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(Yahoo)   Now I am become the debt fueled bubble, destroyer of stock markets   (finance.yahoo.com) divider line 98
    More: Obvious, Steve Keen, economic bubble, Dow Jones Industrial Average  
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4420 clicks; posted to Business » on 13 Mar 2013 at 3:25 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2013-03-13 12:19:38 PM
Watch out Japan, here we come. USA! USA! USA!
 
2013-03-13 12:39:23 PM
So, buy my book and stimulate my economy because you're all screwed anyway
 
2013-03-13 12:45:44 PM

MaudlinMutantMollusk: So, buy my book and stimulate my economy because you're all screwed anyway


Can you link to your book?
 
2013-03-13 12:52:14 PM

Brontes: MaudlinMutantMollusk: So, buy my book and stimulate my economy because you're all screwed anyway

Can you link to your book?


Heh... I wish

/I was referring to the book they refer to in TFA
//sarcasm
 
2013-03-13 12:53:53 PM
Also sarcasm :)
 
2013-03-13 01:31:39 PM
If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.
 
2013-03-13 01:34:01 PM
You noticed?
 
2013-03-13 01:48:47 PM
Thank FSM the working class can't lose all those gains, since nothing trickles down.
 
2013-03-13 01:56:43 PM

GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.


Why not, companies and CEO's are making more now than ever?
 
2013-03-13 01:57:41 PM

GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.


Dammit.

Now I'm just going to have to follow the advice of the local TF investment expert.
 
2013-03-13 02:03:30 PM

GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.


The 1% is doing awesome, and they have like 50% of stock market assets.  And with all the options and leveraging that goes on, why it should only go higher.
 
2013-03-13 02:04:18 PM

GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot


I agree with you.
 
2013-03-13 03:15:36 PM
If you index corporate profits and S&P 500 to 1981, it looks like the markets have finally returned to nominal.

research.stlouisfed.org
 
2013-03-13 03:27:28 PM
A banker don't take a dump without a plan, son.
 
2013-03-13 03:28:10 PM
Yeah, that "all time high" business doesn't account for inflation.  And right now things are going fairly well, without Fed action we'd have been royally screwed.
 
2013-03-13 03:30:15 PM
I think it's the same Boomer investor classes who are chasing their retirement portfolios for the past 30 years and it keeps blowing up in their faces.

See, Boomers are lazy and entitled and impatient. They want ALL THE MONIES now through super fast investments instead of through slow, steady, productive growth that had been the hallmark of investment policy since the 40s. When they moved into positions of management and finance in the 80s, in concert with Reagan-era supply side policies they stuffed Wall Street full of cash and tried to make off like bandits.

Then the crash of 87 occurred and they lost it all. Or, most of it. (also, the recession of 91)

Thankfully, the 90s tech boom came around and they saw an opportunity to make it all back, so they stuffed Wall Street with venture capital tech dollaz and tried to set themselves up for life.

Then the crash of 2000 occurred and they lost it all. Or, most of it. (also, the boondoggle of 03)

To make it all back, they moved into positions of power and leadership and prodded the Bush puppet regime into relaxing financial regulations so they could make it all back, and they stuffed Wall Street with derivatives earmarks and tried to clean house.

Then the crash of 2008 occurred and they lost it all. Or, most of it.

Now, they are attempting to make it all back again, so here we go on another roaring speculative bubble. And this is probably the last one because they're getting old and they want to retire with their money, so they hope to cash out before it crashes again. And it will. And most of them will lose all their money again.

It's like a generational Martingale Strategem -- every time they lose all their virtual paper wealth, they double up and try to make it all back on the next upswing. And each time, the swings get larger, longer, and more pronounced, wrecking untold suffering, misery, confusion and death to whole populations.

Which is essentially what the markets were doing up until 1929.
 
2013-03-13 03:34:09 PM
Yup - stock market moves and valuation have NOTHING to do with actual value right now and haven't for a couple of decades.
 
2013-03-13 03:34:50 PM
Aren't all bubbles debt bubbles, more or less?
 
2013-03-13 03:38:38 PM
Just watched about 1/2 the video.  Stopped when the guy bragged about seeing the 2008 crash coming.  Who didn't see that coming?  Anybody with common sense who wasn't making commissions off selling mortgages to dumb people saw it coming.
 
2013-03-13 03:38:47 PM
Never seems to be a shortage of "money experts" writing books.  Since I can remember, some idiot's been trying to make a buck selling a book saying we're either royally farked or that "the sky's the limit so read my book to get yours!"

And every time, without fail, they claim to have been right in the past about timing the market.  Yet when you look for the evidence, try to find out what they were actually saying historically, it always comes up blank.

The internet must have a funny blind spot about financial people getting things right.

If someone found a way to ever predict what was going to happen, they would either shut their mouths tight, or everyone else would already be following them.
 
2013-03-13 03:41:01 PM
Keen has his eye on margin debt. This is the money people borrow from their stockbrokers to expand their holdings of shares. Keen says the ratio is now 70%, meaning with $300,000 you can borrow $1 million worth of shares.

Keen says margin debt levels in the U.S. now are similar to where they were in 2000 and 2007.

So where were they in 2007? I remember reading that the Big Five investment houses were leveraged up to 95-98% -- a hell of a lot more than 70%.  Don't know if that's the same measure that this guy is using but there was some serious craziness going on back then.
 
2013-03-13 03:43:44 PM

Ishkur: And this is probably the last one because they're getting old and they want to retire with their money, so they hope to cash out before it crashes again. And it will. And most of them will lose all their money again.


One can only hope it is the last one for a while.
 
2013-03-13 03:43:47 PM

stuhayes2010: Just watched about 1/2 the video.  Stopped when the guy bragged about seeing the 2008 crash coming.  Who didn't see that coming?  Anybody with common sense who wasn't making commissions off selling mortgages to dumb people saw it coming.


Your misunderstanding of the 2008 crash is stunning in its breadth and simplicity.
 
2013-03-13 03:48:35 PM

JohnBigBootay: stuhayes2010: Just watched about 1/2 the video.  Stopped when the guy bragged about seeing the 2008 crash coming.  Who didn't see that coming?  Anybody with common sense who wasn't making commissions off selling mortgages to dumb people saw it coming.

Your misunderstanding of the 2008 crash is stunning in its breadth and simplicity.


I think he might be thinking of the real-estate crash, which started 2 years earlier.
 
2013-03-13 04:07:06 PM

impaler: I think he might be thinking of the real-estate crash, which started 2 years earlier.


He'd still be wrong. Shoddy underwriting practices leading to mortgages being held by unqualified buyers was such a miniscule part of the housing bubble it barely warrants being linked at all. All the malfeasance with the ratings agencies and the credit default swap fiasco exposed some unqualified buyers but the housing crash was created by bankers, not first time home buyers. They very idea is absurd on its face.
 
2013-03-13 04:07:32 PM

UseUrHeadFred: Never seems to be a shortage of "money experts" writing books.  Since I can remember, some idiot's been trying to make a buck selling a book saying we're either royally farked or that "the sky's the limit so read my book to get yours!"

And every time, without fail, they claim to have been right in the past about timing the market.  Yet when you look for the evidence, try to find out what they were actually saying historically, it always comes up blank.


That's why I am currently writing three books.  The first one is titled: "writing money expert books to make money" , the second: "how to write a book based on another book by stating everything in that book is wrong." and the third one is more of a self-help book: "how to write a self-help book for dummies"

I should be able to retire once I finish writing them.
 
2013-03-13 04:08:47 PM

GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.


First time I've heard of someone else feeling that way.  I can't figure out what's driving the market higher.

BTW - what's the status of the commercial real-estate market?
 
2013-03-13 04:10:25 PM
Steven Keen is probably the most interesting 'non-mainstream' economist around. It's always good to see him getting coverage. I'd highly recommend his book.
 
2013-03-13 04:10:46 PM

Odd Bird: I can't figure out what's driving the market higher.


Uhhh the Fed creating more and more money?
 
2013-03-13 04:12:21 PM

JohnBigBootay: impaler: I think he might be thinking of the real-estate crash, which started 2 years earlier.

He'd still be wrong. Shoddy underwriting practices leading to mortgages being held by unqualified buyers was such a miniscule part of the housing bubble it barely warrants being linked at all. All the malfeasance with the ratings agencies and the credit default swap fiasco exposed some unqualified buyers but the housing crash was created by bankers, not first time home buyers. They very idea is absurd on its face.


Paul Krugman was writing about the housing bubble and the probability of a crash as early as 2003.
 
2013-03-13 04:18:44 PM

Odd Bird: GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.

First time I've heard of someone else feeling that way.  I can't figure out what's driving the market higher.

BTW - what's the status of the commercial real-estate market?


Slowly recovering for all I've heard.  I remember people predicting massive collapse and doom in that around now back in 2009 but I haven't seen anything else since then.
 
2013-03-13 04:20:58 PM

ricewater_stool: JohnBigBootay: impaler: I think he might be thinking of the real-estate crash, which started 2 years earlier.

He'd still be wrong. Shoddy underwriting practices leading to mortgages being held by unqualified buyers was such a miniscule part of the housing bubble it barely warrants being linked at all. All the malfeasance with the ratings agencies and the credit default swap fiasco exposed some unqualified buyers but the housing crash was created by bankers, not first time home buyers. They very idea is absurd on its face.

Paul Krugman was writing about the housing bubble and the probability of a crash as early as 2003.


That's because that bubble was easy to see when you look at an inflation-adjusted housing price history.  Even by 2003 it stood out as a big bubble.

s.wsj.net

People chose to ignore that and declared infinitely rising house prices a new normal.
 
2013-03-13 04:22:03 PM

MugzyBrown: Odd Bird: I can't figure out what's driving the market higher.

Uhhh the Fed creating more and more money?


lulz
 
2013-03-13 04:44:54 PM

GAT_00: People chose to ignore that and declared infinitely rising house prices a new normal.


One would expect housing prices to rise infinitely. It's inevitable actually. It's just supposed to be real slooooooow and measured and sort of kind of track with inflation and gdp.
 
2013-03-13 04:46:54 PM
In 500 years time people will look back and see this as the biggest debt-financed bubble in human history and ask, 'why didn't we realize it,'" Keen says. "But we think it's normal."

This makes the enormous and unsupported assumption that people will learn from their mistakes.
 
2013-03-13 04:49:02 PM

Odd Bird: GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.

First time I've heard of someone else feeling that way.  I can't figure out what's driving the market higher.

BTW - what's the status of the commercial real-estate market?


As far as I can tell, it's optimism that's sending the stock market up. People invest with their stomachs, not their brains. If they feel good about the future, they buy. They feel bad about the future, they sell. The stocks I've been tracking since about 2007 seemed like they were being held artificially low in price while everyone bemoaned about how awful things were. Once things started turning around, people started feeling comfortable buying again. It's the same thing that causes the 5 day gain, the 2 day correction, rinse and repeat . "Oh life is good, we should buy!" "Oh crap but it's going too high too fast" "Whoops, nope, we're okay again." From 2008 until a few months ago I could set my watch by it.

I'm just not sure about the long term. Student debt, federal debt, the massive healthcare expenses that we know are coming, gold bubble, etc. All that makes me a little nervous about future returns; there's no way a 23-yr-old kid today is going to have disposable income in 10 years if she gets a Master's degree, and that's simply not good for product markets. By the same token, most of the people who HAVE disposable income either aren't doing anything with it (see 1%) or are too sick to do anything with it (see seniors). Could change, but that requires Congress, and I'm certainly not putting any good money on betting that Congress will act.
 
2013-03-13 05:04:32 PM

JohnBigBootay: One would expect housing prices to rise infinitely. It's inevitable actually


No. Only if population keeps increasing. Since this isn't possible and a relative maxima is certain, inflation and housing will eventually reach an equilibrium. And then capitalism will fall apart because it's not designed for such a contingency.
 
2013-03-13 05:10:34 PM

Ishkur: JohnBigBootay: One would expect housing prices to rise infinitely. It's inevitable actually

No. Only if population keeps increasing. Since this isn't possible and a relative maxima is certain, inflation and housing will eventually reach an equilibrium. And then capitalism will fall apart because it's not designed for such a contingency.


To be fair I don't think a population increase is strictly necessary, just home buyers. One could certainly have a housing boom fueled by an increase in the number of buyers even in a shrinking  or stable population. If wages rose that is. So, right about when monkeys fly out my ass.
 
2013-03-13 05:10:37 PM
One thing is clear. This is Bush's fault.
 
2013-03-13 05:14:42 PM

Ishkur: No. Only if population keeps increasing. Since this isn't possible and a relative maxima is certain, inflation and housing will eventually reach an equilibrium. And then capitalism will fall apart because it's not designed for such a contingency.


I'm not sure I see a cap on human population, we still have a LOT of space on Earth to fill up, and there is an ever expanding universe out there.   Assuming we don't have a global nuclear war, getting our tech to the point we can colonize other off-planet areas shouldn't be too much of a stretch.
 
2013-03-13 05:16:05 PM

UseUrHeadFred: If someone found a way to ever predict what was going to happen, they would either shut their mouths tight, or everyone else would already be following them.


Hi, can you please familiarize yourself with the Ancient Greek myth of Cassandra before reality bursts your bubble?  The world does not work the way you think it does.

There were people screaming about the bubble.  But when people chase money, awful things happen, principally among them a total abandonment of reason.
 
2013-03-13 05:17:43 PM

AdolfClamwacker: Assuming we don't have a global nuclear war, getting our tech to the point we can colonize other off-planet areas shouldn't be too much of a stretch.


Didn't you see the space-junk thread?  We're stuck here.

/bored, end of the day, killing time
 
2013-03-13 05:19:06 PM

JohnBigBootay: To be fair I don't think a population increase is strictly necessary, just home buyers. One could certainly have a housing boom fueled by an increase in the number of buyers even in a shrinking or stable population. If wages rose that is. So, right about when monkeys fly out my ass.


Well, yes, demographics plays a key part of it. Since our population is aging and older people generally have more money, that is what is fueling investment, real estate and stock speculation bubbles. Don't expect this to continue: Boomers are a greedy bunch and they plan to sell off everything when they retire, spend it all and leave nothing for their kids. There WILL be a housing crunch in the next 10-15 years.

Wages are always the LAST thing to go up in an inflationary period. Inflation is not bad -- it's supposed to happen. It's good for borrowing but bad for working classes.
 
2013-03-13 05:21:13 PM

AdolfClamwacker: I'm not sure I see a cap on human population, we still have a LOT of space on Earth to fill up, and there is an ever expanding universe out there. Assuming we don't have a global nuclear war, getting our tech to the point we can colonize other off-planet areas shouldn't be too much of a stretch.


This is an awful lot of assumptions.

We can barely sustain ourselves now at 7 billion with the resources we have. What makes you think things will be better with 10/20/50 billion people at first world consumption levels?
 
2013-03-13 05:21:38 PM

JohnBigBootay: Ishkur: JohnBigBootay: One would expect housing prices to rise infinitely. It's inevitable actually

No. Only if population keeps increasing. Since this isn't possible and a relative maxima is certain, inflation and housing will eventually reach an equilibrium. And then capitalism will fall apart because it's not designed for such a contingency.

To be fair I don't think a population increase is strictly necessary, just home buyers. One could certainly have a housing boom fueled by an increase in the number of buyers even in a shrinking  or stable population. If wages rose that is. So, right about when monkeys fly out my ass.


A massive shift in population could do the trick on a temporary basis too.  Or a massive shift in living style.
 
2013-03-13 05:23:23 PM

Odd Bird: Didn't you see the space-junk thread? We're stuck here.


I didn't, I'll look over at the geek tab in a bit.
 
2013-03-13 05:29:22 PM

Ishkur: AdolfClamwacker: I'm not sure I see a cap on human population, we still have a LOT of space on Earth to fill up, and there is an ever expanding universe out there. Assuming we don't have a global nuclear war, getting our tech to the point we can colonize other off-planet areas shouldn't be too much of a stretch.

This is an awful lot of assumptions.

We can barely sustain ourselves now at 7 billion with the resources we have. What makes you think things will be better with 10/20/50 billion people at first world consumption levels?


I don't see the race off the planet a matter of bringing everyone up to first world standards, it's more about developing the tech to leave before we drag everyone down to third world standards.
 
2013-03-13 05:29:37 PM
The market goes up, the market goes down.

You can't explain that.
 
2013-03-13 05:29:38 PM

ShawnDoc: GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.

Why not, companies and CEO's are making more now than ever?


media.tumblr.com

And the wealthy are the ones who won stock, yes, even including your pitiful 401K.
 
2013-03-13 05:35:59 PM

AdolfClamwacker: I don't see the race off the planet a matter of bringing everyone up to first world standards, it's more about developing the tech to leave before we drag everyone down to third world standards.


You have an awful lot of confidence in the feasibility of space travel/living.
 
2013-03-13 05:40:18 PM
Read this crap from a non-American! This is an insult to those who actually troll!

Ishkur
I think it's the same Boomer investor classes who are chasing their retirement portfolios for the past 30 years and it keeps blowing up in their faces.

See, Boomers are lazy and entitled and impatient. They want ALL THE MONIES now through super fast investments instead of through slow, steady, productive growth that had been the hallmark of investment policy since the 40s. When they moved into positions of management and finance in the 80s, in concert with Reagan-era supply side policies they stuffed Wall Street full of cash and tried to make off like bandits.

Then the crash of 87 occurred and they lost it all. Or, most of it. (also, the recession of 91)

Thankfully, the 90s tech boom came around and they saw an opportunity to make it all back, so they stuffed Wall Street with venture capital tech dollaz and tried to set themselves up for life.

Then the crash of 2000 occurred and they lost it all. Or, most of it. (also, the boondoggle of 03)

To make it all back, they moved into positions of power and leadership and prodded the Bush puppet regime into relaxing financial regulations so they could make it all back, and they stuffed Wall Street with derivatives earmarks and tried to clean house.

Then the crash of 2008 occurred and they lost it all. Or, most of it.

Now, they are attempting to make it all back again, so here we go on another roaring speculative bubble. And this is probably the last one because they're getting old and they want to retire with their money, so they hope to cash out before it crashes again. And it will. And most of them will lose all their money again.

It's like a generational
Which is essentially what the markets were doing up until 1929.



troll city? YOU BETCHA!
amazing we call Canada friends. Eh?
 
2013-03-13 05:53:35 PM
Yes and?
 
2013-03-13 06:04:24 PM

Hyjamon: UseUrHeadFred:

That's why I am currently writing three books.  The first one is titled: "writing money expert books to make money" , the second: "how to write a book based on another book by stating everything in that book is wrong." and the third one is more of a self-help book: "how to write a self-help book for dummies"

I should be able to retire once I finish writing them.


You're too late, friend.  I'm writing "how to write a book before that other guy writes a book so as to steal his thunder and make all the money yourself", from Simon & Schuster Publishing.  I already have an advance: they paid me in stock options!
 
2013-03-13 07:03:59 PM

The Evil That Lies In The Hearts Of Men: In 500 years time people will look back and see this as the biggest debt-financed bubble in human history and ask, 'why didn't we realize it,'" Keen says. "But we think it's normal."

This makes the enormous and unsupported assumption that people will learn from their mistakes.


I always look at the Dow of 1413 AD before I buy anything.

/Amalgamated Hearth Kettles, Plc and British Groat Winnowers, Ltd were big movers then
 
2013-03-13 07:23:17 PM

GAT_00: ricewater_stool: JohnBigBootay: impaler: I think he might be thinking of the real-estate crash, which started 2 years earlier.

He'd still be wrong. Shoddy underwriting practices leading to mortgages being held by unqualified buyers was such a miniscule part of the housing bubble it barely warrants being linked at all. All the malfeasance with the ratings agencies and the credit default swap fiasco exposed some unqualified buyers but the housing crash was created by bankers, not first time home buyers. They very idea is absurd on its face.

Paul Krugman was writing about the housing bubble and the probability of a crash as early as 2003.

That's because that bubble was easy to see when you look at an inflation-adjusted housing price history.  Even by 2003 it stood out as a big bubble.

[s.wsj.net image 567x417]

People chose to ignore that and declared infinitely rising house prices a new normal.



Bernake (October 20, 2005):

"House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals."
 
2013-03-13 08:13:35 PM

The Evil That Lies In The Hearts Of Men: In 500 years time people will look back and see this as the biggest debt-financed bubble in human history and ask, 'why didn't we realize it,'" Keen says. "But we think it's normal."

This makes the enormous and unsupported assumption that people will learn from their mistakes.


My experience as that as a society we have a collective 3 to 5 year memory for financial conditions.  Investors look at the last three to five years and assume the future will be just like that.  The problem with that is that it works a good portion of the time.  People move into big market shifts half way through and see results.  Then when conditions change the herd loses because the herd was looking to the past, not toward the future changes in the market.

I see that here among folks who talk about how interest rates have been low and will continue to be low into the future.  I've seen 30 year mortgages at 19% and 3.5% in the past 30 years.  Rates are where they are because of the economic downturn and action by the Fed.  Without the Fed's QE the rate on bonds would be 1% to 1.5% higher than it is today.  Those lower rates cause investment dollars to go for a greater return and with the economy warming up that return is in the stock market because that's where the return is.  The stock market is higher than it would be, but for the most part it's not overvalued yet.
 
2013-03-13 08:26:01 PM

GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.


The stock market isn't driven by the economy.  It's a reflection of price earnings, speculation on the future, and corporate profits.

Three legs that are doing dandy right now.
 
2013-03-13 08:29:54 PM
It's all fiat anyway. When it blows up they'll just make up something else.
 
2013-03-13 09:17:45 PM

GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.


Doesn't matter what I think.  Whether it's gold or equities, if the market is rising I want a piece of it.
 
2013-03-13 09:19:37 PM
The economy is improving while the black guy is President!

Its all going to BLOW and we'll be luck to live through it!

BOOGHA BOOUGHA

/ oh yeah, buy my book...
 
2013-03-13 09:21:04 PM

Incontinent_dog_and_monkey_rodeo: Yeah, that "all time high" business doesn't account for inflation.  And right now things are going fairly well, without Fed action we'd have been royally screwed.


I hate the inflation adjusted argument.  I don't get paid in inflation adjusted dollars and my baker doesn't sell bread in inflation adjusted dollars so just forget that shait.  You look at the numbers as they are today and decide if you want to buy, sell, sit on the sidelines or invest your dollars in sandwiches.
 
2013-03-13 09:30:47 PM

relaxitsjustme: GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.

Doesn't matter what I think.  Whether it's gold or equities, if the market is rising I want a piece of it.


You've got issues then. You'll buy high because the market is on it's way up, and then sell at a loss because the stock has turned. Better investors research a stock, then buy during a correction, or at regular intervals. I seriously hope you only put money into funds, because if you're buying individual stocks, you're screwed.

relaxitsjustme: Incontinent_dog_and_monkey_rodeo: Yeah, that "all time high" business doesn't account for inflation.  And right now things are going fairly well, without Fed action we'd have been royally screwed.

I hate the inflation adjusted argument.  I don't get paid in inflation adjusted dollars and my baker doesn't sell bread in inflation adjusted dollars so just forget that shait.  You look at the numbers as they are today and decide if you want to buy, sell, sit on the sidelines or invest your dollars in sandwiches.


Nevermind. At this point, hand your money over to an accountant.
 
2013-03-13 09:46:02 PM

Mr. Eugenides: The Evil That Lies In The Hearts Of Men: In 500 years time people will look back and see this as the biggest debt-financed bubble in human history and ask, 'why didn't we realize it,'" Keen says. "But we think it's normal."

This makes the enormous and unsupported assumption that people will learn from their mistakes.

My experience as that as a society we have a collective 3 to 5 year memory for financial conditions.  Investors look at the last three to five years and assume the future will be just like that.  The problem with that is that it works a good portion of the time.  People move into big market shifts half way through and see results.  Then when conditions change the herd loses because the herd was looking to the past, not toward the future changes in the market.

I see that here among folks who talk about how interest rates have been low and will continue to be low into the future.  I've seen 30 year mortgages at 19% and 3.5% in the past 30 years.  Rates are where they are because of the economic downturn and action by the Fed.  Without the Fed's QE the rate on bonds would be 1% to 1.5% higher than it is today.  Those lower rates cause investment dollars to go for a greater return and with the economy warming up that return is in the stock market because that's where the return is.  The stock market is higher than it would be, but for the most part it's not overvalued yet.


I think the collective memory is a lot longer than 3~5 years.  Some of it might be dictated by how painful the experience was.  My grandparents who went through the Great Depression carried that hyper-frugal depression era mentality for their entire lives.  How many dot-com investors who took a bath in 2000 missed out on AAPL, GOOG, AMZN and the like because there was no way they would risk a dime on a dot-com stock.  (Maybe not AAPL so much these days :)  I'm willing to bet a large majority of the people who lost their house during that bubble won't be buying a house anytime soon regardless of credit rating.
 
2013-03-13 09:55:27 PM

Peki: relaxitsjustme: GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.

Doesn't matter what I think.  Whether it's gold or equities, if the market is rising I want a piece of it.

You've got issues then. You'll buy high because the market is on it's way up, and then sell at a loss because the stock has turned. Better investors research a stock, then buy during a correction, or at regular intervals. I seriously hope you only put money into funds, because if you're buying individual stocks, you're screwed.

relaxitsjustme: Incontinent_dog_and_monkey_rodeo: Yeah, that "all time high" business doesn't account for inflation.  And right now things are going fairly well, without Fed action we'd have been royally screwed.

I hate the inflation adjusted argument.  I don't get paid in inflation adjusted dollars and my baker doesn't sell bread in inflation adjusted dollars so just forget that shait.  You look at the numbers as they are today and decide if you want to buy, sell, sit on the sidelines or invest your dollars in sandwiches.

Nevermind. At this point, hand your money over to an accountant.


Dafuk you say.  Pay some fund manager 1% or more of my hard earned dollars who, if they are lucky might match the S&P500.  I just wish I had gotten control of my money earlier.  I seriously debated paying the income tax and the penalty and pulling my money out of my 401K when the DJIA hit 12,000 on it's way down several years ago because apparently the only people who couldn't see that bear coming was the idiot fund managers at Fidelity.  Did just fine in gold and I'm almost fully invested right now and with the exception of a gamble on a Phase III drug trial that cost me $$$$ I'm happy with my portfolio.
 
2013-03-13 10:02:32 PM

relaxitsjustme: Peki: relaxitsjustme: GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.

Doesn't matter what I think.  Whether it's gold or equities, if the market is rising I want a piece of it.

You've got issues then. You'll buy high because the market is on it's way up, and then sell at a loss because the stock has turned. Better investors research a stock, then buy during a correction, or at regular intervals. I seriously hope you only put money into funds, because if you're buying individual stocks, you're screwed.

relaxitsjustme: Incontinent_dog_and_monkey_rodeo: Yeah, that "all time high" business doesn't account for inflation.  And right now things are going fairly well, without Fed action we'd have been royally screwed.

I hate the inflation adjusted argument.  I don't get paid in inflation adjusted dollars and my baker doesn't sell bread in inflation adjusted dollars so just forget that shait.  You look at the numbers as they are today and decide if you want to buy, sell, sit on the sidelines or invest your dollars in sandwiches.

Nevermind. At this point, hand your money over to an accountant.

Dafuk you say.  Pay some fund manager 1% or more of my hard earned dollars who, if they are lucky might match the S&P500.  I just wish I had gotten control of my money earlier.  I seriously debated paying the income tax and the penalty and pulling my money out of my 401K when the DJIA hit 12,000 on it's way down several years ago because apparently the only people who couldn't see that bear coming was the idiot fund managers at Fidelity.  Did just fine in gold and I'm almost fully invested right now and with the exception of a gamble on a Phase III drug trial that cost me $$$$ I'm happy with my portfolio.


You don't understand how mutual funds work.
 
2013-03-13 10:17:03 PM
Thanks, Obama!
 
2013-03-13 10:24:53 PM

relaxitsjustme: I think the collective memory is a lot longer than 3~5 years.  Some of it might be dictated by how painful the experience was.  My grandparents who went through the Great Depression carried that hyper-frugal depression era mentality for their entire lives.  How many dot-com investors who took a bath in 2000 missed out on AAPL, GOOG, AMZN and the like because there was no way they would risk a dime on a dot-com stock.  (Maybe not AAPL so much these days :)  I'm willing to bet a large majority of the people who lost their house during that bubble won't be buying a house anytime soon regardless of credit rating.


I don't know. The Great Depression literally hit them in the stomach. Not eating is very visceral and real. That kind of thing stays with a person. The dot com bust was more easily forgettable in comparison.
 
2013-03-13 10:41:52 PM

gameshowhost: Thank FSM the working class can't lose all those gains, since nothing trickles down.



I bet we'll still have to bail them out after a crash. We can't afford to compete with them for politicians/
 
2013-03-13 10:46:11 PM

max_pooper: You don't understand how mutual funds work.


Shut up.  I understand how mutual funds work and I don't want any part of them TYVM.

NOW I could buy a piece of an openly traded mutual fund if I wanted.  At the time I was locked into the 401K plan of my employer with about a 1/2 dozen funds to choose from and EVERY SINGLE ONE lost money.  There was no option to move to cash.  Again why should/would I buy a mutual fund?  I'll pay the $8.00 per trade and pick my own winners and losers.
 
2013-03-13 10:54:18 PM

impaler: relaxitsjustme: I think the collective memory is a lot longer than 3~5 years.  Some of it might be dictated by how painful the experience was.  My grandparents who went through the Great Depression carried that hyper-frugal depression era mentality for their entire lives.  How many dot-com investors who took a bath in 2000 missed out on AAPL, GOOG, AMZN and the like because there was no way they would risk a dime on a dot-com stock.  (Maybe not AAPL so much these days :)  I'm willing to bet a large majority of the people who lost their house during that bubble won't be buying a house anytime soon regardless of credit rating.

I don't know. The Great Depression literally hit them in the stomach. Not eating is very visceral and real. That kind of thing stays with a person. The dot com bust was more easily forgettable in comparison.


True enough.  They didn't talk a lot about it but I did hear one story about stealing potatoes out of a field so they could eat.  How willing to jump back into the market somebody would be is a large part dictated by how much pain they went through the last couple of times around
 
2013-03-13 11:01:05 PM

relaxitsjustme: max_pooper: You don't understand how mutual funds work.

Shut up.  I understand how mutual funds work and I don't want any part of them TYVM.

NOW I could buy a piece of an openly traded mutual fund if I wanted.  At the time I was locked into the 401K plan of my employer with about a 1/2 dozen funds to choose from and EVERY SINGLE ONE lost money.  There was no option to move to cash.  Again why should/would I buy a mutual fund?  I'll pay the $8.00 per trade and pick my own winners and losers.


Sounds like a combination of working for a shiaty company that offers shiaty benefits and not having basic investment knowledge.

My 401k is doing quite well because I did nothing. I kept on putting money into the same funds that saw gut wrenching declines in the crash. While the moran investor like yourself wet his pants, the smart investors understand dollar cost averaging. While the dollars I put in before 2008 are just recently back to where they were in 2008, all the dollars I put in after 2008 have grown by leaps and bounds. Overall I'm up.

But I'm sure your extensive business acumen will render your personal stock picks returns unseen by the professional investment industry.
 
2013-03-13 11:35:33 PM

max_pooper: relaxitsjustme: max_pooper: You don't understand how mutual funds work.

Shut up.  I understand how mutual funds work and I don't want any part of them TYVM.

NOW I could buy a piece of an openly traded mutual fund if I wanted.  At the time I was locked into the 401K plan of my employer with about a 1/2 dozen funds to choose from and EVERY SINGLE ONE lost money.  There was no option to move to cash.  Again why should/would I buy a mutual fund?  I'll pay the $8.00 per trade and pick my own winners and losers.

Sounds like a combination of working for a shiaty company that offers shiaty benefits and not having basic investment knowledge.

My 401k is doing quite well because I did nothing. I kept on putting money into the same funds that saw gut wrenching declines in the crash. While the moran investor like yourself wet his pants, the smart investors understand dollar cost averaging. While the dollars I put in before 2008 are just recently back to where they were in 2008, all the dollars I put in after 2008 have grown by leaps and bounds. Overall I'm up.

But I'm sure your extensive business acumen will render your personal stock picks returns unseen by the professional investment industry.


I wasn't wetting my pants, I was farking pissed off but if I was in my early 60's and planning my retirement you're damn right I would have been wetting my pants.  Overall your up...whoop de doo.  Genius you're up because the market is up, not because you happen to pick the most outstanding fund.  And I said up thread that I'm almost fully invested so what makes you so sure I'm losing money?  But please tell me your secret.  Large cap value fund? Small cap growth?  Let me guess, a 20% mix of 5 different funds.

So how much does your 401K management company charge you for their obviously outstanding services?
 
2013-03-13 11:55:19 PM

relaxitsjustme: max_pooper: relaxitsjustme: max_pooper: You don't understand how mutual funds work.

Shut up.  I understand how mutual funds work and I don't want any part of them TYVM.

NOW I could buy a piece of an openly traded mutual fund if I wanted.  At the time I was locked into the 401K plan of my employer with about a 1/2 dozen funds to choose from and EVERY SINGLE ONE lost money.  There was no option to move to cash.  Again why should/would I buy a mutual fund?  I'll pay the $8.00 per trade and pick my own winners and losers.

Sounds like a combination of working for a shiaty company that offers shiaty benefits and not having basic investment knowledge.

My 401k is doing quite well because I did nothing. I kept on putting money into the same funds that saw gut wrenching declines in the crash. While the moran investor like yourself wet his pants, the smart investors understand dollar cost averaging. While the dollars I put in before 2008 are just recently back to where they were in 2008, all the dollars I put in after 2008 have grown by leaps and bounds. Overall I'm up.

But I'm sure your extensive business acumen will render your personal stock picks returns unseen by the professional investment industry.

I wasn't wetting my pants, I was farking pissed off but if I was in my early 60's and planning my retirement you're damn right I would have been wetting my pants.  Overall your up...whoop de doo.  Genius you're up because the market is up, not because you happen to pick the most outstanding fund.  And I said up thread that I'm almost fully invested so what makes you so sure I'm losing money?  But please tell me your secret.  Large cap value fund? Small cap growth?  Let me guess, a 20% mix of 5 different funds.

So how much does your 401K management company charge you for their obviously outstanding services?


*sigh* I make 20% a year on a mix of about 10 or so individual stocks, usually off the S&P 500, but I'll go for an outlier if the balance sheet looks good. I make investing in a company about THE COMPANY, not the gorram market. Play the market, and that's what you're doing, playing. Look at a company, read its history, and if the balance sheet looks like something like an average American's net worth, avoid at all costs. BTW, that 20% includes the first year drop from 2008-2009 (and actually I made 25% that year, it's fallen off a little since then). The thing that sucks is that when you're making 20% on a $1,000 investment, you can't do much with it (hence why I'm not rich).

Let's see. Your strategy:
"if the market is rising I want a piece of it."
"Did just fine in gold and I'm almost fully invested right now "

Assuming that "fully invested" means you've got almost 100% of your investment money in gold, those two sentences right there tell me to ignore any investment advice you give after "Buy your own stocks." I'm not saying diversification is good (if it gets to the point you don't know what you're holding), but you are setting yourself up for some serious hurt in the future if you don't get out soon.
 
2013-03-13 11:58:48 PM

max_pooper: My 401k is doing quite well because I did nothing. I kept on putting money into the same funds that saw gut wrenching declines in the crash. While the moran investor like yourself wet his pants, the smart investors understand dollar cost averaging. While the dollars I put in before 2008 are just recently back to where they were in 2008, all the dollars I put in after 2008 have grown by leaps and bounds. Overall I'm up.


Yep, you're not going to beat the market. If you do, you got lucky. You won't be lucky forever.
 
2013-03-14 12:25:27 AM

Peki: *sigh* I make 20% a year on a mix of about 10 or so individual stocks, usually off the S&P 500, but I'll go for an outlier if the balance sheet looks good. I make investing in a company about THE COMPANY, not the gorram market. Play the market, and that's what you're doing, playing. Look at a company, read its history, and if the balance sheet looks like something like an average American's net worth, avoid at all costs. BTW, that 20% includes the first year drop from 2008-2009 (and actually I made 25% that year, it's fallen off a little since then). The thing that sucks is that when you're making 20% on a $1,000 investment, you can't do much with it (hence why I'm not rich).

Let's see. Your strategy:
"if the market is rising I want a piece of it."
"Did just fine in gold and I'm almost fully invested right now "

Assuming that "fully invested" means you've got almost 100% of your investment money in gold, those two sentences right there tell me to ignore any investment advice you give after "Buy your own stocks." I'm not saying diversification is good (if it gets to the point you don't know what you're holding), but you are setting yourself up for some serious hurt in the future if you don't get out soon.


You missed my point.  And just to be accurate I didn't actually buy gold, bought UGL and sold it again after it had come about 10% off its high.  Still netted a 17% gain.

You're making a lot of assumptions about my purchasing decisions.  If a stock is on the move I'm definitely interested but FFS I don't just look at the new highs list and decide...ooh I'll take 100 of that and 100 of those.

You make 20~25% returns a year in the market every year?  I don't know what you do for a living but you should be the next hotshot mutual fund manager.
 
2013-03-14 12:36:42 AM

impaler: max_pooper: My 401k is doing quite well because I did nothing. I kept on putting money into the same funds that saw gut wrenching declines in the crash. While the moran investor like yourself wet his pants, the smart investors understand dollar cost averaging. While the dollars I put in before 2008 are just recently back to where they were in 2008, all the dollars I put in after 2008 have grown by leaps and bounds. Overall I'm up.

Yep, you're not going to beat the market. If you do, you got lucky. You won't be lucky forever.


Trying to beat the market is the problem. Too many people are trying to beat the market when it has been proven time and time again that even the vast majority of professional money managers cannot beat the market.

The dollar cost averaging into broad index funds that are diversified (folks who are hoping to retire within 10 years should *not* have 80% of funds in equities)  won't beat the market - but you don't need to beat the market to accumulate enough for a comfortable retirement. A nice string of singles will do fine instead of trying to swing for the fences.
 
2013-03-14 12:49:00 AM

relaxitsjustme: Peki: *sigh* I make 20% a year on a mix of about 10 or so individual stocks, usually off the S&P 500, but I'll go for an outlier if the balance sheet looks good. I make investing in a company about THE COMPANY, not the gorram market. Play the market, and that's what you're doing, playing. Look at a company, read its history, and if the balance sheet looks like something like an average American's net worth, avoid at all costs. BTW, that 20% includes the first year drop from 2008-2009 (and actually I made 25% that year, it's fallen off a little since then). The thing that sucks is that when you're making 20% on a $1,000 investment, you can't do much with it (hence why I'm not rich).

Let's see. Your strategy:
"if the market is rising I want a piece of it."
"Did just fine in gold and I'm almost fully invested right now "

Assuming that "fully invested" means you've got almost 100% of your investment money in gold, those two sentences right there tell me to ignore any investment advice you give after "Buy your own stocks." I'm not saying diversification is good (if it gets to the point you don't know what you're holding), but you are setting yourself up for some serious hurt in the future if you don't get out soon.

You missed my point.  And just to be accurate I didn't actually buy gold, bought UGL and sold it again after it had come about 10% off its high.  Still netted a 17% gain.

You're making a lot of assumptions about my purchasing decisions.  If a stock is on the move I'm definitely interested but FFS I don't just look at the new highs list and decide...ooh I'll take 100 of that and 100 of those.

You make 20~25% returns a year in the market every year?  I don't know what you do for a living but you should be the next hotshot mutual fund manager.


Wouldn't mind necessarily, but I don't have the accounting degree/certificates needed (my BA is English/Women's Studies) and the regulations would restrict me from buying whatever stock I wanted. Besides, it's not the managers that get rich.

And like I said, not much I can do with a 20% return when I've only got 1K in. :(
 
2013-03-14 01:26:43 AM

GAT_00: If you think the economy warrants the stock market being at an all time high, you're an idiot who deserves to lose however much money you've put into it.




OMG, I agree with gat for the first time ever. Free money is flooding the stock market, that is pretty obvious.
 
2013-03-14 03:23:49 AM
"In 500 years time people will look back and see this as the biggest debt-financed bubble in human history and ask, 'why didn't we realize it,'" Keen says. "But we think it's normal."

I DON'T THINK IT'S NORMAL OR OKAY.

Things will only change when gov't benefit checks start bouncing, and Mama can't get her meds and Bubba can't get his beers.

/stock picks? stock ammo.
 
2013-03-14 06:18:27 AM
I don't know about you guys, but I'm going to put all my money in the shelf-stable sandwiches someone was touting in the Amazon prime thread.
 
2013-03-14 10:04:43 AM
Wasn't the leveraging of investments one of the big factors leading to the stock market crash of 1929?

relaxitsjustme: You missed my point. And just to be accurate I didn't actually buy gold, bought UGL and sold it again after it had come about 10% off its high. Still netted a 17% gain.

You're making a lot of assumptions about my purchasing decisions. If a stock is on the move I'm definitely interested but FFS I don't just look at the new highs list and decide...ooh I'll take 100 of that and 100 of those.

You make 20~25% returns a year in the market every year? I don't know what you do for a living but you should be the next hotshot mutual fund manager.


Maybe they're a congressperson? They usually beat the experts in the market.
 
2013-03-14 11:43:38 AM

relaxitsjustme: Mr. Eugenides: The Evil That Lies In The Hearts Of Men: In 500 years time people will look back and see this as the biggest debt-financed bubble in human history and ask, 'why didn't we realize it,'" Keen says. "But we think it's normal."

This makes the enormous and unsupported assumption that people will learn from their mistakes.

My experience as that as a society we have a collective 3 to 5 year memory for financial conditions.  Investors look at the last three to five years and assume the future will be just like that.  The problem with that is that it works a good portion of the time.  People move into big market shifts half way through and see results.  Then when conditions change the herd loses because the herd was looking to the past, not toward the future changes in the market.

I see that here among folks who talk about how interest rates have been low and will continue to be low into the future.  I've seen 30 year mortgages at 19% and 3.5% in the past 30 years.  Rates are where they are because of the economic downturn and action by the Fed.  Without the Fed's QE the rate on bonds would be 1% to 1.5% higher than it is today.  Those lower rates cause investment dollars to go for a greater return and with the economy warming up that return is in the stock market because that's where the return is.  The stock market is higher than it would be, but for the most part it's not overvalued yet.

I think the collective memory is a lot longer than 3~5 years.  Some of it might be dictated by how painful the experience was.  My grandparents who went through the Great Depression carried that hyper-frugal depression era mentality for their entire lives.  How many dot-com investors who took a bath in 2000 missed out on AAPL, GOOG, AMZN and the like because there was no way they would risk a dime on a dot-com stock.  (Maybe not AAPL so much these days :)  I'm willing to bet a large majority of the people who lost their house during that bubble won't be buying a house a ...


Maybe some of them, but not me. I short sold my home in 2010, which really fubared my credit. It's been all good since then, and I finally got approved for a home loan. You see, I still need a place to live, and I am not comfortable throwing money away toward rent when I can own something. So I saved up 25K for the down payment, and just bought a home and will be closing on Monday. Granted, it's a smaller home, and costs much less than the one I bought previously, but I have realized over the last three years that I don't need a big house, and have nobody to impress but myself.
 
2013-03-14 08:53:04 PM

impaler: If you index corporate profits and S&P 500 to 1981, it looks like the markets have finally returned to nominal.

[research.stlouisfed.org image 630x378]


OK, but 1981 was a depression year, 1978 had 14% inflation or thereabouts, a whole decade of serious inflation. Is 1981 a good baseline to pick?
 
2013-03-14 11:51:22 PM

enemy of the state: impaler: If you index corporate profits and S&P 500 to 1981, it looks like the markets have finally returned to nominal.

[research.stlouisfed.org image 630x378]

OK, but 1981 was a depression year, 1978 had 14% inflation or thereabouts, a whole decade of serious inflation. Is 1981 a good baseline to pick?


That depends on if you mean good for being meaningful or good for backing up his point.
 
2013-03-15 03:57:47 AM

Incontinent_dog_and_monkey_rodeo: Yeah, that "all time high" business doesn't account for inflation.  And right now things are going fairly well, without Fed action we'd have been royally screwed.


Instead, we'll just get screwed harder later. Thanks, Fed.
 
2013-03-15 04:38:38 AM

ricewater_stool: JohnBigBootay: impaler: I think he might be thinking of the real-estate crash, which started 2 years earlier.

He'd still be wrong. Shoddy underwriting practices leading to mortgages being held by unqualified buyers was such a miniscule part of the housing bubble it barely warrants being linked at all. All the malfeasance with the ratings agencies and the credit default swap fiasco exposed some unqualified buyers but the housing crash was created by bankers, not first time home buyers. They very idea is absurd on its face.

Paul Krugman was writing about the housing bubble and the probability of a crash as early as 2003.


And he also predicted that, if the bubble were to burst, there might be a bit of an increase in unemployment in the construction industry. What a genius!!!
 
2013-03-15 04:42:04 AM

Ishkur: JohnBigBootay: One would expect housing prices to rise infinitely. It's inevitable actually

No. Only if population keeps increasing. Since this isn't possible and a relative maxima is certain, inflation and housing will eventually reach an equilibrium. And then capitalism will fall apart because it's not designed for such a contingency.


Absurd. Capitalism is merely the private ownership of the means of production. Nothing more. Private ownership won't fall apart because housing prices fail to rise.
 
2013-03-15 04:48:18 AM

Ishkur: Don't expect this to continue: Boomers are a greedy bunch and they plan to sell off everything when they retire...


Ummmm... most people have their retirement investments in IRAs. You must, by law, start liquidating them at 70 years old, or pay a massive penalty.
 
2013-03-15 04:51:17 AM

JohnBigBootay: impaler: I think he might be thinking of the real-estate crash, which started 2 years earlier.

He'd still be wrong. Shoddy underwriting practices leading to mortgages being held by unqualified buyers was such a miniscule part of the housing bubble it barely warrants being linked at all. All the malfeasance with the ratings agencies and the credit default swap fiasco exposed some unqualified buyers but the housing crash was created by bankers, not first time home buyers. They very idea is absurd on its face.


www.edrants.com
"Just keep thinking that until I'm dead."
 
2013-03-15 12:52:48 PM

DrPainMD: Absurd. Capitalism is merely the private ownership of the means of production. Nothing more. Private ownership won't fall apart because housing prices fail to rise.


Capitalism's goal is to amass capital. The only way to make money and increase wealth is if all economic sectors trend upward (especially population). People borrow only because they know they can use the capital to achieve a greater ROI through future growth than the original usury plus interest. But they will not do that if things are stagnating or declining.

For this reason, Capitalism only works under a policy of constant growth which is simply not possible in a finite system. It does not tolerate negative growth or a stagnant equilibrium (however necessary they may be).
 
2013-03-15 06:10:00 PM

Bisu: enemy of the state: impaler: If you index corporate profits and S&P 500 to 1981, it looks like the markets have finally returned to nominal.

[research.stlouisfed.org image 630x378]

OK, but 1981 was a depression year, 1978 had 14% inflation or thereabouts, a whole decade of serious inflation. Is 1981 a good baseline to pick?

That depends on if you mean good for being meaningful or good for backing up his point.


What does inflation have to do with the corporate profit/stock prices ratio?

You know what my point was? That If you index corporate profits and S&P 500 to 1981, it looks like the markets have finally returned to nominal.

Indexed at 100 at 1960:
research.stlouisfed.org

Indexed at 100 at 1970:
research.stlouisfed.org

Indexed at 100 at 1980:
research.stlouisfed.org

Indexed at 100 at 1990:
research.stlouisfed.org

Indexed at 100 at 2000:
research.stlouisfed.org
 
2013-03-16 05:27:40 AM

Ishkur: DrPainMD: Absurd. Capitalism is merely the private ownership of the means of production. Nothing more. Private ownership won't fall apart because housing prices fail to rise.

Capitalism's goal is to amass capital. The only way to make money and increase wealth is if all economic sectors trend upward (especially population). People borrow only because they know they can use the capital to achieve a greater ROI through future growth than the original usury plus interest. But they will not do that if things are stagnating or declining.

For this reason, Capitalism only works under a policy of constant growth which is simply not possible in a finite system. It does not tolerate negative growth or a stagnant equilibrium (however necessary they may be).


A) Capitalism doesn't stop working if companies stop growing.
2) The goal of all businesses, under socialism, communism, or any other -ism you can think of is to grow. Who wouldn't want their businesses to grow?

Where do you get this nonsense?
 
2013-03-16 07:01:45 AM

DrPainMD: A) Capitalism doesn't stop working if companies stop growing.


Yes it does. If there is no growth, then no ROI. No ROI, no borrowing. No borrowing, no investments, all deficit spending stops, the economy grinds to a motherfarking halt and Capitalism itself collapses utterly.

Very few entities in the world can pay off all their expenses with just liquid capital. The only thing keeping Capitalism from imploding on itself is the faith that all economic metrics will keep trending upward. And they will, so long as the population keeps increasing and inflation is steady. But there is a relative maxima to all this and it's going to really hurt when it is finally breached.

DrPainMD: 2) The goal of all businesses, under socialism, communism, or any other -ism you can think of is to grow. Who wouldn't want their businesses to grow?


How can you grow if you can't borrow?

DrPainMD: Where do you get this nonsense?


Where do YOU get this nonsense?
 
2013-03-16 08:45:26 AM

Ishkur: DrPainMD: A) Capitalism doesn't stop working if companies stop growing.

Yes it does. If there is no growth, then no ROI. No ROI, no borrowing. No borrowing, no investments, all deficit spending stops, the economy grinds to a motherfarking halt and Capitalism itself collapses utterly.

Very few entities in the world can pay off all their expenses with just liquid capital. The only thing keeping Capitalism from imploding on itself is the faith that all economic metrics will keep trending upward. And they will, so long as the population keeps increasing and inflation is steady. But there is a relative maxima to all this and it's going to really hurt when it is finally breached.

DrPainMD: 2) The goal of all businesses, under socialism, communism, or any other -ism you can think of is to grow. Who wouldn't want their businesses to grow?

How can you grow if you can't borrow?

DrPainMD: Where do you get this nonsense?

Where do YOU get this nonsense?


Ridiculous. My business, which I've owned for 25 years, hasn't grown any in the last half-dozen years, and I still make a comfortable return on my investment. I'm also part owner in a restaurant which has seen its revenue decrease substantially during the recession, and I'm getting a continued return on that investment, also.

Plus, I borrowed some in the early days of my main business, but haven't borrowed a dime (other than using AmEx cards for travel expenses, paid off at the end of the month, to avoid carrying cash and to have an accounting trail for the money) in almost 20 years. Most of that time saw fairly rapid growth, paid for with present income.

Businesses which are constantly borrowing to expand, and can only pay back the loans if business expands, are not unique to capitalism; they, as I've said, can be found under systems of any -ism. Nor is it necessary to constantly borrow and/or expand under capitalism. Again, it's the private ownership of business; nothing more.

Why do I bother? You obviously know nothing about business other than what you read in Mother Jones.
 
2013-03-16 09:41:51 AM

DrPainMD: My business....


Irrelevant. You are taking a micro view and applying it to a macro concept. Don't do that.

DrPainMD: Businesses which are constantly borrowing to expand, and can only pay back the loans if business expands, are not unique to capitalism; they, as I've said, can be found under systems of any -ism.


Actually, only Mercantilism and Capitalism (and not, say, Manorialism or Latifunda). Deficit financing on a macro level did not exist before then. And economies were separated and only sparsely connected through very thin and very defined trade routes, such that when one economy crashed, it did not affect any other economies and it could be resuscitated by the one next to it, eager to come in and sweep up cheap property and goods, injecting money into the economy and getting things going again. And this was a perfectly normal pattern of behavior of various intricate markets up until about the late 19th century, when it became more than aware to mostly everybody that all economies were getting larger and becoming globally intertwined, and the Depressions of 1873-1896 were warnings that a crashed market in one economy could be powerful enough to bring them all down. And if that's what was going to happen, where was the outside resuscitation going to come from? ....that's where Keynesianism comes in: Governments step in to resuscitate economies in lieu of any outside agent. But this is a digression.

Back to deficit financing: Deficit financing is what makes business work. If you aren't permitted to spend money before you've made it, the global economy grinds to a halt. Without deficit financing, businesses don't get started, HR firms can't do payroll, loans can't be issued, accountants can't do taxes, Hollywood can't make movies, 5-year plans can't be project managed, no one gets educated and nothing gets done. Like I said, there are very very few people in the world who can pay off all their expenses with just liquid capital and not have to ask for loans. These people are too few to run the world economy themselves. Deficit financing adds a viscous layer of fiscal liquidity to the engine of business and helps everyone else join the capitalist game, spreads the wealth, and aids in the all-important economic principle of "getting shiat done".

Deficit financing is the miracle of modern business. It is the most important part of the evolution and growth of economies. It is so vital, to remove it would be like taking photosynthesis away from plants. All (human) life would die.

But here's the problem: Deficit financing is only feasible in an economy of constant growth. Growth makes borrowing easier because it's easier to pay off debts. If growth is negative, that means prices depreciate, and borrowing withers because debts can't be paid off. There are all sorts of bad things economists will warn about but they are all pretty unanimous that one of the worst things is deflation. It stops the money from moving, which further depreciates it, which makes things even worse. Nothing moves when the bottom falls out. Capitalism can't pick itself back up without some outside assistance. The 1930s are a delirious example of this.

(Capitalism utterly failed during the Depression to such an extent that half the world abandoned it entirely. The countries that pulled themselves out of the Depression the fastest were the ones that literally handed their entire economies over to their governments: Russia, Germany, Japan and Italy. The ones that struggled were the ones that stood fast to free market principles: Britain, France, USA. And they were ultimately rescued by heavy government intervention as well).

DrPainMD: Nor is it necessary to constantly borrow and/or expand under capitalism. Again, it's the private ownership of business; nothing more.


Capitalism emphasizes private ownership of the means of production, that is true. But it also emphasizes accumulation of capital as its goal and it can't do this without confidence in future growth and borrowing to necessitate that future growth (it's a positive feedback mechanism). As I previously explained, deficit financing is everything in modern Capitalism. It has been borrowing since 1472 and there has never been known a time, country, location, culture or period where Capitalism has not been borrowing. Because that's really the secret that makes Capitalism work.

DrPainMD: Why do I bother? You obviously know nothing about business other than what you read in Mother Jones.


I have no idea what that is.

I'm not talking about business, I'm talking about Capitalism. I think that's where your confusion lies.
 
2013-03-16 09:52:56 AM

Ishkur: DrPainMD: My business....

Irrelevant. You are taking a micro view and applying it to a macro concept. Don't do that.


Macro or micro are irrelevant. The subject was capitalism, what makes it work, and what causes it to fail. Don't change the subject.

DrPainMD: Businesses which are constantly borrowing to expand, and can only pay back the loans if business expands, are not unique to capitalism; they, as I've said, can be found under systems of any -ism.

Actually, only Mercantilism and Capitalism (and not, say, Manorialism or Latifunda). Deficit financing on a macro level did not exist before then.


Wrong. Debt to finance business has been used whenever a particular business, or proposed business, didn't have the necessary expansion/start-up funds on hand. The type of economic system doesn't matter.

Back to deficit financing: Deficit financing is what makes business work. If you aren't permitted to spend money before you've made it, the global economy grinds to a halt. Without deficit financing, businesses don't get started, HR firms can't do payroll, loans can't be issued, accountants can't do taxes, Hollywood can't make movies, 5-year plans can't be project managed, no one gets educated and nothing gets done. Like I said, there are very very few people in the world who can pay off all their expenses with just liquid capital and not have to ask fo ...

You have absolutely no clue. I'm out of this thread; you can consider my absence of response to whatever drivel you post next to be a win. Be sure to tell me how you "owned" me in the next thread.
 
2013-03-16 04:18:05 PM

DrPainMD: Macro or micro are irrelevant. The subject was capitalism, what makes it work, and what causes it to fail. Don't change the subject.


Yes. I'm talking about Capitalism. You're talking about your business -- completely irrelevant.

DrPainMD: Wrong. Debt to finance business has been used whenever a particular business, or proposed business, didn't have the necessary expansion/start-up funds on hand. The type of economic system doesn't matter.


Yes and no. Usury was simply too primitive and too strict in the ancient world to have any large effect on the economy at all. Before Mercantilism, ALL usuries were liquid. You paid -- and lent -- in actual hard currency. This hampered productive growth since the only people who could engage in such practices were upper classes.

What Mercantilism introduced was the concept of promissory notes to finance large expeditions to the near east (for either trade or conquest), since carrying around a piece of paper that said how much money you had was for easier than lugging around large chests full of coins. In time, these notes became more important as a form of currency themselves than the actual currency they represented. Traders were passing the notes around for payment instead of going to the bank and exchanging them for money, and the banks realized that all the money was staying in one place more frequently, only the name of the owners changed. From this, they realized that they could lend out the money at interest and so long as the traders don't all come looking for their money at once (highly unlikely though it has happened), they're fine. But more importantly: They could lend the money to anyone, rich or poor alike.

This instigated the age of modern banking and Capitalism proper -- the concept of deficit financing, which opened the doors to everybody and really made things move. Point is the fact that debt-financed businesses existed in the past is not an indication that Capitalism can exist without it. Rather, the opposite: Capitalism could not come about until the magnitude of promissory capital reached critical mass.

DrPainMD: You have absolutely no clue. I'm out of this thread; you can consider my absence of response to whatever drivel you post next to be a win.


No, please stick around and let's talk about this. I like these discussions and I'm always happy to joust with a fellow armchair economist, and I have no problem admitting when I'm wrong. Please point out where I "have no clue" and in what manner that I appear to be clueless and I may agree with your assessment if you can back it up with evidence.

There's nothing to "win" here. No one's keeping score. That's childish thinking. We're both interested in what the facts are and what they mean. I only find it aggravating when you tell me I'm wrong but don't explain why, as you have done repeatedly.
 
2013-03-17 02:10:23 AM

DrPainMD: . My business, which I've owned for 25 years, hasn't grown any in the last half-dozen years, and I still make a comfortable return on my investment.


Proving you don't have to be smart in order to run a business.

See also: typical CEO.
 
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