Will Disasters Affect The Stock Market? (real estate, credit, tax, bank)
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
The last couple months have been tough for America. Four hurricanes made landfall. You don't hear much about Florida any more, but the orange crop this year will be the smallest in 75 years.
California has not seen a holocaust like Santa Rosa since the Oakland fire in 1991. Sonoma County doesn't have much of a county seat any more.
Puerto Rico is wrecked and will take years to recover. Rockport is similarly wrecked, and Houston has never seen floods like they saw last month. Meanwhile, we are running headlong for a nuclear confrontation with North Korea. Not fun times.
It's probably not a good time to own an insurance company. Warren Buffet lost a lot of money in the last couple of months. The ag economy in Napa/Sonoma is worth about 900 million a year, and that will take a big hit, depressing things in the Bay Area, and Houston has a lot of uninsured losses too. Somebody has to be pulling money out of the markets to handle the massive expense of disaster damage. Will the stock markets continue to sail along unaffected?
Two edged sword......first the losses that have to be covered will distract with INS claims and payouts, but.....the fact that there is SO much work in the rebuild/recover industry make it something that time will tell as it plays out.
My BIG concern is the opportunity for real employment rebuilding is there....is the TALENT/PROVEN SKILLS???!?!?!?!?!?
The last couple months have been tough for America. Four hurricanes made landfall. You don't hear much about Florida any more, but the orange crop this year will be the smallest in 75 years.
California has not seen a holocaust like Santa Rosa since the Oakland fire in 1991. Sonoma County doesn't have much of a county seat any more.
Puerto Rico is wrecked and will take years to recover. Rockport is similarly wrecked, and Houston has never seen floods like they saw last month. Meanwhile, we are running headlong for a nuclear confrontation with North Korea. Not fun times.
It's probably not a good time to own an insurance company. Warren Buffet lost a lot of money in the last couple of months. The ag economy in Napa/Sonoma is worth about 900 million a year, and that will take a big hit, depressing things in the Bay Area, and Houston has a lot of uninsured losses too. Somebody has to be pulling money out of the markets to handle the massive expense of disaster damage. Will the stock markets continue to sail along unaffected?
Watch the treasury yield curve and the leading economic indicators.
Shortly before the next downturn in the market the yield curve will flatten out and the leading economic indicators will turn down.
Certain stocks will be affected, and certain stocks will rise. As an investor, you would have to determine a strategy to follow and base your decisions off of that. Are you holding stocks for the long-term and looking to make income off of dividends, or are you an investor who is looking to profit off of the waves of the market while holding stocks for the short-term? If your answer is the former (or if you believe in the Efficient Markets Theory), then you would disregard short-term market fluctuations. If your answer is the latter, then these fluctuations would be more of a concern for you.
If I were an investor looking to make a short-term profit off of this disaster, then I would have shorted shares of insurance companies that have policies in that area of the state a few days ago.
I'm really quite concerned about the possibility of armed conflict with North Korea, which would devastate the US economy. We rely on Seoul for large portions of our consumer electronics. Flat panel displays come from Seoul. Memory chips come from Seoul. Does the name Samsung ring a bell? LG? South Korea manufactures 64% of the world's supply of dram memory, and it's all in range of Kim Jong Un's artillery and missiles on the border. It's hard to tell if anything will come of Trump's saber rattling, but if things heat up you better get your sell orders in fast.
As for the rest of the disasters, the only difference this year is the scale. The California fires alone make Sandy look like a minor event. Almost all homes in the area would have fire insurance, so the insurance industry will post some big losses.
Houston is a different deal, since the only flood insurance is provided by the feds, and the federal flood insurance program is already billions in the hole. Even worse, a large majority of the homes and businesses had no flood insurance at all. Many people and businesses will have to borrow heavily to recover.
Puerto Rico is a dependent territory whose finances are managed by the federal government and the economy was already a train wreck. Restoring the island to livability will be a pretty big stress on the federal budget. It's going to be interesting to see if federal aid to Houston exceeds aid to Puerto Rico, even though on paper Texas is on its own and Puerto Rico is a dependent territory.
Historically, disasters have had no impact on the economy as a whole. It's hard to tell if there is a tipping point. The economy is a metastable system, and failures cascade from one sector to the next. Certainly the debt structure is primed to flip. We have a trillion dollars in credit card debt alone. plus 1.3 trillion in student loan debt and 8.25 trillion in mortgage debt. That's really not a concern with a 3% growth rate in the GDP, but something as unpredictable as the collapse of a confidence scheme like the Enron scandal can trigger a major downturn. We are already pretty close to the debt levels of 2008. If people start having trouble servicing their debt, they might quit being consumers to make payments.
none of what caused the 2008 recession are in place today, business is growing and will continue to grow
Some of the weak spots of 2008 are not in place. One big trigger was speculation in crude oil, which pushed prices to $100/bbl. It weakened consumer cash flow to the point that it triggered a downturn, and a lot of financial fantasy castles collapsed.
I think everyone knows that speculation today is rampant, but it's hard to identify a particular lynch pin. In 2001 it was Enron, which triggered the collapse of the entire technology sector, followed closely by the WTC attack. Historically, recessions have happened any time the Fed increased interest rates. That's why they are nervous as a cat at a dog show about bumping interest rates now.
history never repeats itself despite the myths you have been told . the only thing that repeats itself is historians .
each time through out history things play out differently enough to make what you learned about and prepared for , of little use
Generally you are pretty sensible, but that is total nonsense. All you have to do is look at a list of recessions over the last century and the patterns become obvious. Leading the charge are changes in the tax code and government austerity measures, changes in monetary policy, or rampant speculation. The US economy is a metastable system, subject to perturbations much larger than can be explained by root causes. History does repeat itself, over and over and over.
The patterns "become obvious" only in hindsight. Consider the dot-com bust, in 2000. Never again, right? Well, 2007 rolls around. Valuations are high, but not outlandishly so. Stocks have merely recovered to the level that they attained in the winter of 1999-2000, and formerly high-flying tech stocks remained suppressed. For persons not living in America's glamour-cities, who had no personal cognizance of overheated real-estate markets, there was no reason to suspect an impending collapse in stocks... except, of course, in hindsight - where it all seemed painfully obvious.
Of course there are aspects of historical events that much resemble their antecedents. One war looks much like another, one recession like another, one devastating hurricane like another, one demagogue-in-office like another. But are these patterns really so alike, so predictable, that we can generate knowledge that is not merely spine-chillingly prescient in a philosophical sense, but which is actionable - which specifically tells us, what to do with our money? I think not. This is why practically-minded people denigrate academics. It's not that academics are necessarily wrong, but that their being right, is only relevant to abstract and vague matters. It is not helpful for flinty, direct, specific acts - like what's for dinner, or what stock to sell on Monday morning.
A disaster will eventually happen, and it will be of sufficient magnitude to roil the stock market. But when? And how? Even if we somehow accurately guess its coming, and then manage to prepare accordingly - a huge "if"! - well, even then, will we get back into the market, before eventual recovery passes us by?
I too am troubled by high valuations and "calm before the storm" dearth of volatility. It all sounds too good to be true. It all sounds like too much reward, for too little effort. Worry, guilt, nail-biting. But what is the alternative? What else are we supposed to do?
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
