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    Thread: Subprime Meltdown, the US Housing Market & the Direction of the US Economy in 2009 and 2010

    1. Member GeoffD's Avatar
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      09-16-2012 03:01 PM #7771
      Quote Originally Posted by a_riot View Post
      To my mind, if improving the economy and unemployment is the goal, then its smarter to have the gov't spend money on needed infrastructure, energy, tech, medicine and other long term investments that actually might have some return beyond just selling a piece of paper to a bigger fool.
      All the FED can do is control monetary policy.

      What you're talking about is the fiscal stimulus that should have happened 3 years ago. Instead, most of the borrowed money was simply pissed away rather than used on infrastructure. The Republican house controls the budget. In an election year, there is no way they would vote for a sane fiscal stimulus package that focuses on infrastructure. After 8 years of crazy Dubya spending, they've all of a sudden turned into deficit hawks.

    2. 09-16-2012 05:00 PM #7772
      Quote Originally Posted by GeoffD View Post
      All the FED can do is control monetary policy.

      What you're talking about is the fiscal stimulus that should have happened 3 years ago. Instead, most of the borrowed money was simply pissed away rather than used on infrastructure. The Republican house controls the budget. In an election year, there is no way they would vote for a sane fiscal stimulus package that focuses on infrastructure. After 8 years of crazy Dubya spending, they've all of a sudden turned into deficit hawks.
      So the Republican plan is to try and destroy the economy to provoke the American people to vote for them? How stupid do they think the voter is?

    3. Member GeoffD's Avatar
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      09-16-2012 05:59 PM #7773
      Quote Originally Posted by a_riot View Post
      So the Republican plan is to try and destroy the economy to provoke the American people to vote for them? How stupid do they think the voter is?
      If you look at Congress and the Senate over the last 4 years, they must think voters are incredibly stupid. Getting Obama out of office has been mission #1 the whole time. If, like me, you think that a US dollar collapse is the biggest risk to the economy, some blend of tax increase and budget cut compromise really needed to happen a couple of years ago.

    4. 09-16-2012 08:09 PM #7774
      Quote Originally Posted by GeoffD View Post
      If you look at Congress and the Senate over the last 4 years, they must think voters are incredibly stupid. Getting Obama out of office has been mission #1 the whole time. If, like me, you think that a US dollar collapse is the biggest risk to the economy, some blend of tax increase and budget cut compromise really needed to happen a couple of years ago.
      Is it possible to have a united, thriving country based on the sole philosophy of unfettered self interest? I know Ayn Rand thought so, but I have my doubts.

    5. 09-16-2012 08:15 PM #7775
      I think the Fed is trying to drive up inflation expectations and the stock market because both should theoretically stimulate demand, which then theoretically cause firms to hire more. I have my doubts as well but I think that is their plan. Inflation expectations reduce real interest rates (the returns from saving) and goosing the stock market creates a wealth effect that causes people to want to spend more. This is more a less a social experiment to see if it works. The risk is something that I think you alluded to which is that people will just chase yields in alternative investment vehicles causing bubbles rather than than stimulate the real economy.l
      Last edited by vwconvert; 09-16-2012 at 08:19 PM.

    6. 09-16-2012 08:52 PM #7776
      Quote Originally Posted by vwconvert View Post
      I think the Fed is trying to drive up inflation expectations and the stock market because both should theoretically stimulate demand, which then theoretically cause firms to hire more. I have my doubts as well but I think that is their plan. Inflation expectations reduce real interest rates (the returns from saving) and goosing the stock market creates a wealth effect that causes people to want to spend more. This is more a less a social experiment to see if it works. The risk is something that I think you alluded to which is that people will just chase yields in alternative investment vehicles causing bubbles rather than than stimulate the real economy.l
      The so-called "wealth effect" seems to be another farce like trickle-down economics. Why do we run economies on these completely unproven and bogus philosophies? People buy things when they want or need them and can afford them, not just because they perceive themselves to be wealthier. Its the same thing when I hear that somehow by cutting corporate taxes, companies will hire more. Companies only hire people when they need their services to make profits, not because the company simply has more money to spend. Conversely, companies who are losing out on profit due to inadequate staff levels, typically will hire more staff regardless of taxation levels.

    7. Member GeoffD's Avatar
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      09-17-2012 09:53 AM #7777
      Quote Originally Posted by a_riot View Post
      The so-called "wealth effect" seems to be another farce like trickle-down economics. Why do we run economies on these completely unproven and bogus philosophies?
      When we had the tax levels of the 1960's, it's pretty clear that Federal tax structure was a drag on the economy since there was a lot of disincentive to earn your next dollar if you were high income. (Though it was way easier to shelter income then).

      The Clinton-era tax structure wasn't a drag on the economy. The Dubya tax reductions didn't help. The argument is that tax revenues grew every year during his administration but it's pretty clear that this was due to them pumping up the housing market to drive the economy into a bubble. We're paying for that dearly now.

      I think the best thing we could do is let all those Dubya tax policies expire and have some simultaneous large budget cuts. To start, divide by two with the defense budget. The deficit problem really doesn't go away until health care gets fixed. 17+% of GDP totally destroys the budget. The medical cartel needs to take an enormous haircut to fix the problem.

      This is all politically impossible so I see nothing but the status quo.

    8. Geriatric Member ValveCoverGasket's Avatar
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      09-17-2012 11:20 AM #7778
      Quote Originally Posted by GeoffD View Post
      To start, divide by two with the defense budget.


      This is all politically impossible so I see nothing but the status quo.
      agreed 100%

      more of the same ad infinitum

    9. Senior Member AZGolf's Avatar
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      09-17-2012 11:28 AM #7779
      Quote Originally Posted by GeoffD View Post
      The Republican house controls the budget. In an election year, there is no way they would vote for a sane fiscal stimulus package that focuses on infrastructure. After 8 years of crazy Dubya spending, they've all of a sudden turned into deficit hawks.
      Let's start by going over history:

      2001-2003: House led by Republicans, Senate Led by Democrats
      2003-2007: House led by Republicans, Senate led by Republicans
      2007-2011: House led by Democrats, Senate led by Democrats
      2011-2013: House led by Republicans, Senate led by Democrats

      So let's be honest: Republicans only controlled the house for the first 6 years of the Bush II presidency and only had both chambers of congress for the middle 4 years, during which deficits came down from something like 5% of GDP to 3% or so, which isn't fantastic, but it isn't half bad considering how bad the one-two punch of the dot-com bubble was in combination with the September 11th recession. Second, I particularly like it when people talk about "roads and bridges" as America's infrastructure that we need to be spending more federal money on. Only a portion of those projects are even funded at the federal level and ALL of transportation only make up 3% of the federal budget. If you think that the US budget should be all about roads & bridges and that the rest is just fluff, then 97% of the spending is apparently fluff. If America's greatest need is more money spent on transportation, we could double transportation spending and only increase the total federal spending by another 3%. Maybe go write your congressperson a letter because I suspect that spending $40 billion a month on public works projects honestly would be more effective at turning the economy around for the lower and middle class than pumping it into buying up debt certificates.

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      09-17-2012 03:39 PM #7780
      Quote Originally Posted by GeoffD View Post
      I think the best thing we could do is let all those Dubya tax policies expire and have some simultaneous large budget cuts.
      Sounds like the pending "fiscal cliff", which has been described as the worst thing we could do.

    11. 09-17-2012 07:27 PM #7781
      Quote Originally Posted by AZGolf View Post
      Let's start by going over history:

      2001-2003: House led by Republicans, Senate Led by Democrats
      2003-2007: House led by Republicans, Senate led by Republicans
      2007-2011: House led by Democrats, Senate led by Democrats
      2011-2013: House led by Republicans, Senate led by Democrats
      None of this ever matters. Its a farce, there is only one party in power but it has two faces.

      Quote Originally Posted by AZGolf View Post
      If you think that the US budget should be all about roads & bridges and that the rest is just fluff, then 97% of the spending is apparently fluff. If America's greatest need is more money spent on transportation, we could double transportation spending and only increase the total federal spending by another 3%.
      You missed my point but perhaps that suits you. I was using roads, bridges, schools, hospitals, etc as a means of describing things to fund that have real lasting value and actually employ people as opposed to swapping electrons around and shuffling numbers between ledgers.

    12. 05-26-2013 02:01 PM #7782
      Quote Originally Posted by a_riot View Post
      You missed my point but perhaps that suits you. I was using roads, bridges, schools, hospitals, etc as a means of describing things to fund that have real lasting value and actually employ people as opposed to swapping electrons around and shuffling numbers between ledgers.
      I'm going to quote myself since this has suddenly become relevant now that the main artery of trade has collapsed between western Canada and Washington. The Skagit bridge is the main route between Canada and the US, and now that this 60 year old failing bridge has collapsed, and a quick solution is not forthcoming, its clear that investing in infrastructure pays dividends above and beyond increasing employment. It only gets more expensive the longer you wait, and I am wondering how many additional losses, (over and above the $15 million suddenly needed to replace/fix the bridge itself) will be incurred by gov't, companies, and residents.

      The US has become king of short term thinking, willing to sacrifice long term economic benefits that everyone enjoys for short term economic benefits only a few enjoy. Unless of course you happen to be crossing a collapsing bridge while enjoying them. Brings new meaning to the phrase "we'll cross that bridge when we get to it".

    13. 05-26-2013 02:50 PM #7783
      and the janenese (used to be) and chinese are very good at long range thinking...........
      it all makes you wonder about who's plan is being enacted, where and what for

    14. Member GeoffD's Avatar
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      05-26-2013 07:12 PM #7784
      Quote Originally Posted by mauslick View Post
      and the janenese (used to be) and chinese are very good at long range thinking...........
      it all makes you wonder about who's plan is being enacted, where and what for
      Have you actually looked at Japanese economic policy since the Asian Flu/Japanese banking & commercial real estate mess in 1990? It's been "ignore it and kick it under the carpet" for over 20 years. Japan has seen pretty much zero economic growth in that time. They have a rapidly aging population and are facing a retiree:worker ratio crisis that hasn't been addressed. Sony could do no wrong 20 years ago. They're now a trailer in just about all their consumer electronics segments. Even Toyota has lost some of the glow. They still have a vibrant first world economy but the whole Japan, Inc thing where they take over the world that was the common public opinion in the late 1980's has pretty much vanished.

      China is experiencing big wage inflation among their skilled people. We're having trouble retaining people since they can walk across the street and get a 30% raise. The Chinese advantage has been cheap labor. That is no longer the case. An experienced Chinese engineer now costs about $75K/year once you factor in employer-paid retirement taxes and it's looking to hit $100K soon. If you were starting a high tech project from scratch today, you probably wouldn't consider outsourcing it to China given all the problems with distance, culture, language barrier, import hassles for equipment, and cost.

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      05-26-2013 09:12 PM #7785
      Quote Originally Posted by a_riot View Post
      and now that this 60 year old failing bridge has collapsed, and a quick solution is not forthcoming, its clear that investing in infrastructure pays dividends above and beyond increasing employment. It only gets more expensive the longer you wait, and I am wondering how many additional losses, (over and above the $15 million suddenly needed to replace/fix the bridge itself) will be incurred by gov't, companies, and residents.
      we have to let the free market decide when its time to replace our crumbling roads and bridges!


    16. 05-27-2013 03:47 AM #7786
      Quote Originally Posted by ValveCoverGasket View Post
      we have to let the free market decide when its time to replace our crumbling roads and bridges!

      I'm thinking we get one made in China and have it shipped over. Walmart should start selling them the way things are going.

    17. 05-27-2013 02:04 PM #7787
      it was clearly a terrorist attack!.......we need more of everything.........now!

      why isn't there a law against falling bridges?

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      06-07-2013 04:48 PM #7788
      bears pooping in the ocean

    19. Member Mike!'s Avatar
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      06-23-2013 11:41 AM #7789
      So the fed so much as signals that QE will be gradually pared down, and the whole market has a **** fit. I thought these were the people complaining about QE in the first place?

      Really it should be a good sign that the economy is doing well enough to ease off on monetary stimulus.

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      06-23-2013 12:43 PM #7790
      Quote Originally Posted by Mike! View Post
      So the fed so much as signals that QE will be gradually pared down, and the whole market has a **** fit. I thought these were the people complaining about QE in the first place?

      Really it should be a good sign that the economy is doing well enough to ease off on monetary stimulus.
      Yep. The same fits were thrown each time the fed said QE would continue over the past few years. Ignore the hype!

    21. 06-23-2013 04:06 PM #7791
      do you believe everything you read? just food for thought

    22. Geriatric Member ValveCoverGasket's Avatar
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      06-24-2013 11:30 AM #7792
      Quote Originally Posted by mauslick View Post
      do you believe everything you read? just food for thought
      only if i read it on a site advertising the purchase of gold

    23. 06-24-2013 01:39 PM #7793
      what about the sites that aren't advertising the sale of gold........??

      I mean this site advertises vw parts........do you believe that?

    24. Geriatric Member ValveCoverGasket's Avatar
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      06-24-2013 01:41 PM #7794
      Quote Originally Posted by mauslick View Post
      what about the sites that aren't advertising the sale of gold........??

      I mean this site advertises vw parts........do you believe that?
      i get all my real news from the drudge report and sarah palin's facebook.

    25. 06-24-2013 01:52 PM #7795
      Quote Originally Posted by Mike! View Post
      So the fed so much as signals that QE will be gradually pared down, and the whole market has a **** fit. I thought these were the people complaining about QE in the first place?

      Really it should be a good sign that the economy is doing well enough to ease off on monetary stimulus.
      That's part of the inflation trap.

      If I remember the signal, it is just that at some point in the future, possibly not very far off, QE will be gradually pared down if conditions are appropriate. That is a very subtle signal for anyone to have a fit over.

      It is certainly a good sign for an economy to be in a state so that it functions well without having tons of new money pumped into it. However, that a market reacts with panic at this subtle signal may suggest that the economy is in fact not doing all that well.

      At some point, the taps have to close, and that monetary restriction can be expected to have a suppressive effect. In the midst of a vigorous expansion of the productive economy, that suppressive effect may not cause a difficult recession. In any other circumstance, we should expect a recession to result.

      That last part highlights the difficulty of political interaction and influence on the money supply; voters dislike recessions.
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    26. 06-25-2013 05:00 PM #7796
      valve cover your blowing it

      the real news comes from e online and tmz
      what celebs are doing or not doing is where i get my economic and poitical info.......

      sheeze you think AP would be a little more put out about those seized phone records...
      but like all us sheepies just easier to comply and go along

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      06-25-2013 05:07 PM #7797
      Quote Originally Posted by mauslick View Post
      valve cover your blowing it

      the real news comes from e online and tmz
      i avoid the lame stream media.

    28. Member Mike!'s Avatar
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      06-26-2013 09:14 AM #7798
      Quote Originally Posted by zukiphile View Post
      That's part of the inflation trap.

      If I remember the signal, it is just that at some point in the future, possibly not very far off, QE will be gradually pared down if conditions are appropriate. That is a very subtle signal for anyone to have a fit over.

      It is certainly a good sign for an economy to be in a state so that it functions well without having tons of new money pumped into it. However, that a market reacts with panic at this subtle signal may suggest that the economy is in fact not doing all that well.

      At some point, the taps have to close, and that monetary restriction can be expected to have a suppressive effect. In the midst of a vigorous expansion of the productive economy, that suppressive effect may not cause a difficult recession. In any other circumstance, we should expect a recession to result.

      That last part highlights the difficulty of political interaction and influence on the money supply; voters dislike recessions.
      I agree with the vast majority of your observations here. With regards to the bolded part, however, I don't ascribe the same amount of consciousness to market behavior.

      That is to say, due to the speculative nature of the behavior of a large weight of traders, a sell-off isn't necessarily a signal of a weak economy. Rationally, traders are going to protect their personal interests; if their holdings look like they're about to go down to single-digit returns from double-digit returns, they're going to cash out and move to another vehicle where they anticipate their desired growth. This doesn't mean that a collective assertion is being made that the economy is weak or in danger of recession. Growth is growth, after all, in the economy and in equities. The haymakers aren't people like me going long on stocks with 4% dividend yield and moderate growth in a stable sector though. They're chasing the big fish.

    29. 06-26-2013 10:24 AM #7799
      Quote Originally Posted by Mike! View Post
      I agree with the vast majority of your observations here. With regards to the bolded part, however, I don't ascribe the same amount of consciousness to market behavior.

      That is to say, due to the speculative nature of the behavior of a large weight of traders, a sell-off isn't necessarily a signal of a weak economy. Rationally, traders are going to protect their personal interests; if their holdings look like they're about to go down to single-digit returns from double-digit returns, they're going to cash out and move to another vehicle where they anticipate their desired growth. This doesn't mean that a collective assertion is being made that the economy is weak or in danger of recession. Growth is growth, after all, in the economy and in equities. The haymakers aren't people like me going long on stocks with 4% dividend yield and moderate growth in a stable sector though. They're chasing the big fish.
      Certainly, you and I are not the only sort of investor. Yet, even we engage in some degree of speculation. We anticipate and hope that the 4% dividend continues and that the share price next year will not drop to 20% of its current price. I also agree that investors will strive to protect their own personal interests.

      I ascribe some of the market twitchiness to the still painful memory of recent events simply because investors are human and we all remember our last mistake best. However, that alone would not explain an investor trading a share with a single digit return for cash. That effort at self protection indicates that the investor has better things to do with that cash than to leave it in that enterprise.

      The future of many enterprises rests on the health of the wider economy. Where people see their small slice of the wider economy making a tenuous recovery (orders for my widgets are starting up again, and are up to 80% of summer 2007 levels), then those investors can reasonably foresee that and evanescence of the very easy credit terms that drove widget orders up, could just as easily drive them back down. Those declining widget orders can erase those single-digit yields.

      I sell very little, but did so a bit prior to this subtle hint. This was not the result of any extraordinary foresight, but I am not confident that current prices can reasonably be justified.
      Last edited by zukiphile; 06-26-2013 at 11:14 AM.
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    30. Member Mike!'s Avatar
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      06-26-2013 11:16 AM #7800
      Fair enough. Usually after repeated "record highs," a correction is sure to follow one way or another. Many may have just been waiting for the first hint before cashing in their winnings and getting ready to buy back again lower.

    31. 06-26-2013 11:25 AM #7801
      Quote Originally Posted by Mike! View Post
      Fair enough. Usually after repeated "record highs," a correction is sure to follow one way or another. Many may have just been waiting for the first hint before cashing in their winnings and getting ready to buy back again lower.
      I had several smart people (understanding that smart is not the same thing as infallible) suggests that some stocks were irrationally overvalued. That problem is easy to fix. Sell the overvalued asset. There is another problem here the solution for which I still search.

      In 2008 and 2009, when gasoline was down to about two dollars per gallon, I thought to myself that I would prefer to see four dollar per gallon gasoline if stock prices were back up to their full values. In time, my wish was granted. However, like the Twilight Zone episodes in which someone gets his wish but finds the result less than satisfactory, if we value our portfolios in gallons of gasoline rather than US dollars, we have not made up much ground.
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    32. Member GeoffD's Avatar
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      06-27-2013 10:50 AM #7802
      Quote Originally Posted by Mike! View Post
      Fair enough. Usually after repeated "record highs," a correction is sure to follow one way or another. Many may have just been waiting for the first hint before cashing in their winnings and getting ready to buy back again lower.
      Not really. Corporate America is still experiencing record profits. Stock prices map onto corporate earnings and that doesn't look to be correcting downwards any time soon. Labor costs dropped dramatically with all the mass layoffs of the deadwood 5 years ago. Low interest rates make borrowing cheap and nobody is paying much in the way of interest expense.

      Sure, there are internet stocks that are priced nutty but most of the US stock market is priced appropriately based on the P/E ratio.

    33. 06-27-2013 11:02 AM #7803
      Quote Originally Posted by GeoffD View Post
      Not really. Corporate America is still experiencing record profits. Stock prices map onto corporate earnings and that doesn't look to be correcting downwards any time soon. Labor costs dropped dramatically with all the mass layoffs of the deadwood 5 years ago. Low interest rates make borrowing cheap and nobody is paying much in the way of interest expense.

      Sure, there are internet stocks that are priced nutty but most of the US stock market is priced appropriately based on the P/E ratio.
      So if the markets drops 3% over the slightest hint that someday borrowing might cost a bit more, what does that indicate to you?

      The object of my pre-announcement sales is down about 10% from the recent high. That isn't 2008-2009 catastrophic, but it is significant. A lot of people to whom I speak and whose income is promarily from stock ownership are shy about haviong too much in stocks and are holding a lot of cash. That doesn't mean they are correct, but it does indicate to me that their unease has some reasonable basis.
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    34. Member Mike!'s Avatar
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      06-27-2013 11:35 AM #7804
      Quote Originally Posted by GeoffD View Post
      Not really. Corporate America is still experiencing record profits. Stock prices map onto corporate earnings and that doesn't look to be correcting downwards any time soon. Labor costs dropped dramatically with all the mass layoffs of the deadwood 5 years ago. Low interest rates make borrowing cheap and nobody is paying much in the way of interest expense.

      Sure, there are internet stocks that are priced nutty but most of the US stock market is priced appropriately based on the P/E ratio.
      I tend to look for a modest P/E ratio myself, but I'm not sure statistically where most of the market falls.

      I love Chipotle (CMG) food, so it amused me to follow their stock trading at an, in my mind, ridiculous 50+ P/E, and had my intuitions affirmed when it crashed back down to earth. It's now already back up to a P/E of 39. One of my holdings, Apple (AAPL), was consistently returning record profits and still only had a P/E in the ~14-15 neighborhood. It's since crashed to a P/E of 9, on lower margin and lower earnings growth, but still higher earnings.

      My parents recently made a decent amount on Tesla Motors (TSLA) and are still holding it for their belief in the long-term viability of the company, but with only one quarter of a slim profit recorded, there isn't a nominal annual P/E.

      At the end of the day, valuation is all market expectations of future earnings and growth potential. If an expectation of high profit is already priced in, and expectation changes that there will still be a profit, but a reduced one, there's going to be sell-offs.

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      06-27-2013 12:42 PM #7805
      http://news.yahoo.com/signed-contrac...140200685.html

      Signed contracts to buy homes at a 6 year high...

      As for local market anecdotal info, according to monthly RE sales reports, homes my my town are selling in record low DOM and at original list. Low local inventory is making for a sellers market.

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