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Old 01-14-2015, 02:46 PM
 
Location: San Diego California
6,797 posts, read 6,123,932 times
Reputation: 5171

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Quote:
Originally Posted by Lowexpectations View Post
Margin balances may be higher but is the leverage? You brought this up before and couldn't answer the question. Don't just parrot what you've heard you should understand it

If 2007 margin balances were 1 trillion on 2 trillion in assets and now it's 2 trillion in debt on 5 trillion in assets the equity percentages went up

You obviously don't understand the winddown of QE
You are dealing in semantics, because valuations are subjective while the dollars owed are concrete.
As I said before, valuations are based on fictitious accounting and accounting tricks https://encrypted.google.com/url?sa=...YwDAEx33jAosLg
When the valuations are no longer believed, the process of unwinding begins.
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Old 01-14-2015, 03:11 PM
 
17,635 posts, read 12,239,811 times
Reputation: 12870
Quote:
Originally Posted by jimhcom View Post
You are dealing in semantics, because valuations are subjective while the dollars owed are concrete.
As I said before, valuations are based on fictitious accounting and accounting tricks https://encrypted.google.com/url?sa=...YwDAEx33jAosLg
When the valuations are no longer believed, the process of unwinding begins.

It's not semantics. Margin debt could be at an all time high but valuations can be even higer on a multiple. This is like you complaining that mortgage debt is higher than it was in the 70s. With no relation it actually meaningless.
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Old 01-14-2015, 03:38 PM
 
Location: San Diego California
6,797 posts, read 6,123,932 times
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Quote:
Originally Posted by Hoonose View Post
In 2008 so many millions in our middle class were over leveraged with RE. When RE crashed it affected most all neighborhoods in the US, and then their respective economies.

Today we have mostly an over leveraged energy sector on the brink. That is serious enough, but will mostly effect about 5 of our states in any grand manner, and mostly secondarily vs 2008 which affected so many primarily. All the while the other states will get that nice boost from the low energy costs.
The danger in 2008 was not the effect on the middle class, it was the cycle of de-leveraging which would have taken down banks and devastated all asset values.

Instead of managing a controlled cycle of deflation that would have put the economy on a sound foundation for future growth, the Fed not only re-inflated the bubble, but inflated it past it's valuations in 2007.

It did in fact create an economy that was addicted to massive monthly monetary injections although the positive growth effect of those injections were creating diminishing returns.

Now that the drug the economy has been addicted to has been withdrawn, you are seeing the markets reeling with volatility and unable to maintain any sort of positive momentum. This will only get worse as the bond market begins to reel from the defaults in the oil sector as smaller companies cannot cope with prices below break even.
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Old 01-14-2015, 03:40 PM
 
Location: San Diego California
6,797 posts, read 6,123,932 times
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Quote:
Originally Posted by Lowexpectations View Post
It's not semantics. Margin debt could be at an all time high but valuations can be even higer on a multiple. This is like you complaining that mortgage debt is higher than it was in the 70s. With no relation it actually meaningless.
Valuations mean nothing because they are based on fantasy in stead of fundementals.
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Old 01-14-2015, 03:47 PM
 
48,519 posts, read 81,098,930 times
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If so then expect a crisis has there is no way its based on real value. Once the FED leaves the control of interest rates we might see the value actually drop. Remember in other recessions it took a generation for retail investors to really enter the markets and just the low volumes now; says that is likely again once rates rise. Especially has boomers look to take less risk to maintain.
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Old 01-14-2015, 03:51 PM
 
17,635 posts, read 12,239,811 times
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Quote:
Originally Posted by jimhcom View Post
Valuations mean nothing because they are based on fantasy in stead of fundementals.

You are ignoring facts and reality and I'm not surprised by this but it's silly at the same time.


My personal debt has gone up considerably since I was 18 but my income and assets have increased more. If you just keep yelling about my record debt load without context it's foolish
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Old 01-14-2015, 04:52 PM
 
8,301 posts, read 3,465,198 times
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Quote:
Originally Posted by jimhcom View Post
The danger in 2008 was not the effect on the middle class, it was the cycle of de-leveraging which would have taken down banks and devastated all asset values.

Instead of managing a controlled cycle of deflation that would have put the economy on a sound foundation for future growth, the Fed not only re-inflated the bubble, but inflated it past it's valuations in 2007.

It did in fact create an economy that was addicted to massive monthly monetary injections although the positive growth effect of those injections were creating diminishing returns.

Now that the drug the economy has been addicted to has been withdrawn, you are seeing the markets reeling with volatility and unable to maintain any sort of positive momentum. This will only get worse as the bond market begins to reel from the defaults in the oil sector as smaller companies cannot cope with prices below break even.
Of course the banking danger was there. But the Fed took care of that. The Fed didn't and probably couldn't do enough for the broad middle class. So banks subsequently came back, but housing and general demands sunk.

The Fed could also take care of our energy sector if it should crump. I don't think the energy will crisis near to the level as 2008, and I don't think that this will need to happen:

oftwominds-Charles Hugh Smith: Will the Fed Intervene in the Oil Market?
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Old 01-14-2015, 05:59 PM
 
Location: Central Atlantic Region, though consults worldwide
266 posts, read 286,070 times
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Quote:
Originally Posted by Troyfan View Post
That would imply earnings growing 50%+ in three years from a pretty high starting point. Not likely. The current expansion would be 9 - 10 years old, kind of long in the tooth. The earnings cycle may already have peaked.

If the economy keeps expanding 3% - 3.5% a year, the Dow could be at 22,000 - 24,000 in 3 years. And that assumes things go mostly right. Oil stabilizes, Ukraine is quiet, ILIS is contained, China keeps chugging, Europe doesn't become PIGS land, the $ doesn't rocket or collapse, interest rates only rise 1% - 1.5%..a lot of sunshine needs to happen to keep things on track.
I hear ya Troyfan! Still 31K in 3 is a tall order. I think you and JimhCom are at the crux of the matter. However everyone has made good points. Its all a big if, for little has truly gone right... still too many variables. One thing for sure, given the near insolvent Fed, dollar devaluation, I thin, is unavoidable.
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Old 01-14-2015, 08:25 PM
 
Location: San Diego California
6,797 posts, read 6,123,932 times
Reputation: 5171
Quote:
Originally Posted by Lowexpectations View Post
You are ignoring facts and reality and I'm not surprised by this but it's silly at the same time.


My personal debt has gone up considerably since I was 18 but my income and assets have increased more. If you just keep yelling about my record debt load without context it's foolish
Good, well you stay fully invested and we will revisit this discussion in a year or so and see how that worked for you.
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Old 01-14-2015, 08:35 PM
 
Location: Greater NYC, USA
2,762 posts, read 2,627,267 times
Reputation: 1707
What DOW is, it's US monopolies. If DOW grew significantly faster then S&P, I would be concerned. Dinosaurs who have a hard time adopting to modern age and stay afloat only due to their size.

I am sure DOW will go up this year. Can DOW do 5k points in a year, Yes, but once again, I will not be happy about it.

To tell you the truth I would rather be taking bets on S&P. S&P is really Business, maybe I should get QQQ and hold it for a year ?
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