Crazy, crazy day on Wall Street!

[Traveler]

I think there is even another dimension to all this.  When the stocks dropped; in essence wealth disappeared - vanished into oblivion.  Assets that were once thought to be worth so many $$$$ and now worth less on the open market - wealth has vanished into nothingness.   But the recovery was not investors and the world suddenly realizing the assets were really worth the $$$$ before a drop in the market occurred what happened is that the Federal Reserve - all on its own decided to make $3,000,000,000 appear out of thin air and drop those $$$$ on Wall Street.  3 billion is a lot of $$$$ to play funny money with over a 24 hour period. 

 

My financial advisory talks the same funny money language that bytor2112 talks.  But when I ask about this 3 billion dropped into the markets by the feds - the answers I get, do not make a lot of sense to an old engineer and mathematician.  It appears to me that everybody is happier if they think things are okay.  I have a good feel why turbulences occur in fluid dynamics and I do not think market swings on Wall Street are anywhere near as similar or as reliably predictable or consistent.   I think this is more a game of chicken and who blinks first - or should I say last?

Edited August 28, 2015 by Traveler

[Guest MormonGator]

It's important to have a professional handle your money in the stock market. Someone who has a fiduciary interest in handling your money.  

[NeuroTypical]

I think there is even another dimension to all this.  When the stocks dropped; in essence wealth disappeared - vanished into oblivion.  

 

An interesting corollary to this dimension: When stocks rise; in essence wealth is created - appears out of nothing.  

 

I rarely see those who worry about such things, worry about this aspect of it.  But I have to admit it does give me a vague disquiet to think that a massive cornerstone of our financial system is trust that a dollar has value.

[yjacket]

Actually the market is like a casino with the odds in your favor. I find gambling to be gravely immoral-I don't even buy lottery tickets. So no, the market isn't even close to gambling. 

 

I'm a moron who needs an abacus and all twelve fingers to do basic math. If I can figure this stuff out, anyone can 

Lol . . .you know the old saying when the shoe shine boy starts giving stock advice it's time to get out.

I've studied stocks and markets a lot and if it were as easy as a few people here have intoned, everyone would be millionaires.  I'll give you a hint, it ain't that easy.

 

It has only been easy because of the Fed and that is the reason. The Fed has more than quadrupled the monetary base, from 800 billion in '08 to over 4 trillion.  In normal times prior to '08, when a Central Bank does something like that it would instigate massive inflation.  Yet strangely conventional measures of inflation are very benign, the reason being is that that 3 Trillion of magically created out of nothing money went to commercial banks who then took a portion of it and put it in stocks.  Since the Fed stopped QE3, stocks have gone nowhere.

 

There are plenty of real-world examples of stock markets having done absolutely nothing for decades (look at Japan). It is a logical fallacy to think things such as "real estate always goes up", "stocks always go up", etc.  If one is doing that one is being set up for a massive failure.

 

I'll give you the secret to investing; be it real estate, stocks, bonds, commodities, etc. Everything goes in waves-at different points in time some things are overvalued or undervalued compared to other items.  Find what is undervalued compared to other items and buy it. '10-'11 was a great time to be a real-estate investor (bought my first home then sold 3 years later for twice the price). '08 was a great time to invest in stocks (I didn't b/c I was saving money for a home rather than stocks).

 

I'll tell you the thing no one is looking at right now, it's a bond crash. Bonds are in a 30 year bull, bulls don't last forever.  Will it crack in the next year, I don't know- but compared to plenty of metrics, they are coming close to a peak.  Just need one more crack-up spike. I just wish I could find a good way to play a bond crash (I haven't really found a good one yet . . . .)

 

Beware the crack-up boom.

[yjacket]

An interesting corollary to this dimension: When stocks rise; in essence wealth is created - appears out of nothing.  

No such thing.  Stocks rising doesn't create wealth no more than falling prices destroy wealth. The price is simply a reflection of what wealth people think they have.

 

For every buyer there is a seller.  I guarantee you a lot of money-even millionaires were made over the past week. There was a stock broker in 1929 who was very successful who owned a very nice house.  When the crash happened, his wife heard about it and started moving all their furniture out of the house. He came home and saw this and asked her what she was doing-she explained and he said no, I've made more money today than I have in my whole career.

 

The wealth effect is simply that people perceive they are richer when the stock market rises so they go and buy more stuff; they aren't really richer until they sell and convert that stock to something else-they just think they are; and the converse is true.  If stocks rose 100x, unless I'm getting dividends, I didn't increase the amount of things I owned- just the number associated with what I owned increased. If what I owned becomes more valuable relative to everything else, I've made a good investment; if it hasn't then I haven't really done much.

 

It's called inflation-just more pernicious b/c its not as visible as a gallon of gas going from $1 to $3.

 

I rarely see those who worry about such things, worry about this aspect of it.  But I have to admit it does give me a vague disquiet to think that a massive cornerstone of our financial system is trust that a dollar has value.

 

I'ts worse than that. Money is created by one thing in our current system: DEBT.

 

If we paid back all the debt in the monetary system, the entire monetary base-except for nominal currency and cancelled debt-would completely vanish.

 

Our entire monetary system is a corrupt, immoral, evil system. It is why the national debt can never be paid back and will never be balanced; it can't be. If it were the entire monetary system would collapse.  The system was designed by extremely smart bankers who knew what they were doing and the system is how to extract wealth from as many people as possible by doing as little work as possible.  And that is done by turning people into debt-slaves.

Edited August 28, 2015 by yjacket

[NeuroTypical]

If you take out all the melodrama, namecalling, smug boldness, passion, prophecies of doom, emotionally-charged language and bolded words out of your post yjacket, I think I pretty much agree with just about everything you're saying.  

 

A stock's price is a reflection of the value people assign it.  

 

Truth.

[yjacket]

If you take out all the melodrama, namecalling, smug boldness, passion, prophecies of doom, emotionally-charged language and bolded words out of your post yjacket, I think I pretty much agree with just about everything you're saying.  

 

A stock's price is a reflection of the value people assign it.  

 

Truth.

??? Namecalling . . .where did I name call? Where is a prophecy of doom? 

 

Yes I speak passionately about things .  . .and? Emotionally charged? I thought I actually wrote it fairly un-emotionally charged (yes I use bold for emphasis, but that 's about it).

 

If calling it evil, corrupt and immoral is emotionally charge, believe me it's not b/c I'm trying to use hyperbole.  It is honestly a completely evil system. It is one of the most evil systems out there; part of the reason is because it is so hidden and no one knows it.  Unless one really studies and understands exactly what our monetary system does, allows and is designed for, one does not see it, but once one fully comprehends the system one can tell it is pure evil.