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But they are going to have to increase rates eventually within the next 12 - 24 months. They have to. They can't continue the low rate environment forever.
DOW got to the height of 18,000 and now they are coming down because it's nowhere else for them to go. That was the HEIGHT people.
The Fed looks at many things when it sets interest rates. The level of the DOW is NOT one of them.
Thanks. We need more discussion about how Central Bankers, which are just a handful of private industry bankers looking out for their own, are behind the destruction of the middle class and lowering the standard of living for 99% of us.
The Fed's policies promote full employment and inflation control, both of which boost the middle class and increase the standard of living for 99% of us.
I don't understand viewing overpriced stocks as "misallocation" of capital". If you're talking about stocks, then its all on paper, really. Nobody actually paid 50B for Uber, even if that is what the valuation is....if you think that's an insane amount of money, then don't buy Uber and you won't be "misallocating" your capital.
Printing money simply leads to a lower standard of living for everyone except the to 1% which gets most of the newly printed money.
It is like a game of Monopoly where for players each start of with $500 but after two turns, the Central Banker turns to one of the players and gives that player $1,000,000 in interest free loans. Who do you think will win the game?
The Fed looks at many things when it sets interest rates. The level of the DOW is NOT one of them.
Well, they're unlikely to jack up rates during a 30% stock market correction. ...but I agree with your point that the Fed is looking at inflation and growth numbers as their main criteria and not stock prices. Corporate profits are linked to that and stock prices are largely tied to corporate profit so there is certainly an indirect relationship.
I freely admit that I don't know what to think about the market in the short term. In the long term, it stands to reason that automation and globalization will continue to fuel the corporate profit machine. Corporations own the automation and are multinational so they move their business around the world to where it has the competitive advantage. This isn't 1950 where the US was 50% of the global economy and the US domestic economy drove the stock market. If you believe that automation and globalization will continue to make the rich richer, then the equities that are owned almost entirely by the rich are going to continue to grow long term.
I freely admit that I don't know what to think about the market in the short term. In the long term, it stands to reason that automation and globalization will continue to fuel the corporate profit machine. Corporations own the automation and are multinational so they move their business around the world to where it has the competitive advantage. This isn't 1950 where the US was 50% of the global economy and the US domestic economy drove the stock market. If you believe that automation and globalization will continue to make the rich richer, then the equities that are owned almost entirely by the rich are going to continue to grow long term.
I wasn't alive in the 1950s, and I find it to be counterintuitive and illogical that the financial health of America's much-vaunted middle class ought to have any strong connection with stock markets. Yes, Henry Ford was able to generate more profits by paying his own employees more, so that said employees could then afford to buy Ford cars. But I'm tired of hearing that vignette. There are 7 billion people in the world, and only 5% of them are in America. Why should the plight of that 5% - even if all of them were hypothetically "middle class" - matter so much on the global scale?
To me it seems that globalization and automation will have the same effect in our present age, as the cotton gin, the telegraph and the railroad had in the mid-19th century. Those inventions dispossessed large numbers of subsistence-farmers, turning them into the urban poor. But overall the effect was positive.
It also baffles me why there are so many shrill voices calling the US Federal Reserve a "private bank" and the creature of Goldman-Sachs and so forth. Since when was a bank-account or bank certificate of deposit a viable investment? Maybe the Fed's policies are enlightened. Maybe they are stupid. I don't know. Maybe I'm the one who's stupid. But please tell me again: how is it that low interest rates are some nefarious and rapacious transfer of wealth from the middle class to the upper class? Please tell me again: who's the one with mortgages?
[quote=rugrats2001;40927128]This is a misrepresentation of the truth
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A stock investor is part owner of the business.
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Originally Posted by rugrats2001
True. An infinitesimally insignificant part owner with literally no say in the future of the business.
That depends entirely upon how much of the stock you own, however, I routinely get info packets with details about upcoming board meetings and key votes coming up and how to vote on them. So I would say that its a far cry from "literally no say".
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He has invested in the business.
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Originally Posted by rugrats2001
This is wrong. Unless he has purchased stock in an IPO, he has speculated on the market value of shares of stock in a company, no more and no less.
Yes you are invested in the business. Your money pays to the stock holder and his stock transfers to you. The stock represents ownership in a company. Your value is in the company, its earnings, its disasters, so yes you have a real stake in the company. You are speculating on the future of that company. Now you can argue that there are a lot of companies that are grossly over valued and I would agree.
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The $ goes into the funds for the business.
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Originally Posted by rugrats2001
What? Non-IPO stock purchases, i.e. virtually all stock market 'investment', sends money into the pockets of other speculators. The business receives no money whatsoever from these transactions, ever.
They get to keep the invested money and with strong stock they can issue more to generate more investment if needed so yes they do get a benefit from it. Not to mention that lots of decisions and bonuses are based on stock price.
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The dividends you get (as a part owner) comes out of the proceeds of the business.
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Originally Posted by rugrats2001
Correct. But this part ownership was simply transferred from one owner to another. This transfer of ownership provided nothing to the company in the way of funds.
So you went from not owning anything in your first response to now admitting there is a transfer of ownership.
I already explained how the company benefits from it.
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Originally Posted by jotucker99
DOW down over 665. Didn't I say this was going to happen? Stocks have been extremely over-valued for a very long time. My prediction, the bottom is at 10,000 and over the next 24 months you will see the DOW go back down to 10,000.
When The Fed increases rates, my Long Term CDs will be back at 3.5% - 4% . Forget this roller coaster/casino that is the secondary portion of the Stock Market!!
Any prediction in this environment is pure folly. Anything could happen. Everyone knew that it would eventually have to make a correction. The magnitude of that correction and whether or not it turns into a crash are yet to be determined.
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Originally Posted by Unsettomati
It's 12:35 EDT. The DJIA is currently down 132 points, a drop of less than 1%.
Is this what you said was going to happen?
Whipsaws are typical during a crash or strong correction. The dow futures whipsawed for a total of over 4500 pts today.
Here is a chart of the recent history of significant downturns in the stock market. Don't panic, people. It's not the end of the world, or the start of a major economic disaster.
Happens every dip correction without fail, people come out of the woodwork predicting end of days and screaming I-told-you-sos.
They're quite content to sit on the sidelines missing a once in a generation bull market, all the while complaining the stock market is for the 1% and only for foolish gamblers, but man they sure get interested when it goes down.
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. Forget this roller coaster/casino that is the secondary portion of the Stock Market!!
