Dow 9500 ... Where we go from here...

[theeedude]

http://bloomberg.com/markets/stocks/futures.html
Dow is predicted to fall 167 tomorrow based on current futures.

 

[StageLeft]

Originally posted by: senseamp
http://bloomberg.com/markets/stocks/futures.html
Dow is predicted to fall 167 tomorrow based on current futures.

My impression is that lately DOW futures of plus mean a 200 dip and if they are negative by 200 it's going to drop 500.

 

[mshan]

If you need more reassurance to hold onto quality long-term investments, just watch this Charlie Rose interview of Warren Buffett: http://www.charlierose.com/sho...on-with-warren-buffett (you can start around 8:55 to get Buffett's specific comments about recession and unemployment).

Buffett projected either a more "standard" type recession that might last 2 years with unemployment peaking at 7%, or a deeper, nastier recession lasting 5 years with unemployment peaking at 9%.

I've also see commentary stating that the "standard" recession was fully priced into the market days ago).

 

[OS]

i see the bail out didn't do sh*t

 

[LegendKiller]

Originally posted by: OS
i see the bail out didn't do sh*t

Yeah, they already got a 700bn wealth fund up in a week, freeing up massive amounts of liquidity in the system and making the system flush with cash.

Ohhh wait, that's in the land of make-believe.

Come back when you enter reality.

 

[First]

Originally posted by: BansheeX

Nothing moves in a straight line. Some people are running to treasuries, some are running to gold. Bonds are mistakenly seen as safety havens right now to the know-nothing average Joe who has yet to feel the coming inflation. Then people who do no research will realize that the CPI is bullshit and the FDIC doesn't insure value. All it insures is a nominal payout, it doesn't insure that the dollars you receive will buy the same amount of goods it did a week or a year before, which is kind of important in a hyperinflationary environment if one is to occur. So you're seeing both bonds and gold going up as stocks hemorrhage. When inflation becomes apparent in people's everyday lives, the low yield on those bonds isn't going to look so hot, while gold's parabolic increases over the last few years will.

Except no one has suggested a superior alternative to the CPI that would "guarantee" you will receive the same amount of goods per dollar. If you could successfully argue for a superior alternative to the CPI, then why haven't you and where is your research paper on said proposal? That's the thing with you gold guys, you say the CPI is BS, give poor reasons for why it's BS, and then fail to suggest an alternative. Fact is, CPI is flawed but is the best measurement of inflation there is.

No, but some can predict it with a lot more certainty than others, and not confuse problems for strengths. And why is it, exactly, despite all of the Keynesian educated management within these financial firms and banks, so few of them were able to even keep their businesses solvent, were able to spot the inflation that went into tech stocks or housing? I mean, that's a pretty terrible result.

Certainly some of these banks ended with terrible results, i.e. going insolvent. But here's the reality you haven't addressed and/or acknowledged; the alternative system of economy you tout (gold-backed dollars, no Fed, as in the 19th century) saw inferior growth in terms of wages, standards of living, GDP, etc. compared to the last 25-30 years of our non-saving, debt-leveraged, low inflation economy. It is up to you whether you choose to acknowledge this reality or not, but it is indeed the reality. The results speak loud and clearly.

They categorize and exclude inflation to suit their statistics, they can't even see the forest for the trees. Most of what they take as evident is ass-backwards. Take the velocity of money as an example. It's a result of people's valuations of goods including money, not a cause. Take inflation, it is a cause of rising prices, not a result. And somehow, consumption drives economies to them. They even think that falling prices (in a normal environment not succeeding inflationary dependencies) are bad and would cause people to indefinitely hoard for a future lower price, despite the perpetual fallacy this creates or the fact that computers continue to be one of the strongest selling sectors despite consistently falling prices. The whole damn "inflation is a necessity" thing is a scam to justify government excess.

Oy. Here's the problem; you have no schema to refer to when you talk about inflation, you don't have the background. If you had the background in the first place you'd know that your critique of computers is specifically pointed out as an exception to the general theory of incremental inflation (to spur wage earner's consumption when they see their paychecks increasing, even if it isn't necessarily real purchasing power) in virtually every economic textbook in existence. No model is perfect, and no sane economist has ever said so. But fact of the matter is that those models better predict real world conditions than the models you have yet to propose, and probably never will.

Here's the deal; there are all sorts of different factors that affect inflation. For example, your point about velocity makes little sense. The reality is that the Treasury could perpetually increase the money supply, forever and ever, yet we could see deflation if the velocity of money (i.e. the amount and frequency with which cash is spent/transacted) were to increase at a proportionally higher rate. We are the reserve currency of the world, and foreign governments (i.e. the citizens of those countries) have continued to transact U.S. dollars at an increasingly higher rate for god knows how many years now. There will be ebbs and flows in foreign T-bill reserves, but the same principle of increased transactions per dollar is the same. If you let transactions increase per dollar without increasing the money supply, you get deflation, and that's worse than inflation as Japan has (for the most part) proven. We have become a much more integrated and complicated global economy, and the emergence of many of the Asian tigers in the 70's (particularly China, but now obviously South Korea and Japan) are exactly why gold-backed dollars had to eventually be dropped, as they constrained total domestic output and our ability to increasingly negotiate terms of trade with other countries and increase the money supply to keep up with its increased velocity. We let in 2M+ legal immigrants every year, and hundreds of thousands of illegals, which has the effect of balancing a lot of the Treasury's printing press increases too.

So it's blatantly over-simplistic to claim one is a "cause" and the other a "result" when it's hard to measure how many dollars are actually floating around in the world in the first place. These things aren't exact and are therefore subject to error, and no alternative you have proposed would change that. Pegging the dollar to gold would be a disaster of epic proportions and it's exactly why 99.9% of economists aren't suggesting it, anywhere, in any country, on the entire planet. You dismiss them, but your stance is thin because it comes from someone who admittedly doesn't have any background in economics, or finance.

Hayek won a nobel prize in economics for doing exactly that. Keynes was a complete crackpot whose ideas were embraced in the middle of a completely misunderstood depression by the politicians and intelligentsia that were to benefit from his theories, which were essentially centered on government spending and direction of an economy. THAT is how it managed to replace classical understandings. He advocated large government deficits and equated savings to hoarding and leakage, even though savings are the only reason loans exist to increase production, and should be what determines the rate of interest since it is this that convinces those with savings to loan it out rather than hoard. Politicians making loans with other people's money to itself or others based on interest rates that its financial arm price fixes, is not a very stable or efficient system at all, it turns out, and is a theory that in practice leads to collapse as certain as any dictatorship despite any amount of time in which it was sustained.

You are a prime example of someone who doesn't understand leverage or debt financing. I've written about it extensively before, but essentially why you're wrong is that when you make statements like "loans should be based on savings only" you completely ignore projected future earnings. There is an inherent risk when a bank lends to somehow with little savings, but if that were the determining factor, our banks would miss out on the millions of Americans who would have reliably earned the salaries necessary to pay back their loans + interest to these banks. So again, we come back to you only looking at a fraction of the picture; you cry "But we're not saving", but what you fail to acknowledge is that you ignore all the people (usually younger Americans) left out in the cold who would have been able to pay back banks because they are reliable people with good credit, good jobs, and/or eventually saved enough.

This nonsense about Keynes being a crackpot isn't backed up by any peer-reviewed economic journals and you know it (well, maybe you don't). Keynesian theories used as strict models obviously are highly flawed and I've always maintained that reality, but they are integral in combination with a collection of other models (neoclassical, neo-Keynesian, New Economy, et al). Because of their hybridized nature, it seems, their use comes mostly as superb predictors of long-run business cycles, which are undeniable and which I've documented here in detail (see Jeremy J. Siegel's Stocks for the Long Run).

Hayek won a Nobel, yet upon further review his theories have been widely debunked on quantitative grounds, specifically by Milton Friedman, Paul Samuelson, and Paul Krugman. Quotes:

"The Hayek-Mises explanation of the business cycle is contradicted by the evidence. It is, I believe, false." - Milton Friedman

"I tremble for the reputation of my subject" after reading the "exaggerated claims that used to be made in economics for the power of deduction and a priori reasoning [the Austrian methods]." - Paul Samuelson

When you're dismissed by Friedman and Samuelson, you're just not taken seriously, and it's precisely why Austrians won't be taken seriously until they learn to use econometric models. You dismiss mathematics and empirical study for economics, and this dooms your beliefs to not be taken seriously by anyone of any significance.

Now that artificially low rates have incentivized an entire sector to become a market of flippers and speculators with no legitimate demand at the prices they bid up between each other, a free market would see those jobs purged and reallocated over a number of years to manufacturing of exports to correct the mistakes brought on by the false signals created by centrally directed interest rates. The Keynesian solution is not to let this happen. It believes that withdrawal symptoms from a drug is not a solution, but a problem to be avoided with more and more of that drug. To have the government print money at no labor or material cost, essentially stealing purchasing power from holders of dollars, domestic and abroad, to create new credit extensions in an attempt to maintain these bubble jobs and home prices. Bubble jobs and home prices that can only exist from this money being loaned at fantasy interest rates that the government is dictating through a central bank. It simply won't work, and you're free to invest in government bonds and companies run by Keynesians, but I'm looking at all the numbers and fundamentals and I severely doubt their ability to continually drain the savings of the world towards these ends.

I would also point out that Peter Schiff has refuted the idea that homes are currently illiquid assets. They are, in fact, perfectly liquid assets with plenty of buyers, just not at the prices that the sellers are demanding. While sales at those prices would be a detriment to the speculators and lenders, they would be to the benefit of many responsible savers and home buyers who never strayed from their principles. The bailout is rewarding the former at the expense of the latter. And you can see the moral hazard this creates, as well as they way in which it might incentivize the wrong kind of future behavior. Just as the FDIC removes the fear of losing one's deposit to a highly leveraged bank that otherwise might have prevented that business model from becoming the norm. Just as the entire idea of having a lender of last resort to prevent bankruptcy removes the fear that otherwise might have deterred banks from following imprudent policies and lending standards. Thus socialism ultimately perverts the very risk/reward system that makes self-regulation occur by trying to backstop something as fundamentally desirable as due consequence and fundamentally undesirable as fraudulent lending.

You may severely doubt our ability to leverage, but point blank you just don't understand it. You still make the same mistake with regards to your interpretation of inflation, continually linking it to money supply and nothing more. You perpetually posit that interest rates shouldn't be controlled but offer no evidence, NONE, that no central bank would be the superior solution. It's all talk but no juice.

What kinds of models? I've seen thorough explanations destroying basically every one of Keynes' mistakes, including his disregard of Say's Law on which his subsequent arguments depend. Academia is always looking for sexy objective equations to explain subjective human behavior. Therein lies your problem. Economics is more complicated than a collection of mathematical formulas that spit out correct answers for you every time.

http://www.mises.org/story/1803

Economics is indeed more complicated than a set of mathematical formulas. To reject econometrics outright on its face, as Austrians do, shows that they take the other extreme while modern economists take the balanced viewpoint. As Samuelson and Friedman pointed out, Mises and Hayek offer no proof (empirical or otherwise) for their assertions, which similarly to you, are overstated or outright false, as I clearly delineated above. There is just more objective and widely verifiable scientific ways of proving that certain economic models work while other ones don't. And Mises and Hayek offer weak models that aren't used anywhere.

Really, the question you have to ask itself at this point is, why does every industrialized country in the world continue to function with these central banks based on manipulated interest rates and in many cases high leverage? Why have savings gone done but wealth, standards of living, et al gone up for 30 odd years? You claim it's because of a shadow government that purposefully distorts CPI inflation numbers. Me, I can look at it as most other informed people do; everyone else came to the same logical conclusions based on the hard evidence that was reproducible in real world settings. And therein lies the problem with Austrian economics; it doesn't reflect the real world. In fact, it makes perfect sense that Ron Paul supports said economic theory, as he himself is quite detached from Americans and the rest of the world.

 

[OS]

Originally posted by: LegendKiller

Originally posted by: OS
i see the bail out didn't do sh*t

Yeah, they already got a 700bn wealth fund up in a week, freeing up massive amounts of liquidity in the system and making the system flush with cash.

Ohhh wait, that's in the land of make-believe.

Come back when you enter reality.

that's assuming the treasury can even really fund it;

link

 

[nageov3t]

HangSeng
14,611.49
?1,331.75
?8.35%

 

[Dissipate]

Originally posted by: Evan Lieb
Hayek won a Nobel, yet upon further review his theories have been widely debunked on quantitative grounds, specifically by Milton Friedman, Paul Samuelson, and Paul Krugman. Quotes:

"The Hayek-Mises explanation of the business cycle is contradicted by the evidence. It is, I believe, false." - Milton Friedman

"I tremble for the reputation of my subject" after reading the "exaggerated claims that used to be made in economics for the power of deduction and a priori reasoning [the Austrian methods]." - Paul Samuelson

When you're dismissed by Friedman and Samuelson, you're just not taken seriously, and it's precisely why Austrians won't be taken seriously until they learn to use econometric models. You dismiss mathematics and empirical study for economics, and this dooms your beliefs to not be taken seriously by anyone of any significance.

Were you aware that David Friedman (Milton Friedman's son) is also an economist and is an anarcho-capitalist ? He is a classical school economist who advocates 0 taxes and 0 government.

So it is not just the Austrians who believe that all government intervention is counterproductive.

Check out his book:
Hidden Order

 

[First]

Originally posted by: loki8481
HangSeng
14,611.49
?1,331.75
?8.35%

Ouch, what a beating.

 

[First]

Originally posted by: Evan Lieb

Originally posted by: Dissipate

Originally posted by: Evan Lieb
Economics is not an exact science, no one can time or predict the market with any certainty. But Keynesians and their brethren have developed models far more congruent with current business cycles than any Austrian economist, anywhere in the world. That's a fact you'll have to live with I'm afraid. In fact, Austrians haven't come up with any models that have been able to predict anything near our current economic forecasts. It's why Austrian economics is widely considered as sort of a joke among Econ departments; all qualitative analysis with absolutely no balanced work in real world econometric models, nothing quantitative. That's exactly why virtually no one researches Austrian economics, here or elsewhere.

Keyne's qualitative theories were refuted by Hayek and others. Hence, the quantitative data based on those theories is bunk.

Then link them and explain them. If you can.

Bump.

 

[CyberDuck]

Originally posted by: Jaskalas

Originally posted by: CyberDuck

Originally posted by: Jaskalas
14,000 to 8,500 is a 40% drop from the high. How low do we go?

7000+-

I said so in a post a few months back - if 10500-10000 was broken, then it could very well go to 7000. There is a head-shoulder formation in the dow chart (if you know anything about technical analysis)

Yet if large numbers of companies are on the verge of sinking, especially after this failed holiday season, maybe you?re not factoring in if Main Street collapses. That 7,000 level sounds nice, if this crisis is somehow contained.

I?m worried that this shows no sign of containment and is instead hitting critical mass. Wall Street collapsing alone might stop at 7,000, but we?re on the verge of losing so much more than finances.

I didn't really factor in anything since it's based on pure pattern recognition in the 10 year dow jones chart. But the increasing panic is a sign that the bottom is approaching. We have an expression here that the market does not turn around before the last optimist has become pessimist. Panic has to be equalised and overcome by greed before we see a bottom. It's pure psychology governing now, and P/E numbers are meaningless. In addition a lot of the trading is done by computers who use pattern recognition, and know about the critical levels and chart formations. If 7500-7000 is broken then I can see no bottom, so let?s hope that does not happen.

 

[Capitalizt]

France and Japan are both down 9%+ today.

 

[StageLeft]

Originally posted by: Capitalizt
France and Japan are both down 9%+ today.

And Japan finished the day down 9 something, its worst since 1987.

DOW will race toward 8k today, I'd guess.

 

[Pliablemoose]

European shares plunge as global rout accelerates
German DAX down 8.2%, French CAC-40 down 6.8%, FTSE 100 down 6%

Text

Gold has crossed the S&P :shocked:

Japan's 10% down held :shocked:

 

[dmcowen674]

Opened down -350 and dropping fast 8200

 

[dmcowen674]

-525 8000

 

[JohnCU]

jesus fucking christ, i said it'd bottom out at 7800 i was horribly wrong

 

[dmcowen674]

Wall streeters will get to home early today

The market will be halted at -1100

Russia did not even open their market today after it crashed.

 

[StageLeft]

Wow, it really is dead.

 

[Thump553]

Market has been open five minutes and it's down 680. Going to be a historic day.

 

[JohnCU]

omg almost 700 points down stop trading now

 

[dmcowen674]

-770 7800

 

[StageLeft]

Originally posted by: dmcowen674
Wall streeters will get to home early today

The market will be halted at -1100

Russia did not even open their market today after it crashed.

That's a dave prediction that doesn't seem inplausible.

 

[RightIsWrong]

Down into the 7800s now. This is going to be another ugly day.