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

[pacfan]

So you know some concepts in financial management pacfan. What I'm more concerned is the increasing price of fuel. It's very alarming.

No, I'm just a boxing fan who dabbles in everything.

Seriously, I wanted to involve myself in local socio-econo-political discussions but just don't have the time to do so. You probably know we got lots of mess to clean up.

[luvfightgame]

Unfortunately whenever a topic like this comes up everyone gets wrapped up in the details and the side effects of the real problem.

We have debt money. There is perpetually more debt than money. This is because of the way the system is designed. There is no way to get out of debt unless the system is changed. There is too much debt owed to people who do nothing. Money is simply to exchange things between people, the people who provide the money get too much out of it.

For a house... you borrow $100k but you pay back $300k. The person who built, sold, and lived in the house get paid out of the $100k. Then the other $200k of interest is payed out the rest of your life. To put it simply we have economic leeches that are sucking the system dry.

Don't believe that there's lack in this world. We have plenty of food, water, shelter, for every human on the planet. But it's being held back for money. One fastfood chain's waste for a day could feed all the starving people. The major hotels have enough empty rooms, the newly built houses that are empty, etc. Don't believe the hype. There's plenty for everyone, but millions starve so hundreds can have so much they couldn't spend it in their life times.

[Kirkland Laing]

Ooogh. We not only have a stock bubble but also a debt bubble, part of which already burst. National (public) debt is always manageable but the level of those personal household debt is somewhat alarming, especially the increase in percentage relative to the disposable income. But let me tell you that debts themselves are not necessarily bad things as long as they are manageable. You can keep on borrowing and borrowing without problem as long as you have the capacity to pay the due amounts. But the problem is that any imbalance in the economy may affect that capacity or capability to pay. Now, we are faced with at least two of them, the subprime crisis and the high oil price. IMO, among the three of them, the debt crisis, high oil price and the stock market, one gotta give. So the way I see it, if the subprime debt crisis and the high oil price persists, the stock market, which is the barometer of economic health, will be increasingly vulnerable. But, good for us, even if it falls it'll probably be a soft landing like a domino tipped with short one-ended track. But - a big but - on the other hand, it is not entirely impossible that the domino could be a long, multi-ended tracks, which once tipped could have immense impact on the economy. I have to say that I'm not about to press the panic button, but still, it won't hurt to be prepared for the worst. So what I'm trying to impress upon you guys here is that you should at least be prepared for the worst, mentally and emotionally - there is nothing to lose. Though it's easy to exagerrate the effects of economic decline, the worst that can happen is that there will be more business and personal bankrupcies, more lost jobs, less or even negative economic growth, which translates as lesser overall wealth and declining values of your assets (properties) and earnings. Can you live with that? Of course you can. At least you guys in the developed world are still lucky because you probably won't go hungry, unlike the rest of the world.

What's going to happen in the future is that economys are going to keep growing, but the wealth generated by those economys is going to increasingly end up at the very top end of the earnings scale. People who have to work for a living are fucked as labour rates are increasingly arbitraged downwards by the billions of new workers in the global economy.


In America the median wage has stood still since Reagan took office and this generation won't do as well economically as their parents. For the next generation or two in industrialised countries, things will be increasingly tricky for their populations. But in the long run -- by which I mean the long run in which we're all dead -- economic circumstances will improve immeasurably.

[El Kabong]

Kirkland....always the happy go lucky, sunshine on my shoulders, today is a wonderful day kind of guy.


A better way to look at things is this way: "Now or in the recent future is a great time to invest"

[Kirkland Laing]

Kirkland....always the happy go lucky, sunshine on my shoulders, today is a wonderful day kind of guy.


A better way to look at things is this way: "Now or in the recent future is a great time to invest"

Here are a couple of articles for you to read. They're written by partner in one of the world's biggest investment firms. This guy is one of the high priests of globalisation, and these articles caused controversy in the financial community when they were released. They're long and have no pictures but for somebody just setting out on the earning curve they're very worth reading. Try taking in some actual facts instead of nonsense, you'll benefit in the long run :

Morgan Stanley - Global Economic Forum


Morgan Stanley - Global Economic Forum

[pacfan]

Kirkland....always the happy go lucky, sunshine on my shoulders, today is a wonderful day kind of guy.


A better way to look at things is this way: "Now or in the recent future is a great time to invest"

Here are a couple of articles for you to read. They're written by partner in one of the world's biggest investment firms. This guy is one of the high priests of globalisation, and these articles caused controversy in the financial community when they were released. They're long and have no pictures but for somebody just setting out on the earning curve they're very worth reading. Try taking in some actual facts instead of nonsense, you'll benefit in the long run :

Morgan Stanley - Global Economic Forum


Morgan Stanley - Global Economic Forum

I've just breezed through these articles which were written on early 2006, several months after the start of oil price increases but little over a year before the eruption of the subrime loan crisis. It pretty well illustrates why the theorists' views sometimes fail against what actually happens, or collides with that of what businesses (the practical ones) actually do.

The part about household debts clearly illustrates my point. The author strongly implied that the household debt situation was healthier than what the data were indicating then (2006). In his analysis, he even included the mortgage credits, which is where the subprime loans comes in, and everyone by now knows what actually happened. Let me quote the crucial part of his analysis:


<EM>For investors, this scrutiny of the data has important implications. Careful analysis of consumer debt service and financial obligations ratios reveals a healthier American consumer than commonly thought. That throws some cold water on the pessimists’ slowdown story, because presumed household balance-sheet fragility is the lynchpin for that scenario. If I’m right about the prospects for improving job growth and wage gains, moreover, my colleague David Greenlaw and I think the housing bust scenario that many investors fear is far fetched. In our view, it would take soaring interest rates or declining employment to produce a bust (see “Housing Wealth and Consumer Spending” and “Home Sweet Home,” Global Economic Forum,

[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.

[Kirkland Laing]

Kirkland....always the happy go lucky, sunshine on my shoulders, today is a wonderful day kind of guy.


A better way to look at things is this way: "Now or in the recent future is a great time to invest"

Here are a couple of articles for you to read. They're written by partner in one of the world's biggest investment firms. This guy is one of the high priests of globalisation, and these articles caused controversy in the financial community when they were released. They're long and have no pictures but for somebody just setting out on the earning curve they're very worth reading. Try taking in some actual facts instead of nonsense, you'll benefit in the long run :

Morgan Stanley - Global Economic Forum


Morgan Stanley - Global Economic Forum

I've just breezed through these articles which were written on early 2006, several months after the start of oil price increases but little over a year before the eruption of the subrime loan crisis. It pretty well illustrates why the theorists' views sometimes fail against what actually happens, or collides with that of what businesses (the practical ones) actually do.

The part about household debts clearly illustrates my point. The author strongly implied that the household debt situation was healthier than what the data were indicating then (2006). In his analysis, he even included the mortgage credits, which is where the subprime loans comes in, and everyone by now knows what actually happened. Let me quote the crucial part of his analysis:


<FONT face="Times New Roman" size=3><EM>For investors, this scrutiny of the data has important implications. Careful analysis of consumer debt service and financial obligations ratios reveals a healthier American consumer than commonly thought. That throws some cold water on the pessimists’ slowdown story, because presumed household balance-sheet fragility is the lynchpin for that scenario. If I’m right about the prospects for improving job growth and wage gains, moreover, my colleague David Greenlaw and I think the housing bust scenario that many investors fear is far fetched. In our view, it would take soaring interest rates or declining employment to produce a bust (see “Housing Wealth and Consumer Spending” and “Home Sweet Home,” Global Economic Forum,

Nobody working on Wall Street will ever state publicly that they think any capital market in anything is going to lose value at any point in the future. Everything is always a fantastic investment and only ever going to improve.

When one of these characters whose job it is to boost up the products his company buys and sells tells you that there's trouble ahead it's worth paying attention to.

[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.

[pacfan]

Nobody working on Wall Street will ever state publicly that they think any capital market in anything is going to lose value at any point in the future. Everything is always a fantastic investment and only ever going to improve.

When one of these characters whose job it is to boost up the products his company buys and sells tells you that there's trouble ahead it's worth paying attention to.

Yup, even the news that comes from Wall Street usually paints the rosier side of the picture. They've got business to protect - which runs into trillions of dollars.

[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