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i would disagree. thats like saying nadaq at the low in 2008-2009 was still in a bubble because those who bought the dot coms at nasdaq 5000 were still behind.
asset classes get pricing errors all the time. nasdaq at 5000 was a pricing error, gold back in the 1980's at 875.00 was a pricing error.
homes bought a few years back at those prices was an error as well.
folks who have a loss or negative equity because they bought at the wrong time during an error doesnt mean prices are still in a bubble.
in fact home affordability because of rates is at one of the most affordable levels we have had in a long long long time.
whether folks decide not to buy or have no job doesnt mean things are still in a bubble.
prices may be fair and wont drop any further because of many different reasons even though sales are few.
we have that going on in nyc . our market hasnt fallen much, if we have no additional shocks we may not fall anymore and basically the market is just slow but stabilized.
Except for texdav’s post, all I hear is how it affects stocks, bonds, Banks, companies, strong dollar vs weak dollar; not much talk about individual/aggregate human leverage.
Possession of cash/liquid money is analogous to guns & ammo—it protects the individual from bandits & keeps the peace. Idle** savings; & minimal dependence on credit/debt, is the big stick the citizenry needs to keep the Gov’t/financial apparatus in check.
People who think cash is irrelevant:
DEBTORS
Credit dependant spendthrifts
Investors’ with under-performing retirement plans
Financial Apparatus
Banksters
Real Estate Industry
Automotive Industry
Healthcare Industry
Education Industry
FED/Gov’t (no choice—collectively, the citizenry are financially inept)
Big Business(?)
People who think cash is relevant:
Savers
Soros/Buffett/others of that ilk (no insult intended)
Home buyers that pay in full or substantial down payment
People who respect responsibility & limitations
**I used the word Idle savings to represent an invisible hand of the citizenry to combat the vulture appetite of the financial apparatus.
cash is a commodity just like any other. dollars are traded world wide everyday as a commodity .. like it or not cash is an asset class.
we hold cash for many reasons and im the first person to say cash is an important part of a portfolio and our lives.
but the key word is part of a portfolio. it should not be your sole source of investing and if it was you paid the price for holding the wrong asset at the wrong time.
my portfolio is over 25% cash yet the total mix still has returned over 9% the last 25 years. the fact is that cash is an important part of my life and
has to be held but the low rates really didnt influence things much as the low rates merely caused my longer term bonds to soar compensating for the zero rates on cash..
Last edited by mathjak107; 10-08-2012 at 10:58 AM..
Saving is strictly a function of abstinence which is to leave resources on the market even though you have the buying power to claim them. The rate of return economically should be a cut of the marginal gain. For example if you wanted to use a bus ticket to ride to a ball game while someone else wanted it for something more important, then there is an economic gain from abstinence. In a slack economy there are lots of bus seats so there is little marginal gain from simple abstinence.
This is very different than investment which tend to spur basic consumption, for example if you decided to bus people over to a new business. Savings and investment are related, but they are really not quite the same thing.
whatever means we use to grow our savings is savings. like i said cash is an asset class. its no different then anything else when it comes to how we grow the money we have no immeadiate need for..
This is too true. But if you put money in CDs in banks or credit unions then you tend to fight outsourcing. The return on your money is not measured in % return on your money it is measured in jobs not sent overseas. Looking at just where you get the highest dollar return is short sighted. Looking at where your money will get your grand kids work to do is also important.
corporations have huge cash hoards , possibly the highest levels of cash in decades and that has no bearing what so ever on what jobs are out sourced.
as a manufacurer myself i outsource the manufacturing of parts for one reason.
i need to be competitive to stay in business. we employ 70 people in long island ny who assemble , qc and engineer our products but the parts are outsourced and made overseas..
i can tell you it has nothing to do with our cash levels.
Saving is strictly a function of abstinence which is to leave resources on the market even though you have the buying power to claim them. The rate of return economically should be a cut of the marginal gain. For example if you wanted to use a bus ticket to ride to a ball game while someone else wanted it for something more important, then there is an economic gain from abstinence. In a slack economy there are lots of bus seats so there is little marginal gain from simple abstinence.
This is very different than investment which tend to spur basic consumption, for example if you decided to bus people over to a new business. Savings and investment are related, but they are really not quite the same thing.
as far those complaining they were punished by the low rates as savers ,investing and saving are the the same thing.
they put most or all of their assets in a bank and did the wrong thing. its a simple concept and requires no high level economics in the discussion about it.
betting the ranch on anything regrdless is just poor planning plain and simple. they needed their short term dough and any money with an intended purpose in the bank and the rest diversified.
if they did that there would be no reason to complain, they would have done just fine just becuse of the low rates.
whatever means we use to grow our savings is savings. like i said cash is an asset class. its no different then anything else when it comes to how we grow the money we have no immeadiate need for..
Cash is completely different. Everyone cannot save money at the same rate to have any effect. Its a debt instrument. Cash is nothing but an obligation to the rest of the economy. It might not be a different asset to you. The total amount of cash and government bonds is nothing but government obligations. Every private cash asset is just an obligation. It cancels out.
in fact home affordability because of rates is at one of the most affordable levels we have had in a long long long time.
And what happens when the rates go up to a long term more sustainable level? Will the prices have to go down to maintain affordability? 0.25% prime for how long? For ever? QEIII for ever? There are two ways out of a liquidity trap. One write off as bad the bulk of the existing debt or inflate away the value of the existing debt.
Quote:
Originally Posted by mathjak107
whether folks decide not to buy or have no job doesnt mean things are still in a bubble.
If you have high unemployment for long time spans then the prices of houses will have to come down to stabilize the market. If they started in a bubble then the bubble is still there until the prices fall to accommodate the lost income in the economy. So any upward movement is bubble blowing.
Quote:
Originally Posted by mathjak107
prices may be fair and wont drop any further because of many different reasons even though sales are few.
we have that going on in nyc . our market hasnt fallen much, if we have no additional shocks we may not fall anymore and basically the market is just slow but stabilized.
At 0.25% prime. What about at 6% prime? And no QEIII?
Quote:
Originally Posted by mathjak107
corporations have huge cash hoards , possibly the highest levels of cash in decades and that has no bearing what so ever on what jobs are out sourced.
I agree with you completely.
Quote:
Originally Posted by mathjak107
as a manufacurer myself i outsource the manufacturing of parts for one reason.
i need to be competitive to stay in business. we employ 70 people in long island ny who assemble , qc and engineer our products but the parts are outsourced and made overseas..
i can tell you it has nothing to do with our cash levels.
It has nothing to do with your cash levels. But it has a lot to do with the baby boomers saving for retirement in the stock market. If you put cash in the stock market it goes up. If you put cash in the bank they have to loan it out or invest it in some way. Savings rate and where that money goes tend to influence where the economy grows. Savings tends to get turned into manufacturing. Debt tends to get turned into sales.
Consumer savings Vs. corporate cash levels.
Aside from unsustainable bubble blowing our economy is contracting. Or not growing as fast as the population. So what are the corporations going to spend their cash hoards on?
Personal savings means that you aren't spending all your income. So you produce more that you consume.
Personal savings rate in banks tends to drive balance of trade. What the corporations do with their money doesn't matter. Cash in the hands of the Rich tends to drive debt bubbles. Savings by the poor tends to drive manufacturing.
your getting to deep and involved . its really not rocket science to do what best fits the times we are living in.
we are all responsible for our own financial well being and we need to take the right steps at the right time.
thats all in saying, it goes no deeper then that.
we go to where the food is.
you are not looking long term. I am looking at how to grow the economy so that my grand kids will have the same standard of living that my parents had. The growth in the economy from 1981 on was influenced by the policies put into place. The trend has been for outsourcing. This grows the top at the expense of the middle. We are now top heavy. There will be a correction.
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