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

[First]

Originally posted by: Dissipate

Originally posted by: Evan
Investing in U.S. markets long term (20 and 30 years) has resulted in 7% compounded annual returns since 1802, vastly superior to any return you could get on gold or bonds.

Frankly, you'd have to be entirely ignorant not to see exactly how wise it is to invest in U.S. equities long term.

Check historical debt levels and savings rates, then get back to me.

Please explain in precise detail why a large debt is always bad and why a high savings rate is always good. You'll have to address how Japan's economy stagnated for 10 years despite having a savings rate that has dwarfed the U.S. for decades. Also address why any 30 year period since 1802 (including the Great Depression), American citizens have earned nearly 7% compounded annually on their principal equity investments and why that trend won't continue. I look forward to you falling flat on your face, per usual.

EDIT; Woops, nearly 7% not 6%.

 

[Slew Foot]

The problem with the stock market is that the government is changing the rules as it sees fit. Banks in trouble? OK, you cant short sell them for a bit. Need a bailout, we'll bail out you and you, but not you. Investors dont have confidence in the market, becasue they fear the the govt is going to step in and change the rules at any given time.

 

[SSSnail]

It's not the government, it's the hands behind all the madness that are driving this chaos. It's The Great Depression, part deux.

 

[Thump553]

It's looking like there will be a whole new flock of 52 week lows set again today, but I still think talking about Great Depression II is overblown. The market is reacting badly because government bailouts seem to be treated as a matter of right by investors these days. The Detroit bailout is going to fail-for now-because of horrible PR blunders by the Big Three chairmen (the three private jets) but more importantly by the fact that no feasible recovery plans were set forth by them. Our politicians from both parties (properly, in my view) reacted to this as a call to throw government dollars down a black hole.

Detroit HAS to get it's act together and come back to Washington with the equivalent of a prepackaged Chapter 11 that has some reasonable chance of an upside recovery at the other end. Sacking management or greatly restricting their huge pay has got to be part of the deal. Real legacy costs cuts also have to occur. If that is part of a national health system reform then maybe we will all benefit but I revolt at paying for some GM worker (or retiree's) gold plated health care when I struggle to pay for my own mediocre health insurance out of my own pocket.

Most people and investors, including myself, are pretty gunshy right now given the results of the financial system bailout-$350 billion spent so far, not a penny used to buy the so-called toxic assets that were supposed to be the core of the program, and situations like insurance companies buying up banks in order to get into line for the government largess (the Hartford and Phoenix are two that I'm aware of). Meanwhile massive layoffs not only continue but accelerate, and it doesn't take a PhD in economics to know that will be bad for the economy. So far our money seems to have been spent to prop up the corporate dynasties.

One relatively positive point-of the stocks I presently own or follow, most are far less oversold than in the October plunge and overall the market volume is below normal for the last week. In other words prices are falling but their is not a panic-people just don't see a reason yet to swope in on the bargains.

 

[StageLeft]

:thumbsup: for Thump553's post.

 

[Muse]

Originally posted by: Slew Foot
The problem with the stock market is that the government is changing the rules as it sees fit. Banks in trouble? OK, you cant short sell them for a bit. Need a bailout, we'll bail out you and you, but not you. Investors dont have confidence in the market, becasue they fear the the govt is going to step in and change the rules at any given time.

That will be one of the challenges of the new administration, to create and maintain a structure that doesn't have investors edgy. What's gone on the last month or two is amazingly chaotic.

 

[Dissipate]

Originally posted by: Evan
Please explain in precise detail why a large debt is always bad and why a high savings rate is always good.

Go talk to any financial planner, they will tell you several reasons why a high savings rate for any individual is good:

A. Allows you to save for retirement.

B. Allows you to get through a layoff/tough economic times.

C. Allows you to earn interest income.

D. Allows you to take advantage of an investment opportunity.

Those are just four general reasons off the top of my head why everyone should have a high savings rate. And like I said, go to any financial planner and they will tell you three words over and over again: save save save. Any financial planner who tells you to liquidate all your assets, blow it on worthless toys and then go into a massive debt should be fired on the spot.

If you can't understand why large debt is bad then you truly do have some learning disability.

If a financial planner tells me to save like crazy and an economist tells me to spend like crazy, who am I to trust? Common sense tells me the financial planner is right and the economist is a nut job. You certainly seem to fall in the latter category.

You'll have to address how Japan's economy stagnated for 10 years despite having a savings rate that has dwarfed the U.S. for decades.

Two words: central bank. Another two words: government intervention. Japan lives under your favorite guys: central bankers. If anything, their economic stagnation should be a case against central banking, not for it.

You will have to address how the U.S. managed to create the wealthiest economy in the world during the Gilded Age with no central bank and with a much higher savings rate.

Also address why any 30 year period since 1802 (including the Great Depression), American citizens have earned nearly 7% compounded annually on their principal equity investments and why that trend won't continue. I look forward to you falling flat on your face, per usual.

EDIT; Woops, nearly 7% not 6%.

It was possible because Americans had a positive savings rate until recently, and far far less debt. The trend won't continue because debt has spiraled out of control, and until it is brought under control the markets will remain weak. The government, instead of encouraging people to save is encouraging people to borrow more, racking up even more debt, which is part of the problem in the first place!

 

[First]

Originally posted by: Dissipate

Go talk to any financial planner, they will tell you several reasons why a high savings rate for any individual is good:

A. Allows you to save for retirement.

B. Allows you to get through a layoff/tough economic times.

C. Allows you to earn interest income.

D. Allows you to take advantage of an investment opportunity.

Those are just four general reasons off the top of my head why everyone should have a high savings rate. And like I said, go to any financial planner and they will tell you three words over and over again: save save save. Any financial planner who tells you to liquidate all your assets, blow it on worthless toys and then go into a massive debt should be fired on the spot.

Not a single sane financial planner will just say someone as layman as "save", that's asinine and means nothing. Save to what, where, when, how? Where do you put the money is the question; equities, bonds, commodities, etc. A mixture of all 3 is a good idea and a financial planner will also tell you it's smart to take out loans (yes, debt) to finance appreciating assets like homes. They'll say your time value of money is far too critical to finance everything with savings. The good ones will say hold off on paying your school loans back too quickly if you can find an alternative investment yielding higher than the interest on those school loans. There's preferred debt and then there's bad debt. Some consumers will refinance a home to consume while others will refinance to invest. A combination of the two is a good idea with an emphasis on the later.

So overall you still don't get it. Please explain why our lower savings rate today is a negative and why debt financing, real estate liquidity, and more modest retirement accounts are an inferior alternative. You still haven't addressed why Japan isn't booming despite their much higher savings rate. Can't man up as usual.

If you can't understand why large debt is bad then you truly do have some learning disability.

If a financial planner tells me to save like crazy and an economist tells me to spend like crazy, who am I to trust? Common sense tells me the financial planner is right and the economist is a nut job. You certainly seem to fall in the latter category.

You have absolutely no clue what is going on and it's sad to even think you've deluded yourself into thinking otherwise.

Two words: central bank. Another two words: government intervention. Japan lives under your favorite guys: central bankers. If anything, their economic stagnation should be a case against central banking, not for it.

Sorry, you'll have to explain why their central bank stagnated their economy. Be specific now.

You will have to address how the U.S. managed to create the wealthiest economy in the world during the Gilded Age with no central bank and with a much higher savings rate.

Look up the stats kiddie. We improved upon that economic model in the 20th century when we added a central bank, better regulation, and de-pegged the dollar from gold. As a result we experienced the largest growth in equities and standards of living in U.S. history. The stats are final and undeniable.

It was possible because Americans had a positive savings rate until recently, and far far less debt. The trend won't continue because debt has spiraled out of control, and until it is brought under control the markets will remain weak. The government, instead of encouraging people to save is encouraging people to borrow more, racking up even more debt, which is part of the problem in the first place!

Again, why has Japan not flourished more than the U.S. if their savings rate is so much higher than the U.S.? Remember, both countries have a central bank so that isn't an excuse. Think about it, hard.

 

[TallBill]

Well things were going ok until the bailout got announced.

 

[StageLeft]

I love it so much that I probably try to fit it in where it doesn't always fit, but the Tragedy of the Commons is a psychological reality I see in many things and this and other economies is one of them. Basically: doing what is best for yourself is fine if you do it, but if everybody acts like that, everybody loses, whereas if people are merely doing what is good for themselves, that's possible for everybody; individual greed or selfishness causes a problem. Of course, whether you personally do what's best for yourself or not is of no consequence on the micro level. Knowing this, everybody will tend to do what is best for themselves, and then as a whole everybody suffers. It's why fisherman will all overfish until an area runs out of fish and then none of them can even make a subsistence living. It's why saving a ton is great for your house, but bad for the economy if we all do it.

 

[Dissipate]

Originally posted by: Evan
Not a single sane financial planner will just say someone as layman as "save", that's asinine and means nothing. Save to what, where, when, how? Where do you put the money is the question; equities, bonds, commodities, etc. A mixture of all 3 is a good idea and a financial planner will also tell you it's smart to take out loans (yes, debt) to finance appreciating assets like homes. They'll say your time value of money is far too critical to finance everything with savings. The good ones will say hold off on paying your school loans back too quickly if you can find an alternative investment yielding higher than the interest on those school loans. There's preferred debt and then there's bad debt. Some consumers will refinance a home to consume while others will refinance to invest. A combination of the two is a good idea with an emphasis on the later.

I didn't say they would only tell people to save without giving them any advice as to how to save/invest. Your assertions refute the idea that negative savings are good, so you are contradicting your economic doctrines. Of course there is good debt and bad debt. Your economic theories tell you that people should go into bad debt to stimulate the economy, a financial planner will tell you that bad debt is bad debt and should be avoided as much as possible.

So overall you still don't get it. Please explain why our lower savings rate today is a negative and why debt financing, real estate liquidity, and more modest retirement accounts are an inferior alternative. You still haven't addressed why Japan isn't booming despite their much higher savings rate. Can't man up as usual.

Japan lives under a highly regulated economy with a central bank and few to none natural resources. What other reason is there to give? You haven't addressed why the U.S. economy isn't booming right now despite having a central bank for 100 years.

You have absolutely no clue what is going on and it's sad to even think you've deluded yourself into thinking otherwise.

Do you live by your economic doctrines? Is your savings rate 0 or negative? If it isn't then you aren't practicing what you preach. Time to man up and spend all your savings to stimulate the economy.

Sorry, you'll have to explain why their central bank stagnated their economy. Be specific now.

Sure, as soon as you tell me how savings stagnated their economy. BTW, here is another clue for you:

Text

I guess you have never heard of Japan's propped up 'zombie' banks and corporations.

Look up the stats kiddie. We improved upon that economic model in the 20th century when we added a central bank, better regulation, and de-pegged the dollar from gold. As a result we experienced the largest growth in equities and standards of living in U.S. history. The stats are final and undeniable.

So in that case the economy should be totally fucking booming right now. With 100 years of experience the central bank should have us all on a path to total and utter prosperity. Hell, we should be in Utopia by now.

Again, why has Japan not flourished more than the U.S. if their savings rate is so much higher than the U.S.? Remember, both countries have a central bank so that isn't an excuse. Think about it, hard.

Simple, they propped up dead companies and banks, much like what the U.S. is doing now.

 

[Engineer]

Looks like the close *may* take out the 2002 lows. If so, it could get that much more painful.

 

[ranmaniac]

Dow in 7500 range now..

 

[First]

Originally posted by: Dissipate

I didn't say they would only tell people to save without giving them any advice as to how to save/invest. Your assertions refute the idea that negative savings are good, so you are contradicting your economic doctrines. Of course there is good debt and bad debt. Your economic theories tell you that people should go into bad debt to stimulate the economy, a financial planner will tell you that bad debt is bad debt and should be avoided as much as possible.

Please cite the statistics that show most Americans are in bad debt. If you can't then GTFO, because your assumption is asinine at best. Individual consumers aren't the problem in the current meltdown, sub-prime had very little (like 5%) to do with this situation.

You haven't addressed why the U.S. economy isn't booming right now despite having a central bank for 100 years.

The U.S. is in a recession, recessions have existed since our founding. Not hard to understand.

Do you live by your economic doctrines? Is your savings rate 0 or negative? If it isn't then you aren't practicing what you preach. Time to man up and spend all your savings to stimulate the economy.

Sorry, cite the stats or continue to look foolish.

Sure, as soon as you tell me how savings stagnated their economy. BTW, here is another clue for you:

Text

I guess you have never heard of Japan's propped up 'zombie' banks and corporations.

The burden of proof is on your shoulders kiddo, explain why their extremely high savings rate hasn't saved them? And I like how you linked to an article you can't explain and don't understand.

So in that case the economy should be totally fucking booming right now. With 100 years of experience the central bank should have us all on a path to total and utter prosperity. Hell, we should be in Utopia by now.

WTF are you talking about? No one here or elsewhere said our current economic models wouldn't lead to boom/bust cycles. Those fluctuations are a way of life and always have been, before the dollar de-pegged and before the Fed was established in 1913. Get a clue, the stats say you're wrong. HMI, GDP, wages, etc. all up significantly since we de-pegged in 1971 (and not fully until the early 80's).

Simple, they propped up dead companies and banks, much like what the U.S. is doing now.

The U.S. has been propping up banks and dead companies for decades and decades. Again, you have not isolated the differences between the U.S. and Japan. It's OK to simply say you don't know, which we all know is the case. Here's the reality; Japanese consumers save like crazy but don't spend anywhere near as much. Their economy suffers for it because they can't stimulate growth and that leads to stagnant/declining production, which leads to stagnant/declining wages, and stagnant/declining standards of living. Consuming is vital and I'm sorry you don't understand it.

 

[SP33Demon]

Market is getting powerslammed, jesus:
Dow 7,552 -444.99

 

[Engineer]

Originally posted by: SP33Demon
Market is getting powerslammed, jesus:
Dow 7,552 -444.99

Per CNBC, 1/3 of the S&P500 companies no longer meet the qualifications to belong to the index (i.e. they are below the required 4 billion dollar market capitalization needed to be a part of the S&P500). I imagine the S&P rules will need to be rewritten.

 

[jpeyton]

DOW 7500? I know some talking head predicted it a few weeks before the election. Can't remember who it was.

 

[dullard]

Originally posted by: jpeyton
DOW 7500? I know some talking head predicted it a few weeks before the election. Can't remember who it was.

That was me 5 weeks ago. But, I'm not a talking head. And I don't think even now that 7500 will be the lowest close. I just can't fathom a good basis for estimating the bottom.

 

[dmcowen674]

Originally posted by: jpeyton
DOW 7500?

I know some talking head predicted it a few weeks before the election.

Can't remember who it was.

I said 7500 by the end of the year (well it's early) and bottoms at 3600.

Only 3900 to go.

 

[Slew Foot]

I figured 8 grand would be a tough breaking point for a while, not sure where things go from here.

 

[wwswimming]

Originally posted by: SSSnail
It's not the government, it's the hands behind all the madness that are driving this chaos. It's The Great Depression, part deux.

if GM goes BK, Michigan will be "Lord of the Flies", writ large.

 

[wwswimming]

Originally posted by: wwswimming

Originally posted by: SSSnail
It's not the government, it's the hands behind all the madness that are driving this chaos. It's The Great Depression, part deux.

if GM goes BK, Michigan will be "Lord of the Flies", writ large.

some problems even Nehalem can't solve.

Nehalem dual CPU systems - Q1 2009.

uhhhh ... OOPS a daisy ... sorry bout the double post.

 

[fleshconsumed]

Just 500 more points and DOW will have fallen in half from its high of 14K.

 

[First]

Originally posted by: dmcowen674

Originally posted by: jpeyton
DOW 7500?

I know some talking head predicted it a few weeks before the election.

Can't remember who it was.

I said 7500 by the end of the year (well it's early) and bottoms at 3600.

Only 3900 to go.

It would be the first time you've ever been right about anything, too. :laugh:

 

[nergee]

Gee, just imagine where the DJI would be if we didn't get the
700B bailout shoved up our asses....