Dow, wow (1 Viewer)

[Gaius46]

The market is now completely detached from reality. Nothing but a Ponzi scam.

The market is driven in good part by future expectations. It always has been. Even if those expectations are unrealistic that doesn’t make it a Ponzi scheme.

 

[ludin]

Let me hand you a $100 currency note and ask you a simple question: What do you think this $100 note is worth? The answer is 'belief'. You believe that $100 bill is worth $100 because it says 'Federal Reserve' on it. What is backing up all our paper money? Since Nixon took us off the gold standard, which backed up our money, it's now backed up by nothing other than 'the full faith and credit of the US government'.

The gold standard was horrible but i won't get into why here.
You logic can be applied to anything at any time. we all know that something is only worth what someone thinks it is.

Thus, money has value because people believe it does. And as long as they believe the story, it continues to hold value. The moment they stop, it fails and becomes a worthless piece of paper and our economy and society falls apart.

No we will just find another median to trade in. again everything has value because someone believes it does. it doesn't just apply to money.

Ask yourself a question. If all the money in the U.S. only totals $6 trillion how can the New York Stock Exchange have stocks valued at $15 trillion? The value of oil, the value of IBM, the value of any major stock is nothing more than an estimated net worth, it's not a specific number or value.

That is liquid money. there is a difference between liquid money an asset value.

On the New York Stock Exchange (NYSE), as of October 1999 there were 3,066 companies listed. One of them was IBM. A site like this one would tell you that IBM had 1,809,090,000 outstanding shares on October 21, 1999, and this page would tell you that the stock closed at $91 on October 21, 1999. That means that IBM's total capitalization was:

1,809,090,000 shares * $91 = $164,627,190,000

In other words, if all the shares of IBM were bought by someone for $91 per share, the person would have to pay $164 billion to buy IBM. If you perform that calculation across all 3,066 companies on the NYSE and add them all up, you get a total capitalization of $15 trillion.

again this doesn't support you argument that it is monopoly money.

If i take your 100 dollars and i buy 1 share of IBM for 91 dollars. it means i have 1 share valued at 91 dollars.
if something happens to IBM and it drops to 85 and i sell that stock i have lost 6 dollars.
If IBM does something good and the stock goes up to 100 dollars and i sell it then i have gained 9 dollars.

it is real the money will go into my account.

 

[ludin]

The market is now completely detached from reality. Nothing but a Ponzi scam.

you don't know what a ponzi scheme is do you?

 

[HumblePi]

The gold standard was horrible but i won't get into why here.
You logic can be applied to anything at any time. we all know that something is only worth what someone thinks it is.



No we will just find another median to trade in. again everything has value because someone believes it does. it doesn't just apply to money.



again this doesn't support you argument that it is monopoly money.

If i take your 100 dollars and i buy 1 share of IBM for 91 dollars. it means i have 1 share valued at 91 dollars.
if something happens to IBM and it drops to 85 and i sell that stock i have lost 6 dollars.
If IBM does something good and the stock goes up to 100 dollars and i sell it then i have gained 9 dollars.

it is real the money will go into my account.

We did find something else to trade with, it's petrodollars. What's the price of crude these days?

 

[ludin]

We did find something else to trade with, it's petrodollars. What's the price of crude these days?

why does petrodollars have value?
ol yea because someone thinks it does.

same as gold.

right now crude is at 26 bucks 2 months from now it could be worth 40
2 months from now it could be worth 10.

why? because people think so.

The value of anything is what someone is willing to pay. I recently sold my house. now the market said i could max out at 165. however someone bought it for 159.
that is what my home is worth regardless of what the market said.

 

[HumblePi]

why does petrodollars have value?
ol yea because someone thinks it does.

same as gold.

right now crude is at 26 bucks 2 months from now it could be worth 40
2 months from now it could be worth 10.

why? because people think so.

The value of anything is what someone is willing to pay. I recently sold my house. now the market said i could max out at 165. however someone bought it for 159.
that is what my home is worth regardless of what the market said.

Oil is something people can do without. Summer slows down production, cars are more conservative with gas, many factors affect our dependence on oil. Gold is a constant and there's a limit on how much of gold is stockpiled anywhere. That's why it's a safe backup for the dollar.

 

[ludin]

Oil is something people can do without. Summer slows down production, cars are more conservative with gas, many factors affect our dependence on oil. Gold is a constant and there's a limit on how much of gold is stockpiled anywhere. That's why it's a safe backup for the dollar.

actually not really a lot of people run their heat on heating oil etc all bi-products of oil refining.
the reason that oil price has sunk is that there is a bit of a childishness being played out on the world scene with Russia and OPEC sticking their tongues
out at each other.

With all the travel restrictions in place there is an over supply of oil.

Gold is hardly a constant.
No Gold is a horrible back up for the dollar.

you evidently haven't been paying much attention to gold prices.

 

[HumblePi]

actually not really a lot of people run their heat on heating oil etc all bi-products of oil refining.
the reason that oil price has sunk is that there is a bit of a childishness being played out on the world scene with Russia and OPEC sticking their tongues
out at each other.

With all the travel restrictions in place there is an over supply of oil.

Gold is hardly a constant.
No Gold is a horrible back up for the dollar.

you evidently haven't been paying much attention to gold prices.

Yes the Saudis and Putin had a 'bit of childishness' over oil because the greedy Saudis wanted to keep the prices of oil high, it gives them an edge since the world trades in petrodollars. For three years, Russia and Saudi Arabia had a deal. Together, they used their collective market power to put a floor under oil prices by limiting their production. As soon as the demand went down, the Saudis wanted to cut production to keep the price per barrel high. Putin said 'no way' because Russia's economy is hurting and he needs the oil money. The Saudis flooded the market with cheap oil. It had nothing whatsoever to do with less travel due to Covid-19.

 

[ludin]

Yes the Saudis and Putin had a 'bit of childishness' over oil because the greedy Saudis wanted to keep the prices of oil high, it gives them an edge since the world trades in petrodollars. For three years, Russia and Saudi Arabia had a deal. Together, they used their collective market power to put a floor under oil prices by limiting their production. As soon as the demand went down, the Saudis wanted to cut production to keep the price per barrel high. Putin said 'no way' because Russia's economy is hurting and he needs the oil money. The Saudis flooded the market with cheap oil. It had nothing whatsoever to do with less travel due to Covid-19.

you obviously didn't read what i just wrote.

 

[Visbek]

We are in the midst of, possibly, the worst economic crisis ever. And yet the DOW has been shooting up for a couple of days. Do you wonder WHY?

Not really. After all, some of us already know how economics and the markets works (generally speaking, of course).

To begin with, stocks are not a good barometer of the overall health of the economy. It's simply one of many places where investors allocate capital.

Second, stocks aren't fully based on the value of a company today. It's really a measure of what someone thinks the stock will be worth in the future.

Third, the rise in stocks actually isn't that consequential. The S&P lost 1/3 of its value overnight, and has only clawed back a small amount of that.

Fourth, it's typical for markets to rise a little bit even in a devastating economic downturn. E.g. after the 1929 crash, and before hitting rock bottom in 1932, there were several periods -- some months long -- where stocks rose again, but the overall trend was still headed straight for the bottom.

Maybe the massive bailouts of big companies and Wall Street banks, and the infinite magic money injected by the Fed. Allowing these companies to buy back their own stock.

In case no one mentioned it already:

The CARES act specifically prevents corporations who take Federal loans from buying back stock, or making other capital distributions (like paying out dividends), until the loan is repaid.

And as I've told you elsewhere: The Fed isn't handing out free money.

This doesn't help the economy. It just sets us up for even worse crises in the future.

Sorry, but that is flat-out wrong.

The CARES act is certainly not perfect, and it won't be the last stimulus bill. But it, and the Fed's actions, are designed to prevent the economy from completely crashing and burning.

It would be very difficult to claim it's creating a moral hazard, because unlike the 2008 recession, the companies getting the bailouts did not cause the recession. They are getting whacked by COVID-19, just like everyone else. Even if they didn't get and squander the Trump tax cuts, they'd need the same type of bailout right now.

 

[Visbek]

No, I do not think it's all just faith. It is faith PLUS some kind of limit. We have always believed the Fed would keep the money supply within reasonable limits. We no longer have any reason to believe that.

Yes, actually, we do.

1) The Fed took similar actions after the 2008 crash. It didn't cause hyperinflation.

2) The Fed hasn't blown its 2% inflation target in 40 years.

There HAS to be some kind of limit. But the Fed has stopped limiting dollars. So there is a meteor heading for the earth.

Yeah, that's not how monetary policy actually works. As I've tried to explain to you before, it is nowhere near as simple as just counting M1 and calling it a day.

In fact, similar to 2008, there are going to be massive deflationary pressures right now. Would you buy a car or a house right now? Are you going to start that remodeling project? Take a vacation? Buy a ticket to Coachella or an NFL game? No, no, no, no, no and no. No one knows if they will have a job 12 months from now, which means spending will fall (just like after 2008).

There are some inflationary pressures -- health care costs will go up (though no one is doing anything unless the need is dire right now...), and I'm sure that essential workers are likely to demand higher pay and medical benefits. However, that's going to be a pretty small part of the economy. But the effects of slamming on the brakes will vastly outweigh any inflationary pressures resulting from that, or from QE, or other Fed measures.

 

[Good4Nothin]

The market is driven in good part by future expectations. It always has been. Even if those expectations are unrealistic that doesn’t make it a Ponzi scheme.

When it's detached from business, then it is a Ponzi scheme.

 

[Good4Nothin]

No we will just find another median to trade in. again everything has value because someone believes it does. it doesn't just apply to money.

There are reasons someone believes something does or does not have value.

 

[Good4Nothin]

you don't know what a ponzi scheme is do you?

Yes I do. You don't understand the stock market, do you?

 

[CaughtInThe]

 

[Good4Nothin]

why does petrodollars have value?
ol yea because someone thinks it does.

same as gold.

No. Petroleum has value because it's useful, and the supply is finite. Petroleum can't be made artificially, and neither can gold. Gold isn't all that useful, but it is beautiful and lasts forever.

When people value things, it's always for a reason.

 

[Good4Nothin]

It would be very difficult to claim it's creating a moral hazard, because unlike the 2008 recession, the companies getting the bailouts did not cause the recession. They are getting whacked by COVID-19, just like everyone else. Even if they didn't get and squander the Trump tax cuts, they'd need the same type of bailout right now.

Ok, but they were in bad shape at least since September 2019, because of taking unwise risks. The Fed was bailing them out back then, way before the virus.

 

[iguanaman]

Maybe it is because China saw its first day with no new deaths or community infections reported....

Yes they are 2 months ahead of us meaning we can see the light at the end of the tunnel in June if we play our cards right. Epidemiology is mostly math.

 

[Visbek]

Ok, but they were in bad shape at least since September 2019, because of taking unwise risks. The Fed was bailing them out back then, way before the virus.

The banks were fine in September 2019. The Fed was reacting to a highly unusual spike in overnight lending rates -- and it worked.



The spike wasn't a result of "banks taking unwise risk." It may have been the opposite, as banks were forced to be more conservative after 2008, by both regulation and their near-death experiences. So, it's entirely plausible there was a market glitch (much like a flash crash); banks were reluctant to lend, so they didn't even it out quickly; the overnight repo market got tight; the banks didn't want to lend; so the Fed stepped in.

And again, the Fed didn't just hand out free money. They merely acted like a commercial bank working in the overnight repurchase markets. Meaning people needed overnight loans, and instead of getting it from Citibank or HSBC, they got it from the Fed -- and had to repay the next day.

 

[Good4Nothin]

The banks were fine in September 2019. The Fed was reacting to a highly unusual spike in overnight lending rates -- and it worked.

View attachment 67277416

The spike wasn't a result of "banks taking unwise risk." It may have been the opposite, as banks were forced to be more conservative after 2008, by both regulation and their near-death experiences. So, it's entirely plausible there was a market glitch (much like a flash crash); banks were reluctant to lend, so they didn't even it out quickly; the overnight repo market got tight; the banks didn't want to lend; so the Fed stepped in.

And again, the Fed didn't just hand out free money. They merely acted like a commercial bank working in the overnight repurchase markets. Meaning people needed overnight loans, and instead of getting it from Citibank or HSBC, they got it from the Fed -- and had to repay the next day.

What you are saying is very different from what I read. For example, at wallstreetonparade.

 

[Visbek]

What you are saying is very different from what I read. For example, at wallstreetonparade.

I can't respond to that without knowing which articles you've read.

I can say I'm not terribly impressed with some of the articles I'm seeing on that site. For example, it assumes that because the CARES Act allocated $454 billion to be used as the reserve for corporate lending, that means the Fed expects to lose all of that money to "toxic debt" held by Wall Street banks -- even though the authors openly admit that "didn't happen last time."

Maybe you need to find a more neutral site. Just a thought.

 

[EMNofSeattle]

Maybe it is because China saw its first day with no new deaths or community infections reported....

 

[Good4Nothin]

I can't respond to that without knowing which articles you've read.

I can say I'm not terribly impressed with some of the articles I'm seeing on that site. For example, it assumes that because the CARES Act allocated $454 billion to be used as the reserve for corporate lending, that means the Fed expects to lose all of that money to "toxic debt" held by Wall Street banks -- even though the authors openly admit that "didn't happen last time."

Maybe you need to find a more neutral site. Just a thought.

That is not the only site I read. I think you need to find more varied sources, instead of only reading what the mainstream news wants you to believe.

 

[Drawdown]

Yes they are 2 months ahead of us meaning we can see the light at the end of the tunnel in June if we play our cards right. Epidemiology is mostly math.

We'll see. Americans are a selfish, impetuous lot. I expect as soon as we "ease up" people will go back to flooding the stores and the crap will start all over again. NYC area is going to be a persistent problem because the stores there generally are not conducive to hoarding and people generally don't have cars.

 

[eohrnberger]

No. Petroleum has value because it's useful, and the supply is finite. Petroleum can't be made artificially, and neither can gold. Gold isn't all that useful, but it is beautiful and lasts forever.

When people value things, it's always for a reason.

"Petroleum has value because it's useful" True.
"the supply is finite" also true
"Petroleum can't be made artificially" well, it can be made 'artificially:

Synthetic fuel - Wikipedia
en.wikipedia.org › wiki › Synthetic_fuel
Jump to Oil sand and oil shale processes - Speight included liquid and gaseous fuels as well as clean solid fuels produced by conversion of coal, oil ...‎Synthetic Fuels Corporation · ‎Category:Synthetic fuels · ‎Fischer–Tropsch process

Synthetic oil - Wikipedia
en.wikipedia.org › wiki › Synthetic_oil
Synthetic oil is a lubricant consisting of chemical compounds that are artificially made. Synthetic lubricants can be manufactured using chemically modified ...‎Types · ‎Full

Synthetic fuels in the United States - Wikipedia
en.wikipedia.org › wiki › Synthetic_fuels_in_the_United_States
Synthetic fuels in the United States is an issue of rising importance due the crude oil prices, and geopolitical and economic considerations.‎History · ‎Coal reserves · ‎Economic viability · ‎Initial consumers

Synthetic crude - Wikipedia
en.wikipedia.org › wiki › Synthetic_crude
Synthetic crude is the output from a bitumen/extra heavy oil upgrader facility used in connection with oil sand production. It may also refer to shale oil, an output ...
​

whether this is economically viable wasn't the question.

"Gold isn't all that useful" Not true. Gold is used in many of the circuit boards, CPUs, memory, etc. etc. And also for heat protection / heat dissipation.

Electronics

Only 10% of the world consumption of new gold produced goes to industry,[9] but by far the most important industrial use for new gold is in fabrication of corrosion-free electrical connectors in computers and other electrical devices. For example, according to the World Gold Council, a typical cell phone may contain 50 mg of gold, worth about 50 cents. But since nearly one billion cell phones are produced each year, a gold value of 50 cents in each phone adds to $500 million in gold from just this application.[143]

https://en.wikipedia.org/wiki/Gold#Electronics

As a contrast, how valuable is sand? It isn't. So not only is gold valuable as a material for creating electronics, it is also rare, both drive its price higher.