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(Yahoo)   Now I am become the debt fueled bubble, destroyer of stock markets   ( divider line
    More: Obvious, Steve Keen, economic bubble, Dow Jones Industrial Average  
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4436 clicks; posted to Business » on 13 Mar 2013 at 3:25 PM (4 years ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»

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2013-03-13 03:15:36 PM  
2 votes:
If you index corporate profits and S&P 500 to 1981, it looks like the markets have finally returned to nominal.
2013-03-13 01:31:39 PM  
2 votes:
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 09:46:02 PM  
1 vote:

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 04:49:02 PM  
1 vote:

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 04:20:58 PM  
1 vote:

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.

People chose to ignore that and declared infinitely rising house prices a new normal.
2013-03-13 03:38:38 PM  
1 vote:
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 03:30:15 PM  
1 vote:
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 03:28:10 PM  
1 vote:
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 01:57:41 PM  
1 vote:

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.


Now I'm just going to have to follow the advice of the local TF investment expert.
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