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Old 06-06-2020, 07:28 AM
 
10,548 posts, read 4,582,964 times
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Quote:
Originally Posted by TimAZ View Post
The inflation was in equities. The SP500 is up 450% since 2009, GDP is up only 144%. No way we are 3X as productive today compared to ‘09. The difference is due to share buybacks and debt.
The stock market is not the economy. Equity inflation is not general inflation.

The asset inflation was inevitable IMO and a big reason why I am rich today.

Follow, don't fight the Fed. Interest rates were/are key.

The relative weakening of the USD is not the same as inflation.
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Old 06-06-2020, 07:29 AM
 
Location: Washington Park, Denver
8,082 posts, read 7,509,836 times
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Quote:
Originally Posted by TimAZ View Post
The inflation was in equities. The SP500 is up 450% since 2009, GDP is up only 144%. No way we are 3X as productive today compared to ‘09. The difference is due to share buybacks and debt.
Well, look at PE ratios. Have those exploded? You’ll certainly see another spike now because stocks are forward looking, but the overall trend line isn’t odd.

https://www.macrotrends.net/2577/sp-...earnings-chart
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Old 06-06-2020, 08:04 AM
 
2,600 posts, read 990,345 times
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Quote:
Originally Posted by SkyDog77 View Post
Well, look at PE ratios. Have those exploded? You’ll certainly see another spike now because stocks are forward looking, but the overall trend line isn’t odd.

https://www.macrotrends.net/2577/sp-...earnings-chart
Real wages have been flat since the 1980s, nothing close to the growth seen in share prices, how would you explain away that discrepancy in a “booming” economy? A: It’s all buybacks and debt-fueled “growth”. Last month numerous public companies apparently borrowed money (with the Fed as backstop) and “coincidentally” were able to pay dividends to shareholders. My guess is this won’t happen on a regular basis, so when it doesn’t happen next quarter...?
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Old 06-06-2020, 08:05 AM
 
Location: Washington Park, Denver
8,082 posts, read 7,509,836 times
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Quote:
Originally Posted by TimAZ View Post
Real wages have been flat since the 1980s, nothing close to the growth seen in share prices, how would you explain away that discrepancy in a “booming” economy? A: It’s all debt-fueled “growth”.
I never said the economy was booming. That was Trump. I just told you that PE ratios were not dramatically changed.
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Old 06-06-2020, 08:13 AM
 
Location: Washington Park, Denver
8,082 posts, read 7,509,836 times
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Quote:
Originally Posted by Taggerung View Post
Let's examine why the USD became the global reserve currency to begin with:

1. It was backed by, and redeemable for gold at $35/oz.

2. It was issued by the world's largest creditor nation.


Neither of those conditions exist now. The US will lose its privilege as the world's reserve currency and when it does, it will be a fast track to 3rd world status for us

I agree that no other currency will replacege USD as the reserve currency. Every other currency in the world is competing in a race to the bottom. Which is why we'll have no choice but to return to sound, honest money ie gold and silver.
So wrong. Sorry, but this is your perception, backed by your strange idea that we should be on the gold standard. As I’ve said earlier, this is religion for you. It’s a belief not informed by any facts, and no proof to reality will ever sway you.

Here’s what it takes to be the global reserve currency.

Quote:
In order to achieve international status, a currency must fulfill four conditions.

*Its value must be stable, which means low inflation.
*It must belong to a large country that weighs heavily in global trade and finance.
*It must sit on top of deep and efficient financial markets, which are smartly regulated under an independent judiciary.
*It must be seen as a benevolent monopoly.

In order to challenge the existing leading currency, another currency must not just fulfill the same conditions. Its country must be seen on the ascent and, crucially, the current leader must make blunders that undermine the appeal of its currency.

China has not hidden its intent of doing so. Three years ago, after intense lobbying, the renminbi joined four other currencies that define the IMF’s Special Drawing Rights (SDR). The Chinese authorities were elated. They saw this event as a first stage of the long march of the renminbi toward becoming an international currency, possible the international currency. This showed that they misunderstood what an international currency is. The renminbi remains largely an unconvertible currency, the largest Chinese banks are state-owned and the financial markets are neither free from public interference nor backed by effective and transparent regulation and oversight. A currency that is subject to government interference, in a country where there exist few checks and balances, does not stand any chance of becoming an international standard, and there is no indication that matters are about to change.
https://voxeu.org/content/and-dollar-reigns-supreme

Last edited by SkyDog77; 06-06-2020 at 08:44 AM..
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Old 06-06-2020, 10:41 PM
 
Location: Oregon, formerly Texas
6,384 posts, read 4,328,694 times
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I don't think it's a surprise that stocks have far outpaced gdp and wages. Once FAANG started to dominate the markets, profitability divorced from general economic prosperity.

It's not unheard of for a handful of companies to dominate the market. In the old days, GM, GE, etc... used to have those roles. But they were jobs engines. The FAANGs are job killers. Every one of them.

It's only going to get worse. At least half of the workers laid off due to coronavirus will never hold a similar job again, because those jobs are over. Dead. Killed by the virus. Just like after 2008, businesses will realize they didn't need so many workers. They'll economize, do more with fewer human resources.
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Old 06-07-2020, 12:11 AM
 
4,589 posts, read 1,945,548 times
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Quote:
Originally Posted by redguard57 View Post
I don't think it's a surprise that stocks have far outpaced gdp and wages. Once FAANG started to dominate the markets, profitability divorced from general economic prosperity.

It's not unheard of for a handful of companies to dominate the market. In the old days, GM, GE, etc... used to have those roles. But they were jobs engines. The FAANGs are job killers. Every one of them.

It's only going to get worse. At least half of the workers laid off due to coronavirus will never hold a similar job again, because those jobs are over. Dead. Killed by the virus. Just like after 2008, businesses will realize they didn't need so many workers. They'll economize, do more with fewer human resources.
May be this was the AI & Robotics wave that they were talking about. Now that companies know how to operate in a lean manner, they can implement it down the years. And now with no more new recruitments, entire dpeartments like HR can go away.
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Old 06-08-2020, 05:36 PM
 
9,280 posts, read 8,118,599 times
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GE was famous for acquiring companies, laying off workers, and playing accounting gimmicks using the rollup strategy. They eventually got burned for branching out into financial services. They and other rollups like Enron, Cisco, Microsoft, Tyco, and Texas Instruments were where the market cap was concentrated in 2000. Japanese stocks dominated world markets in 1990. Energy stocks dominated world markets in 1980. Tech stocks and conglomerates were the leaders in 2000. When the wave goes out, one finds the accounting scandals. The big techs also get the benefit of getting indefinite tax deferral from the Trump tax scam. Their actual tax rates are in low to mid single digits.
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Old 06-09-2020, 11:09 PM
 
794 posts, read 174,773 times
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Quote:
Originally Posted by SkyDog77 View Post
“Fiscally” and “politically” are the same thing.

The distinction is made between fiscal policy and monetary policy.

The Fed, not “the Feds”, controls monetary policy. “The Fed” is short for the Federal Reserve. It is an independent, non political body run by economists.

Congress controls fiscal policy.

I suggest Khan Academy’s macroeconomics class if you want to begin to understand this stuff.

Again, for people to move away from the dollar, there has to be a better alternative. There is not one.
1. “Fiscally” and “politically” are different things. Politically system got abused from the moment US first imposed first unilateral sanctions. In normal situation the affected country would just show middle finger to US, and continue business with everybody else. But in the situation when dollar is reserved currency the chain is so deep that almost every company on the planet is affected. This is called dictatorship. Earlier US was using this tool very carefully, trying to avoid unilateral sanctions, and just blackmail other counties in UN to create illusion of "world support". Lately though the tool got abused too much. Right now over half of the world is under this or that US financial sanctions. Do you think other countries will just continue to love the dictator, or would work hard to become independent?

2. Fiscally system got abused at the moment "The Fed" (same as "Feds"*) started to print more t-bills that was tolerably for other countries to absorb. Recent influx of $4T was a killer. Do you think other countries are so stupid to sell real assets for thin air?

So overall, days of dollar as "reserve" currency are counted. As I said, new mechanisms are not as convenient, but countries are willing to pay this price for their independence - US dictatorship now costs them more than usage of other mechanisms.

* You can sing all day long about independence of "The Feds", but it's same fairy tale as "free market", "independent courts" etc.
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Old 06-10-2020, 08:05 AM
 
10,548 posts, read 4,582,964 times
Reputation: 2158
Quote:
Originally Posted by kanonka View Post
1. “Fiscally” and “politically” are different things. Politically system got abused from the moment US first imposed first unilateral sanctions. In normal situation the affected country would just show middle finger to US, and continue business with everybody else. But in the situation when dollar is reserved currency the chain is so deep that almost every company on the planet is affected. This is called dictatorship. Earlier US was using this tool very carefully, trying to avoid unilateral sanctions, and just blackmail other counties in UN to create illusion of "world support". Lately though the tool got abused too much. Right now over half of the world is under this or that US financial sanctions. Do you think other countries will just continue to love the dictator, or would work hard to become independent?

2. Fiscally system got abused at the moment "The Fed" (same as "Feds"*) started to print more t-bills that was tolerably for other countries to absorb. Recent influx of $4T was a killer. Do you think other countries are so stupid to sell real assets for thin air?

So overall, days of dollar as "reserve" currency are counted. As I said, new mechanisms are not as convenient, but countries are willing to pay this price for their independence - US dictatorship now costs them more than usage of other mechanisms.

* You can sing all day long about independence of "The Feds", but it's same fairy tale as "free market", "independent courts" etc.
1. I agree that the world is stuck on the USD. But it has no other choice right now or on the horizon.

2. This is the whole deal that very few appreciate. We here get real stuff/goods for vapor fiat. Sure it is hard on those losing jobs due to off shoring. But they and the vast majority of our people get useful stuff at discounted, inflation fighting prices. All the while the foreign producer has to use their resources and pollute their environment while doing so. If you didn't lose your job to this, it doesn't get any better.
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