Market crash: are we there yet ?

[chucklesR]

Originally Posted by wardp

So how are we going to pay for our excess spending of the last 8 years. Don't say cut gov. until you say what you will do without.

Ward,
I'd do without everything not related to safety, defense, and maintenance of current programs at current levels. That's hard enough to get the yahoo's to do.
All of the pork, all of it - 2 million to research blueberries in upstate Maine etc.. every single penny, gone. If people want better blueberries they can research and test it on the open market.

Then start cutting any and every freaking program not mandated in the Constitution.
It would be cheaper to build hospitals and staff them than continue supporting Medicare. If you want healthcare free, sure. It will be government brand with as much quality as they add to any service/product.
Otherwise, pay for your own.

Unemployment insurance? The best insurance in the world is keeping up with current marketable skills and that is a individual responsibility, but if you want it, go work at the hospital, clean a street or work a job for the community while on the dole.
Welfare? Total cut. I'm a cold heartless bastard, get over it. Government has taken the place of family. It's time to revert back. Uncle Sam doesn't exert peer pressure to get lazy butts off chairs and behind the shovel, instead he just doles out checks that are wasted money. "Promote the general Welfare" in the Constitution was not meant to mean actively send cash to people, it meant provide the laws and structures of a safe society in which people can prosper.
You know why those news stories and human interest articles you see sometimes about people that bootstrapped themselves off the dole are considered 'news'?
Because it's unusual. We have to stop that. Reagan had it right, but the exceptions and loopholes grew to much.


To me, if you want it you earn it - stop expecting it.

[PBzeer]

But Chuck, what will the politicians buy....errrrrrr, get votes with?

[chucklesR]

Legislative, governing ability?

[sailaway21]

Originally Posted by wind_magic

I agree this will probably be the end result, but I don't think it will happen yet.

Right now it's all about deflation. People are scrambling to put away cash for the long winter. No matter how much money the government prints and throws out on the street, people are going to do exactly what the banks are doing, they'll take the money and put it away and say thank you very much, but they won't spend it. The Fed is pushing on a string, they can't spur the economy on because no matter who they give money to, nobody is willing to lend it, or borrow it.

Later, some day down the road, all that money will come out of the vaults and out of people's pockets, but I don't think there is a lot of danger of that right now. That's usually something that happens on the other end of a deflationary bear market, not at the beginning of it. An example is silver which is at the moment back down below 10$us/oz. People are not bidding the price up, even though silver is an absolutely terrific hedge against inflation, instead they are selling their silver to buy cash despite the fact that the Fed is printing more and more of it. People are pulling cash out of the economy faster than the Fed can put cash into it.

Hyperinflation is more a product of war. During war the government is stuck, especially if they are losing, because they can't get anyone to lend them money and they have trouble increasing taxes, so all they can do is inflate the money supply to buy the things they need. They will even hyperinflate the currency, even when they know it's destroying the economy, because it's better that than lose the war - they figure they don't have a choice. In normal times no government would let their currency devalue that much if they had any choice at all. War is always associated with gold for that reason, because gold becomes the only safe hedge against wartime currency devaluation, it becomes the only currency that anybody will trust.

I'm not sure you've got this exactly correct, Windy. And I know that you and I agree with Mr. Buffet and not the practice of most investors. It's too late to put your money into cash or even gold. But fear is rampant. And as Warren B says, you need to be greedy when others are fearful. When others are greedy you need to be fearful. Overlooking good buys awaiting the bottom of the market is just plain foolish. And there are many good buuys out there.

I think you're backwards on hyperinflation and war. Hyperinflation often precedes war, the best example being the Wiemar Republic's attempt to print it's way out of depression. The lack of any economic success internally makes it palatable to export, or blame, the problem on external factors. War is a logical solution then. You're correct though, in that war can lead to hyper-inflation as soon as it becomes doubtful as to the viability of the full faith and credit of the government.

I feel somewhat comfortable compared to many in that I have a job that is somewhat recession proof. As a well driller my services are steadily in demand. From a personal standpoint it appears that my procrastination on the kitchen project in the new house may end up being fiscally prudent. (as if I knew this in advance!, hah!) The numerous big ticket items, as well as core materials, are likely to become much more inexpensive to purchase with retailers looking to move things like ovens, refrigerators, and cabinetry at much lower profit margins just to keep cash flow going. The manager of the local Home Depot turned down my insanely low offer on one of his three top of the line Honda mowers a month ago. He stated that since there will be no new model next year he was content to sit on the three over the winter until spring demand arrived. I'm anticipating that that demand will not materialize, and since those mowers that will be stocked in the spring are already ordered and on ships now, I'm anticipating a glut of Honda mowers at the Home Depot. With a dearth of buyers, I expect my insanely low offer will be more appealing.

[wind_magic]

Originally Posted by sailaway21

I'm not sure you've got this exactly correct, Windy. And I know that you and I agree with Mr. Buffet and not the practice of most investors. It's too late to put your money into cash or even gold. But fear is rampant. And as Warren B says, you need to be greedy when others are fearful. When others are greedy you need to be fearful. Overlooking good buys awaiting the bottom of the market is just plain foolish. And there are many good buuys out there.

I agree with you for the medium term that it's time to get out of cash and back into stocks because they have taken a beating. I disagree with the majority out there that thinks the market has to pop right back up to new highs, or even trade up to new highs anytime soon, however. We could be going into a long bear market that hasn't seen the lows yet and might not see the lows for a long, long time. I definitely agree we are near a short term bottom though.

Stock prices don't have to go back up anytime soon. Anyone with any doubts about that, ask the fine folks in Japan how they feel about the Nikkei 18 years after it hit it's high in 1989. The Nikkei sits at 8693 today, and at it's high it was at 38915, a loss of about 77% over 18 years.



It can't happen to us, right ? Why, because we're special, because we have some kind of destiny ? Yeah, that's what the people of Japan thought when the estimated price of Tokyo was higher than the entire United States, and we in the states were sitting around watching movies like "Gung Ho" and trying to figure out how Japan was doing it. Seriously, look at that chart and imagine you were going to be a buyer, exactly where would you have bought in, and when would you have sold ? Follow that graph with your eyes over to the 10000 level, just below there at 8693 is where the Nikkei is today, less than half the level of everything on that chart after the top. Do you really wish you'd bought the Nikkei a year after it topped for the long haul ? All week on CNBC last week they were talking about how the market made it's biggest week long drop since the spring of 1933 ... do you really wish you'd bought into the stock market in 1931 a year after the crash in October '29 ? These things can go on for a very long time, and good deals can get to be even better deals. By long term historical P/E measures the U.S. stock market is still very expensive. Stocks can lose 50% of their price, then lose 50% again, then lose 50% again, then lose 50% again, then lose 50% again, then lose ...

I think you're backwards on hyperinflation and war. Hyperinflation often precedes war, the best example being the Wiemar Republic's attempt to print it's way out of depression. The lack of any economic success internally makes it palatable to export, or blame, the problem on external factors. War is a logical solution then. You're correct though, in that war can lead to hyper-inflation as soon as it becomes doubtful as to the viability of the full faith and credit of the government.

Of course you are right, it isn't always war that causes hyperinflation.

Wikipedia has a pretty good page about hyperinflation too, CLICK

[PBzeer]

As near as I can determine, the ONLY thing anybody knows about the market is that it will go up and down. Beyond that, none of the so-called experts seem to have any more of a clue than I do.

[sailhog]

One thing that gets overlooked in this mess is the upside. Parents aren't going to be able to get nearly as many loans for college tuition in the coming months, which means tuition is going to drop like a stone. People are going to be able to afford a standard mortgage for a home... gas prices are falling... This overabundance of credit has made everyday things ridiculously expensive. Take away the credit, and poof! life becomes affordable... and sane.

[sailaway21]

I'm not completely clear on the systemic problems within the Japanese economy but have a layman's impression that there are fundamental problems within a xenophobic banking and finance system that prevent it from rebounding even over a decade after it's decline. I'm under the impression that they're unwilling to cut losing ventures, inefficient subsidies are remain protectionist.

I am unable to summon up much faith that the the US has a manifest destiny to return to profitability and remain nervous about government's involvement in "managing" the economy. I'm curious as to how banks will be able to continue to "sit" on money without lending....and remain in business as banks. And my layman's impression is also that a flight towards cash means that there is a lot of cash out there seeking a better place of lodging. I'm wondering what those venture capitalists are occupying their time with these days.

[sailaway21]

Originally Posted by sailhog

One thing that gets overlooked in this mess is the upside. Parents aren't going to be able to get nearly as many loans for college tuition in the coming months, which means tuition is going to drop like a stone. People are going to be able to afford a standard mortgage for a home... gas prices are falling... This overabundance of credit has made everyday things ridiculously expensive. Take away the credit, and poof! life becomes affordable... and sane.

Even kitchen's become viable projects!

[sailhog]

Originally Posted by sailaway21

Even kitchen's become viable projects!

Sway,
Beware of Amana... Forbid Mrs. Sway to even look at those appliances. Friends say they look great... and that they're incredibly expensive... and that they break...