Did things not go smoothly?

Jan 2019
130
USA
#81
The stock market has nothing to do with economic success. If it did, each stock price would reflect the company's financial figures. They don't. The stock market runs on rumor, fear, greed, and a herd mentality. It has nothing to do with economic fundamentals. How is it sound financial practice to borrow enormous sums of money to purchase your own shares? In the short term it drives up the stock price but in the medium term it creates debt that can never be paid down. That isn't a problem for the CEO or CFO because they will have moved on to the next job with hefty bonuses, leaving the new CEO/CFO to carry the can.


The bursting of one of the debt bubbles is the usual cause. Last time it was the sub-prime property market but it was precipitated by one company - Lehman Brothers. There are plenty to choose from this time. Auto debt. Student debt. Stock market debt. Retail industry debt. Credit card debt. It could even come from overseas; China and Europe are massively in debt. When a large enough institution has trouble fulfilling its obligations (like Lehman Brothers), that instigates a rout that flows through to the rest of the market. Many think that the junk bond market will kick off the next one. The recent inversion of the bond yield curve supports that argument.

If you think the US is doing great, then consider these:
77% of Americans are living paycheck to paycheck. No savings at all.
US auto loans are at a record $584 billion and are still rising. A record 7 million of those loans are more than 90 days delinquent.
US student debt has doubled since the last recession to a record $1.56 trillion and is still rising. A record 5.1 million of those loans are more than 90 days delinquent.
US credit card debt is over a trillion dollars for the first time ever and is still rising.
Retail sales last quarter saw the biggest fall since the GFC.
A record number of retail chains closed last year (over 3,800 stores) and even more are predicted this year.
Mortgage rates are at record highs yet housing demand has fallen 10%. Despite that, the number of properties on the market continues to rise and prices continue to rise.
Chapter 11 bankruptcies are at record highs.
Chapter 12 (farming) bankruptcies are at record highs.
For the first time in over a century the average US life expectancy has fallen.
It's best we just say that we have fundamentally different views on the way the world works. For you to say things like stocks don't reflect a companies financial figures is mind boggling to me. I'm confused with your entire response. You're talking about sub-prime mortgages, you're all over the place. Do you know what happened in 2008 exactly?

I don't think there is anything left to discuss. You can have your opinion. We can revisit this next April when the economy has crashed. I'll remember to remind you, don't worry..
 
Last edited:

Dan Howard

Ad Honorem
Aug 2014
4,475
Australia
#82
Stocks are just another commodity; their price is determined by supply and demand regardless of the financial situation of the respective company. Look on your graph at the crash last year. The S&P 500 index fell from 2914 on Sep 28 to 2347 on Christmas Eve; a fall of 20%. Did all of those companies suddenly become 20% less profitable within that three month period? How they magically recover all that profitability in the first couple of months of this year? Forget about stock price; a good company to invest in has a decent dividend yield every year. Relying on capital growth is not investing, it is gambling.
 
Last edited:

sparky

Ad Honorem
Jan 2017
4,528
Sydney
#83
the stock market is ALWAYS wrong , too cheap or too expensive
but just right on average
if the stock market is rising too much it follows that a serious downward adjustment will occur
always as a sharp re-adjustment rather than a slow one
 

Dan Howard

Ad Honorem
Aug 2014
4,475
Australia
#84
the stock market is ALWAYS wrong , too cheap or too expensive but just right on average
Yep. If you stand with one foot in boiling water and one foot in ice water, the average suggests that you must be comfortable.

if the stock market is rising too much it follows that a serious downward adjustment will occur
always as a sharp re-adjustment rather than a slow one
A conservative investor will see the signs and get out in time, but most people are greedy and want to hold on for just a bit longer. Keep in mind that you will never go broke taking a profit. A guaranteed profit right now is better than the potential of a greater profit in the nebulous future.
 

Dan Howard

Ad Honorem
Aug 2014
4,475
Australia
#86
You never need to sell if your portfolio consists of stocks with reliable dividend yields. You get a return on your investment every year regardless of the stock price.
 

GogLais

Ad Honorem
Sep 2013
5,347
Wirral
#87
Regarding Merkel and the dog - yes, it makes Putin seem a hard man and a tough negotiator at the time. But is Merkel then going to go home and give Russia whatever they want? Did Putin’s gesture achieve anything?
 

sparky

Ad Honorem
Jan 2017
4,528
Sydney
#88
It seems to have been a bit of a stuff up
Putin is a notorious dog lover , for him a Labrador is the animate equivalent of a comfort blanket
it must have been un imaginable for him to think that living slobering mop had any threat value
 

Dan Howard

Ad Honorem
Aug 2014
4,475
Australia
#90
It was twelve years ago, January 2007. Merkel had been Chancellor for sixteen months. It was no "stuff up"; it was a deliberate attempt at intimidation. He tested her year the year before with a gift of a small dog. After seeing her reaction he started using his dogs to intimidate her.