher than even the other rich folks who make up the top 1%.

http://bangordailynews.com/2012/03/29/politics/93-percent-of-income-growth-went-to-top-1-percent-study-says/

In 2010, according to a study published this month by University of California economist Emmanuel Saez, 93 percent of income growth went to the wealthiest 1 percent of American households, while everyone else divvied up the 7 percent that was left over. Put another way: The most fundamental characteristic of the U.S. economy today is the divide between the 1 percent and the 99 percent.

This income inequality is exacerbated by preferential tax rates for investment income over wage income. This is how Mitt Romney who has an income who many, many times my income actually paid a lower tax rate than I did. Because he has almost no wage income. (He also used loopholes to convert what should be wage income into investment income, so he could get the lower tax rate.) For guys like Romney, this isn't money they have a risk, they a guaranteed income that is taxed lower than wages.

So the rich are getting richer and ever since the Bush Tax cuts get to keep more of their wealth as well.

[Droid101]

it's still good news though Kevin

these are publicly traded companies that are gaining value...meaning the ones profiting off this are the American public, not just the big wigs

Err, Big Wigs are the ones with million dollar stock accounts. Not regular Americans.

Most of these profits is going to rich people. Same old same old.

[KevinNYC]

Jobs being done offshore, automation and leveraging of massive computer power is also increasing productivity per worker which is increasing profits.

[KevinNYC]

it's still good news though Kevin

these are publicly traded companies that are gaining value...meaning the ones profiting off this are the American public, not just the big wigs

most of the US workforce does have some form of retirement fund that is composed of stocks...

Yes, it's good news, and I'm glad it's happening.

But implicit in netsfans' question was why is this happening if we are in a weak recovery (the economy even contracted last quarter). My answer was to point out that there's a reason why this is going on when the full economy is slumping along. If it feels like it's disconnected from the full economy, it's because it is. This disconnect is something we are going to have to deal with as a country.

American public doesn't really = stock owners
http://inequality.org/wp-content/uploads/2011/01/distribution-of-us-wealth-2009.png

[-p.tiddy-]

Err, Big Wigs are the ones with million dollar stock accounts. Not regular Americans.

Most of these profits is going to rich people. Same old same old.
most of it is, yes...however the American public is STILL profiting as well

it's still good news

[-p.tiddy-]

American public doesn't really = stock owners

I think the American workforce...aka those with salaries...are mostly stock holders

I am part of that...when the Dow goes up, so does my 401k

I know I am not the only one in this country with a 401k

just because the "big wigs" own most of the stock doesn't mean the rest of us aren't making out too...

[KevinNYC]

I think the American workforce...aka those with salaries...are mostly stock holders

Yes, I know that lots of Americans have 401Ks, but I still think you are confusing the subset with the whole

Again the American workforce does not equal those with salaries.

Those with salaries does not equal stock holders.

Also investors in the American Stock Market does not equal American investors. Something like 20% of the stock market is owned by non-Americans

[GOBB]

"The middle class was always synonymous with economic security and stability," Draut said. "Now it's synonymous with economic anxiety."

......

[Raider007]

good news :applause:

[boozehound]

it's still good news though Kevin

these are publicly traded companies that are gaining value...meaning the ones profiting off this are the American public, not just the big wigs

most of the US workforce does have some form of retirement fund that is composed of stocks...
You say this, but its pretty inaccurate. Tons of americans have very few if any major investments in stocks bonds and mutual funds.

In fact, the poorest 50% of americans own less than 0.5% of the stocks bonds and mutual funds in the market. Meanwhile, the top 1% own 50%. So, who does the rising stock market actually benefit?

[Burgz V2]

WHy is Dow going up so high? jw dont know much about this

The Dow Jones consists of a lot of industrial and manufacturing companies that were help by the Obama administration. Obama has tried to create an economic situation where these "American" manufacturers can thrive, however, on top of that these manufacturers have restructured themselves to be more "flexible". Really what has happened is they have outsourced jobs, departments etc. to other places where they may be done more efficiently (read cheaply) and rather than spurring the "job creation" Obama has talked about, this really only benefits executives who get a share of the profits.

Is this the Obama administration's fault? Maybe, i'd personally say not entirely. This was always the MO of many of these companies so I'm not sure why we expected it to change. But I also think it is very irresponsible for Obama to keep telling everyone he wants to "bring American manufacturing back", when really all that is happening is the OWNERS of American manufacturing are the only ones who would be benefitting.

[boozehound]

also, dont forget that the fed is dumping $ into the markets still.


http://money.msn.com/top-stocks/post.aspx?post=e39ff42b-15ab-4783-9772-68a4f720bc2e&from=en-us_msnhp

[Scoooter]

Ultimately every job will succumb to automation, then people will really figure out what to do with themselves.

[KevinNYC]

Meanwhile, the top 1% own 50%.

It's not quite that high. It's more like 35-38% of all stocks. They own 47% stocks that are held outside retirement accounts though.


also, dont forget that the fed is dumping $ into the markets still.

Again you're confusing the market with the entire economy. The Fed is trying to juice the economy and not just the markets.

See this thread (http://www.insidehoops.com/forum/showthread.php?t=292165) for one way it works.

[boozehound]

It's not quite that high. It's more like 35-38% of all stocks. They own 47% stocks that are held outside retirement accounts though.



Again you're confusing the market with the entire economy. The Fed is trying to juice the economy and not just the markets.

See this thread (http://www.insidehoops.com/forum/showthread.php?t=292165) for one way it works.
I cant find the article I was reading earlier, but this addresses it to a degree. Dont have time to read the other thread right now, perhaps later. http://money.msn.com/top-stocks/post.aspx?post=a2eba6a6-d24d-4633-b91a-356875ee5ef2
http://www.forbes.com/sites/afontevecchia/2012/12/12/qe4-is-here-bernanke-delivers-85b-a-month-until-unemployment-falls-below-6-5/

The QE attempts put federal money directly into the markets (writ large) by buying up securities. This is not the same as juicing the economy with infrastructure projects, etc. It is the direct use of funds to stabilize and grow the money markets.

[-p.tiddy-]

You say this, but its pretty inaccurate. Tons of americans have very few if any major investments in stocks bonds and mutual funds.

In fact, the poorest 50% of americans own less than 0.5% of the stocks bonds and mutual funds in the market. Meanwhile, the top 1% own 50%. So, who does the rising stock market actually benefit?
that is all so vague...would the poorest 50% be unemployed? or youngins making min wage?

I think this benefits THE MIDDLE CLASS...the homes with a head figure that gets up and goes to work and makes a salary, he also has a retirement fund or and E-Trade account that is booming right now.

I don't believe that not many Americans are stock holders...investment banks make all of their money dealing with OUR money, and they aren't just dealing with the top 1% either...

[-p.tiddy-]

http://sas-origin.onstreammedia.com/origin/gallupinc/GallupSpaces/Production/Cms/POLL/xnwdiyq-vkigopl2cn_mlw.gif


here we go...

it's going down, so that is not good obviously...but 54% of Americans are invested in the marker in some way.

that is a lot of us

it's not just big wigs that are making out here...

[bdreason]

Most of these Corporations on the Stock Exchange aren't really American companies. They don't employ many Americans (outsourcing), and they don't promote domestic growth. Maybe their founders are American, or their HQ is located in America... but their sole focus is profit, and any form of Nationalism has long been lost.

[-p.tiddy-]

Most of these Corporations on the Stock Exchange aren't really American companies. They don't employ many Americans (outsourcing), and they don't promote domestic growth. Maybe their founders are American, or their HQ is located in America... but their sole focus is profit, and any form of Nationalism has long been lost.
you're right no one has a job in the US

we are all broke other than the 1% that is rich and outsourcing everything and own 100% of the stock...the Dow just exists for them :rolleyes:

Microsoft, Apple, Exxon-Mobile, Walmart, Chevron, GM, GE, Ford, etc...they don't employ anyone...no Americans work for those companies





threads like this really let you know who the glass-half empty/half-full people are

[bdreason]

I didn't say they don't serve a benefit, but to act like the Stock Market is a reflection of stability or health in the American economy is laughable at best. There are literally hundreds of economic indicators I would look to before considering the Stock Market.

[-p.tiddy-]

I didn't say they don't serve a benefit, but to act like the Stock Market is a reflection of stability or health in the American economy is laughable at best. There are literally hundreds of economic indicators I would look to before considering the Stock Market.
well I DIDN'T say that but I do think the market is a sign of how our companies are doing...obviously it is

generally when a company is doing well, their stock rises because of it...the market collapsed during the great depression, and booms when the economy is at a high




"literally hundreds of economic indicators I would look to before considering the Stock Market"

LITERALLY HUNDREDS???...now that is laughable

[ALBballer]

If you look at the the graph corporate profits as a share of national income are at levels from the 1950's and 60's when we had nearly two decades of economic expansion and where you support a family on a single income.

This is what people are talking about when they talk about wealth in equality. Income is not going to salaries it's going to be people who own companies/lots of stock. I'm not talking about your 401K or a small business, I'm talking the highest levels of income. The income growth of the top .1% of earners is way higher than even the other rich folks who make up the top 1%.

http://bangordailynews.com/2012/03/29/politics/93-percent-of-income-growth-went-to-top-1-percent-study-says/


This income inequality is exacerbated by preferential tax rates for investment income over wage income. This is how Mitt Romney who has an income who many, many times my income actually paid a lower tax rate than I did. Because he has almost no wage income. (He also used loopholes to convert what should be wage income into investment income, so he could get the lower tax rate.) For guys like Romney, this isn't money they have a risk, they a guaranteed income that is taxed lower than wages.

So the rich are getting richer and ever since the Bush Tax cuts get to keep more of their wealth as well.

To be fair Romney did not deduct millions in Charitable contributions either which could have lowered his effective tax rate even further. His schedule A shows over $2,000,000 paid to charities. Most of his income is investment income which istaxed at around 15% for long term capital gain, factor in itemized deductions and other credits, and there is your answer for his low tax rate (which you mentioned._ I'm not sure of the loophole you are speaking of but Americans could also invest in the stock market and be taxed at a preferential rate as well. This option is not just for the rich though it does favor them since you're average american does not have the capital to go invest.

Personally I just filed my taxes and I paid an effective tax rate of 11% and I file MFJ with income a lil under 100k. A single taxpayer making $45k will end up with an effective tax rate of under 14% after standard deduction and personal exemption. Tax rates are at an all time low for everyone.

But you are correct that the news in the original topic is more beneficial to the 1% who own close to the majority of the stock than to the average american. Prime speaks of 401k but this money fluctuate and unless you are pulling you're money right now this temporary gain could go down to 0 tomorrow hypothetically.

Personally I'm hoping this trend continues and Gold/Silver decreases and I will buy up some more of that. Stocks won't be worth shit if the money the government is printing is worth less than the paper it is printing on.

[-p.tiddy-]

http://en.wikipedia.org/wiki/Economic_indicator

here you go bdreason

look at #7

[-p.tiddy-]

To be fair Romney also didn't deduct millions in Charitable contributions either which could have lowered his effective tax rate even further. Most of his income is investments which are taxed at around 15% for long term capital gain, factor in itemized deductions and other credits, and there is your answer for his low tax rate. I'm not sure of the loophole you are speaking of but Americans could also invest in the stock market and be taxed at a preferential rate as well. I just filed my taxes and I paid an effective tax rate of 11% and I file MFJ with income a lil under 100k. A single taxpayer making $45k will end up with an effective tax rate of under 14% after standard deduction and personal exemption. Tax rates are at an all time low for everyone.

But you are correct that the news in the original topic is more beneficial to the 1% who own close to the majority of the stock than to the average american. Prime speaks of 401k but this money fluctuate and unless you are pulling you're money right now this temporary gain could go down to 0 tomorrow hypothetically.

Personally I'm hoping this trend continues and Gold/Silver decreases and I will buy up some more then. Stocks won't be worth shit if the money the government is printing is worth less than the paper it is printing on.

it isn't just 401ks obviously but there are plenty of people retiring right now as I type this...or this year altogether, and I promise you they are happy about the Dow right now



part of the problem in here is that that average poster is young, never touched the market

if the age range in here was 40-60 year olds, this thread would have a completely different tune

[lefthook00]

I don't think this is "real". Nothing has really changed since the meltdown 5 years ago besides the fed printing money.

There hasn't been a "true" recovery.

If you notice, the improvement in the stock market has followed the increase in money printing, to a tee.

This crazy amount of money hasn't fully reached the markets/economy yet, but it will, this is a fact, unless they destroy the money, which they won't do. It is also a fact that when this happens, inflation/interest rates will go up, and there will be a huge market correction. These are facts, you can calculate this mathematically.

When inflation/interest goes up, companies will be spending more money on borrowing costs than business expansion costs. That means lower profit margins, lower dividends, and less hiring. Plus, more layoffs. Which means that consumer spending will go down...and ya'll know that the U.S. economy mostly depends on consumer spending.

Don't let this current "good news" fool you. There is still a huge bubble.

Why do you think Warrent Buffet, the master, the biggest cheerleader for U.S. company stocks, is dumping over 20% of his stocks that depend on consumer spending? Why do you think that he dumped his whole stake in Intel? Why do you think he sold 19 million shares of Johnson&Johnson?

Why do you think John Paulson just dumped 14 million shares of JP Morgan Chase?

Why do you think George Soros sold all of his bank stocks?

They are thinking ahead.

[-p.tiddy-]

no inflation is very low right now despite the "money printing"

in fact in 2008 we were almost deflating



just because we print money, that doesn't mean it stays in the US


that being said I think that perhaps some of this is inflation...def not all of it though...the stock market isn't just an indicator of inflation


here are inflation rates:

http://www.usinflationcalculator.com/inflation/current-inflation-rates/

we are at 1.6% right now, that is very low

[lefthook00]

no inflation is very low right now despite the "money printing"

in fact in 2008 we were almost deflating



just because we print money, that doesn't mean it stays in the US


that being said I think that perhaps some of this is inflation...def not all of it though...the stock market isn't just an indicator of inflation


here are inflation rates:

http://www.usinflationcalculator.com/inflation/current-inflation-rates/

we are at 1.6% right now, that is very low

Trust me it won't stay that low. It's b/c the money hasn't fully hit the markets and economy yet.

[-p.tiddy-]

Trust me it won't stay that low. It's b/c the money hasn't fully hit the markets and economy yet.
since the "bail out" it has...for sure

that is all the "money printing" you speak of right?

hell, some companies, like AIG, have already paid back their bail out money...




what do you think has to happen before the money "fully hits the economy"?...it hits right away...you think the money is just lounging around not doing anything?

[Norcaliblunt]

The money fetish continues. We need production, production, and production.

[lefthook00]

since the "bail out" it has...for sure

that is all the "money printing" you speak of right?

hell, some companies, like AIG, have already paid back their bail out money...




what do you think has to happen before the money "fully hits the economy"?...it hits right away...you think the money is just lounging around not doing anything?

I'm not talking about right now, I'm talking about what's going to happen in the near future. Printing money isn't inflationary under current conditions, but these conditions won't last forever. The fed is eventually going to have to sell off the debt it bought, which means it will eventually turn into debt held by the public. That's what I meant by that.

[KevinNYC]

The QE attempts put federal money directly into the markets (writ large) by buying up securities. This is not the same as juicing the economy with infrastructure projects, etc. It is the direct use of funds to stabilize and grow the money markets.
Yes the Fed is buying securites and Treasury Bonds, but not stocks. They are not directly juicing the stock market. Neither of these directly affect corporate profits which is what is driving stock prices.

The Fed is making credit more easily available throughout the economy not just the stock market. It's not like people are using this free credit to buy stocks and that is what is driving up stock prices. That's not how it works. (Econ or Finance folks can correct if I'm wrong on this.) What the Fed is doing affects millions of people who are not involved in the stock market.
Car Sales are up. (http://www.nbcnews.com/business/auto-sales-surge-despite-washington-budget-fight-1C8636739)
Housing prices are climbing again. (http://www.marketwatch.com/story/us-home-prices-extend-gains-in-january-2013-03-05) (P.tiddy was that you talked about the time to buy about 8 months ago?)
I'm going to refinance my debt soon. Buying mortgage backed securities is a way of freeing up credit, so it directly affects only a small number of companies and is not enough by itself to buoy the stock market.

[-p.tiddy-]

yeah that was me, and yes the housing market is recovering now

that is another good indicator


http://unemploymentdata.com/wp-content/uploads/2012/04/BLS_vs_Gallup_Unemployment_3.jpg


^^^ that is yet another good indicator...unemployment is streadaly going down


I didn't make this thread to say "we are back! everything is awesome!"...but how can anyone ignore the fact that we are making progress and are in fact on the road to recovery?

I know Doom and Gloom is popular, but at some point people have to come out and say "okay, well maybe I was wrong, maybe this whole bail out idea actually did work for us"

[KevinNYC]

To be fair Romney did not deduct millions in Charitable contributions either which could have lowered his effective tax rate even further.

Yeah he only did that because he was running for President and didn't want his tax rate to look really bad. And since he lost the election, he is totally within his rights to file an amended return and claim that income. I would bet a month salary he only didn't claim of donations for the years that he released his returns.

The loophole I was talking about is called Carried Interest. (http://www.nytimes.com/2013/02/25/opinion/carried-interest-an-unjust-privilege-for-financiers.html?_r=0) To this day Romeny is gettting partnership money from Bain Capital and is structured in a way, that there is virtually no risk to it, but it qualifies as a capital gain. This is literally the way that the rich have gotten richer in recent years.

[QUOTE]A Costly and Unjust Perk for Financiers

OF the many injustices that permeate America

[Norcaliblunt]

I know Doom and Gloom is popular, but at some point people have to come out and say "okay, well maybe I was wrong, maybe this whole bail out idea actually did work for us"


The problem is homie, nothing has been done to stop another crash from happening again. No significant policy change or anything. History will repeat itself, as it did repeat itself in the fashion of the Great Depression during 2007 and 2008. So that leaves a lot to be desired. As for the bailouts, the fed could've issued 0% interest loans to those involved in actual tangible production rebuilding America, instead of giving it to the zombie banks, and a much faster and productive recovery would of happened.

[KevinNYC]

I don't think this is "real". Nothing has really changed since the meltdown 5 years ago besides the fed printing money.

This is simply not true. We are no longer in crisis and the fundamentals of the economy have stabilized.

And it's wrong to say the money hasn't hit the economy yet. It's just not true. In fact what the past few years have proven is that under the current circumstances with very low demand (due to unemployment) and interest rates near zero you can increase the money supply without driving up inflation.

It just a very special set of circumstances at economists call the Liquidity Trap or the Zero Lower Bound problem. This is why the all the folks screaming that the US is going to turn into Zimbabwe have been wrong year after year.


This crazy amount of money hasn't fully reached the markets/economy yet, but it will, this is a fact, unless they destroy the money, which they won't do. It is also a fact that when this happens, inflation/interest rates will go up, and there will be a huge market correction. These are facts, you can calculate this mathematically.
Actually destroying the money is exact what Bernanke intends to do. The previous Fed Chairman Paul Volcker calls this "taking away the punch bowl" once the party gets going good. If you are using low interest rates to spur the economy, you want to raise the interest rates when the economy gets going good, so that it doesn't overheat. "Destroying the money" is a standard tool of Federal Bankers and creating a tight money supply is how Volcker broke the back of inflation from 1979-83.


When inflation/interest goes up, companies will be spending more money on borrowing costs than business expansion costs. You seem to be describing adjustable rate interest loans, your scenario only occurs if they borrowed their money at an adjustable rate which they didn't. That's for unsophisticated home buyers. Companies will be paying what the rate they borrowed at now (which is why they should borrow now and invest in their company or in bridges and roads or a 21st century infrastructure if you're a government). What happens when the interest rates go up is they will borrow less...see the punch bowl analogy above)
Why do you think Warrent Buffet, ....Why do you think John Paulson....Why do you think George Soros.....

They are thinking ahead.
They might be thinking ahead, but they are also professional traders who understand "taking a profit and exiting the market." Yes, the market just hit near six year peak, so they will take their profit and make decisions on where to invest that money. It might be they think there will be a selloff and they could buy back those very same stock cheaper in a month or two. They are very used to closing out a trade and restarting at zero gained or lost.

[-p.tiddy-]

The problem is homie, nothing has been done to stop another crash from happening again. No significant policy change or anything. History will repeat itself, as it did repeat itself in the fashion of the Great Depression during 2007 and 2008. So that leaves a lot to be desired. As for the bailouts, the fed could've issued 0% interest loans to those involved in actual tangible production rebuilding America, instead of giving it to the zombie banks, and a much faster and productive recovery would of happened.
the market will go up and down for eternity...other recessions and booms will happen, that is a given...there is no law that can fix everything for good

inflation will happen for eternity, at some point a cheeseburger will cost $100 instead of $1...that doesn't matter though, it's all relative

out debt will rise forever, at some point we will look back at our current debt and think it is low (what $16 trillion?)...but people will bitch about it for eternity and act as though one day someone is going to come along and force us to pay it off...I can remember my own parents bitching about our ridiculous debt back in the 80s.

and there will ALWAYS be people that declare the country is Doomed...always have been, always will be.

in the end, as long as there is no nuclear war, we will be fine...



what we saw was no where near the "Great Depression" btw

[Norcaliblunt]

the market will go up and down for eternity...other recessions and booms will happen, that is a given...there is no law that can fix everything for good

inflation will happen for eternity, at some point a cheeseburger will cost $100 instead of $1...that doesn't matter though, it's all relative

out debt will rise forever, at some point we will look back at our current debt and think it is low (what $16 trillion?)...but people will bitch about it for eternity and act as though one day someone is going to come along and force us to pay it off...I can remember my own parents bitching about our ridiculous debt back in the 80s.

and there will ALWAYS be people that declare the country is Doomed...always have been, always will be.

in the end, as long as there is no nuclear war, we will be fine...



what we saw was no where near the "Great Depression" btw

Now who's pessimistic. Lol.

[Norcaliblunt]

You also didn't address the point I made about how a faster and more productive recovery could take place.

[-p.tiddy-]

Now who's pessimistic. Lol.
that is pessimism, that is stating that the system we have in place is working fine, and it has been working fine ever since we left the gold standard which was a long time ago, it just involves eternal inflation and debt which are not nearly as bad as people think.

[-p.tiddy-]

You also didn't address the point I made about how a faster and more productive recovery could take place.
well that could be true

I know our Gov is far from perfect, I'm sure there are things they could have done that would have been much better.

[KevinNYC]

Times Article today
touches on both corporate profits and the actions of the Fed
http://www.nytimes.com/2013/03/06/business/daily-stock-market-activity.html?pagewanted=all&_r=1&

[Norcaliblunt]

The crisis was the result of a $1.5 quadrillion derivatives bubble with the guise of the housing collaspe. These exotic instruments were banned from 1936 to 1982 under the Commodities Exchange Act of 1936. So there is definitely some governmental policy that could be done. In fact the whole crisis is result of deregulation.

[KevinNYC]

NY Magazine points to this article from four years by "The World's Wrongest Man" (http://nymag.com/daily/intelligencer/2013/03/worlds-wrongest-man-ventures-latest-prediction.html)

http://online.wsj.com/article/SB123629969453946717.html

[KevinNYC]

The crisis was the result of a $1.5 quadrillion derivatives bubble with the guise of the housing collaspe. These exotic instruments were banned from 1936 to 1982 under the Commodities Exchange Act of 1936. So there is definitely some governmental policy that could be done. In fact the whole crisis is result of deregulation.

That's the first time I've heard of a derivatives bubble. I think it's easier to say it was failure of risk management on a massive scale. That the risk of derivatives specifically mortgage-backed CDO's and credit default swaps was massively mispriced.

Also I think Soros's idea is an easier one. In 2008 before Lehman Brothers blew up and the economy exploded he said that the popping of the almost-a-decade-long housing bubble revealed the multi-decade credit "superbubble" (http://online.wsj.com/article/SB121400427331093457.html?mod=hps_us_at_glance_mar kets) that was about to pop.

Which explains why companies like GE and GM got into trouble even though they weren't in the housing market.

[Just2McFly]

Prime is an avid debater, I don't anyone else who would talk topics in so many fields...

[boozehound]

that is all so vague...would the poorest 50% be unemployed? or youngins making min wage?

I think this benefits THE MIDDLE CLASS...the homes with a head figure that gets up and goes to work and makes a salary, he also has a retirement fund or and E-Trade account that is booming right now.

I don't believe that not many Americans are stock holders...investment banks make all of their money dealing with OUR money, and they aren't just dealing with the top 1% either...
you really think that 50% of americans are unemployed or kids? Really? Really? The point is that half of america has minimal investment in the markets (mostly because they dont make enough to save). This is the middle class, at least part of it, and the working poor. Even those with investments are such a paltry part of the overall market (say, someone with 50-500k in the market) that they cant compare to the returns generated by the people who control the vast majority of market shares.

[Jello]

Lol this ptiddy guy. Do people really think that the middle class are the "homes with a head figure that gets up and goes to work and makes a salary?" No the middle class are small businesses. The same small businesses that got hit when the mortgage bubble popped after they used home equity to finance their business. You know what's preventing the loans to small businesses? Stricter regulations and incentives for banks to heighten their loan standards.

[lefthook00]

This is simply not true. We are no longer in crisis and the fundamentals of the economy have stabilized.

And it's wrong to say the money hasn't hit the economy yet. It's just not true. In fact what the past few years have proven is that under the current circumstances with very low demand (due to unemployment) and interest rates near zero you can increase the money supply without driving up inflation.

It just a very special set of circumstances at economists call the Liquidity Trap or the Zero Lower Bound problem. This is why the all the folks screaming that the US is going to turn into Zimbabwe have been wrong year after year.

Actually destroying the money is exact what Bernanke intends to do. The previous Fed Chairman Paul Volcker calls this "taking away the punch bowl" once the party gets going good. If you are using low interest rates to spur the economy, you want to raise the interest rates when the economy gets going good, so that it doesn't overheat. "Destroying the money" is a standard tool of Federal Bankers and creating a tight money supply is how Volcker broke the back of inflation from 1979-83.

You seem to be describing adjustable rate interest loans, your scenario only occurs if they borrowed their money at an adjustable rate which they didn't. That's for unsophisticated home buyers. Companies will be paying what the rate they borrowed at now (which is why they should borrow now and invest in their company or in bridges and roads or a 21st century infrastructure if you're a government). What happens when the interest rates go up is they will borrow less...see the punch bowl analogy above)

They might be thinking ahead, but they are also professional traders who understand "taking a profit and exiting the market." Yes, the market just hit near six year peak, so they will take their profit and make decisions on where to invest that money. It might be they think there will be a selloff and they could buy back those very same stock cheaper in a month or two. They are very used to closing out a trade and restarting at zero gained or lost.

You know, my area of expertise is more towards public accounting and financial statement analysis(and I'm learning more about finance and economics because I eventually want to go toward investment banking), so my information may not be completely accurate or even relevant.

That being said, what has actually changed since right before the meltdown? There is still a dollar bubble. There is still a debt bubble. There is still a housing bubble. The salary/house price gap is still crazy. Money supply is expanding faster than GDP. What is the difference? I'm getting my information from Bob Wiedemer, who predicted the first meltdown when everyone said he was crazy.

[lefthook00]

NY Magazine points to this article from four years by "The World's Wrongest Man" (http://nymag.com/daily/intelligencer/2013/03/worlds-wrongest-man-ventures-latest-prediction.html)

http://online.wsj.com/article/SB123629969453946717.html

Can you tell me why this guy is wrong?


Bob Wiedemer, author of the best-seller The Aftershock Investor: A Crash Course in Staying Afloat in a Sinking Economy, regards the 2007 puncturing of housing market prices and the 2008 financial market swoon as the precedents to two much larger and much more dangerous bubbles.

These more pernicious threats are the dollar bubble ("printing money") and the government debt bubble ("borrowing money"). While both are expanding at a sickening pace, in the near term they deceptively make things seem much better than they are.

But, like all bubbles, they are unsustainable. And when these collapse, they are going to take the entire financial system, and very possibly the currency, with them (a.k.a. the "aftershock")

Bob predicts the rupture of both these bubbles will most likely happen in the next 2-4 years and accelerate astonishingly rapidly once it begins. Part of the reason for this is that the Fed, now boxed in by its committed course of action, will print like mad to slow the process down -- which ultimately will serve instead as fuel for the fire. This will be the point at which the Fed loses control of interest rates.

Wiedemer is fairly confident that the Fed is well-aware of this dire probability, but finds itself increasingly stuck to avoid it. At this point, the major financial markets (stocks, bonds, housing) are so dependent on Fed liquidity that any efforts to withdraw the punchbowl will send prices lurching downwards, threatening the weak global economy. It's now a binary choice between damned-if-it-does and dammned-if-it-doesn't.

As Chris summarizes, the Fed's main strategic consists completely of "hope". It's backup strategy? "Panic"

Not surprisingly, Bob and Chris discuss the wisdom of focusing on preservation of purchasing power, and positioning one's financial assets safely before the aftershock arrives. For many, that will include working with a financial adviser who understands the nature of the risks in play and can help you allocate your assets accordingly (a reminder that we know a few, if you're looking).

The main thesis in Aftershock is that these bubbles

[KevinNYC]

Can you tell me why this guy is wrong?

The guy I mentioned or the guy you mentioned, but I have never heard of before?

[lefthook00]

The guy that I mentioned, Bob Wiedemer, I posted an article of his opinion in my last post.

[KevinNYC]

Well if you took the investment advice in that guy's book, you would have lost a lot of money in the past 18 months. His book advised you to sell your house, sell your stock and put everthing in Gold.

Let's say you followed his advice, and you had $100,000 invested in fund that mimicked the sp500. You would have bought $100,000 of gold which would be worth about $87,000 and you would have missed out on $22,000 in profits in value if ignored his advice and did nothing. So you would have a real loss of 13% and and and opportunity loss of 35%.

Oh and you would have sold your house for much less than you could today.

[kNicKz]

the dow is up we're saved!!!!

*ignores skyrocketing gas prices + 10000 other things raping the economy*

[-p.tiddy-]

you really think that 50% of americans are unemployed or kids? Really? Really? The point is that half of america has minimal investment in the markets (mostly because they dont make enough to save). This is the middle class, at least part of it, and the working poor. Even those with investments are such a paltry part of the overall market (say, someone with 50-500k in the market) that they cant compare to the returns generated by the people who control the vast majority of market shares.
50% of all everyone in the country? All ages? I'm sure that is a large % yeah.

Your initial point was not many people own stocks...but that isnt true...lots of people invest spread out and plan a proper retirement

[-p.tiddy-]

Booz, around 45% of people over 18 are unemployed in the US

So yeah, at least 50% are unemployed or kids

[KevinNYC]

Can you tell me why this guy is wrong?


Bob Wiedemer, author of the best-seller The Aftershock Investor: A Crash Course in Staying Afloat in a Sinking Economy, regards the 2007 puncturing of housing market prices and the 2008 financial market swoon as the precedents to two much larger and much more dangerous bubbles.

These more pernicious threats are the dollar bubble ("printing money") and the government debt bubble ("borrowing money"). While both are expanding at a sickening pace, in the near term they deceptively make things seem much better than they are.

But, like all bubbles, they are unsustainable. And when these collapse, they are going to take the entire financial system, and very possibly the currency, with them (a.k.a. the "aftershock")

Bob predicts the rupture of both these bubbles will most likely happen in the next 2-4 years and accelerate astonishingly rapidly once it begins. Part of the reason for this is that the Fed, now boxed in by its committed course of action, will print like mad to slow the process down -- which ultimately will serve instead as fuel for the fire. This will be the point at which the Fed loses control of interest rates.

Wiedemer is fairly confident that the Fed is well-aware of this dire probability, but finds itself increasingly stuck to avoid it. At this point, the major financial markets (stocks, bonds, housing) are so dependent on Fed liquidity that any efforts to withdraw the punchbowl will send prices lurching downwards, threatening the weak global economy. It's now a binary choice between damned-if-it-does and dammned-if-it-doesn't.

As Chris summarizes, the Fed's main strategic consists completely of "hope". It's backup strategy? "Panic"

Not surprisingly, Bob and Chris discuss the wisdom of focusing on preservation of purchasing power, and positioning one's financial assets safely before the aftershock arrives. For many, that will include working with a financial adviser who understands the nature of the risks in play and can help you allocate your assets accordingly (a reminder that we know a few, if you're looking).

The main thesis in Aftershock is that these bubbles – this dollar bubble and this government debt bubble – will burst. It is not as if it will not burst for 15 or 20 years. We say it is somewhere in two to four years. You need to be prepared for it.
The debt will always be funded as long as the Federal Reserve stands willing to buy all the bonds that the government sells. At some point, that creates inflation: that pushes up interest rates. The Fed will fight those interest rates going up. At first, they can do it. They just print more money. That keeps interest rates down, but ultimately that inflation will force them up. We cannot just pull the money out and raise interest rates now; it's going to pop the real estate and stock bubbles.

What is going to happen is the Fed is going to lose control of those interest rates. When you print too much money, it gets you control short-term, but it is a recipe for losing control long-term. With those interest rates going up, what is going to pop? The stock market and real estate bubbles. All of that is what kicks off the big problem going forward. Normally you would say the bond market is going to be the problem, but I would tell you that it is actually going to be more stocks and eventually even real estate combined. Then ultimately, the bond market starts to go down, and down quickly once it starts.

When the dam finally breaks, it will break quickly. Literally, it is in a matter of months or certainly no more than a year once it really starts to go.

You get very, very high inflation. We could have stock market holidays and things like that.

The big difference between now and the depression is that the government is also in trouble at this point. We are really not going to have a huge failure until the government kind of comes to its wits' end. It will, but it comes as a last massive orgy of money printing to try to save everything - unlike anything you have seen yet. QE1, QE2, QE3 is nothing like what the Fed has to do when this thing starts to fall. They have to print, buy, and buy, and buy, and try to keep up the falling house. They will not be able to do it, but that will be the reaction.

Then at some point, it is not going to work and the whole thing goes.

Other than the fact that the scenario above is not going to happen and that those guys are associated with kooky website Newsmax.com and their prediciting of doom is very personally profitable for them. (http://finance.fortune.cnn.com/2011/09/02/aftershock-finding-fortune-in-marketing-doom/) I don't know what to tell you.

You can just watch this instead.
http://w3.newsmax.com/a/aftershockb/video47.cfm?promo_code=F15F-1

Nothing says trust more than a website that doesn't allow to pause or stop or fast forward the video that is playing. :roll:

If you didn't know, there's a lot of money to be made by marketing fear. I like the other ads you see on Newsmax


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[boozehound]

50% of all everyone in the country? All ages? I'm sure that is a large % yeah.

Your initial point was not many people own stocks...but that isnt true...lots of people invest spread out and plan a proper retirement
no, as usual, you just dont get the point. the point is that the stocks owned by at least half of the people in this country account for less than a single percent of all stocks. Its not that they dont own any, its that they cant own enough to be a significant portion of the market.


the richest 20% of the US make more than 93% of the income (it helps that the richest 1% make about 25% of all monies). that means that 80% of americans make less than 7% of the money. Stocks are not driven by some engineer or teacher or whoever in the middle class making decisions about his or her retirement portfolio. They are tools used by the ultra-wealthy to accumulate even more wealth. That is why the stock market is not a great indicator of overall economic health (compared to unemployment #s, consumer spending index, housing or construction or manufacturing index). They massive amount of money generated through speculation doesnt actually produce any tangible good or service (this is hyperbole, but its true enough). This is a significant change over the last 3 decades and is part of the reason why banking (writ large) generated more $ (like, 3 or 4 times, I forget the figure) than all other industries combined (you know, like healthcare, or agriculture or manufacturing) from 1996-2006. Its a ****ing ponzi scheme.

[boozehound]

Booz, around 45% of people over 18 are unemployed in the US

So yeah, at least 50% are unemployed or kids
so, half the US in unemployed? Where did you get this fabulous statistic? Are you including unemployed people like mitt romney?

[lefthook00]

Well if you took the investment advice in that guy's book, you would have lost a lot of money in the past 18 months. His book advised you to sell your house, sell your stock and put everthing in Gold.

Let's say you followed his advice, and you had $100,000 invested in fund that mimicked the sp500. You would have bought $100,000 of gold which would be worth about $87,000 and you would have missed out on $22,000 in profits in value if ignored his advice and did nothing. So you would have a real loss of 13% and and and opportunity loss of 35%.

Oh and you would have sold your house for much less than you could today.

True, but he is saying that you will be better off later down the line when a second recession hits. I see what you're saying though, that these fear mongers are being proven wrong consistently at the moment.

[-p.tiddy-]

so, half the US in unemployed? Where did you get this fabulous statistic? Are you including unemployed people like mitt romney?
Look it up...I'm on my phone and posting links is too time consuming

Google "what percentage of Americans are unemployed"

[ihoopallday]

Really wish I knew more about how the stock market works. Maybe I'll take some economic classes some time in the future. Till then, I'll read some books. Very curious about it.

[lefthook00]

Other than the fact that the scenario above is not going to happen and that those guys are associated with kooky website Newsmax.com and their prediciting of doom is very personally profitable for them. (http://finance.fortune.cnn.com/2011/09/02/aftershock-finding-fortune-in-marketing-doom/) I don't know what to tell you.

You can just watch this instead.
http://w3.newsmax.com/a/aftershockb/video47.cfm?promo_code=F15F-1

Nothing says trust more than a website that doesn't allow to pause or stop or fast forward the video that is playing. :roll:

If you didn't know, there's a lot of money to be made by marketing fear. I like the other ads you see on Newsmax

LOL I know, they are trying to sell you an apocalypse zombie kit for $199 or whatever, but that's not the only source that he's been on. And he predicted the meltdown that happened a while back when EVERYONE was saying that it was impossible, and he was warning everyone the same way.

I have another question, answer if you want to:

When the meltdown happened, the fed tried to cut interest rates before they tried quantitative easing, and it did nothing. Then it rolled out the QE program and things got better. It's obvious that the QE is the main factor in our recovery, right?

In order to improve conditions, the fed started the QE program by buying massive amounts of mostly US treasury bonds. The purpose of this was to drive down interest rates and bond yields lower, to promote borrowing and spending in the private sector, to parallel govt. spending, right?

So...now that things are "getting better", how do you expect the fed to sell off all the bonds that it bought without increasing interest rates(which destroys their value)? People are already beating them to the punch and selling.

[-p.tiddy-]

no, as usual, you just dont get the point. the point is that the stocks owned by at least half of the people in this country account for less than a single percent of all stocks. Its not that they dont own any, its that they cant own enough to be a significant portion of the market.


the richest 20% of the US make more than 93% of the income (it helps that the richest 1% make about 25% of all monies). that means that 80% of americans make less than 7% of the money. Stocks are not driven by some engineer or teacher or whoever in the middle class making decisions about his or her retirement portfolio. They are tools used by the ultra-wealthy to accumulate even more wealth. That is why the stock market is not a great indicator of overall economic health (compared to unemployment #s, consumer spending index, housing or construction or manufacturing index). They massive amount of money generated through speculation doesnt actually produce any tangible good or service (this is hyperbole, but its true enough). This is a significant change over the last 3 decades and is part of the reason why banking (writ large) generated more $ (like, 3 or 4 times, I forget the figure) than all other industries combined (you know, like healthcare, or agriculture or manufacturing) from 1996-2006. Its a ****ing ponzi scheme.
You're not getting me...the top %1 owning the majority of the wealth has NOTHING to do with the fact the the stock market going up does infact help the middle class a great deal.

Stocks are driven by company performance, at least they are supposed to be

[boozehound]

You're not getting me...the top %1 owning the majority of the wealth has NOTHING to do with the fact the the stock market going up does infact help the middle class a great deal.

Stocks are driven by company performance, at least they are supposed to be
again, the point is that the % of stocks owned by the middle class (and traded by them) is a minuscule factor in the market. The bottom 80% of the US (so, the entire middle class, working poor, unemployed and some of the middling upper class) owns less than 9% of the stock market. http://www.advisorone.com/2013/01/23/the-middle-class-is-leaving-the-stock-market

That means that the richest 20% of the country owns 90% of the stock market. Who influences the market by trading and who benefits from the rise? Now, I am not saying there isnt any benefit to the middle class, but you are fooling yourself if you think its an actual indicator of overall economic health.


Also, if you think the market is predominately driven by company performance, you are even more naive than you project on this forum. If that were the case, the only major shifts in stock price would be tied to measures of company performance (quarterly reports, etc). Instead, we see days like yesterday/today where there is a massive increase in the value of these stocks based solely on speculative demand.

[shlver]

And it's wrong to say the money hasn't hit the economy yet. It's just not true. In fact what the past few years have proven is that under the current circumstances with very low demand (due to unemployment) and interest rates near zero you can increase the money supply without driving up inflation.
???
Clarify this for me. Doesn't low inflation mean that the money has not flowed into spending or investing hands and is not circulating?

[-p.tiddy-]

again, the point is that the % of stocks owned by the middle class (and traded by them) is a minuscule factor in the market. The bottom 80% of the US (so, the entire middle class, working poor, unemployed and some of the middling upper class) owns less than 9% of the stock market. http://www.advisorone.com/2013/01/23/the-middle-class-is-leaving-the-stock-market

That means that the richest 20% of the country owns 90% of the stock market. Who influences the market by trading and who benefits from the rise? Now, I am not saying there isnt any benefit to the middle class, but you are fooling yourself if you think its an actual indicator of overall economic health.


Also, if you think the market is predominately driven by commpany performance, you are even more naive than you project on this forum. If that were the case, the only major shifts in stock price would be tied to measures of company performance (quarterly reports, etc). Instead, we see days like yesterday/today where there is a massive increase in the value of these stocks based solely on speculative demand.
Stock prices are highly reflected by a companies performance and quarterly earnings...obviously

As well as their projected earnings


And when a company decides to go public it could be for many reasons but most try to split the stock up to where shares are affordable to the middle class, that's the whole point.

Do you have a portfolio of any kind booz?

[KevinNYC]

LOL I know, they are trying to sell you an apocalypse zombie kit for $199 or whatever, but that's not the only source that he's been on. And he predicted the meltdown that happened a while back when EVERYONE was saying that it was impossible, and he was warning everyone the same way.

I have another question, answer if you want to:

When the meltdown happened, the fed tried to cut interest rates before they tried quantitative easing, and it did nothing. Then it rolled out the QE program and things got better. It's obvious that the QE is the main factor in our recovery, right?

In order to improve conditions, the fed started the QE program by buying massive amounts of mostly US treasury bonds. The purpose of this was to drive down interest rates and bond yields lower, to promote borrowing and spending in the private sector, to parallel govt. spending, right?

So...now that things are "getting better", how do you expect the fed to sell off all the bonds that it bought without increasing interest rates(which destroys their value)? People are already beating them to the punch and selling.

The Fed did not play things perfectly, but they did essentially prevent a REAL MELTDOWN and they stabilized the system enough that we did not have a full blown panic. They did this mainly through lending to trouble financial companies (http://www.econbrowser.com/archives/2012/08/us_monetary_pol.html) and taking distressed assets of their hands, when value returned to these assets, they could sell them. (The FED even made a profit on AIG.) The bailouts were not handled correctly in terms of accountability, but they were necessary and we did not have a depression. This initial stabilizing of the system was the most important thing the FED did.

QE 1 and 2 were intended to prevent DEFLATION (http://www.econbrowser.com/archives/2012/08/us_monetary_pol.html)would have made things worse. Basically the answer to the question of how will the Fed sell off the bonds is over a loooooong term. One of the things they did was selling a bunch of short term US Debt while buying the same amount of long term US Debt (http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm). This gives the US a longer time to pay off and helped lower US borrowing costs. So they are not going to flood the market with the bonds they bought and there will plenty of customer for US debt for a long, long time.

As for this question
how do you expect the fed to sell off all the bonds that it bought without increasing interest rates(which destroys their value). I'm not quite sure of this, but I think your premises is off. I don't think the value of the current bonds would be affected by future increase in interest rates. I think that would change the value of future bonds, not the bonds they currently hold today.

Also I submit that EVERYONE was not saying it was impossible. Paul Krugman was talking about a housing bubble in 2005. Dean Baker (http://www.cepr.net/index.php/publications/reports/the-run-up-in-home-prices-is-it-real-or-is-it-another-bubble) was talking about it in 2002 and sold his house in 2004 because it and went back to renting. Nouriel Roubini was talking about it around 2004 and 2005 as well. (http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html) The NY Federal Reserve was talking about a Housing Bubble in 2004 as well.

Check out the archives of the blog Calculated Risk. It basically documented the bubble as it grew and grew. The blog started in Jan 2005 and by Jan 11th talked about an asset bubble in housing (http://www.calculatedriskblog.com/2005/01/housing-prices-asset-bubble.html)
You see someone asking the right questions there....it also shows the housing slowed and then rose again in 2005 before prices peaked in 2006, this the result of Wall Street juicing the market for buying mortgages which they were packing up as derivatives.

What I think even these folks who knew about the housing bubble missed was how much damage it would do because
A. No one really knew how many secondary bets on housing Wall Street made because these deriatives CDOs and CDSs were essentially private contracts. Did anyone really know that AIG was essentially ensuriing a giant chunk of entire mortgage secondary market?
B. No one really understood how big "the shadow banking" and the overnight "repo" system where companies borrow money every night had grown.
C. They didn't undersand how much of that shadow banking system was using mortgage products as collateral.

So when disaster struck it was worse than folks predicted, but there were a lot folks out there early on the housing bubble.

QE is a factor in our recovery, but not the main factor. Unemployment is in better shape than its been, consumer and corporate confidence is up, productivity is up, etc.

[Jello]

This ptiddy guy is missing the point and diverting the main point of the argument with his stupid percentages and semantics. The middle class have their assets tied into their home not the stock market. Before the recession and the housing bubble burst, almost 70% of all middle class assets were tied into their homes. Stocks were less than 10% of the assets for the middle class. So now explain how the majority of he middle class that do not have assets in stocks is being significantly uplifted. They're not. You're handwaving under the pretense that you think you know what you're talking about.

[-p.tiddy-]

This ptiddy guy is missing the point and diverting the main point of the argument with his stupid percentages and semantics. The middle class have their assets tied into their home not the stock market. Before the recession and the housing bubble burst, almost 70% of all middle class assets were tied into their homes. Stocks were less than 10% of the assets for the middle class. So now explain how the majority of he middle class that do not have assets in stocks is being significantly uplifted. They're not. You're handwaving under the pretense you know what you're talking about.
Home is most peoples main investment true but this thread is about the stock market doing well.

The housing market is doing much better too now though...

[Jello]

Home is most peoples main investment true but this thread is about the stock market doing well.

The housing market is doing much better too now though...
:facepalm Hopeless.

[-p.tiddy-]

This jello guy needs to understnd that a companies stock going up is a sign of the company making money, hiring more, etc

And no not everything is outsourced

[-p.tiddy-]

What do you know, unemployment has been trending down at the exact same time the market started trending up

What a strange bizarre coincidence

[Jello]

Your reading comprehension is so bad that it is impossible to debate with you.:lol

[KevinNYC]

???
Clarify this for me. Doesn't low inflation mean that the money has not flowed into spending or investing hands and is not circulating?

No low inflation means that the gap in demand is so big right now that even with the increased money supply circulating, inflation is not a problem. Essentially we are in a special place with a weak economy and interest near zero that you can lower rates enough to match the weak demand. Japan has been going through this since their real estate bubble in the 1990's. They did it wrong and it was called The Lost Decade. That's the thing that they are missing about the current period. "Printing Money" is not inflationary when you are in a "Liquidity Trap" or near the "Zero Lower Bound" like we are now.


Ben Bernanke just appeared before Congress and they asked him what about savers aren't you hurting them. He said if we tried to raise interest rates to 4% or 5% it would hurt the economy and interest rates would fall again. We are just not able to sustain higher interest rates right now.
The Cleveland Fed estimates that 10 year expected inflation is 1.53%
(http://www.clevelandfed.org/research/data/inflation_expectations/index.cfm)

Bernanke just testified about this idea that "printing money" will be a problem.
[QUOTE]you

[-p.tiddy-]

Your reading comprehension is so bad that it is impossible to debate with you.:lol
Your saying the middle class doesn't own much stock right? Or no?

I think it is you that needs to read my posts again...

[Jello]

Your saying the middle class doesn't own much stock right? Or no?

I think it is you that needs to read my posts again...
Case in point.

[-p.tiddy-]

Um, you just said the middle class has their money in their home and NOT the stock market...

Wtf

Do you even know what you're debating guy?

[KevinNYC]

an easier read on Bernanke's testimony
http://www.newyorker.com/online/blogs/johncassidy/2013/02/bernanke-lectures-gop-on-austerity-economics.html

One Congressman called him "the biggest dove on inflation since WWII" Bernanke pointed out he has the best record on inflation of any Fed Chief since WWII

[Nanners]

http://i.imgur.com/ICWEyun.gif

[lefthook00]

The Fed did not play things perfectly, but they did essentially prevent a REAL MELTDOWN and they stabilized the system enough that we did not have a full blown panic. They did this mainly through lending to trouble financial companies (http://www.econbrowser.com/archives/2012/08/us_monetary_pol.html) and taking distressed assets of their hands, when value returned to these assets, they could sell them. (The FED even made a profit on AIG.) The bailouts were not handled correctly in terms of accountability, but they were necessary and we did not have a depression. This initial stabilizing of the system was the most important thing the FED did.

QE 1 and 2 were intended to prevent DEFLATION (http://www.econbrowser.com/archives/2012/08/us_monetary_pol.html)would have made things worse. Basically the answer to the question of how will the Fed sell off the bonds is over a loooooong term. One of the things they did was selling a bunch of short term US Debt while buying the same amount of long term US Debt (http://www.federalreserve.gov/newsevents/speech/bernanke20120831a.htm). This gives the US a longer time to pay off and helped lower US borrowing costs. So they are not going to flood the market with the bonds they bought and there will plenty of customer for US debt for a long, long time.

As for this question
how do you expect the fed to sell off all the bonds that it bought without increasing interest rates(which destroys their value). I'm not quite sure of this, but I think your premises is off. I don't think the value of the current bonds would be affected by future increase in interest rates. I think that would change the value of future bonds, not the bonds they currently hold today.

Also I submit that EVERYONE was not saying it was impossible. Paul Krugman was talking about a housing bubble in 2005. Dean Baker (http://www.cepr.net/index.php/publications/reports/the-run-up-in-home-prices-is-it-real-or-is-it-another-bubble) was talking about it in 2002 and sold his house in 2004 because it and went back to renting. Nouriel Roubini was talking about it around 2004 and 2005 as well. (http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html) The NY Federal Reserve was talking about a Housing Bubble in 2004 as well.

Check out the archives of the blog Calculated Risk. It basically documented the bubble as it grew and grew. The blog started in Jan 2005 and by Jan 11th talked about an asset bubble in housing (http://www.calculatedriskblog.com/2005/01/housing-prices-asset-bubble.html) You see someone asking the right questions there....it also shows the housing slowed and then rose again in 2005 before prices peaked in 2006, this the result of Wall Street juicing the market for buying mortgages which they were packing up as derivatives.

What I think even these folks who knew about the housing bubble missed was how much damage it would do because
A. No one really knew how many secondary bets on housing Wall Street made because these deriatives CDOs and CDSs were essentially private contracts. Did anyone really know that AIG was essentially ensuriing a giant chunk of entire mortgage secondary market?
B. No one really understood how big "the shadow banking" and the overnight "repo" system where companies borrow money every night had grown.
C. They didn't undersand how much of that shadow banking system was using mortgage products as collateral.

So when disaster struck it was worse than folks predicted, but there were a lot folks out there early on the housing bubble.

QE is a factor in our recovery, but not the main factor. Unemployment is in better shape than its been, consumer and corporate confidence is up, productivity is up, etc.

Tnx bro.

[Jailblazers7]

I think most incredible call on the bubble was Kindleberger who called the 2001 stock bubbleand housing bubble. He was retired and died in 2004 I believe but this interview is pretty amazing.

http://bodurtha.georgetown.edu/enron/A%2091-Year-Old%20Who%20Foresaw%20Selloff%20Is%20%27Dubious%27 %20of%20Stock-Market%20Rally.htm

[Sarcastic]

This shouldn't be a surprise to anyone. Corporations have been hoarding cash for a long time now. They could easily reinvest that money into jobs here in America, but are instead choosing to hold it overseas. Apple for one has something like $100 billion that they are just "holding onto" for supposed reinvestment.

[KevinNYC]

I think most incredible call on the bubble was Kindleberger who called the 2001 stock bubbleand housing bubble. He was retired and died in 2004 I believe but this interview is pretty amazing.

http://bodurtha.georgetown.edu/enron/A%2091-Year-Old%20Who%20Foresaw%20Selloff%20Is%20%27Dubious%27 %20of%20Stock-Market%20Rally.htm

Jailblazers, know anything about the bond market? Did I get this one right?


As for this question
how do you expect the fed to sell off all the bonds that it bought without increasing interest rates(which destroys their value). I'm not quite sure of this, but I think your premises is off. I don't think the value of the current bonds would be affected by future increase in interest rates. I think that would change the value of future bonds, not the bonds they currently hold today.

[Balla_Status]

This shouldn't be a surprise to anyone. Corporations have been hoarding cash for a long time now. They could easily reinvest that money into jobs here in America, but are instead choosing to hold it overseas. Apple for one has something like $100 billion that they are just "holding onto" for supposed reinvestment.

I really doubt you're any kind of expert to make a statement like this. They can choose to do what they want with it.

[Jailblazers7]

Jailblazers, know anything about the bond market? Did I get this one right?

Your prob gave a good summary. I think the entire point of open market operations for the Fed when they sell bonds is to increase the interest rate. Until that happens, the bond market won't take a hit.

[boozehound]

Stock prices are highly reflected by a companies performance and quarterly earnings...obviously

As well as their projected earnings


And when a company decides to go public it could be for many reasons but most try to split the stock up to where shares are affordable to the middle class, that's the whole point.

Do you have a portfolio of any kind booz?
OF course I do. But it is paltry compared to any $ needed to influence the market.

The point is, stocks are not a simple reflection of a companies success or earnings (though it obviously influences them). They are driven by volume of sales and demand essentially.



As for your prior question, I would guess the unemployed # to be around 12% (not including guys like romney - technically unemployed, or a stay at home mom/dad in a single income household). underage? not that high. Only a % of kids actually work.

[-p.tiddy-]

OF course I do. But it is paltry compared to any $ needed to influence the market.

The point is, stocks are not a simple reflection of a companies success or earnings (though it obviously influences them). They are driven by volume of sales and demand essentially.



As for your prior question, I would guess the unemployed # to be around 12% (not including guys like romney - technically unemployed, or a stay at home mom/dad in a single income household). underage? not that high. Only a % of kids actually work.
When you are over 50 and nearing retirement will it still be "paltry"?...would you say that the market going up will help you out financially then? If yes do you think there will be others like you?...even millions other like you?

MY POINT, is that the market going up does, without question, help the middle class.

I don't care if corporate big rigs own 99.999999% of the market and are super trillionaires...that is beside my point.

[longhornfan1234]

What is happening is so obvious to anyone with a working brain. The Fed pumps money into Wallstreet, artificially inflating it and instilling confidence in the average Joe investor. Once the share prices go up, the billionaires dump their stock and take all of average Joe's money. The Fed Govt is helping them do this.

[Norcaliblunt]

http://m.youtube.com/watch?v=QPKKQnijnsM

This video sums the wealth inequality in this country pretty simply. Watch until the end and it mentions investments.

[Norcaliblunt]

So What do we do?

I support the program of the United Front Against Austerity:

1. A 1% Wall Street Sales Tax will make flash-trading impossible, will incentivize investment in plant and equipment, and will redistribute a small part of this unearned wealth back to the national and state treasuries, where it will pay for healthcare, welfare, public employees, etc.

2. Nationalize the Federal Reserve to lend long-term public credit for infrastructure, industry, agriculture and main street. We can in short order achieve full employment with 30 million sustainable, union-wage jobs in production, and minimize the demands on social services. And sorry, Wall Street, we're taking back the bailout out of your hides and canceling QE3.

Other measures include:

[KevinNYC]

What is happening is so obvious to anyone with a working brain. The Fed pumps money into Wallstreet, artificially inflating it and instilling confidence in the average Joe investor. Once the share prices go up, the billionaires dump their stock and take all of average Joe's money. The Fed Govt is helping them do this.

I'm not sure you understand how the Dow works. It's supposed to represent a cross-section of the American economy. Of the 30 stocks in the index only 4 are connected to finance, two banks, a credit card company and an insurance company. However they were not among the companies that have been driving this rally. Here's the companies that contributed most to the rise of the Dow with the biggest contributions on top.

IBM
Catepillar
3M
Chevron
United Technologies
American Express
Home Depot
Boeing
McDonald's
Walt Disney

Of the top ten stocks that pushed up the Dow, only 1, American Express has anything to do with finance. The others look to me to pretty well connected to the American Economy.

[KevinNYC]

This shouldn't be a surprise to anyone. Corporations have been hoarding cash for a long time now.

Hoarding cash doesn't affect corporate profits and it doesn't help raise your stock price.

In fact, it may do the opposite (http://news.investors.com/technology/022113-645277-apple-could-unlock-shareholder-value-with-preferred-shares.htm?ref=SeeAlso).


Apple (AAPL) has done a poor job of managing its $137 billion cash hoard and its stock price has suffered as a result, hedge fund manager David Einhorn charged Thursday.
In a conference call with investors and media, Einhorn, founder and president of Greenlight Capital, an Apple shareholder, detailed his proposal for Apple to unlock shareholder value by issuing preferred stock he called "iPrefs," in a nod to Apple product names.
The preferred shares would be issued to existing shareholders and would be attractive to investors seeking safe income, Einhorn says. They would pay perpetual dividends and provide a yield better than government and high-quality corporate bonds, he says.

http://www.cnbc.com/id/100481469/Einhorn_My_Plan_Could_Boost_Apple_Stock_by_150

Greenlight Capital's David Einhorn appealed directly to Apple shareholders Thursday in a conference call to get more of them to join his push to get the tech giant to distribute more cash.

Einhorn said Apple is trapping $14 per share in earnings by hoarding cash and that his plan could boost the stock by $150.

[shlver]

No low inflation means that the gap in demand is so big right now that even with the increased money supply circulating, inflation is not a problem. Essentially we are in a special place with a weak economy and interest near zero that you can lower rates enough to match the weak demand. Japan has been going through this since their real estate bubble in the 1990's. They did it wrong and it was called The Lost Decade. That's the thing that they are missing about the current period. "Printing Money" is not inflationary when you are in a "Liquidity Trap" or near the "Zero Lower Bound" like we are now.
Yeah, that's what I'm talking about. The money has not hit the economy.
Liquidity trap

A liquidity trap is a situation described in Keynesian economics in which injections of cash into the private banking system by a central bank fail to lower interest rates and hence fail to stimulate economic growth. A liquidity trap is caused when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. Signature characteristics of a liquidity trap are short-term interest rates that are near zero and fluctuations in the monetary base that fail to translate into fluctuations in general price levels.
The money is not circulating to influence supply and demand between money and goods. Inflation is not occurring because the money is not circulating in the economy.

[Burgz V2]

I'm not sure you understand how the Dow works. It's supposed to represent a cross-section of the American economy. Of the 30 stocks in the index only 4 are connected to finance, two banks, a credit card company and an insurance company. However they were not among the companies that have been driving this rally. Here's the companies that contributed most to the rise of the Dow with the biggest contributions on top.

IBM
Catepillar
3M
Chevron
United Technologies
American Express
Home Depot
Boeing
McDonald's
Walt Disney

Of the top ten stocks that pushed up the Dow, only 1, American Express has anything to do with finance. The others look to me to pretty well connected to the American Economy.

he's a troll dont mind him.

but your post is spot on. Read my earlier post I made about the Obama administration bringing back "American manufacturing and industry". People will look at this index and assume that this is do to these companies doing well through consumer activity but this is false. These companies have all gone through major restructuring, even predating the financial crisis (not just the companies you mention too), in order to a) become more efficient and b) take advantage of legislation that allows them to. What is it they say? Don't hate the player, hate the game?

[-p.tiddy-]

yep, I feel like I need to explain to people just the simple base principle of "investing" in here...how it is "supposed" to work anyway.

Let's say you were to invest $10 million dollars to make a new movie (ISH knows movies lol), where does that money go?...it goes to the actual production of the movie...it pays the people making the movie...it creates the jobs that are now open because of your investment. If the movie profits, SO DO YOU!...If the movie fails, you lose your money.

This same concept is true in the stock market (or at least it should be)...if a corporate big wig purchases $1 Billion worth of stock in say Microsoft, then that $1 Billion ACTUALLY GOES TO MICROSOFT...it pays the employees and perhaps creates new employees, it allows them to grow the business. If Microsoft shows gains then the stock goes up...if they show loses then the stock goes down.

Now some people in here are pointing out that there is a lot of outsourcing, and then on top of that the CEOs just horde to money rather than grow their business, and those are valid points, but it isn't true throughout every business, many companies are actually growing.


check this out:

http://moolanomics.com/blog/wp-content/uploads/2012/12/Nov12-Dow-Employ-1024x628.png

the employment rate and the DOW pretty much mimic each other...this is because the Dow going up is more money for more jobs


I'm pretty sure most in here know this but just making sure...because it seems like some are trying to over complicate this to the point that they forget the basic principles of simple investing.

[Nanners]

Sorry if this was posted already.

http://www.npr.org/blogs/money/2013/03/05/173515767/the-dow-isnt-really-at-a-record-high-and-it-wouldnt-matter-if-it-were


Just a quick, cranky reminder: Despite what you may have read, the Dow Jones industrial average did not hit a new high today in any meaningful sense.

After adjusting for inflation, the Dow was higher in 2000 than it is today. It was also higher in 2007. It would need to rise another 10 percent or so to hit an all time high in real (i.e., inflation-adjusted) terms.

[Balla_Status]

I think primetime wins the award for "Most Graphics and Visuals Posted on a message board."

[-p.tiddy-]

yeah part of it is inflation, that was brought up...but I didn't know just 10% higher would be all time high with inflation flattened out.

that means we are in the top 10% in terms of all time rankings? correct?

[Nanners]

yep, I feel like I need to explain to people just the simple base principle of "investing" in here...how it is "supposed" to work anyway.

Let's say you were to invest $10 million dollars to make a new movie (ISH knows movies lol), where does that money go?...it goes to the actual production of the movie...it pays the people making the movie...it creates the jobs that are now open because of your investment. If the movie profits, SO DO YOU!...If the movie fails, you lose your money.

This same concept is true in the stock market (or at least it should be)...if a corporate big wig purchases $1 Billion worth of stock in say Microsoft, then that $1 Billion ACTUALLY GOES TO MICROSOFT...it pays the employees and perhaps creates new employees, it allows them to grow the business. If Microsoft shows gains then the stock goes up...if they show loses then the stock goes down.


No.

Stock is generally only purchased from startup companies looking for venture capital money or IPOs. If you go purchase shares in microsoft right now, the money goes to another stock trader who has put those shares up for sale, it absolutely does not go to Microsoft.

[-p.tiddy-]

I think primetime wins the award for "Most Graphics and Visuals Posted on a message board."

I don't think I post lots of images...

that graph just happens to be a very large image...no small one out there

[-p.tiddy-]

No.

Stock is generally only purchased from startup companies looking for venture capital money or IPOs. If you go purchase shares in microsoft right now, the money goes to another stock trader who has put those shares up for sale, it absolutely does not go to Microsoft.
okay yeah it is at start up, but you are INVESTING in Microsoft...that start up stock did go to them

who you bought the stock from, that is just the stock trading hands from one investor to another, but the base of it is in Microsoft though

[-p.tiddy-]

If the original money can't be linked to MSoft in some way, then it doesn't make any sense at all...

[-p.tiddy-]

it isn't really "start up" companies either...it is companies that decide to go public

like Facebook recently...they aren't a "start up" company...when they went public they got money from the public in return for shares in their business.

that investment money went to them


this also happens anytime they issue more stock...

[KevinNYC]

Yeah, that's what I'm talking about. The money has not hit the economy.

Read further through that Wikipedia entry (http://en.wikipedia.org/wiki/Liquidity_trap#Conceptual_evolution) to see that the meaning of a liquidity trap has evolved beyond just cash hoarding.
However, while Keynes's formulation of a liquidity trap refers to the existence of a horizontal demand curve for money at some positive level of interest rates, the liquidity trap invoked in the 1990s referred merely to the presence of zero interest rates (ZIRP), the assertion being that since interest rates could not fall below zero ..., monetary policy would prove impotent in those conditions, just as it was asserted to be in a proper exposition of a liquidity trap. Given that there is no evidence of the existence of a liquidity trap for an interest rate greater than zero, in modern macroeconomics liquidity trap refers to a situation in which the nominal interest rate is zero. As a consequence of this, a liquidity trap is also known as The Zero Lower Bound Problem..... Paul Krugman argued repeatedly in 2008-11 that much of the developed world, including the United States, Europe, and Japan, was in a liquidity trap.[2] He noted that tripling of the U.S. monetary base between 2008 and 2011 failed to produce any significant effect on U.S. domestic price indices or dollar-denominated commodity prices.

I'm sure I learned about this from Paul Krugman and here's how he defines it (http://krugman.blogs.nytimes.com/2010/03/17/how-much-of-the-world-is-in-a-liquidity-trap/)
[QUOTE]As I

[DonDadda59]

Looks like things are finally starting to take a positive trajectory (corporate profits are at an all time high). Now we just need the House Republicans to stop with their obstructionist nonsense and we just might see a boom in the next few years, the sequester will definitely hurt the economy in the short term and possibly long term if there is no balanced solution coming.

[INDENT]Job gains, stronger economy boosting stock markets

More than four years after the worst financial collapse in a lifetime, the lingering effects that have been holding back the U.S. economy are finally fading away.

That, at least, is what investors in the stock market seem to be thinking these days as they push the Dow Jones industrial average to ever-new heights.

The latest evidence to support that renewed confidence came from a report Wednesday showing solid job gains in February, based on monthly data collected by payroll processor ADP.

[B]Employers added nearly 200,000 jobs last month after hiring 215,000 new workers in January, a revision that boosted that month

[Jailblazers7]

Read further through that Wikipedia entry (http://en.wikipedia.org/wiki/Liquidity_trap#Conceptual_evolution) to see that the meaning of a liquidity trap has evolved beyond just cash hoarding.

I'm sure I learned about this from Paul Krugman and here's how he defines it (http://krugman.blogs.nytimes.com/2010/03/17/how-much-of-the-world-is-in-a-liquidity-trap/)

Interesting policy to get around the zero lower bound is electronic money. Miles Kimball writes about it here:

http://qz.com/21797/the-case-for-electric-money-the-end-of-inflation-and-recessions-as-we-know-it/

Cool stuff for anyone interested.

[Nanners]

it isn't really "start up" companies either...it is companies that decide to go public

like Facebook recently...they aren't a "start up" company...when they went public they got money from the public in return for shares in their business.

that investment money went to them


this also happens anytime they issue more stock...

thats why i said startups OR IPOS....

[-p.tiddy-]

thats why i said startups OR IPOS....
okay right...didn't catch onto that first read

[boozehound]

This chart is an example of why the record Dow is really not an indicator of the economy recovering. Which was the premise in the OP (not whether the dow benefits the middle class). Basically, we are in such a deep employment hole that there is no historical precedent outside of the GD.

http://www.npr.org/blogs/money/2013/02/15/172116698/the-scariest-job-chart-ever-isnt-scary-enough?utm_source=NPR&utm_medium=facebook&utm_campaign=20130307

http://media.npr.org/assets/img/2013/03/07/joblossesjan2013_custom-51799ecaed69487dd4f0e2b0d0f26d6c619d69c8-s40.jpg]


In previous postwar recoveries, the number of jobs was about 7 percent above its previous peak by this point, on average.

In other words, if this had been a typical recession and recovery, the U.S. economy would now have roughly 10 million more jobs than it did at the previous peak. In fact, there are now three million fewer jobs.

[Jailblazers7]

Graph for pt:

http://www.washingtonpost.com/blogs/wonkblog/files/2013/03/stock_wlf.png

Top 10% in wealth own 80% of stocks.

[-p.tiddy-]

Graph for pt:

http://www.washingtonpost.com/blogs/wonkblog/files/2013/03/stock_wlf.png

Top 10% in wealth own 80% of stocks.
Jail, I assumed that the top 10% actually had more than that

so the middle class actually has roughly 20% of the stock market?...that's a lot I would say


top 10% isn't even "super rich" anyway...that could be seen as "upper-middle-class"...so really in my eyes, the middle class owns more than 20%...closer to 40%

it is just that top 1% that is the "super-rich"

[-p.tiddy-]

http://en.wikipedia.org/wiki/Personal_income_in_the_United_States

yeah see, the top 10% is still middle-class...they are the upper-middle

top 10% still makes less than 6-figures


if you make over $87,499, you are in the top 10%



so to me, the middle class owns half, 50% of the stock market...the super rich 1% own the other half though, lol

[KevinNYC]

Regarding the debate up thread, Barry Ritholtz whose blog I've quoted a couple of times says the Dow Jones would be about 20-30% lower without the Fed activity.

[-p.tiddy-]

Regarding the debate up thread, Barry Ritholtz whose blog I've quoted a couple of times says the Dow Jones would be about 20-30% lower without the Fed activity.
but is that consistent throughout all recent times?

if that is a constant then not really a big deal

[KevinNYC]

but is that consistent throughout all recent times?

if that is a constant then not really a big deal

No that is the recent Fed activity trying to juice the economy.

[KevinNYC]

http://news.yahoo.com/drop-us-jobless-claims-fuels-140014149.html
Another drop in weekly U.S. jobless claims helped sustain the optimism in markets Thursday, particularly on Wall Street where the Dow Jones index was eyeing up its tenth straight day of gains.
The Dow has recorded a series of record closing highs after rising for nine straight sessions, its longest winning run since 1996. Many stock indexes around the world have risen in the slipstream of the Dow's advance to multi-year highs, too.
"Not since the halcyon days of 1996 have we enjoyed such a long winning streak for the Dow," said Chris Beauchamp, market analyst at IG. "Even the most bullish of analysts could now be forgiven for feeling a little nervous, with expectations of a pullback still widespread."
However, figures showing that weekly U.S. jobless claims fell by a greater-than-anticipated 10,000 to 332,000 helped sustain hopes over the U.S. labor market and provided stocks with further momentum. Also helping sentiment were lower than anticipated producer price inflation figures and an unexpected narrowing in the country's current account deficit

could this be for real?