Obama is a good man and shouldn't worry because the Romans, Scribes, and Pharisees of Jesus day treated him the same way

You guys pointing to the stock market as a reflection of the economy doing well must have thought the sub prime lending was a good idea too.
The Stock market is a bubble waiting to burst.
Since 2008 the Government has made cheap money available by keeping the interest rates unrealistically low and flooding the market with cash through QE.
Large corporations are taking advantage of the cheap money and reducing their liabilities to shareholders through dividends by buying back their own stock at unprecedented rates. The stock prices are artificially inflated because the corporations buying back their own stock are willing to pay a premium not to have it in public circulation. Stock is a way of borrowing money. Why pay dividends to shareholders when it is cheaper to buy back your own stock and keep the dividends?

One of the problems this has created is a rate of return on investment savings by individuals putting their money in IRA's and the like. Let's say someone put away a million dollars over their lifetime counting on a 6% rate of return during retirement. That's $60000 per year they can probably live off of interest alone. Add in their SS and they planned on living fairly comfortable. But you can't get that rate of return anymore because the cheap money the Government is handing out keeps the interest rates artificially low. Large corporations aren't offering their stocks in a "free market" and they are over valued.
Most people in or nearing retirement stay away from risky stocks to avoid fluctuations but they will keep certain ones that are known to produce satisfactory dividends on a consistent basis.
My dad never "played the stock market" that much but he always had AT&T stock because of the consistency. That was 30 years ago. Problem is that even those companies are taking advantage of the low cost of money and creating an artificial bubble in their own stock prices by creating a demand because they are buying back their own stock.

With interest rates so low due to policy, now that $60000/year interest you were expecting is $15000. That's a big hit to take especially in retirement where the income is fixed. To add to that dilema our population is retiring at a record pace. Those portfolios were expected to be a major part of our economy. Now portfolios that have stock are over valued and highly vulnerable. Portfolios staying in the money markets are not receiving decent returns and it's harder for people to grow them or live off of them.

What happens when the government starts raising the interest rates? Those retirement portfolios in the money markets will be the last to see increasing returns because it will take time for the interest rise to make it that far. What will be worse is the corporations will no longer be able to afford the interest on what they have borrowed so they will look back to the markets to sell their stocks to borrow money. Once that stock starts hitting the market the prices will go down to reflect realistic corporate values not ones inflated by their own buy back policies. In other words the DJIA will see a major adjustment back to reality, at least, or worse. Companies that have leveraged themselves in the cheap money will be in serious trouble once their stock values fall because they won't be able to sell enough of their stock at high enough prices to pay off or service the growing debt . The resulting crash in the stock market will be as bad or worse than it was in 2008.

Once things adjust then hyperinflation will kick in. Interest rates will rise but not enough for those in retirement to recover from the loss in their portfolios due to inflation. Maybe they get back to earning $60000/year in interest but the inflation will increase the cost of living so that 60k still seems like 15k present value, or worse. Originally Posted by boardman

+1

+1 Originally Posted by I B Hankering

Another brilliant AND ORIGINAL response from the gayest Nazi in the reich!

http://www.addictinginfo.org/2014/11/09/baffled-canadian-writes-to-u-s-voters-after-midterm-you-dont-know-how-good-you-have-it-with-obama/

From the article:

For more than a decade, the Pew Research Center has been asking people around the world about their opinion of the United States. The upshot: In every region of the globe except the Middle East (where the United States was wildly unpopular under George W. Bush and remains so), America’s favorability is way up since Obama took office. In Spain, approval of the United States is 29 percentage points higher than when Bush left office. In Italy, it’s up 23 points. In Germany and France, it’s 22. With the exception of China, where the numbers have remained flat, the trend is the same in Asia. The U.S. is 19 points more popular in Japan, 24 points more popular in Indonesia, and 28 points more popular in Malaysia. Originally Posted by SpeedRacerXXX

One of the bodybuilders in the book Pumping Iron says that a few people have been honest enough to tell him that there's an insecurity about being around someone who's physically overpowering. Exactly the same punk-ass dynamic is at work in the psyches of foreigners who feel relieved at the weakening of the United States.

The Stock market is a bubble waiting to burst.
Since 2008 the Government has made cheap money available by keeping the interest rates unrealistically low and flooding the market with cash through QE.
Large corporations are taking advantage of the cheap money and reducing their liabilities to shareholders through dividends by buying back their own stock at unprecedented rates. The stock prices are artificially inflated because the corporations buying back their own stock are willing to pay a premium not to have it in public circulation. Stock is a way of borrowing money. Why pay dividends to shareholders when it is cheaper to buy back your own stock and keep the dividends?

.... Originally Posted by boardman

Boardman - good analysis but I am not as worried about a stock market crash as you are. As long as corporate earnings are strong, stocks will remain attractive. A good yardstick to keep an eye on is the average P/E ratio for stocks in the S&P 500. If it stays around 15-20x I don't see a big problem. Earnings put a floor under the market. The reason the market crashed in 2008 is because the economy went into free-fall. Nearly all businesses experienced a sharp drop in sales or revenues, in many cases wiping out earnings because the firms couldn't reduce costs as fast as they were losing revenues. Investors fled stocks until they felt confident that the drop in sales/revenues had bottomed out in 2009, allowing companies to start reporting profits again.

Also, I disagree with your assertion that "stock is a way of borrowing money". That's way too simplistic and doesn't allow for the concept of risk and the huge differences between debt and equity. If you issue debt, you have a legal obligation to pay the interest - otherwise your creditors can force you into bankruptcy. If you issue equity, you can always cut/suspend dividends in a downturn and stay in business. That's why firms in highly cyclical industries should rely more on equity (and less on debt) to finance themselves.

.

Sounds like those old retired folks should have invested in stocks!



.

Another brilliant AND ORIGINAL response from the gayest Nazi in the reich! Originally Posted by Yssup Rider

Says the Hitler worshipping, lying, hypocritical, racist, cum-gobbling golem fucktard, HDDB, DEM who is the only forum member known to have searched for, found and posted his own, personal swastika emblazoned LBGT banner.

Originally Posted by Yssup Rider

You have 0 comprehension of what it takes to turn an economy around after the COLOSSAL MESS he inherited. I do very well and some would say I'm in the top 5% ;-) but let me say that you need to keep things in perspective. No one said the record was perfect but what is the comparison to?

FACT we are in a better place today than when he took the reins from Bush. Black unemployment has 0 to do with his policies all you've done is shown your racial hand by even mentioning it in context. Should we go down the rabbit trail of discussing how institutional policies keep "blacks" from economic parity.

Sit down and shut up I swear man I get tired of arguing with mental midgets. ;-) Originally Posted by Zanzibar789

Unfukkinbelieveable !
Now der I wwere sittin der thinkin Bammy dont got nuttin to do with increaz inergies in Merica.
Whudda thunk it? Dat mo fo done gots da inergy duction up 67% jus cuz he bes dat gud !
Him duz bes da real massiah now !

Unfukkinbelieveable !
Now der I wwere sittin der thinkin Bammy dont got nuttin to do with increaz inergies in Merica.
Whudda thunk it? Dat mo fo done gots da inergy duction up 67% jus cuz he bes dat gud !
Him duz bes da real massiah now ! Originally Posted by rioseco

Wow!

Glad you posted that in blue, dipshit.

It wouldn't have come out in black.

Boardman - good analysis but I am not as worried about a stock market crash as you are. As long as corporate earnings are strong, stocks will remain attractive. A good yardstick to keep an eye on is the average P/E ratio for stocks in the S&P 500. If it stays around 15-20x I don't see a big problem. Earnings put a floor under the market. The reason the market crashed in 2008 is because the economy went into free-fall. Nearly all businesses experienced a sharp drop in sales or revenues, in many cases wiping out earnings because the firms couldn't reduce costs as fast as they were losing revenues. Investors fled stocks until they felt confident that the drop in sales/revenues had bottomed out in 2009, allowing companies to start reporting profits again.

Also, I disagree with your assertion that "stock is a way of borrowing money". That's way too simplistic and doesn't allow for the concept of risk and the huge differences between debt and equity. If you issue debt, you have a legal obligation to pay the interest - otherwise your creditors can force you into bankruptcy. If you issue equity, you can always cut/suspend dividends in a downturn and stay in business. That's why firms in highly cyclical industries should rely more on equity (and less on debt) to finance themselves.

. Originally Posted by lustylad

I think the earnings will suffer enough when the interest rate rises. Interest expense is negligible on income statements right now. When it becomes a significant expense earnings will take a hit. In order to minimize that hit they will begin selling that stock at inflated prices that they caused. At first it will be a good way of paying down the debt and reducing the interest rates but I'm afraid many of the corporations are too leveraged in the cheap money and won't be able to recover quickly enough to keep their stock prices from suffering. Sure they will have released the stock to the public so they get their money back but then if adjustments occur because of new earnings reports that don't support the inflated prices people paid for the stock then things start to go down hill.
Those same interest rate rises will obviously affect the servicing of the government debt causing one of three things to happen. Significantly higher taxes, significantly decreased spending or default. I don't think default is a realistic option. Decreasing government spending, while in the long run, would be the best solution we are not willing to go through that kind of pain. That leaves increased taxes.

I want to see a broader tax base but the Democrats will not let that happen if they have any say so. The easiest way to raise taxes, especially in crisis is to point to the recent past earning of corporations and make them out to be the villains as well as the panacea even though their current situations are not nearly as strong as they were before the interest rate hikes. Raise taxes on the corporations and it's the same as raising taxes on everyone because the price of their product or service goes up. If discretionary spending decreases, GDP falls and were in a free fall until it either stops or the government steps in. When the government steps in it is always a band aid, never a cure. TARP is a good example of kicking the can down the road.

As to your second statement, obviously firms that rely more on equity are healthier in the long run. They are in control of what happens and they are using "their" money. However, when interest rates are as low as they are it entices corporations to supplement their operational earnings by issuing debt while paying very little interest and using that debt to buy back their own stock and keep the dividends. They are willing to pay inflated prices for their own stock in order for that to happen because as long as the earnings are good then they get to keep them and it really doesn't matter what the stock price is. That strategy only works for so long though. At some point they own all the stock and assume all the risk at which point any hiccup in the economy puts them at risk by lowering the value of the stock they own or they start minimizing their risk by putting the stock back out and then are subject to corrections in a volatile market. Provided they are in a good cash position then they can whether the storm.

Much of our problem today is that many corporations are and have been in a good cash position for far too long, since about 2010 and are keeping that cash offshore and hoarding it for the next crash so they can survive it. That's cash that would otherwise naturally stimulate the economy if it were being spent here on capital expenditures and increased wages but we are sending those jobs overseas and much of the PP&E is being bought, or worse, leased over there because of the economic climate we have created here. It's a huge circle that we can't get out of without significant short term pain.

Sounds like those old retired folks should have invested in stocks!



. Originally Posted by WTF

A lot of them were in 2001 and took a serious hit. Portfolios diversified after that but they still took a hit in 2008. A friend of mine's mother was in great financial shape in 2008 living comfortably off of the interest and dividends from the portfolio that her husband set up for her prior to his death in 2005. Unfortunately she knew very little of the economy and her adviser was slow to react. So when things started to fall apart in 2008 she didn't get out fast enough and lost around 70% of her investment. She gets by on SS now. Fortunately her house and now 10 year old Tahoe were paid for.

That's why any financial adviser worth his salt will tell you to move away from stock markets and towards the money markets as you near retirement. Growth potential obviously isn't there but risk is minimized and you don't have to worry about having time to recover from the valleys you know are coming. However, with interest rates being artificially low for so long that million dollars that many planned on living off of just doesn't produce enough income.

With our population growing older the retired person's spending obviously becomes a larger part of our economy. If they don't have the money to spend then it affects the economy more than it did 20 years ago simply because there are more of them.

A lot of them were in 2001 and took a serious hit. Portfolios diversified after that but they still took a hit in 2008. A friend of mine's mother was in great financial shape in 2008 living comfortably off of the interest and dividends from the portfolio that her husband set up for her prior to his death in 2005. Unfortunately she knew very little of the economy and her adviser was slow to react. So when things started to fall apart in 2008 she didn't get out fast enough and lost around 70% of her investment. She gets by on SS now. Fortunately her house and now 10 year old Tahoe were paid for.

That's why any financial adviser worth his salt will tell you to move away from stock markets and towards the money markets as you near retirement. Growth potential obviously isn't there but risk is minimized and you don't have to worry about having time to recover from the valleys you know are coming. However, with interest rates being artificially low for so long that million dollars that many planned on living off of just doesn't produce enough income.

With our population growing older the retired person's spending obviously becomes a larger part of our economy. If they don't have the money to spend then it affects the economy more than it did 20 years ago simply because there are more of them. Originally Posted by boardman

Interest rates are historically low but not artificially low any more than they were artificially high in the early eighties. They are what they are.

Old people spend very little. They get breaks on their property taxes and the super rich old fuckers want their estate tax repealed! How about we increase the super rich estate tax and funnel that to the super ignorant old folks that are not good estate planners....is that what you want?

. It's a huge circle that we can't get out of without significant short term pain. Originally Posted by boardman

Who do you expect to be the next Jimmy Carter that hire's say a Paul Volker and then gets slammed the rest of his life for actually starting the short term pain process? Because what you are really talking about is the power of the Fed.