Post by FunkySwerve on Aug 12, 2011 0:14:12 GMT
Unfortunately the current problem is, indeed, all about the U.S.
No, as much as I would love to lay this all at the feet of republican schenanigans with the debt ceiling, this drop has surprisingly little to do with the U.S. - it's largely being driven by the weakness and interconnectedness of global markets, especially Europe, who are looking anxiously towards Germany to save their butts again.
Forget comparing ourselves to Europe. China is the new boss, and they are economically stronger than most people want to acknowledge.
There's a modicum of truth in that, actually. The problem is, people were saying the same thing 20 years ago.
To put it in a nut shell, the U.S. has used it's longstanding status as world economic superpower to borrow an unprecedented/untenable amount.
Actually, we haven't borrowed that much. The debt has been blown all out of proportion by the talking heads. Should we have doubled the debt under Bush? Obviously not. But equally obviously, we don't owe an 'untenable' amount, by any measure.
Greenspan stated that had he been in charge at the time, the great depression would have been avoided. Greenspan's "magic" was simple: create investment and spending by borrowing/spending at whatever level is required to keep the economy growing.
Yes, spending is the Keynesian way out of this mess, and the only real way. The idea that cutting spending is going to help, being advocated by the republicans, is lunacy. Of course, Greenspan would've had to contend with their refusal to accept this, just as Obama has, so saying it wouldn't have happened, is empty bragging.
As long as the economy keeps growing, then the debt to gdp ratio remains sound, and you can keep borrowing. This model was adopted by U.S. businesses, and of course, the U.S. real estate market.
Actually, it wasn't. What Greenspan was advocating was countercyclical spending, by the government. Businesses can't 'adopt' this model - it's a prescription for GOVERMENT spending to shore up weak consumer spending. What businesses did was to temporarily alleviate weak demand with overly-loose and ultimately unsustainable lending practices. This artificially boosted demand and hid the problem. Stronger regulations, like those being pushed by democrats in Congress, would've prevented a lot of the shenanigans - including the triple A rating given to a lot of the junk debt by agencies being payed to rate them that way. Republicans have sworn to block this legislation, because it is EBIL big government.
As long as prices climbed, people could borrow more and more, causing prices to continue to climb. Greenspan's "magic" was a de facto ponzi scheme.
Actually, yes, it did resemble a ponzi scheme, with similar results. The only problem here is that what happened has no bearing whatsoever on Greenspan's advocated solution.
So what now? We can all take the "rats jumping ship" approach that Funkyswerve is bragging about.
Ooooh comparing me to a rat! I'm blushing. I wasn't bragging, actually, though I'm glad I got out when I did. Your remark betrays a profound ignorance of the market. If you think stocks are going to do more poorly, you are SUPPOSED to sell them. This is what makes the market economy function. There is nothing dishonorable about it - it's how the market prices things. It is FUNDAMENTAL to the capitalist system. Comparing me to a rat over it, and on your first post, no less, makes you look like an ignorant, flame-baiting moron. Of course, this isn't your first post, is it, Enius?
Panic-selling what we have left, while stampeding to the border like a herd of Depends filling grandmothers.
No one advocated panic selling. And despite the immediate gain on the day after she got out, my mother is still quite happy to have done so. That's because the market, as shard noted, is behaving in extremely erratic fashion. There is considerable value in stability, and that value, for the time being, is greatly decreased when it comes to the US market. No one but an idiot wants to gamble their retirement when they're on a fixed income.
The risk there is that, like today's 420 point dow gain, the "long and strong" side of the market finds a way to win, and Funkyswerve et al get their collective arses handed to them by those investors (many foreign) who had the balls to step up.
Psst. Dumbass...read my post. I got out two weeks ago, and saved myself a big percentage in doing so. I'm doing a lot better at present than those who stayed in, as you're advocating.
In any case, fleeing in terror to countries as closely economically tied to the U.S. as Canada and Mexico is largely nonsense.
No, no it isn't. And as I already noted, there was no terror involved, just pessimism over republican idiocy, which turned out to be justified. The stocks I moved to are doing quite well by comparison to the US market. You don't have any idea what you're talking about here. Yes, markets are linked. No, they aren't identical. It also don't really advocate for the stocks I got - a fair percentage are in oil, something I do NOT want to be invested in. I was making an investing decision, not writing a manifesto, as you seem to think.
This problem took a long time to create, and I'm not sure that there is an easy solution at this late stage in the game. If there is one, then it will certainly involve Americans doing the opposite of Funkswerve's "buy anything but American" sell-out.
Actually, I'm still quite happy to buy a number of American stocks. I suspect, for example, that Walmart, whose prospects look dim, will do slightly better than expected in the next months. Any bargain chain should. Unfortunately, that kind of pick-and-choose just isn't worth my time at present, as my IRA is still comparatively small - I put varying percentages into varying funds offered by my investment company - pretty standard. Only an idiot or a troll would read what I said as 'don't buy American'.
It would involve Americans standing united, and investing in themselves. Investing in education, technology and infrastructure, to earn back our eroding competitiveness. The solution would also likely involve deep cuts in spending on war. Way too much money has been spent in Afghanistan, Iraq and many other foreign conflicts.
With you a wholehearted 100% on all that. When that happens, I'll definitely be moving some of my stocks back into US funds. The notion that getting out of US funds is somehow threatening that, is wrongheaded. Companies already have 2 trillion in capital - they aren't counting on stock sales to generate it at present. They're sitting on their hands not because of a lack of capital, but because of weak demand.
The economic spin-offs and returns are just not there, and international investors look very harshly upon nations at war.
This is utter horsecrap. Obviously, they're not going to invest in a war-torn nation with confidence, but countries at war? Please.
In 2003 the president of a Swiss investment bank that I was meeting explained that, by policy, most Swiss pension funds were no longer allowed to invest in U.S. equities because the country was at war. The Swiss know the dangers of prolonged war, and so did Sun Tzu:
More horsepucky. Here's a 9-hour old article. I quote:
"According to pensions experts, Swiss schemes are being hit hard by the crisis in Europe and the US, where they have allocated a large percentage of their portfolio to equities."
And later...
"As a result, Swiss pension funds have invested a large part of their equity portfolio in the euro-zone and the US, which has exposed them to exchange rate risk. "
Even WERE what you said true, it would NOT be because nations at war don't do well - it often stimulates the economy and boosts research, in fact - but because of putative Swiss neutrality. The US isn't really 'in' a war, we're just blowing tons of cash and getting people killed in pursuit of some highly questionable foreign policy goals.
Props for quoting Sun Tzu, he's one of my favs. The notion that he regarded war as something to be avoided because of the risks is absurd, however. Yes, he acknowledged the risks, including those of protracted campaigns, but also the benefits. From the opening lines of the Art of War:
"The art of war is of vital importance to the State. It is a matter of life and death, a road either to safety or to ruin."
Of course, with rotating troop deployments, much of what he was concerned about there doesn't apply, but your point on the costs is well taken, and I agree that we're wasting ridiculous sums of money, and have been ever since we failed to draw down at the close of the Cold War. What that has to do with the topic at hand, however, is beyond me, since this crash, as I note above, has little to do with faith in the US's backing its debt - indeed, people have been buying up treasury bonds to shelter from the storm.
Thanks for posting - and with an alt, at that! I haven't given a good pwning in quite some time. Kind of a waste of dev time, but still good fun. All the same though, please save the trolling for another site.
Funky