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Dow Dives 400 Points to End it's Worst Week in 10 Years

Mycroft said:
No. It won't. And that's Trump's doing.

He is unhooking the US economy from the global economy...the stock market, that is.

If the US economy suffers, it'll be from opposition forces such as Powell.
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There is no such thing as an economy independent of macroeconomic and global forces. When Trumpers say stuff like this, and want economic isolation, you actually sound iike Communists. Isolated economic states fail.
 
SheWolf said:
I can't image how our allies will respond in the future. Our bank and housing policies led to global recession during the Bush years, and now our trade war is hurting the global economy. It doesn't make the US look good, and they probably feel better about entering trade deals we are not involved in. :(
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I'm also very concerned with our military allies, and our intelligence allies. It's just a bad scene, all around.
 
Chomsky said:
Great post.

Presidents do often get too much praise and complaint for the economy. But I must admit, when a President - as an individual - starts trade wars, it's a bit hard to believe they are not responsible for the actions that result. These are self-inflicted wounds.
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Took the words out of my mouth.
 
Cardinal said:
Took the words out of my mouth.
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Well actually, I never though of it in those terms until I penned that post. If a President goes to war, yeah he's responsible for the outcome. Be it a military war, or economic war.
 
Chomsky said:
Well actually, I never though of it in those terms until I penned that post. If a President goes to war, yeah he's responsible for the outcome. Be it a military war, or economic war.
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While the axiom that Presidents don't have god-like powers over the economy is true, it's also true that Presidents don't typically start trade wars with some of our largest trading partners.
 
Captain Adverse said:
I'm not an economist, so I ask our educated economists this question....

What effect does the Federal Reserve's increasing interest rates have on investment confidence?

My limited understanding of market motivations seems to indicate that investors seek the greatest return they can achieve and will "buy low and sell high."

The stocks were soaring because of the tax breaks, trade treaty changes, and low interests rates allowing borrowing to buy more stock combined to create a bull market confidence.

However, buying low and selling high usually means (if I understand correctly) selling fast and hard the moment confidence that share prices will continue to increase disappears and is replaced with fear prices are threatening to drop.

That this creates a downward spiral unless investors are willing to commit funds to bolster the stock.

Doesn't the Fed's increase in interest rates deter borrowing to invest and thereby affect such confidence?
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I am not an economist... I have studied a lot of economics, and thought about majoring in it, but I am an accountant... :2razz:

Your question in bold is a little tricky because the Fed is not concerned with investor confidence. The Fed's primary concern is with monetary policy. The Federal Reserve increases interest rates because they are concerned about inflation, and the supply of money in the economy. If the interest rates are increased, it should encourage people to save more and spend less, which will decrease the supply of money in the economy. In theory, this is supposed to prevent the dollar from dropping in value.

The stock market is a reflection of voter confidence. The federal reserve does not try to manage voter confidence, but they try to soften the bumps, drastic ups and downs, and market swings. The Feds are concerned with inflation, recessions, market instability, etc., otherwise monetary policy.

Investors and economists think a little different, but mostly all agree that Trump's tax cuts caused a market bubble which would also see a correction. Companies used their tax cuts to buy back their own stock, decreasing supply. It wasn't a reflection of economic growth, but of a temporary cash influx that was used to manage stock prices. Since the cash inflow was not due to growth, it would not last, so the market was predicted to correct.

As for some of your investment questions, I know less about that. My investor advisor often says the portfolio value is not the only thing to pay attention to, because total amount of stocks owned is sometimes more important. Almost every kind of market has opportunities.

In this case, the greatest opportunity was for the corporations themselves. Though managing their stock prices and inflating the prices super high, the executes took high pay outs. Stuff like this is why CEOs receive so much criticism. Their primary concern is the stock price, not the day-to-day operations of the company. In the long term, this entire tax cut could end up being bad for many Americans, the deficit, and possibly the economy, but the CEOs and executives got huge checks.
 
Chomsky said:
Trade-wars, administrative uncertainty, and government shutdowns, weigh on economies Mycroft.
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Wasn't there a insanely long government shut down during the Clinton years? What did the markets do then? Does anybody remember.... lol... because I have a feeling that Trump's Admin is uncharted waters. I think I remember his supporters saying, "he is unpredictable," and it's not a good thing for the markets. The trade wars aren't good, but neither are is untrustworthy declarations and announcements like, "NK is ending the nuclear program." A few months ago he announced progress towards ending the trade war with China, and the market rallied. A few days later, that statement was retracted, and the market slumped again. He has actually go off certain companies and made statements, causing that company's stock price to destabilize.
 
Chomsky said:
...

Personal commentary:

I'm surprised this didn't get any notice here Friday, that I can see. But our markets seem to possibly be heading into rather serious trouble. The tech-heavy NASDAQ, and the large cap S&P 500, are now officially in bear markets. The Dow isn't far behind. And, the Bond markets keep flirting with an inverted yield curve.

This is dismal market performance, that too often foreshadows a recession.

So what's going-on, here?
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Red:
Yep.
 
Chomsky said:
Thanks for this reply.

I'm thinking very much along your lines, and posted it in a more detailed post a day or two ago - but can't find the post.

Essentially, I think it's possible the long and steady Obama recovery may have been getting near it's natural end. Then Trump greased the markets with the tax-cut candy, producing a sugar high. In response to the sugar high, the fed got excited and started bumping rates a bit more judiciously than it otherwise may have. Now the high is over, the rates are raised, and Trump is throwing tons of uncertainty into the markets via trade-wars, the shutdown, attacking the fed chairman, Syria & Afghanistan withdrawals resulting in Mattis leaving, along with the myriad of other stuff he does.

What we don't know, is what the fundamentals are telling us. It's impossible to decipher due to the economic chaos, particularly the tariffs and trade wars.
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Thanks. That's essentially what I was really thinking when I blurted out that hasty response to your thread. You've fleshed it out quite nicely.

Once again, as in the 2000's, the GOP has cut taxes when it should have been socking away funds for the inevitable downturn. The Fed is about out of tricks as well. Trump isn't a wildcard, he's a psycho card.
 
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OldFatGuy said:
I am a long time investor in both equities and real property for decades, having started with next to nothing. Any success I have enjoyed is due more to timing, good joss or luck, than skills. Not superior knowledge or excessive greed. In the beginning for me and my partners the goals were developing a reputation for quality product and selling right, knowing you make your money when you buy. We started by buying old houses, rehabbing them with our own labor and reselling. The timing was right. It was period when one generation which had bought for $10-20k, raised their families, built their businesses and retired were selling for $30-35k houses others did not want, and when we finished we sold them below market at $60-75, parleyed our profits for larger and larger transactions, gained reputations with investors as being straight shooters and not screwing anyone. The opportunities were endless as we repurposed commercial properties and not only did our investors never get taken for a ride, they always earned more than they expected. Eventually we built a portfolio of cash producing rental properties, with the smaller user are our target and tenants. We rented carefully, gave good deals to our tenants and made money. Today, myself, former partners, their heirs are all sitting pretty, with rents from more than 200 NYC commercial properties that were unwanted, and another 200 either recently redeveloped, in progress or recently sold. We pooled a lot of talent that worked well together, no one became embittered, and we made our mistakes, sometimes at great costs. No one is perfect. We took it on the chin, and moved forward.

I got into equities for fun, not profits. It was a form of gambling and I never bet more than I could afford to lose. There were losers and winners, and as time passed I got better at winning. Politics earns neither credit or debit for the overall state of the marketplace. It may be the beneficiary or the victim dependent upon the times, but the real forces that be are un-understandable. There are moments of over exuberance and moments of undue depression. It is only a game. Sometimes the players win, sometimes not. If I followed the advice of experts, I'd be broke.

The current state of the market is healthy. The hedgers and the traders are taking a bath, the long term players are scooping up bargains. There are no shortage of buyers for the equities that have been kicked in the nuts, so to speak, and many will morph into great earners again as times move forward, some in far better shape than when the current reverses, some won't. No one has a working crystal ball to predict the future. Some will get hurt, others will get wealthier. Those who don't will complain, whine, cry corruption, seek relief. Too bad. Never risk more than you can afford to lose. This is a time to make fortunes, as was the great depression, or suffer.

Don't blame others, and so what if the US doesn't remain eminent? Everyone wants to be rich, not everyone can be rich. Life is not fair. No one is guaranteed life will be fair. No one can cure all the world's ills. Live with it the best you can.
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What do you think of the housing market and real estate today/right now? Do you think it's overvalued? Do you think it's strong or weak? Where do you predict it could go?
 
Chomsky said:
I'm also very concerned with our military allies, and our intelligence allies. It's just a bad scene, all around.
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I know. They are actually saying that they can't trust us as much or rely on our leadership. It's very sad. I also think the Canadians are really ticked, and maybe they will one day trust us again too.

I know some good people who voted on Trump, and just wanted to give him a chance, but he is really destroying our reputation internationally. They may not understand right now, but our international reputation and leadership actually counts for something, and translates into benefits for everyday Americans. Our trade is important, war time alliances, and we need actual allies.
 
Chomsky said:
Well actually, I never though of it in those terms until I penned that post. If a President goes to war, yeah he's responsible for the outcome. Be it a military war, or economic war.
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It's not really a matter of opinion or politics. Many of Trump's policies and their outcomes were predictable, because it's a matter of economic theory and basic teaching.
 
Cardinal said:
While the axiom that Presidents don't have god-like powers over the economy is true, it's also true that Presidents don't typically start trade wars with some of our largest trading partners.
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And with good reason... when is the last time America was in any trade war? We are currently in multiple trade wars.
 
SheWolf said:
Wasn't there a insanely long government shut down during the Clinton years? What did the markets do then? Does anybody remember.... lol... because I have a feeling that Trump's Admin is uncharted waters. I think I remember his supporters saying, "he is unpredictable," and it's not a good thing for the markets. The trade wars aren't good, but neither are is untrustworthy declarations and announcements like, "NK is ending the nuclear program." A few months ago he announced progress towards ending the trade war with China, and the market rallied. A few days later, that statement was retracted, and the market slumped again. He has actually go off certain companies and made statements, causing that company's stock price to destabilize.
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There was a period of a couple months, where Gingrich & Clinton had a protracted battle, involving several shutdowns & CRs. I know one shutdown was for almost a month. It was over the budget and personal conflict between the two men. In the end, Gingrich got the worst of it from what I remember. But I was pro-Clinton then, until the Lewinsky scandal.
 
Xelor said:
Red:
Yep.
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Those are really good articles. Thanks for posting. I couldn't read one of them, because I think I needed to subscribe... lame
 
SheWolf said:
It's not really a matter of opinion or politics. Many of Trump's policies and their outcomes were predictable, because it's a matter of economic theory and basic teaching.
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Yeah, that's the amazing thing. It's like economic principles & axioms mean nothing to this administration. Actually, neither do facts mean much to them.

Did you see Mycroft state that Trump was going to "withdraw" America from the Global economy? Wha? We're now done with capitalism?? This new Republican Party is really something!
 
Why shouldn’t markets be selling off? We have policy uncertainty, with a government shutdown and with the prez talking about firing the Fed chair. We have traded wars. We have interest rates rising because government debt is competing with private borrowing and we have economic growth falling.

It’s difficult to get the economy right when people at the helm know what they’re doing but these guys have no idea what they’re doing.
 
Chomsky said:
There was a period of a couple months, where Gingrich & Clinton had a protracted battle, involving several shutdowns & CRs. I know one shutdown was for almost a month. It was over the budget and personal conflict between the two men. In the end, Gingrich got the worst of it from what I remember. But I was pro-Clinton then, until the Lewinsky scandal.
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Do you remember if the market was stable? And did the shut down impact your life ever? I assume it was unpopular with the people...
 
Mycroft said:
All that "stuff" except the shutdown have been happening for two years and the market just kept going up.

But when the Fed and Chucky got into the act, the market went to hell.

It doesn't take a rocket scientist to see what the cause is...but it does take a TDS sufferer to think the cause is Trump.
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Markets have been falling all 2018.
 
Chomsky said:
Yeah, that's the amazing thing. It's like economic principles & axioms mean nothing to this administration. Actually, neither do facts mean much to them.

Did you see Mycroft state that Trump was going to "withdraw" America from the Global economy? Wha? We're now done with capitalism?? This new Republican Party is really something!
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Yes, I told him that the sounded kind of like a Communist... :2razz:
 
Chomsky said:
What's wrong? It's been tried before. Cuba, Soviets, North Korea. It doesn't work, and ends in dismal failure.
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What's been tried before?
 
Airyaman said:
So 100% on the Fed then? Nothing at all to do with tariffs?
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Nope. Nothing to do with tariffs.

Look at the timeline. Ask yourself, what happened in October when the market started its slide? Answer: Tariffs has been an issue for more than a year...no market slide. The Fed opened their mouth...all hell breaks loose.
 
SheWolf said:
There is no such thing as an economy independent of macroeconomic and global forces. When Trumpers say stuff like this, and want economic isolation, you actually sound iike Communists. Isolated economic states fail.
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I've said nothing about "isolation". Unhooking simply means we won't be dependent upon or controlled by the global economy. It doesn't mean we won't take part...on our terms.
 
SheWolf said:
Do you remember if the market was stable? And did the shut down impact your life ever? I assume it was unpopular with the people...
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I wasn't particularly following the markets, but I don't remember any market problems to be honest. If there was a crash, I suspect I would have read it in the papers or seen it on the news. There was really no effect on my personal life. But it might be interesting to find the shut-down dates, and compare them to the Dow charts.
 
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