Will the stock market hold...or is the bubble ready to burst?

[pacfan]

Wait a minute folks, I've put much more than what came out above, the reply posting is having some bugs here so I'll continue later. Probably it has something to do with the copy and pasting.

[pacfan]

Let me continue where I left off.

But at least, the author had some forsight to say that,

As always, there are risks to the story. The American consumer isn’t invincible; for example, even moderate levels of debt and debt service can turn into vulnerabilities in the face of shocks such as supply-induced energy price hikes. Contrariwise, however, if energy prices stabilize and job gains improve moderately, overall growth may be stronger, inflation risks higher, and monetary policy may tighten further than is currently in the price.

Those vulnerabilities are exactly what I've been trying to point out here. High oil prices and subprime mortgage crisis are putting some (nobody knows exactly how much) pressure on the stock market, making it vulnerable to fall - the whole idea behind this thread. So now, you guys know why I'm a bit (to put it mildly) concerned about the health of the stock market.


About the falling real income of rich countries, geez, that's common sense! It goes like this: when a country become rich, because of high income and strong demand, the overall cost tends to go up. Businesses, which continuously aims for efficiency, naturally don't like high costs. So when the costs go up, they tend to shift to places where the costs (relative to production) are lower thereby shifting some of the incomes there.

Where the original idealists of globalization probably failed is that they failed to see the magnitude of that shift. They thought that the shift would probably be limited to low-tech, purely labor related areas. But that was clearly not the case, they shifted almost everything.

[Kirkland Laing]

Let me continue where I left off.

But at least, the author had some forsight to say that,

As always, there are risks to the story. The American consumer isn’t invincible; for example, even moderate levels of debt and debt service can turn into vulnerabilities in the face of shocks such as supply-induced energy price hikes. Contrariwise, however, if energy prices stabilize and job gains improve moderately, overall growth may be stronger, inflation risks higher, and monetary policy may tighten further than is currently in the price.

Those vulnerabilities are exactly what I've been trying to point out here. High oil prices and subprime mortgage crisis are putting some (nobody knows exactly how much) pressure on the stock market, making it vulnerable to fall - the whole idea behind this thread. So now, you guys know why I'm a bit (to put it mildly) concerned about the health of the stock market.


About the falling real income of rich countries, geez, that's common sense! It goes like this: when a country become rich, because of high income and strong demand, the overall cost tends to go up. Businesses, which continuously aims for efficiency, naturally don't like high costs. So when the costs go up, they tend to shift to places where the costs (relative to production) are lower thereby shifting some of the incomes there.

Where the original idealists of globalization probably failed is that they failed to see the magnitude of that shift. They thought that the shift would probably be limited to low-tech, purely labor related areas. But that was clearly not the case, they shifted almost everything.

The subprime mess is inadvertantly propping the stocl market up as a great deal of the money the Fed is printing ends up being invested in stocks. Also the current inflationary monetary policy means that future inflation is factored into current stock prices, propping them up too.

Falling incomes wasn't in the brochure when the benefits of deregulating world markets was being sold to western populations. It's unlikely they'll view the effects of globalisation favourably in the future. Maybe if you're worried about the stock market it might be a good time to hedge your investments by investing in pitchfork futures.

[El Kabong]

Mr. Doom and Gloom strikes again....we haven't even really had a TRUE recession.....although it might be better for everyone in the long run if we had one as it corrects the market in small doses as opposed to an economic doomsday a la the Great Depression.

If the US economy tanks then everyone else is going to follow....same thing happened a couple years ago with the Asian markets. Everyone was like "Oh my God the World is going to end China and Japan are having a hard time!!!" well everyone is still here.....and the greatest thing.....Europe is next....have fun yall

[Kirkland Laing]

The US economy will continue to soar upward barring the occasional hiccup. The problem is that the beneficiaries of that growth are a small number of people and the vast majority of Americans are treading water at best and will be worse off in the long run. People entering the job market today will not do as well economically as their parents.

[pacfan]

Okay, folks, here comes mr. doomsday...

Ya kirk, no doubt for most Americans the real income hasn't gone up in awhile. It has to do with the maturity of the US economy. The average income has gone up to the level where it has affected the overall costs of doing business there and so any effort to increase production activities is negated by that increase in costs. It's sort of a state of equilibrilium - increase production - increases incomes - which increases costs - which then pulls down production - and which in turn pulls down income; sort of tug-of-war that keeps income from going up. Of course some of it has to do with the migration of jobs due to globalization. Something similar happened in Japan almost 2 decades back. Japan has reached the peak of its production activities, practically producing everything for the world, which tremendously increased their income. With huge amount of money in the system and few other options left to invest within the country, it chased limited assets, chiefly real estates and stocks, resulting in highly unrealistic assets prices or the bubble. To make the situation worst, they had almost unlimited savings which means unlimited loanable funds, most of which found their ways to the property/stock markets, further hyper-inflating their prices. And you know what happened next; the bubble got so big that it wasn't able to hold itself anymore and so it burst. Ever since then, the Japanese economy went through a long period of deflation, something almost unheard of until that time, where the value of of almost everything there went down, including the income.

Of course the situation between Japan and the US is quite different as the US still has much more room for growth in its economy. But because of globalization, they are limited to only certain areas of the industry, mainly the services-oriented IT related ones, which as you've said, makes only few individuals rich - hyper-rich, while most other people's wealths are unaffected.

[luvfightgame]

Mr. Doom and Gloom strikes again....we haven't even really had a TRUE recession.....although it might be better for everyone in the long run if we had one as it corrects the market in small doses as opposed to an economic doomsday a la the Great Depression.

If the US economy tanks then everyone else is going to follow....same thing happened a couple years ago with the Asian markets. Everyone was like "Oh my God the World is going to end China and Japan are having a hard time!!!" well everyone is still here.....and the greatest thing.....Europe is next....have fun yall

Are you basing our "true" recession on statistics? You might enjoy this article...

Behind the falsification of US economic data

[Kirkland Laing]

Whether the Dow takes a trip to 7000 in the next year or so depends on events, but one thing we are assured of is inflation. This is just the start of it, worth reading :

Pressure from oil prices spreads - International Herald Tribune


This is all down to the idiot Bush. I'm really furious about that guy right now. In a day or two I'm going to install a piece of art in this thread expressing my feelings for George.

[pacfan]

Yup, the effects of high oil price is starting to show their ugly faces little by little. As I've said, something's gotta give - either the oil price or debt crisis eases or the stock market goes, though that doesn't necessarily mean it'll end up in a depression, but definitely a recession at the least...

...go slow on the ol' man though, he ain't got much time left anyway, I mean in the office.

[pacfan]

Yup, the feds have already injected tens of billions of dollars to bail out some troubled banks so we'll just have to hope that that will be it and the debt crisis eases - or else, the apocalyptic (ok, I'm exaggerating) oil price spike can just make it worst and put the world into another recession, at the least.