Economic collapse

Folks we may be seeing it, if anybody is listening to Trupiano and Al Martin... well we have seen a pretty bad week for the Dow Jones... we will see... and he is not the only one concerned... bout what is going on...

scarry information.

it's just a small blip on the radar screen. Our citizens will purchase more, they have to purchase more. It's patriotic to shop and be up to your asshole in debt. Be patriotic citizens, go shop and stop worrying about an economy that is vibrant and overflowing with great Wal-Mart deals. That is all. You may continue your discussion, but NOT on this subject. You have been warned, citizen. :sarcasm:

10% corrections in markets are very common, and with a market valued over 10,000, that's going to be about 1,000 points.

There's a Yale professor who writes about this. The week before the crash in '29 there was a "correction" -- I forget what it was, it might have been as little as 3-5%. Many people who sold on the day of the big crash cited the previous drop as a sign that they needed to get out on that day. And the big drop isn't even the big problem. For example, I think the market temporarily climbed back from the big drop within four or five years (not adjusted for inflation). However, adjusted for inflation, it took the market something like 30 years to pass the 1929 levels.

The problem with bubbles exploding (and whether a 10,000 dow is still a bubble is open to debate -- P:E ratios might suggest that it is) is that you lose a lot of built-up wealth that could have been put to much better uses than speculating on asset values, like building infranstructure and educating people, and those failures to invest in the future become huge opportunity costs that take, oh, say, 30 years to fix.

I think if you look at America today, it's pretty safe to assume that we're not making the necessary investments in infrastructure, education, or even in R&D in useful, socially valuable technologies (like cures to deseases, rather than treatments, alternative energy sources, more efficients modes of transportation). I also think it's safe to say that we are putting too much money into speculation on assets at questionable valuations, like real estate and equity and hedge funds..

with questionable valuations? Sorry. I'm not buying this.

Public companies have to disclose so much that you generally have a very good idea of what you are buying and what it will do over the short, medium and long term.

Now, if you chase completely speculitive companies - Internet, most biotech - or companies with all sorts of warning signs - Enron, AIG, Taser, General Motors, etc - well, that's "lie down with dogs, get up with fleas."

You can argue if the valuations of a company on a P/E basis are right or not, but you WILL know what the company is actually worth.

If you buy junk anyway hoping for massive returns, well, good for you.

potential.

The value of a stock should reflect its dividend/earning potential. When its valuation moves away from that and towards a point at which people think it will somehow move due to "irrational exhuberance" than you're living in a bubble that can pop.

Same with land. Its value should reflect its potential rental income with some adjustment for the fact that most people don't rent their primary residence ever. When the price people are willing to pay for a house starts to reflect the belief that t he house is going to climb $100,000 based on irrational exhuberance, then you're living in a bubble.

The short version: prices that are based on the idea that other people just irrationally want something and are willing to pay ridiculous percentages of their income to have it are just as likely to go down rapidly as they are to go up rapidly. If they're not based on income potential, then they're based on very easy to change psychological factors, and then you're risking wealth by counting on those shifting psychological factors to continue into the future.

:-)

Or have they increased your chocolate ration yet?

For a moment I was going how did this Freeper get that high of a post cont... you made me laugh

Who is Trupiano?

comes after Hartman and he interviews Al Raw every Friday... and Al Raw has been quite accurate

Don't believe me? Ask the Gauleiter of Mecklenberg...

Tony T is a huckster

but he ain't the only one expecting the housing buble to burst, and he ain't the only one selling that collapse... overall he is repeating what among others the world bank is saying....

Stocks move like a cross-cut saw blade - up and down. Just tilt it up so it averages about a 10% gain per year OVER TIME.

Bank stocks will get whomped when the housing bubbles go, though.

a 1929 event or worst, no black Tuesday but that is what we will see sooner than later... over the long haul, 30 years, stay in the stock exchange, but short term... 1929 type collapse... and this may just be the beginning. and the economic pressures and conditions are very similar to 1929

I know most people who play in the Stock Exchange don't like this view... but this view is based on that pesky thing they don't teach no more at school... HISTORY...

Among other side effects housing did collapse... but so did job prospects

And using history to model current economic patterns is a badly flawed idea. You can predict that bubbles will pop - but you can't predict exactly when and how bad. Etc.

As far as the stock market losing %-wise what it did in 1929 - impossible. September 11th pretty well illustrated how far things can fall short of a gigantic natural disaster - and if you bought good stocks when people sold off that much on 9/11, you're sitting pretty right now.

You won't see Dow 8000, period, and I'm pretty sure you won't see Dow 9000. That's because a drop towards 9500 would be more than enough to make a lot of stocks really, really cheap and attractive. There's short term support at 10,000 itself for that matter - just watch the market bounce early next week.

The only way you'll ever see another Great Depression in this country is if you have a massive natural disaster - Yellowstone, New Madrid, SF or LA flattened by quake, hurricane on New Orleans - or the entire housing market went pop AT ONCE - which isn't going to happen.

I don't agree... by the way, it is not 1929, they are ciclical, have been ciclical for oh since the dow started running... it is called a boom bust economy. Bushonomis, is not taht different from Hooversim, or McKinley... and what do they have in common? Ok, I will let you ponder that one... those who think we cannot have a 1929 like event are dreaming

the Chinese central bank stops buying treasury notes? That would flatten more than your average hurricane and earthquake combined. It's in the cards. We just don't know when they will do it.

My guess is that it will come shortly after the EU drops their arms embargo, opening up unfettered trade with China.

Or start of a massive offshoring trend that could destroy the middle class, ruin small businesses, and collapse our economy. I hope not but best to be prepared anyways. If I had alternative investments, I'd dump into that but for now, my money is safe in the bank (for now).

A collapse in the stock market caused ordinary people to pull in their belts and stop all purchases except necessary food items. That caused a collapse in the consumer economy.

The New Deal eventually started putting people back to work on public projects, thus putting money back into their pockets and causing a resurgence of consumer demand for goods and services. The manufacturing infrastructure had been shuttered for several years, but it was still intact, and people started to move back into non governmental jobs.
Roosevelt also had another advantage that we don't have: a smaller, more manageable debt. It was easy to find people to sell an incrased national debt to back in the 30s because the USA credit rating was good.

Fast forward to now. The consumer market is slowly drying up as people become more nervous about their long term employment prospects. That's increasing unemployment even more, and industries desperate to keep squeezing profits out of their businesses are relocating to countries whose currency exchange rate is so low that their workers look like real bargains. Our manufacturing infrastructure has largely been exported, with the machinery either exported along with the jobs or sold for scrap. We have no manufacturing base left, and the clerical base is starting to follow it. With the disappearance of jobs there comes a disappearance of infrastructure. We can no longer rebuild industries because the equipment is gone and the buildings have either been converted into housing or have fallen into total disrepair.

We can't put people back to work on credit, either. Our credit rating in the world is so bad right now that Wall Street is having to eat the additional debt that Idiot is building up.

The only thing that will get us back to a country that works for all its people will be some rather Draconian cuts in government expenses with some rather extreme tax hikes on the richest to siphon off enough hoarded wealth to get the money pump working again, from the bottom up, like it always does. I don't expect to see this in what remains of my life. Our country would rather see us starve.

Unless it is in Euros or you are diversified heavily in Gold. Ever heard of a currency collapse? It happens all the time in other countries and it's already halfway happened here. You've already lost like 40% in the past 4 years.

Where could I purchase such purty metal? I live in KY and I doubt the local gold coin store has what I need. Also, how would gold survive a crash? Globally it's good but locally may do badly. Wouldn't platinum do better? Or even crude oil commodities? Seems even if I did put my money into a metal or whatnot, people could break into homes looking for such metal and it wouldn't be safe anywhere (except for the bottom of a quicksand pit). I want something that would preserve or increase my cash AND have it elsewhere and safe.

100,000 Kalashnikovs were going to be used for **

**Donald Rumsfailed was upset last week about Hugo Chavez purchasing 100,000 Kalashnikov Russian rifles. He couldn't understand why Venezuela would do such a thing.

"Why goodness gracious me, why would Venezuela feel the need to do such a thing, is utterly beyond me", said RumsFool in an interview last week.

Now we know.

The Dow lost 3.9% of its value this week. While distressing, it doesn't come anywhere near a crash. The day it drops 20% or more, I'll start using the word "crash."

This is certainly small enough to flood with Fed funny money on Monday to pick the average comfortably above 10,000 again, which is what I fully expect to happen. The Fed will be aided by bargain hunters who still believe they can win the lottery.

The reason I'm not terribly alarmed right now is because Idiot is still trying to flog his social security scam. The day he gives up on that idiotic idea is the day I'll start getting more nervous about the Dow.

As a result the market crashes in 1929 or 1987 get a lot of attention. However, history shows the real damage is done in the long term secular bear market slides such as occurred in the early 1930's and the 1970's. These are less spectacular but go on longer. They can also contain cyclical bull market rallies that dupe a lot of investors back into the market for more punishment. Quite a few commentators think that this is exactly what has been happening in the past twelve months. The events of the past week are a sign that the underlying bear market is reasserting its influence. As a consequence stocks are going to become an increasingly dangerous place for the ordinary individual to hold their money. I expect the downtrend to continue and to gather pace over the summer. You will only know that the bottom has been reached when everyone thinks all hope is gone.

Furthermore, I wonder if Bush's social security plan wasn't a way to shore up a stock market with already questionable equity valuations. I bet they wanted to get SS money in there to drive up demand for stocks without companies actually having to prove to invetors that the stocks are worth their valuations.

It might be that the market is also reacting to the unlikelihood of that money coming in any time soon, thus forcing existing investors to look at the real value of their stocks -- ie, PE ratios. And without a strong middle class out there willing to buy products they really want and are free to chose (with the exception of iPods), investors are wondering just what exactly stocks are worth..

Can you explain what you mean?

AFAIK, all the Fed could do is lower interest rates, which usually pushes the stock markets up, since speculators can leverage at lower cost.

However, the Fed is in a bind. If they start lowering interest rates, the dollar would tank. Despite popular mythology, that is not a good thing, so the Fed is currently reluctant to lower rates.

Of course, they are also reluctant to raise rates, because that could pop the real-estate bubble.

It's one of those damned if you do, damned if you don't situations. Fold in the current account deficit, and you start looking into the abyss.

When is still a question, if is a foregone conclusion.

The crash of 1929 DID NOT cause the Great Depression despite what some here might think. The Great Depression started before the crash ever took place. Large stock market declines come and go and are not to be feared. There's an old saying that the market has predicted 18 of the last six recessions. The crash of 1987 is a good example as is the financial panic of 1998.

To the government anyways.