When you push the pendulum so far in one direction, its eventual swing in the opposite direction will be disastrous. As we spend our future tax dollars through borrowing, the Federal government will have no tools to deal with the crisis. It will take a long time to pay back the accumulated debt. It will destroy our economy in a fashion that makes 2008 look like a blip.
13
When Trump was elected, stock futures trended down as worry spread in New York and California. Since Election Day, the Dow Jones has risen 10,000 points from just over 17,000 to over 27,000 points. That rise has bailed out public and private pension plans, college endowments, and individual portfolios. Taxes on the capital gains have lifted state revenues from New Jersey to California. The strong stock market has created a welcoming environment for new companies and encouraged a massive increase in charitable contributions.
5
So the 12000 points Obama added to DJIA after the worst recession in history did not have similar effects as you mentioned? I would say trump was given a gift.
11
--Use to project future economics of US economy, the difference between Republican and Democrat governing. From: Politics That Work
--Change in Unemployment Rate by Party of President- Since 1945 Each party has held the presidency for the same number of years since 1945. During those years, the unemployment rate has risen 11.8% under Republican presidents and has fallen 7.2% under Democratic presidents. Unemployment has fallen during the overwhelming majority of Democratic years since 1949. Unemployment rose steadily under Republicans up until 1982, then fell during the remaining Reagan years, and then rose again under both Bush Presidents.
--Dow Jones Performance by the Party of the President During the most recent 15 years during which Republicans have held the presidency, the value of the Dow has increased by 42%. During the Democratic presidencies, it has increased by 609%- 14.5 times faster. The average growth in the value of the Dow under Democrats during this period has been 14.75% and under Republicans it has been 5.11%.
--Change in Disposable Income Since 1930 by the Party of the President In the 44 years that we have had Democratic presidents since 1930, the real per-capita disposable income has increased 271%. During the 40 years during which we have had Republican presidents, it has increased 44%. On average, it has increased 3.1% (after adjusting for inflation) under Democratic presidents and 1% under Republican presidents.
8
My first thought when I read "There is no alternative" was to think of all the communities around the country that could easily find ways to invest that money in making improvements to their towns. It is one of the most damaging things about massive inequality - the people with money have so much they literally don't know what to do with it and cannot possibly spend it, while millions of people living in precarious financial circumstances in run-down towns abandoned by business could invest it for a much broader economic impact.
8
Most Americans aren't benefiting from the stock market boom [CNN Business]
The stock market's record-breaking ascent this year has become a favorite topic for President Donald Trump. "With the great vote on Cutting Taxes, this could be a big day for the Stock Market - and YOU!" he tweeted on Monday morning.
It's true -- the S&P 500 is up 17.4% since the beginning of the year and the Dow Jones Industrial Average is up 22.2%, reflecting strong corporate earnings and the anticipation of a massive tax cut.
But just who benefits from those skyrocketing numbers?
The short answer: Wealthy people.
As measured by those who declare ordinary dividend income on their tax returns, stock ownership varies dramatically by income level. Among filers who make less than $25,000 a year, only about 8% own stocks. Meanwhile, 88% of those making more than $1 million are in the market, which explains why the rising stock market tracks with increasing levels of inequality.
How many people actually make more than $1 million a year… According to a Wall Street Journal article published on October 25th, 2011 called The Wild Ride of the 1%, in 2007, before the Great Recession, there were nearly 400,000 individuals earning $1,000,000 or more in the United States.
In the depths of the recession in 2009, there were still 236,883 individuals who earned more than
5
The Stock Market vs The Economy Explained [CNBC]
Each day, investors are treated to news about the economy and information about how the stock market has done recently. It can be very difficult to process what’s going on because at any given moment in time, there may be very little correlation between how things are going in the real world and how prices are acting on Wall Street.
Investors are not well served by incorporating economic expectations into their long-term investment plans for the following reasons:
1. The future is impossible to predict.
2. Even if you knew what would happen in the future, you would still have to guess about what that might cause buyers and sellers to do, and how sentiment might shift in the investment markets.
3. There were many years during which stocks have rallied as the economy had performed worse than expectations. There are also years during which economic data was strong but stock prices were weak. And then we’ve seen literally everything in between. No one can reliably predict which of these scenarios is more likely to occur in advance.
Understanding the economy is a helpful exercise. Placing market bets as a result of this understanding is a carnival game on the midway.
3
I wonder if taking my money out of the market if the taxes would be the same as a downturn? Of course that relies on how far the downturn goes. But if it's 20% what difference would it make?
1
Prepare yourself for weird: There is no natural law or theory or equation or model that can predict "market" behavior. Market behavior is in fact human behavior, and human behavior cannot be accurately predicted. The value of a thing or a being or an idea lives only in the mind of the beholder and can change instantly. Therefore trade and financial instruments of all kinds, even currency, are subject to uncertainty at all times. This makes it impossible to "store value" reliably (we call storing value "saving"). The smart move is to secure what you need (sources of food, water, shelter, etc.). When these needs are met, your ability to withstand financial upsets will be greatly improved. My main point here is this; don't believe a shred of what you hear from the financial world. It offers only narrative fallacies.
3
Why do investors think they need or want this now and will risk it on this valuation w/ global data showing recession or worse in 19 or 20?
It will find fair value and that may be a level many older inv will never recover from? Cash is okay, maybe gold/silver is a good alternative. Careless, they always find fair value.
Look at the S&P corrections in 2000 and 2008 against the run in stocks since 2009 on the west economic expansion in history on the highs debts in history with Central Bankers in full panic/chaos mode.
Also have POTUS lying about China trade and economic strength of US against dat that show otherwise.
Risky and dangerous or brave and correct thing to do, investors will decide for themselves.
1
Sadly, historically low rates mean that those without enough money to be riding the stock market as well as seniors who must keep more of their funds liquid have nowhere to go with their money.
The last year or so savings accounts, money markets, and CDs have at least been paying something (again, not much by historical standards). If the Fed drops rates two or three times it will again create hardship for folks trying to save a little and get ahead a little - and for senior citizens who must go elsewhere than the stock market even if it is a TINA environment.
7
@Anne-Marie Hislop: Yes, this is indeed sad. They may be more challenging to use for some, but online banks still offer better rates than traditional brick-and-mortar banks. Rates at online banks are typically 10-20 times those at traditional banks. You can still find savings accounts and CDs with interest rates of 2% or a bit more at online banks. We have a traditional money market account at Bank of America that is earning just 0.03%. And online accounts come with the same insurance and security as accounts at traditional banks. It's true that you can't walk into an online bank, but nobody that I know likes walking into a traditional bank these days. And you probably get better phone service from an online bank.
1
Stocks for the long run. One, not only are investors skeptical but based on what I read retail investors are not leading the stock market, a plus. Two, stock buybacks continue, albeit at diminished pace; all else equal, fewer stocks resulting from continued buybacks should mean higher stock prices. Three, the American corporate machine keeps grinding; costs will be cut to maintain earnings, you have to see that in the long run these amazingly focused companies will find a way. Four, forecasts show earnings turning north after this tepid 2019.
2
And after all this time, people are still playing the market. Find a mix, suitable to your age, Put the money into lost cost, managed funds, Vanguard, etc. and LET IT SIT. Don't "time the market" don't worry about your brother in laws hot stock. Live prudently, save a percentage of your income, and worry about friends, children, charities, and the fact that you will croak, one day, and have to leave it in worthy hands. Worked for me. I never made a lot of money, but I saved, lived modestly, and worried about friends, loved ones, and living. Now, I have more than I really need.
27
These type of articles have been going on for decades.
11
Stocks are the place to be! Bonds are leaching off of old-economy laggers that weren't providing an adquate wage model to prevent world-wide secular stagnation. But be leary of investing in companies that don't pay high wages: we need new companies and products that support high-paying jobs to realign the economy as a whole. If investors continue to hunt the easy money using cheap, foreign labor, the economy will be dragged down and all of those investment will go down with it.
4
So we’re going to have tax cuts and lower interest rates while the economy is doing well. We can do that for now as inflation isn’t a problem. But with slower population growth, less people in a workforce and stagnant wages, GDP can’t rise. A recession will eventually come. And to spark the economy out of the recession, there will be no more rate to lower, and no more taxes to cut.
30
When Obama was President it was downright unpatriotic to root against the economy like this article does. I wonder what has changed?
4
Why do defenders of Trump use an Obama equivalency as their first point of argument when coming to Trump’s defense?
The short answer to your question is that it is obvious that Wall Street doesn't reflect Main Street (which was also the criticism during Obama's terms) and more importantly, Trump is manipulating the market in hopes of winning re-election. Case in point is his bullying of the Fed chairman.
25
@Stephan
I think we can agree that corporations and businesses are less regulated under the trump administration than the Obama administration. While this is not a good thing from every perspective, it allows businesses a greater degree of comfort in investing in themselevs. When the corporate world in general does well, wage increases follow, which has what happened since 2016. Yes wages have ctaching up to do, and a higher minimum wage IS warranted, but economic realities need to take precednece over populist emotions.
2
By the way Ambrose, re not rooting against Obama's economy, you may want to google Mitch McConnell's talk and actions from January 2009 to January 2017.
13
"Economic Fears Rise"
Really? In the best economy in 20 years.
6
@SS Try reading the article and not just the headline.
16
Thank you, President Obama.
21
@Stephan LOL So predictable. I was wondering when the first socialist would compliment cool-daddy for other's fine handiwork in steering our economy to the heights we see today.
I'm thinking today's long standing recovery is more accurately the long term result of GWB's policies and planning. Thank you George!
2
Over the past 10 years I have become pessimistic regarding the possibilities of the current economic situation. Company profits depend on the consumer and other worldwide metrics. I wonder when the US population will hit another financial wall. Personally, I have begun limiting consumption because I can no longe afford it. I wonder how many others are in my situation. The so called tax cuts decimated me financially. I only buy food and other essentials. Focus on paying down your mortgage because the grim reaper is coming for you.
8
How long to become a pessimist? Were you a quasi-pessimist for a few years before going all out?
2
So... company profits depend on people buying their stuff??? How else can companies make money?
1
I'm interested in how tax cuts decimated you? This is the first year in a long time I didn't owe money on 4/15. The Ides of April.
4
Irrational Exuberance? In both the Stock Market and our president.
7
The best stock market outcome would be a slide in stocks early next year, to bring them back to a realistic level, followed by a short-term recession just hard enough to make a few cultists blame trump.
6
If only we could time the market, we would all be rich!
We are going to wake up one morning in 1930.
13
Woah. I'm going to be 89 years younger?
7
Ahh, the "fear" card. Cheap shot. There is not fear in the markets. There is logical and prudent wariness after the longest bull market ever. Stop fear mongering.
7
Please keep this in mind...the Savings and Loan debacle from the 1980s resulted in some 500 indictments. The Worldcom, Enron, Global Crossing frauds resulted in many indictments in the late 1990s early 2000s. The far more massive subprime debacle, resulting in the "Great Recession" resulted in...well, NO INDICTMENTS. Yes, nary a prosecution, from Countrywide to Citigroup to Wells Fargo, et alia. Not only that, TARP, ZIRP and the QEs provided these offenders with trillions of dollars, billions of which were used to pay "bonuses" to those who defrauded the American people. Such are the actions in an Oligarchy.
It is quite apparent that we have had full and complete "regulatory capture", from the Treasury Dept. to the Fed. The revolving door from the private sector to govt. "service" and back assures a never ending path to great wealth as long as those regulators "look the other way". There will be no prosecutions next time around....but then again, there will be no money for bailouts. But rest assured, the "players" most likely realize this and have most likely squirreled away billions upon billions as a from of "self-bailout" when, not if, the next blowup occurs.
21
Well that might be because fraud is a crime and a recession isn't. Granted people did supremely stupid things leading in to 2008 but you can't throw EVERONE in jail for malfeasance
@John
Oh, there was a tremendous amount of fraud circa 2006-2008...just witness the purposeful actions of Goldman Sachs in knowingly, willingly and apparently fraudulently selling subprime bonds that it had rated AAA while simultaneously shorting them because GS knew they were essentially worthless. This is just one of many examples....
7
It's one thing when company stocks depends on how well businesses are doing. That's the real economy at work
But today's rising stock market is evidently supported by the following factors: low, and the perceived need for even lower, interest rates; and lower income tax rates.
Let's take apart the low taxes bit. The reason they worked at all has little to do with greater disposable income for working people. The theory was that companies would use their tax cut to invest in plant, equipment and hiring workers. In fact, they used it to buy back their stock. Fewer shares on the market, at the same total value, equals higher price per share. So, who benefits? Why, senior management, of course, who are largely paid in stock and see their nest eggs fatten in front of their eyes.
At some point, artificial support becomes unsustainable. Classic bubble material.
21:35 EDT, 7/11
35
@mancuroc Like many, you have no idea how buybacks work.
By virtue of buying back the stock, two things happen:
1. There are fewer shares on the market (the purchased shares aren’t on the market)
2. The company is worth less (the cash that was used to buy the shares back left the company)
Buybacks in and of themselves don’t increase stock price - at least not directly. They are a tax-advantaged way to dividend shareholders. They are tax advantages for 2 reasons:
1. Shareholders who sell can get long term capital gains treatment (lower tax rate)
2. Shareholders who don’t want to cash out (and this recognize gains) don’t have to sell
Buybacks (only) indirectly influence prices via a signaling mechanism. There is an asymmetry of information, and the people who know the most about a company are the management. The fact that they’re directing the company to buy back shares likely means that they think the company is undervalued. People buy low and sell high. Others seeing that the guys who know the most are buying then tend to be more likely to buy, thereby increasing demand for the stock. Increased demand obviously translates into higher prices.
That’s the long way of saying “the winners are the owners.” But isn’t that the point of companies? Why would someone own/buy shares if they thought that they were going to lose?
Criticizing companies forgiving tax-advantages dividends seems akin to criticizing them for making money to me.
1
Shareholders benefit. ie people who buy stock not just "senior management"
1
@mancuroc What day, month, year will the bubble burst?
When? Hello?
I didn't think so.
So how ugly should we be expecting this to be when it falls apart? Is it 08 levels or worse?
4
So, should I buy or sell?
2
@morbeedo Hopefully you have a written investment plan that will be effective for decades, not based on the news cycle. Such as "I will invest in S&P 500 index funds with 10% of my income until age 50, then move assets to a mix of 60% bonds and 40% equities"
4
How is this a question? Follow Bogle's advice. Buy & Hold low-TER index funds. And don't forget to hold it when the market unavoidably crashes again.
5
When you have the means to recover from your financial losses with government bail outs, its just another day at work. The rich do not worry about going hungry, feeding and clothing their kids week by week. You know that those who can take advantage of these stock wins are doing so at record levels. They have financial advisors paid to assure that their losses are minimized and protected from being totally wiped out.
Meanwhile, I am doing ok but when the next sink hole comes, I have no control over my 401k being vaporized or if a health issue that causes catastrophic cash/income loss, I will just be out of luck.
He is flailing his arms at the economy and his rich pals more and grabbing more and more power. He is putting his finger on the scale like no other President.
Meanwhile, he is impeaching himself so we shouldn't worry about it.
1
Luring in the suckers.
An old trick.
1
For the sake of the future of the world, the very best thing that could happen is a steep and deep decline in the stock market.
What's that old advice? "Buy low, sell high."
Best advice now? SELL!!!
We must get rid of resident moron, if the world has any chance of reversing the self-destructive path it is currently on. That starts by booting the moron and his entire administration out of the white house. A rising stock market gets in the way of that essential requirement, since too many Americans "vote their pocketbook" and might tip the next election his favor -- again. We simply can't survive another 4 years of this administration. SELL!!!
8
Don't make this complicated. It's simple.
More cheap credit by either a rate cut or rate hold. The bubble blowing continues.
7
I see DT pushing Powell on rate cuts so he can claim credit for increases before the election. After the election, he will blame Powell and everyone else for the resulting recession.
6
Stock markets looks six months ahead. That is Christmas shopping time. Good retail sales are anticipated. Stocks are expected to climb with or without rate cuts. Add the realization of anticipated rate cuts, the stock market will rise even more. Then comes Trump’s re-election and can be sure the elimination of tariffs with phony trade deal with China. The stock market moves up. Then comes the poll predictions. If Trump appears to be loosing, then stock market nose dives. Expect stock market to rise till December, then beware and go on caution side lightening in stocks and adding bonds.
3
“ There is no alternative”, pretty well sums it up with a couple of caveats: For retirees there were at one time rules that suggested those with a net worth of less than $250,000 not invest at all, then there were rules outlining how much to allocate to domestic, foreign, strategic sector, precious metals, the list is endless: those allocation parameters still exist but the era of buybacks and zero bound rates seem to have turned those rules on their head. ETFs tracking the whole market have beaten the professionals largely because, in my opinion, many companies aren’t doing that well as far as top line growth but their stock prices have been rising due to mergers and buy backs which creates a supply and demand situation; there are of course outliers like Apple or Facebook that create enormous profits but largely the market moves seem to be in tandem to interest rates and the trillion dollar tax gift from Trump creating free cash for more buybacks. I know I feel like a fool for exiting the market in 2008 after a 40% hit but I had friends in high places including one of the largest mutual funds in San Francisco who were doing just that, of course several of these folks started taking their money out of the market years before and investing it in San Fransisco real estate, even collectibles, namely autos and art. Being a dummy I cut my spending to the bone and tried to figure out how much cash I could draw every month and survive, it’s not been fun hoping I guessed right.
3
@Ted Buybacks aren’t evil. They are often demonized by politicians who have no idea what they’re talking about, but they are just tax-advantaged dividends, nothing more.
Also, active investors set prices. Passive funds track the prices set by those active traders. Therefore, passive investments, on average, are exactly as good as average active investments (on a risk-adjusted level). The two caveats are: A) fees are markedly less and B) taxes are less (fewer instances of selling means fewer instances of gain recognition). Therefore, after fees and taxes, passive funds (ETFs) our performance active funds with similar risk profiles. It has nothing to do with topline growth (or lack thereof).
1
Interest rates have been at historic lows for ten years; we'll call low interest rates the drug. The Fed starting showing some discipline and raising interest rates last year; we'll call that trying to ween the addict off the drug. Last December the addict had such a seizure in response to the Fed's curtailing... and so scared Jerome Powell and his pals, that he said, I'm so sorry about that... don't worry... I won't cut back on your drug supply any more than I already have; and now he is saying, as the addict grows more and more pale... okay, you're looking a little peaked, don't fret my friend, I'll add a little bump to your supply. The addict cheers up. For the time being. The problem is, this type of drug supply/demand behavior really only makes the addict worse, not better. And for addicts that don't get sober, their only end is insanity or death. We are currently addicted to feeling good and not doing the right and necessary things if they may, for a time, not feel so good. That is the ethos of failure.
15
So there will be fewer options available later on if and when there is a need to smooth out the impact of a recession with a much needed rate cut
18
Downturns are good if you have a long-term horizon ( >10 years). We're actually paying a premium on stock prices now and a correction wouldn't hurt.
11
@sthomas1957
I agree with you. A correction, anytime -- but sooner the better -- please!
1
@sthomas1957
Stock market multiples are easily within historic norms - so there is no premium in the current market.
btw Stock valuation is not based on how much they have increased in price during the past 6 months - it is a function of their current Price to their Earnings Potential [P/E]
1
One word: bubble. Have seen it before.
27
We have a 401K at work, a super nice guy I work with, age 50 has 100 percent of his 401K in the G fund which invests in government securities. He thinks he is safe by not investing in the S&P Fund. He is an engineer. I tell him to look at the returns on the S&P. He is happy with the return in the G fund and proudly told me "I am earning $18 a day in interest". While all your money should not be in the S&P, some people just don't get it.
4
@Jack You co workers is a smart man. Close to retirement, possibly unable to get a comparable job if he loses his, he is holding what he has. A dark cloud always comes, this run up can't last forever. We did the same thing and are sleeping better.
15
@kie, He has never been in the market. Now at age 50 investing 25K a year in 401K (6K catch up over age 50 and19K regular a year). has worked 29 years same company.
2
@kie Age 50 is not close to retirement (especially any hope of early retirement). The Great Depression only lasted 15 years (or so) to reclaim previous highs. If you had been investing along the way (dollar cost average), recovery would only take 7 years.
https://money.cnn.com/2015/02/26/investing/stock-market-crash-bubble-investing/index.html
1
What could burst the bubble? Government debt the highest since after WWII. Social security and Medicare benefits will drain economic growth as baby boomers exit the workforce. Perhaps Japan's lost decade is what is in store for the US economy.
14
The stock market hype means nothing to middle class people who are struggling. This is hype for the rich.
16
@pb It means a great deal for those who have retirement funds in the stock market and have no other place to put those funds because the return is so low. With the elimination of company based pension funds where else do you put retirement savings? Not if, but when there is a correction, if it is anything like 2008 then another great depression will result because the Fed has so little room to work with. And if it happens in the next 18 months we, the 99% will be in deep deep trouble.
42
<<...and if it happens in the next 18 months, we're all in trouble>>
Or NOT. Maybe that would ensure that the Worst President EVER will be defeated. That would be cause for a nationwide celebration like the country has never seen!
2
@pb
Well over half of tax-paying Americans have investments in the stock market - either directly or indirectly
4
"That climb earned itself a nickname, the TINA market. It stands for There Is No Alternative, which simply means that because central banks around the world were holding rates so low, investors had little choice but to buy American stocks."
There is always an alternative - that of holding on to cash. That alternative gets exercised when "the market" comes to a sudden realization that the price paid for stocks is not worth the small dividends paid by stocks and the large risk posed by a substantial market correction. Such "Minsky moments" as they are called are invariably painful.
9
Well, the rich can keep their money in the market for as long as they want but at some point it will come crashing down and then what? If they are diversified they might be okay but for any fool who has all of his or her money in stocks I say get out now-sell high, and buy low later. I think the next recession will be worse than the last simply because the government has more debt now and rates are already so low that there isn't much room to cut more. I think it will make the last recession look like a picnic.
15
Money is cheap in Europe also. But, their stock market is a fraction of ours.
Difference? We have Trump.
They don't.
2
@John Huppenthal The stock market was going up under Obama more than it has under Trump. Increasing deficits do not bode well for the long term.
13
@John Huppenthal: The difference is that we have the American stock market and the Europeans don't--except insofar as they invest in the U. S. (TINA). Personally, I think Trump probably represents the biggest fear that those outside the U. S. have regarding the U. S. stock markets. He has created (trade wars, coming currency wars?) or exacerbated (geopolitical instability, federal deficits) some of the biggest fears that people world-wide (including Americans) have about the U. S. stock markets. How much larger would our markets be today if Trump were not continually knocking them off their stride?
14
Careful! This could be the macro version of "pump and dump"
13
Investors, like Goldilocks, want it just the way they want it. And what they want is cheap money. They're a greedy, skittish bunch who turn pale at the slightest ill wind. Only in America would the addition of 244,000 jobs (just last month) be bad news for these canaries in the coal mine. It's a good thing they're not defending America like our brave - highly underpaid - soldiers. Otherwise, we'd all be left to fend for ourselves (see 2008).
4
So much my savings account.
1
@Rob Brown
There are internet banks paying 2%
@Brad
Thanks. I had seen those, but it still isn't what it used to be.
@Rob Brown
Yes, I understand.
It looks like the stock market should fear a recession we were riding high before until the market almost took a nose dive beware better save your money under the mattress cause guess what this market will tumbke again good luck if you can survive the recession thats coming up!
2
@Every ready Bunny
Tell that to all the people with 401K penalties for removing it.
First, punctuation.
Second, it's not the down days that mess up your portfolio. It's missing the up days.
1
Wall Street has always applauded unemployment and now it also applauds corruption. There are some truly conservative, ethical and moral people on Wall Street but they have been over run by profit seeking racist misogynistic liars. In another 8 months or so all of the supposedly good economic indicators will be revised to show that it was just a giant con. The economy is still in the doldrums and destroying the democracy and the environment isn’t fixing it, it’s just lining corrupt pockets...
7
@SW ... perhaps, but you remember that old saying, " even a busted clock is right twice a day ".
@SW
Trump managed to bankrupt casinos, he is doing the same to the nation's economy. The ground under the economy feels soft, the MIC is making real money for the warprofiteers, the bankers and industry and even more if there is a war with Iran. The middle-class people will be the big losers, as always.
As far as people with real money are concerned “What’s a billion if you’ve got five”.
1
Any position in stocks is a gamble, less so now, but the tide will eventually turn as it always does. Thinking this bull run will continue is foolish. I agree with investors who favor in a diversified portfolio of tried and true companies that have been around for the ups and downs. You don’t achieve the highest highs, but you preserve investment during downturns and position yourself for the inevitable rebound. Other strategies involve more risk. It’s all a gamble. You have to ask yourself how much risk you’re willing to take because a mistake can be tragic.
3
A river boat gambler got stuck for a few days in a one-horse village. He looked around without success for some action to pass the time. He finally found a twelve year old boy who was willing to flip pennies with him, but only on the basis of "heads I win, tails you lose."
A passing stranger observed the scene for awhile and the boy's steadily increasing pile of pennies. Then in amazement he asked the gambler, "You lose no matter how the flip turns out. Don't you understand that?"
"Yeah, I do...But it's the only game in town."
34
This article could have been written anytime last year. Right up to the point where the market lost a years worth of gains in a month. A month no one predicted. The stock market is not the economy and does not mirror what is going on in America. I learned that after 911. Patriotic fervor gripped the citizenry, politics took a back seat (Bush's approval rating spiked 40 points) and we were united in our resolve to stand strong. That's when all eyes turned to the stock market to see how the money people would react. The patriotic thing to do would have been to buy stock, or even hold stock, to show that corporate America stood with all Americans. Instead, the sell off was so catastrophic, they had to close down the exchange. The stock market doesn't reflect America, it warps it.
5
Oh, for crying out loud.
For all of the talk about America as the land of opportunity -- with freedom of speech, freedom of religion, freedom of assembly etc. -- America is the land of a tax code which makes it easier to turn a buck anywhere else on the planet.
Not that this is a bad thing, mind you. Just stop the fiction that poor people have a chance at the American Dream.
15
Prudent investors are always afraid when investing in equities. Today’s market is no different from any other.
2
Start with the fact that they are spending money like drunken sailors (sorry about the slight to nautical types), ridiculous low interest rates that are fueling a sugar high in the overall economy, bank rates are ludicrous, so all the money is flowing into the Wall Street Casino. Nobody is worried because we inflate and deflate bubbles as often as actors and actresses sign up to do weight watchers commercials after they blimp up. Politicians of both parties long ago decided that the bill for this is being passed on to their grand kids, so rather than deal with any of the unpleasantness. more drinks have been ordered and the country is distracted by re-litigating who said and did what in the last century. Not to worry, while we are in a holding pattern, Trump is very comfortable in the way back machine and we might be able to squeeze out another couple of years before the bill becomes due. Sorry millennials, while you have been arguing over the proper pronouns to use, the bill will be arriving and all the boomers will be showing the generations that follow them their alligator arms, while subsequently moving to a gated over 55 community where you can't live and even among residents these matters are considered impolite conversation.
9
@Kevin I'll not be shamed for listening to my Asexual friend's requests. Its not like we can't both care about what people want to identify as (instead of forcing them into an externally defined identity) and fix our broken politics.
Frankly, its not even our fault because WE AREN'T IN OFFICE. Its the Silent and Boomers that have gotten us, and are keeping us here.
And WE can't have social programs that the Boomers benefited from, like SS, because when we do it its socialism.
5
@Tyler: If you're going to give up so easily and so soon then it's no wonder. Care about your friend's requests AND fix the broken politics. DO IT. And fix Social Security while you're at it. Three things at once. No one will be on your side if you don't have one.
3
Warren Buffett said it about two months ago. As long as interest rates remain this cheap, stocks are a bargain.
14
Rates so low that "Investors have little choice". Then, when rates are back to nothing again, and Wall Street has wrung every last dollar from everyone they can, down goes Frazier.
10
The military adventures and the overkill potential of the military arsenal is eating up the wealth of the nation. The budget is eating up some $1 Trillion, not counting the costs of the potential war in Iran and Venezuela and who knows where else. But that gets paid with CRs, so the people don't know how much the Iraq war and all the other military escapades cost the taxpayers. We should not forget, the top 1% and the corporations pay not much taxes to speak of, wage earners and salaried working people carry the real burden of taxes.
14
There's the aspect of workers' wages generally remaining stagnant as a result of the minimum wage going nowhere. The humane thing to do would be to raise the minimum wage significantly; inflation would start to rise somewhat, and then interest rates would be raised. "TINA" would disappear, the fixed income route would start being a viable option once again. And the market might calm down, at last.
23
@JR: But the result would be good, old fashioned capitalist inflation!
1
@Stan Sutton
Raising the minimum wage is something that has been done in capitalist countries for decades, yes. It just needs to be done well.
1
What goes up, must come down, JR.
1
Federal spending is going through the roof. Corporate spending is dropping like a stone.
Federal spending increased 6.6% from the year earlier period October through June. The US budget deficit this year is going to be right around 1 Trillion dollars.
Our entire economy is being propped up by huge increases federal spending. Without it we would be in a severe recession right now.
18
@HL
The military budget alone eats up about $1Trillion, all to finance the weapons to blow up the world several times over.
What nation is about to invade the US anyway? Canada and Mexico the only nations we share borders with don't look like they would attack us. We have to look for enemies on other continents thousands of miles away.
Cutting the military budget in half would pay for affordable health care for all.
112
@HL -
1. Federal spending sends money FROM the government (which has an infinite supply) to the private sector.
2. Taxes take money OUT of the private sector and send it back to the federal government.
3. The deficit measures the amount left in the private sector.
4. As the economy grows we need more and more money in the private sector to buy and sell stuff and for banks to use as reserves to make loans.
5. The trick is to get the money to the people who need it and will spend it, not to those who do not need it and will use it to speculate. See market, stock. For example, Trump's tax cut did not do this.
6. If this theory is right, then periods of "fiscal responsibility" in which the government had surpluses and paid down the national debt should have led to disastrous economies.
They have.
The federal government has balanced the budget, eliminated deficits for more than three years, and paid down the debt more than 10% in just six periods
since 1776, bringing in enough revenue to cover all of its spending during 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, and 1920-30. The debt was paid
down 29%. 100%, 59%, 27%, 57%, and 38% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.
8
@HL, The subways in NYC, Boston and Washington DC are in total disrepair, yet DoD gets a blank check. The Joint Strike Fighter is a bottomless pit of waste. The military is a social program. Military personnel retire and then become Federal civilian employees to work on pension number two. The US Government should rebuild the subways in NYC. Boston and DC. Eisenhower warned us.
90
The markets are manipulated. The banks need more, not less, capital reserves. The politicians are bought off hacks. Citizens United must be repealed (corporations are not people). Phrma is gouging patients. The right wing is bad. The left wing is bad. In the U.S. always follow the money if you need to know why things happen or don't. It has been less than 10 years since the great economic meltdown. It will happen again and sooner rather than later but who cares because the extremely rich and powerful will be fine.
21
@R. Anderson
The real joke is the little interest on savings will be taxed like earned income too. So much for the tax cut.
11
Economics is not a science.
Economists are not scientists.
There are too many variables and unknowns to craft the double-blind experimental controlled tests that provide predictable and repeatable results that are the essence of science.
America is not a business. America is a nation state.
The President of the United States is not a businessman. The President is the head of government and state.
The only thing that motivates Donald Trump is related to whatever profitable Trump Organization advantage he is hiding from the American people in his personal income tax returns and business accounting financial records arising from his occupation of the Oval Office of the White House.
25
@Blackmamba It's not that there are too many variables and unknowns to craft a viable macro economic forecasting model. The fundamental "problem" is that any econometric model MUST contain at least one exogenous variable That means that to run a model someone must make a guess as to futures for that variable. in simple English, that means the analyst must guess the future data of that variable. More often than not, that variable is future interest rates. Even the Fed doesn't know what it will do in the future regarding interest rates.
1
@Blackmamba
Trump thinks he owns the nation, he can do as he pleases just as he did with the casinos and real estate and all his business. So far he has created nothing but chaos, at home and abroad while he financed his personal lifestyle like the king of France.
6
Not only are bond yields in the US low, they are below zero in Japan and Germany. Plus Europe seems closer to a recession than the US and China looks risky, too. That makes US stocks the cleanest shirt in the dirty hamper. 20 years ago when a similar situation occurred, money rushed into mortgages, emerging markets and Puerto Rican debt. By contrast, the S&P 500 seems the least bad option.
3
@Rick
Interests on savings are so low that after taxes they are close to zero too, less than inflation. Saving accounts are melting like ice cubes.
2
This isn't hard. Look at https://www.financialsamurai.com/what-percent-of-americans-own-stocks/
It's inequality, wealth inequality. Some figures:
"Those families in the 90th percentile have a net worth of almost $1,000,000. Meanwhile, those in the 50th percentile or below hardly have any net worth at all."
The Rich spend a lower percentage of their money. What's a guy or gal who already has so many houses he can't remember how many & an elevator for his horse gonna spend his money on? The answer is he is going to use it to
speculate, e.g. stock market.
Here are some more figures:
"What percentage of Americans own stock? According to the Federal Reserve, of the 10 percent of families with the highest income, 92 percent owned stock as of 2013, just above where it had been in 2007. But ownership slipped for people in the bottom half of the income distribution, and to a lesser degree for people who were above the median but below the top 10 percent.
As of 2019, the top 10 percent of Americans owned an average of $969,000 in stocks. The next 40 percent owned $132,000 on average. For the bottom half of families, it was just under $54,000."
"What’s even more astounding is that the top 1 percent of households by wealth owned nearly 38 percent of all stocks shares."
"Since 2008, over 85 percent of income gains have gone to the top 1 percent of households, most to the top 0.1%"
So what did you expect when all the money went to the Rich?
55
@Len Charlap Thank you so much, Len! I've been struggling to figure out how to spend all stock market gains, and the answer, of course, is an elevator for my horse.
11
@Len Charlap
I'm always curious how Trump's base, almost none of whom own stocks, reacts to this fist pumping? They didn't seem to notice that they received not a cent from his tax cuts and that didn't upset them, so apparently, they don't eat food, drive, or pay rent; they subsist in some mysterious fashion on the gaseous emanations of Fox News.
2
@Bob M: How is your horse supposed to spend his stock market gains?
There’s an alternative. You can come here to Las Vegas and get yourself a comp card at one of the casinos and feed your retirement money into a slot machine. If you win, you can go home with a pretty good return. If you lose, at least you’ll get a discount on the buffet.
12
@Mark
Hope you are joking! Investing in the stock market has been very, very good to me. Playing the lottery and slot machines have been very, very bad to me. In short, Casinos and the lottery are the ripoff.
7
@Juan
I'm sorry to hear of your misfortunes. Have you considered craps?
1
@Mark - Your odds are a lot better in the Market.
4
Lower the interest rates and give a trillion dollars in tax cuts and cheap return of offshore monies to corporations and what happens?
Just this. People with the money to invest "want" more than .4%, and corporations use 75% of that found $$ to buy back their stock and make them, and hence their salaries, look better.
And yes, they have built more plants here, but real companies don't do that since they have some spare cash around, since it can take 3 - 5 years from inception to opening, but what is best for them and their investors.
Which IS good, since it used to mean more and better paying jobs. Well, was.
50 years ago.
5
There are always plenty of things to worry about regarding investing in the stock market. A very wise financial advisor once showed me the difference between being in the market for 10 straight years and being in that same market minus the 10 best days of return during those same 10 years. The difference in return was remarkable. He was emphasizing the importance of staying in without trying to time the markets. Getting rich quickly in the markets is almost impossible. Do research, invest in solid companies or ETFs, and hold on. That's my 2 cents worth.....hopefully worth 3 cents in a few months. Dan
20
@Dan Dollar cost averaging is hard to beat. You have to know how to do your math. If you are about to retire you need enough cash to last for a few years until the market goes up again.
2
I agree. I’d also like to add that if you’re still working with some extra income, save the cash until the markets drop about 10 percent, which they definitely will on occasion. That’s the time to invest , when everyone else is selling. It has worked well for me. Thanks for reading. Dan
6
@Dan
Right on, Dan! I try to do the same. If there is a recession or the market crashes, I will grit my teeth and try to buy, buy, buy, even though it feels counterintuitive - and then not watch for a while. Buy and hold. Amen.
2
We are in dire straights indeed if stock market valuations are so dependant on low interest rates. We need higher rates to balance the markets and allow conservative money to seek safe havens, so we can avoid the TINA effect, which I think has been effect for at least the last six years. There is too much money in equities that simply does not belong there, and when there is a hiccup (and there will be) all of that will be the first out the door, creating a market catastrophe. We are in a stock bubble, I think every bit as bad as the housing bubble of eleven years. Buyer beware.
20
Algos and short-covering / short squeezes. Approximately 80% of stock trading today is algorithmic trading using computer programs, most of them fairly similar in their strategy. When the market's up, these programs want to buy more, and when it's down they want to exit. This results in exaggerated price movements. However, if you look at the stock market volume (e.g SPY volume) lately, it's been really abysmal.
A suspicion I have is that the US stock market, considered to be a safe haven internationally, is also bolstered by the billions of dollars "stolen from the people" by the increasing number of corrupt politicians, public servants, etc. in other countries.
13
I remember last year I received daily notifications that the economy is about to crash from this very publication. Eventually there will be a slow down or recession, that's how.it works. I guess by doing this you can say you were right in the long run, but it's just plain speculation because no amount of success is due to this president. If I'm not mistaken km pretty sure a nobel prize winning economist said the stock market would never recover if he was to even win the election.
4
@Micah West It's true that Trump has essentially nothing to do with the continuation of the economic recovery that was under way long before he even considered running for fake POTUS. It's also likely that the economist you refer to won't make that mistake again, even if Donald Duck is elected.
1
@Micah West When everyone is buying into the market, that is irrational exuberance. Get out. When everybody is selling, buy.
1
There is no economics only politics.
11
Remember back to 2008: as long as the music played, financial “ geniuses” danced to the housing and mortgage repo play. The Fed had fine-tuned their magic such that recessions were a thing of the past. Stocks, housing prices, and the markets were going to go up forever. ...Until the music stopped.
Trump and his whole executive branch are totally incompetent plutocrats lining their own pockets. Trump can only stage manage his reality-TV presidential appearances, certainly nothing of any substance in the US or the world.
Yeah, what could possibly go wrong in the stock market?
45
@RealityCheck
The stock market crashed badly in 2008. Yes. It happened. But it recovered pretty impressively. Up. Down. And back up. It is the trend for the last century.
1
@AK Remember that in the aftermath of 2008, millions! of people lost their homes and their jobs. Sure, the stock market recovered and those people fortunate enough to have enough assets and who invested in the stock market recovered and did well.
But the economy should be about people, about the average American wage earner and how they are doing.
Today's news is that 40% of Americans have trouble paying week to week bills and expenses. This stock market does not benefit them much. Higher wages would. Job creation does. Job re-training does. Affordable education does. Portable health insurance does. Affordable child care does. Effective transportation systems do.
The stock market does not help the average American pay bills or that catastrophic medical expense that leads to bankruptcy and even homelessness.
The stock market is still for the rich and not for the average American. The Fed should not prop up or super-charge the economy for political reasons to to line the pocket of the already rich and well-off.
4
Who profits from the Federal Reserve Policy ?
"despite the fact that almost half of all households owned stock shares either directly or indirectly through mutual funds, trusts, or various pension accounts, the richest 10 percent of households controlled 84 percent of the total value of these stocks in 2016." [1]
The richest 10%.
The Fed does its part in increasing the already alarming inequality in the US. Meantime , small savers are left out.
[1] Household Wealth Trends in the United States, 1962 to 2016: Has Middle Class Wealth Recovered?
Edward N. Wolff NBER Working Paper No. 24085
Issued in November 2017
3
@Lars
The four largest holders of stocks classifications are not individuals.
So - no.
Internet banks offer one-year CDs with APY of 2.5%+
3
@alecs I'm retiring in one year, and I plan to cash out my (meager) 401K and put it into CDs. You have to figure that APY at 4% if you don't have financial "managers" skimming off the top, and stocks are ridiculously overvalued. The sugar high of Tump's tax cut will wear off soon enough.
18
Poor investors. They just have no choice. Seriously though the real story is that there are no profitable investments to be had because global capitalism has entered a phase of secular stagnation.
12
@Christian Haesemeyer
Look to the left - there is a graph - it is titled "The S&P 500" - does it look like it is secularly stagnated?
1
But if rates continue down, or there’s a flight to safety, then the 30 yr US Treasury bond will be the best investment going, like it was the whole last decades of falling rates. Just buy them before the rates fall further.
1
Well. there are safe investments, (German Bunds, Swiss Government Bonds) but they cost you money, rather than earning money. The current yield on the 10 year Swiss government bond is -0.5% (That is minus)
The fundamental problem with the Federal Reserve policy is that it loads the bill for the current exuberance onto future generations.
Real yields safe investments are negative. The current real yield of the 10 year Treasure is negative -.4% (current nominal yield 2.04%, 2018 inflation 2.44%, real yield - 0.4%)
By law, Social Security must invest in Government securities. Your SS taxes earn that flow into the Social Security Trust Fund earn a negative return
11
@Woof
But if rates continue down, or there’s a flight to safety, then the 30 yr US Treasury bond will be the best investment going, like it was the whole last decades of falling rates.
3
This is the terrible situation which those of us in retirement, or preparing for it, are stuck in.
It's one thing if you believe that the economy is really strong, the stock prices are justified and will continue to grow (which I don't), and/or you can afford to wait for long-term trends to work themselves out. Or if you've already made gains.
But when there is, indeed, little other choice, it's almost a lose-lose proposition; perhaps the only consolation would be, if inflation were correctly correlated with interest rates, your money is not losing too much of its value.
Alas, from a consumer's perspective, I see prices for critical expenses rising faster than the official inflation rate, and certainly faster than interest rates.
67
@lm I took all my money out two years ago because of Trump, a year before my retirement. There are those who would say that I've missed out on a lot but I haven't thought about the stock market in two years, I haven't worried about the timing of the inevitable downturn or the length of the recovery to follow. If you're close to retirement and you worry about cashing out too early, don't. The lack of profit might cost you but the lack of worry is priceless.
65
@Rick Gage I sold my risky stocks and low performing mutual funds in early 2018. I kept my safe mutual funds and bought CD.s with the cash. Even if the market drops I have enough cash to withdraw 5% for several years. When the market starts to go up again I can reinvest some of the CD money if I have some left. We both have a plan that suits our needs.
8
@lm
Sell enough now to raise a couple of years’ worth of cash that you can live on when the market tanks. That way you’re selling when the market’s low.
Just leave the rest where it is.
Others might say one, three or four years but that’s the general idea
1
It's TINA but most investors have their fingers ready to click the sell button. Most recent example was the sell off last December but those who were brave and greedy enough to buy in December were very happy indeed.
3
This is Alice in Wonderland thinking...left is right, up is down, etc. Just today, the govt. reported that inflation had ticked up more than expected and the labor market was the tightest it had been in decades with wage gains picking up as well. Yet, in this environment, Powell has not only waived the white flag, he is leading the charge to lower these extremely low interest rates while the 10-year treasury bond has already dropped precipitously these last six months? Curiously, that bond bottomed out at 1.95% earlier this week and nudged up to 2.1% today. Perhaps the bond market senses that things aren't as dire as Trump (this is the greatest economy ever...take about Alice...) has been harping to Powell. Either way, this will end very, very badly as it always does when "there is no alternative."
42
Very simple reason that stock prices are rising; supply and demand. Bond prices are low and dropping further. Everyone is searching for a better return on their money.
If interest rates went back up to their historical rates, you'd see a major drop in stock prices.
48
@Reuven right! And that should have been the policy as the recession thoroughly wound down. Now the economy is being stimulated for short term gains and from multiple directions. Who will be left holding the bag?
13
@Reuven. Not even close to "everyone". Most of us don't actually have stock portfolios, and many who are somewhat in the market are there only through their IRAs and such, little pieces of funds managed by professionals who seem quite good at skimming any actual gains off as fees.
What's driving this increasingly distorted market is way too much money in way too few hands, idle cash looking for a place where it can grow. The bedrock real economy, the great sea anchor of America's postwar middle-class prosperity, is being strangled by successive Republican plutocratic tax cuts, ratcheting public revenues critical percentage points of GDP below the levels necessary to pay for our public spending, while at the same time middle-class wages have stagnated.
The resulting chronic deficits and endless public debt, coupled with the ominous levels of private credit card, mortgage, and student-loan debt, mean that the meth-bender stock market is the only positive indicator. The unemployment numbers do not account for the millions working multiple low-pay jobs or labor-participation declines; they're blunt instruments.
Corporate profits got candy from the tax cuts, and so did the thin-crust investor class. The real economy is sick, but the crust owns the mechanisms of correction.
So, swells in the c-suites and penthouses and private jets, enjoy the ride. This will not end well.
3
Bond yields are low and dropping. Bond prices are high and rising. They move in inverse relationship. If you bought bonds in the past, prices have risen and you have profits.
1
"investors had little choice but to buy American stocks"?
Is that good for investors, or is it good for those that receive commissions from the buying and selling of those American stocks?
Sounds like greedy minds at work.
We hear many different news stories about how the world's economy is about to take a negative turn, but it seems like everyone in the business of buying and selling stocks thinks that they're smarter than anyone else. They always end up getting burned.
It would seem that the music is about to stop, but not enough chairs for everybody.
What was that definition of insanity again?
22
@S Butler
Definition of insanity ( re: stock gains)....
Take some gains NOW and eliminate debt, then let the rest ride.
Make hay while this sun shines, and it is shining as bright as ever....!
If you panicked in 2008 and sold, you LOST OUT.
If you panicked in Dec 2018...you LOST OUT.
The stock market is the ONLY place where people buy high and sell low. Use the supermarket strategy: Buy when the item is ON SALE!!!!....And today might very well BE the sale price....
ANd by the way, the DOW was declared "Too high" at 14,000, 15,000, 16,000, 17,000 18-27,000....
It's ALWAYS gonna be too high, until it isn't.
Eliminate your debt with the gains. Pay off the mortgage. Pay the CC's. Pay off the car note on the 5 year old not-so-much -fun -any- more car in the driveway ( "won't do that again" you cry!).
Folks...it's not IF a crash/recession occurs, it's WHEN .
Has been like that forever.
3
@Ignatz. This is what people that sell stocks for a living tell their marks. Then when the market tanks, they say it's not their fault, "you should have done your homework", but were saying "trust me, I know what I'm doing" right up until the crash.
There ARE alternatives. (and that’s all I have to say about that.).
4
@Nearing Retirement-Not really, CDs or bank accounts that pay nothing, annuities that make the insurance companies richer than you, keeping money in the mattress etc. etc.
Whether we like it or not, the general stock market is the only place to be for retirement.
37
@Paul
Workers lost their pensions years ago, and now have to roll the dice; either keep your money in a safe place (e.g. Bank CDs) with very low interest rates, or take a chance on losing your life savings in the stock market. Meanwhile, stocks, and real estate, have skyrocketed, aided by low interest rates. The wealthy have so much wealth that their investments have grotesquely distorted the real estate markets around major cities, and the costs of stocks. As if that were not enough, the wealthy received a huge tax cut last year, dramatically increasing the federal debt. The rest of us are left behind to shoulder the long term effects of budget deficits, interest costs on the debt encroaching on government spending that could improve people's lives. As the effects of Global Climate Change become more severe, the very wealthy will find refuge in locations not yet impacted, and we will be left to fight for our lives (or, at least, our Grandchildren will).
115
@Michael Banks-Thank you for your reply. I agree with most of what you say but the bottom line is you have to in it to win it or saying it another way if you can't beat em, join em.
If you have some retirement money and you don't want to go broke, you have to put your IRAs into the market.
What's the use of present day Americans trying to stave off the problems in the future that you mention if we go bankrupt?
1
The end is gonna come. Massive debt on all sides, corporate welfare, blooming deficits, college loans, boomers aging, SS and Medicare funding crises, insane trade wars, America turning into a banana republic etc. etc.
The only question is when. That is the hard part. The two greatest downturns in modern times in 1929 and 2008 took app. 10 yrs. to implode. By that measure it could be as late as 7 yrs. from now or it could be next month.
100
@Paul Even a month from now is an eternity in the stock market. By the time anyone can see a downturn in progress, there will be no opportunity to get out without losing a lifetime of investment returns.
It may only take seconds in a run on the stock market to lose everything.
53
@Paul - I think you left out dogs and cats living together. Not making this up. Just check youtube for video evidence.
3
@S Butler
that's silly....In Decmeber of 2018, on had several months to "get out" already....down down down.
I BOUGHT in December.
2