Stocks: How Bad And How Much Worse Could It Get?
The S&P 500 and Nasdaq printed new highs on Wednesday and then experienced sharp reversals. This week's video reviews concerning charts, as well as charts that did not sustain significant damage. The video also contains a stock/bond opportunity cost analysis.
Video Length: 00:39:24
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I think the low yields and the economy are the big worry. Less so with the stock market, however, if real estate drops precipitously after the summer run I would start to be cautious. Without such low yields property would probably show a more obvious weakening.
First, why is the real estate market such a big concern? The constant sales of property mostly boosts the prices without increasing the value. That is what I have seen, and that lead to that gigantic disaster a few years ago.
Scond, the stock markets well being IS the worry of those who take care of "their friends" there. Protection of stock prices seems to be one of the main goals of the federal banking system, regardless of the damage that it does to whomever else might be in the way. THAT appears to be the primary motivation for having constant inflation. I am sure that I have seen that stated, that inflation is needed to keep stock prices rising.
The real estate market tends to be a giant receptacle for accumulating excess cash and is one of the first assets to build an asset bubble. These assets are acquired with leverage which exacerbates leverage in the system and the asset prices are not liquid, meaning the price can fall easily and when they fall, the debt does not have adequate assets to stay solvent and leads to an even greater price drop. The addition of derivative in the housing and real estate market only elevates this volatility and divorces the banks and people who would normally have an interest in the real estate. Thus with real estate being an asset that requires constant administration costs, there is literally no one who wants to pay the taxes or administration of assets and thus the property depreciates further. Real Estate will typically fall first before the stock market does for two simple reasons. It's asset price is not standardized or fixed and it is an asset that requires cash flow to maintain making it arguably a wasting asset. And it is more leveraged than stocks typically are excluding option positions.
My idea is that marketing real estate debt as a derivative should be considered a felony criminal offense and punished with both fines and prison time. The reason being that it indeed does exactly what M.K.W. says that it does.
Agreed.
The post should have been in a text format so that it could be better grasped and taken into one's head.
Never ask how much worse a situation could get unless you wish to find out first hand. And never ever believe that things can't get any worse because there is no limit at the low end. And for the stock market, that ONLY gets bad for those who have invested, a fairly small portion of the population that is wealthy enough to be able to afford to invest.
My concern about how bad things are already set to become is based on the amount of money already to drive inflation, and the huge mountain of debt that producing that mountain saddled the nation with. To repeat an old expression of mine, " that is not the light at the end of the tunnel, it is a fast freight headed our way."
What keeps inflation in check is the fact that most of the money is in people's hands that don't need to use it and have fantastic interests in hoarding it. Unfortunately making money off that hoarding is hard since increasingly all the money is going this way and returns are shrinking because there are fewer and fewer places that make decent returns. This is why the market is going up.
I do not see that I am hoarding money, I see it as holding it for the near future when I will need it to purchase food and other things equally as important.. I DO "See A Bad Moon Rising", to quote a line from that old song.
I've always felt that in tough times, companies cut salaries and let people go - forcing those who remain to pick up the slack. And then the companies horde the savings for themselves.
Good song. Obviously I'm not talking about you, however, even well off to mid class people are trying to conserve their assets and cash. This is why there is deflationary pressures. This is especially true since banks want to build their reserves. Until there is more stability and money starts flowing again I don't think we're going to see bad inflation unless somehow production is severely crimped or halted (like a oil war).