This topic shows the fractious nature of politics right now. This is consistent with the horrible economy, the fragile financial system,and the negative investor attitudes of depressions.
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Depression investing requires a willingness to be out of the markets while the speculators are dominant and the courage to return when the prevailing attitude is "all is lost". At the end of 2008 there was talk that corporations would all default on their debts, meanwhile the spreads on junk bonds were 100% more than their all time wides and simple math indicated the greatest buying opportunity in history.
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But, those few who embrace depression investing see it differently. We think that the cycle is one of bubble and crash with the end coming , likely, 80/90% down from the peak. This whole process could take 15/20 years.
BTW, this is bad for golf clubs since frugality is rampant and saving to protect your own future is more important than spending money on such frivolities as golf.
Bump.
Most find it hard to believe that a drop of 80-90% in market value is possible, since very few of us have seen such a thing. I get a sense that such a severe drop is unlikely, for a variety of reasons. But some statistics, such as the magnitude of outstanding debt, are similar to the Great Depression, and all the fancy accounting and maneuvering by corporations and government may not be able to stop a big decline.
More short take opinions:
The Japanese stock market (NIKKEI) is 75% below its peak 20 years ago.
High unemployment is here to stay, because of globalization and mechanization. Move manufacturing overseas, build robots who do the work of 5-25 men, and presto, there are fewer jobs needed. Seems pretty obvious to me. And what are we going to do about those people who can't find a job? Tricky problem.
Unions are a favorite whipping boy in the press, because they can be corrupt and because they tend to support one political party (the Democrats). However, I think the country is a happier place with more of those type of medium paying jobs here in country. But as long as it's profitable to import the goods rather than produce them here, those jobs are gone for good. American corporations and their shareholders benefit greatly from globalization. Third world countries benefit greatly too. I believe the majority of Americans suffer as a result. We could argue that, but it's not going to change any time soon.
Large American corporations are very powerful, both at home and abroad. Laws and politics benefit the big companies. Many American companies have huge economic moats and barriers to entry, and are still expanding globally. This is likely to keep the stock markets from dropping too far.
Some regulation is bad and some regulation is essential. The cry to continue dismantling regulation loses me when I see the havoc investment banks caused over the last ten years. Sure, people should only buy houses they can afford, but I can remember a time not so long ago (like 15 years ago) when the bank was the policeman in this transaction, and responsibly rejected applications for credit. As far as I can tell, the mortgage/housing bubble/crash is enormous, the largest we've seen, and is not anywhere near reconciled.
Quantitative easing raises the price of all assets, including housing.
Mike, FYI I haven't made a move in a long time. I maintain an undiversified portfolio with one dominant holding, a powerful American corporation with a huge economic moat, that provides a tangible, necessary service to its customers. That and a few broad based index funds, plus enough cash for 2-3 years of living on the sidelines. I don't have the stomach to play the shorting game, and I've been schooled to believe that timing the market is difficult if not impossible.
(On the other hand, when quantitative easing is signaled by the Federal Reserve, as it was recently, it's fairly easy to assume that assets will stay buoyant. I learned that from the "other" David Tepper on CNBC one morning, who said it was easy for him to invest recently, since the Federal Reserve kept signaling their intent.)
I don't buy for a minute the logic that says "reduce the taxes on small business so they can grow and hire more people." You've got to be pretty gullible to believe that shit. I think a small business owner will only grow and add personnel if demand for his/her products grows. Lower taxes puts more spending cash in people's pockets, and they will likely spend most of that on goods and services, which increases demand, but if I saved $50k a year in taxes on my business, I'd take a vacation or join a golf club, but I wouldn't add somebody. The last thing I'd do is add a body around the office.
Call me crazy, but I believe the availability of cheap, high quality oil is a primary driving factor in world politics and the markets.
I have some friends who (rightly) think the market should be much lower, as the market appears to be propped up by artificial means. But it is in the best interests of most Americans that these assets maintain a higher price, so they can be used to purchase goods and services. Perhaps I'm not being clear here. (Added: What I'm saying here is whether it is right or wrong, fair or unfair, it's good for America that these assets are fully valued.)
If money gets tight, and stocks drop to where I need to hunker down for a few years, those nice golf club memberships will be the first thing to go. They are my only real luxury anyway.