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Old 07-12-2017, 08:02 PM
 
7,022 posts, read 6,651,851 times
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Quote:
Originally Posted by ohio_peasant View Post
what exactly the Fed bought, and why, and according to what calculation. But if Pub is right, and ultimately the Fed scored a handsome profit from their dealings, then I fail to see a reason for moral outrage, or how to justify a complaint of class-warfare or corruption or otherwise nefarious machinations.
The Federal Reserve remitted to the US Treasury an amount equivalent to only 2% yield on the assets it holds.

There is no moral outrage. He doesn't know what he's talking about.

Mortgage debt didn't have negative yields. He tried to equate them to sovereign debts with negative yields in an attempt to redirect from the previous statement about investments in assets with negative expected returns.

He labeled all mortgage assets as toxic. As I explained, the Fed bought mortgage agency debt issued by the government mortgage agencies. If they had losses on some of the mortgages held by the agencies, it would've only cut into the profits on the other mortgages in the portfolio. In addition, the Fed bought treasuries which were used to finance the bailout of the same agencies. They are reaping profits on one hand as a result of the injection of funds with the other.

The description of the Fed's holdings of mortgage-related assets is here.

https://www.newyorkfed.org/markets/a...asury-faq.html

The original point was why was the market skyrocketing and the answer was that the cb's purchase > 2 trillion dollars of sovereign debt or > 800 billion dollars in excess of financing requirements for those governments.

Last edited by lchoro; 07-12-2017 at 08:35 PM..
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Old 07-12-2017, 08:24 PM
 
8,744 posts, read 2,413,376 times
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Quote:
Originally Posted by k374 View Post

I guess I am trying to find out what is the catalyst that investors are believing that valuations are warranted? Is it solely Trump's tax cuts for the rich? But if it was just that wasn't that rally already over? Why is it still rallying to new highs? What other news is coming out on a daily basis to go higher and higher?
You sound like the BS reports we hear on the radio and TV - "skyrocketing".

As a long term investor (since about 1982), I don't think the market is "skyrocketing".

Hear me out for a short while.

The DOW was at over 11k in 2000. Now it is 17 years later and it is 21K.

Inflation, by itself (no actual gain) would make the DOW 16K by now. Therefore, an investor made 5K over and above inflation in 16+ years.

Any way you look at it or work it out, this is a VERY LOW return on investment. Describing it as "skyrocketing" is beyond the pale.

The way that the news media and wall street works is thus - if the DOW is 10K and crashes to 6K....they wait a couple weeks, then when it goes up to 7K they trumpet how great it "skyrocketed" by 17%.

But all the poor schmucks that are still down 30% are scratching their heads.

Bottom line. The stock market is not high. Those invested in the broader markets have barely done better than inflation. The Nasdaq today is lower (or the same) as it was 17 years ago.

Some "boom", eh?
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Old 07-12-2017, 08:35 PM
 
8,744 posts, read 2,413,376 times
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Quote:
Originally Posted by ohio_peasant View Post

All of this constitutes an amusing political debate, but back on topic: what exactly has changed in America's laws, regulatory environment, or any other aspect of public policy, that is now so conducive to business, that in the recent past was a roadblock and an impediment? Is this change, assuming that there is one, fragile or enduring?
Please see my math above and tell me where you see these great returns. By my calcs, the numbers are single digits each year - and LOW single digits if inflation is figured in. When risk is assumed, the returns are even lower.

If the OP is not factual, the discussion of it can't be either.

None of this "boom" adds in the assumption that many fools (and really smart people) ran scared and sold and got out of the market (largely) due to the Great Recession...so their assets were/are lost forever. I could tell you two stories of very high IQ people I know who lost their entire nest eggs (I consider a 80-90% loss a finality....when you sell).

It sounds like the discussion is about some of the same propoganda you mention. IF someone bought at the lows and IF they bought these companies and IF IF IF, then the market "skyrocketed" for them.

I consider myself an "above average" investor and make all my own decisions. Fidelity only reports back to 2003, but I have averaged 10% per year since then....a figure way higher than the indexes, but certainly not into "skyrocketing" or "hedge fun numbers". My more conservative Vanguard mutual funds (60% stocks 40% bonds) have made 6-7% yearly over the past 12-14 years.

I am happy with both - but see absolutely no evidence of skyrocketing. People need stuff and they buy it. There are more people - both here and abroad - to do so. Good companies increase efficiency. Put it all together and it can make for gains over the long run.

But don't listen to me. Listen to Warren Buffet. He has claimed many a time that we are in a era of single digit yearly gains.

Am I wrong here to NOT describe that as skyrocketing?
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Old 07-13-2017, 12:53 AM
 
4,772 posts, read 2,273,078 times
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Quote:
Originally Posted by craigiri View Post
I could tell you two stories of very high IQ people I know who lost their entire nest eggs (I consider a 80-90% loss a finality....when you sell).
I'd love to hear a story how someone lost their entire nest egg.

S&P 500 dropped 54%, even if you were 100% in stocks and sold everything at the exact worse day you wouldn't have come near losing everything. Did they have their entire nest egg in one company like Bear Stearns or something?
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Old 07-13-2017, 09:50 AM
 
6,831 posts, read 4,426,984 times
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Quote:
Originally Posted by craigiri View Post
Please see my math above and tell me where you see these great returns. By my calcs, the numbers are single digits each year - and LOW single digits if inflation is figured in. When risk is assumed, the returns are even lower.
Oh, I agree entirely! I've often posted, that market returns thus far in the 21st century are lackluster, and are even more so, if we consider markets outside of the US. The long-term story is sharp oscillations superimposed onto slow growth. But like you say, it's those very oscillations, that allow partisans of either side to excessively emphasize this or that particular date and range of calculation, leading either to "skyrocketing" or "collapsing".

Quote:
Originally Posted by craigiri View Post
None of this "boom" adds in the assumption that many fools (and really smart people) ran scared and sold and got out of the market (largely) due to the Great Recession...
Another important point. I gather that so many of the doomsday prophets have arrived at their stance because it's personal. They were active investors, and lost money. Now they're upset, and project their personal grief onto the broader economy.

Quote:
Originally Posted by craigiri View Post
Fidelity only reports back to 2003, but I have averaged 10% per year since then....a figure way higher than the indexes, but certainly not into "skyrocketing" or "hedge fun numbers". My more conservative Vanguard mutual funds (60% stocks 40% bonds) have made 6-7% yearly over the past 12-14 years.
Referring to the comments above (both yours and mine), if we baseline from 2003, at a market nadir, we arrive at quite healthy returns since then. But were we to have backtracked to 2000, and set our baseline point then, well, our ensuing CAGR would have been considerably attenuated.
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Old 07-13-2017, 05:11 PM
 
4,229 posts, read 1,910,681 times
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Quote:
Originally Posted by lchoro View Post
Last I recall, they didn't buy any CDO's which the banks were holding during the crisis.
What sort of asset mix was acquired in the AIG bailout?

Quote:
Originally Posted by lchoro View Post
The only way the Fed would have expectations of having a huge profit on debt assets is to go out and buy more of the same assets itself to drive up their value.
Or of course some of the "toxic assets" might have turned out to be "toxic" in the short run but "non-toxic" in the long run. Wouldn't have been the first time that the gloomer-doomers got things all messed up after all.

As for the rest, I have only followed the bouncing ball.
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Old 07-15-2017, 12:34 PM
 
Location: Brawndo-Thirst-Mutilator-Nation
15,240 posts, read 15,250,601 times
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I have NO IDEA??? I realized quite a while ago, I know nothing about the stock-market or anything financial.

I THOUGHT that there would be a significant and sustained correction in the stock-markets about a year ago, when they ended all the funny-money and zirp....totally wrong, I have no financial-sense.
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Old 07-15-2017, 08:24 PM
 
Location: City of the Angels
2,223 posts, read 1,526,787 times
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Quote:
Originally Posted by tickyul View Post
I have NO IDEA??? I realized quite a while ago, I know nothing about the stock-market or anything financial.

I THOUGHT that there would be a significant and sustained correction in the stock-markets about a year ago, when they ended all the funny-money and zirp....totally wrong, I have no financial-sense.

One thing many investors have learned is that you don't fight the Fed.
They will print money to inflate away debt and to get this "new normal" market back on track even if it causes the dollar to go to 1/2 of a penny in value.
In the end, perhaps in our lifetime, the market will go back to as it was originally intended to be and we can invest in certificate of deposits once again and ladder them to make a living off of when we retire, like in the good old days.
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Old 07-16-2017, 06:21 AM
 
4,229 posts, read 1,910,681 times
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CD's are typically bank time deposits, just like passbook savings accounts except with penalties for early withdrawal These are the low rungs on the investment ladder. They have never been much more than convenient short-term parking spots -- insured locations where inflation could be at least partially held at bay. Only twice so far in this century (2006 and 2008) has the net real rate of return on CD's been positive. The good old days were not so good at all if one were tied up in CD's.
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Old 07-16-2017, 09:21 PM
 
Location: City of the Angels
2,223 posts, read 1,526,787 times
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Quote:
Originally Posted by Pub-911 View Post
CD's are typically bank time deposits, just like passbook savings accounts except with penalties for early withdrawal These are the low rungs on the investment ladder. They have never been much more than convenient short-term parking spots -- insured locations where inflation could be at least partially held at bay. Only twice so far in this century (2006 and 2008) has the net real rate of return on CD's been positive. The good old days were not so good at all if one were tied up in CD's.
I'm assuming that you're stating the obvious for other people who may not know what they are,
The logic behind them was not to tie your money up in them but to have them mature at different times so you could make a monthly living off of them plus have the option to free your money at a certain point in time to be used for more risky investments if you saw something.
There were no money market funds back then to seek a safe haven in other then passbook savings accounts and you could also use muni bonds for safe investing.
The 1990's seem so long ago and the investment strategies from that period now seem so foreign.
It seems now in these times that you have to use options to straddle a calendar and to have to hedge a portfolio to hang onto what you have.
Plus, I'm surprised that the VIX is so low because of the perceived level of uncertainty in implementing an fiscal agenda.
We live in interesting times.
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