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It is starting to get ugly. - Fed is raising rates to slow down the economy/inflation - Tech, which did alot of the leading of the market, is finally having t

It is starting to get ugly. - Fed is raising rates to slow down the economy/inflation - Tech, which did alot of the leading of the market, is finally having to account for alot of its negative externalities. - The US is picking a fight with China and Europe over trade access, though I think the US has a point on this fight. - Market is just over bought by several common factors - Too much institutional money is chasing too few ideas so that these trades are all levered up, the risk here is that the first person to be forced to unwind could cause alot of additional unwinding as the selling off feedback loop plays out. And sadly this could have been bitcoin's time to shine and show that its a gold replacement by performing well when the market goes to shit, but bitcoin is going through an ever larger correction at the moment. Hand's up, who thought back in December that we'd see a 6 handle on bitcoin by April:( Good time for HFT firms though, volatility is back.

deleted 9y ago
[deleted]
ihsw2 9y ago
There is an open possibility that cash will flood into BTC/ETH as a store of value in a highly volatile S&P market, replacing traditional reservoirs (eg: Japanese/other international equities, precious metals, etc).
- dragontamer 9y ago
  > highly volatile S&P market Erm, S&P's implied volatility is 23.62% / 30-days. Bitcoin's volatility is over 100% / 30-days. https://www.bitmex.com/app/index/.BVOL https://www.bitmex.com/app/index/.BVOL Implied volatility and historical volatility are different, but they're at least "the same units". So please tolerate this apples-to-oranges comparison. Still, its clear that BTC is way more volatile than the S&P500, even today. In times of crisis, people move their money from high-volatility to low-volatility sources. IE: Stocks to Bonds. In times of growth, people move from low-volatility to riskier (but higher potential of gains), ie: Bonds to Stocks.
- ng12 9y ago
  I doubt it. Buying gold is irrational in most situations. People do it because it "feels" safe and I'd argue BTC definitely does not.
  - AnimalMuppet 9y ago
    I disagree. I think gold functions, essentially, as a short on paper currencies.
    - ng12 9y ago
      I didn't say you can't make money buying gold, just that gold is driven by irrational fear.
      - AnimalMuppet 9y ago
        And I still disagree. Deciding you want a way to short paper currencies can, at times, be very rational. Does gold fulfill that function reasonably well? Yes, I think history shows that it does. So it can be very rational to buy gold. (Perhaps "short" was the wrong word. But it is where people go - with reason - when they're losing confidence in fiat currencies.)
  - hyperbovine 9y ago
    Exactly. There is a reason that the BTC icon is ... a gold coin.
- bmpafa 9y ago
  Why BTC / ETH and not, say, bonds? I would think BTC / ETH would be anathema to someone fleeing volatility, no matter how bad the S&P got, but I am only a casual watcher of any market.
- hw 9y ago
  Crypto is far from being a good store of value. I'd argue it's even more volatile than the legacy markets right now. If anything, there'd be a spillover where traders and investors derisk entirely and go into fiat or the traditional store of value which is gold.
- sbinthree 9y ago
  No, this won't happen, fear makes people go back to old stores of value / dig in to their current ways, as opposed to seeking out new ways (usually). The circumstances that lead people to seek out new ways tend to be an absence of fear and a desire for better functionality as opposed to fear. Cryptos are much more likely than conventional securities to go to near-zero, and fearful people know that.
- tedsanders 9y ago
  Your comment contains a financial fallacy. Cash cannot flood "into" assets. For every buyer of an asset there is always a seller of that asset. The same number of dollars will be held regardless of the price of cryptocurrencies.
  - djrogers 9y ago
    No, if I buy BTC for $1 then sell it for $2, there is now $1 more in BTC than I put in to it. If cash cannot flood 'into' an asset, then the assets value would never grow.
    - dragonwriter 9y ago
      > No, if I buy BTC for $1 then sell it for $2, there is now $1 more in BTC than I put in to it. There are no dollars in BTC, period. Dollars and BTC may both move, and in certain exchanges one may be traded for the other, but the dollars are never in BTC. (Your net worth, which you may choose to measure in dollars, may be tied up in BTC, but no actual dollars are.)
    - tedsanders 9y ago
      No worries, this is actually a pretty subtle concept because it's an instance where the properties of the aggregate are different than the properties of the individual. An individual can put cash into an asset. You can start with $1, then exchange it for BTC, and now you have $0. The amount of dollars in your accounts has gone down and the amount of BTC in your accounts has gone up. But in aggregate, this is impossible. There is a (mostly[1]) fixed supply of dollars in the world. And there is a (mostly) fixed supply of BTC in the world. When you buy BTC for $1, the $1 just moves from your account to someone else's account. Their BTC moves from their account to your account. In aggregate the amount of dollars is the same before the transaction and after. The amount of BTC is the same before the transaction and after. The reason for this is that for every buyer, there is always a seller. Every single time someone puts dollars "into" an asset, someone else is taking dollars "out of" the asset on the other side of the trade. No one has ever put dollars "into" BTC on net. Generally, prices do not go up because dollars go "into" the asset. It is fallacious to say that the stock market has gone up because dollars have gone "into" the stock market. Dollars flow through markets, they don't flow into markets. Prices reflect opinions of people making transactions, they don't reflect a history of dollars that have gone "into" an asset. To be fair, this issue is kind of pedantic and besides the main point of this thread, but I do think it's a fallacy worth being aware of. Ever since I learned of it, my financial thinking has felt clearer. [1] let's say fixed with respect to you any buy/sell transactions you may or may not execute (this would have be an asterisk, but it turned all of my text into italics)
- john_moscow 9y ago
  Sure, fearing overvaluation (i.e. too high price-to-earnings ratio) of stock markets, people will switch to an asset where the "earnings" part is zero by design. Sorry, but I would rather place my bets on real estate or dividend stocks (reasonably P/E'd stocks to be more precise).
- this_user 9y ago
  That makes no sense at all. High volatility for the SPX means +-2% a day. High volatility for crypto currencies means > 20%. Why would you try to secure your capital by moving it to something that is orders of magnitude more volatile? A store of value is by definition something that moves as little as possible.
PKop 9y ago
Gold is poised as, with stock market declines, US funding of deficits gets severely pressured. As a result, Fed will have to reverse course, sacrificing the dollar to maintain asset prices and ability to finance government. We'll see if dollar has a short term rise, though as a flight to safety, though I think unlike in past downturns, the dollar and US economy is in a much worse position.
- AnimalMuppet 9y ago
  How does the stock market declining affect US funding for deficits? Deficits are funded by bonds, which (almost always) move in the opposite direction from stocks. This also means that your second sentence doesn't follow. > ... though I think unlike in past downturns, the dollar and US economy is in a much worse position. I'm a bit undecided, but I fear that you are right on this one.
  - PKop 9y ago
    I've been following the thesis of @LukeGromen, (here's a sampling)[0]. Here I think he covers it mostly in full [1]. Definitely worth a listen.. Also, here is a great 5 part podcast from December where he (and other Dollar bears) talk about the dollar decline[2]. Because of US dollar reserve status, government spending has been financed by foreign buying of treasuries, especially China. In recent years, they have rightly seen the fiscal situation of US, with massive liabilities, as being fixed only by devaluation of the dollar and therefore in real terms holding treasuries, or especially continuing to stockpile them not prudent. And he points out many examples of how they have recently been declining their purchases of treasuries and stockpiling gold (them and Russia). He argues their recent opening of a Oil futures market as their avenue to moving away from dollar, eventually (long long term) pushing Renminbi to gain reserve status but in medium term using gold / oil as their leverage away from dollar. On the stock market/taxes connection, he points out usually a yr over yr decline in tax receipts occurs in recessions. But last month, in the midst of an "everything bubble" (stocks, real estate, bonds, etc.) we saw a year over year decline of tax receipts. [3] Also that stock market is increasing % of GDP & most taxes paid by wealthy whose income increasingly based on stocks market returns implies a dependence at the margin of government spending on high equities valuations. [4] If the market continues to decline, and future months tax receipts decline, the "fed put" will get called into action, as China has stopped funding deficit (enough to match it's increase) so it has to be funded by rising rates in the private market. Libor shows this, as does the decline of the dollar. Here's a link his slide deck covering all of this [5]. See slide 26 for a chart showing that when tax receipts fall "enough", US quickly takes action to weaken the dollar. Slide 25 shows that declines in tax receipts usually correspond to recessions, but except recently.. [0] https://twitter.com/LukeGromen/status/978994115047231488 https://twitter.com/LukeGromen/status/978994115047231488 [1] https://www.theinvestorspodcast.com/episodes/luke-gromen/ https://www.theinvestorspodcast.com/episodes/luke-gromen/ [2] https://www.macrovoices.com/336-anatomy-of-the-u-s-dollar-end-game-part-1-of-5 https://www.macrovoices.com/336-anatomy-of-the-u-s-dollar-en... [3] https://twitter.com/LukeGromen/status/979079824567427073 https://twitter.com/LukeGromen/status/979079824567427073 [4] https://twitter.com/LukeGromen/status/979087795447894017 https://twitter.com/LukeGromen/status/979087795447894017 [5] https://www.dropbox.com/s/j86wfg79iyds85j/Luke%20Gromen%20Slide%20Deck%20for%20Parts%203%20and%204.pdf https://www.dropbox.com/s/j86wfg79iyds85j/Luke%20Gromen%20Sl...
bjelkeman-again 9y ago
What trade access does the US want in Europe that we are denying?
- dragontamer 9y ago
  I have no freaking idea. But its the mindset of a lot of Americans. As an American, I apologize for the ignorance of the majority of us. Unfortunately, Trump's words are resonating and many people believe Mr. Trump's point of view. EDIT: I see the downvotes. So let me challenge you with this thought. Exactly WHAT ARE THE Europeans doing to hurt the US's economy? As per the question of the direct parent of this post.
  - toomuchtodo 9y ago
    Come on, this isn't the thread for it. People don't vote for Trump because they're ignorant or stupid, it's because they're desperate. And if you don't believe that's the case, I'll go spend a day in rural West Virginia with you and show you first hand. As an American, I despise the man, but fully support his efforts at tempering globalism and clamping down on H1Bs. I don't have to like him to judge his policies on a case by case basis.
    - dragontamer 9y ago
      This specific issue has nothing to do with Trump. For at LEAST the last 20 years, I've heard of people complain about "Trade Deficits" and the perils of "Globalization". Sure, Trump is an anti-globalist. But so are a TON of other people. My statements are aimed at anti-globalists in general. > And if you don't believe that's the case, I'll go spend a day in rural West Virginia with you and show you first hand. Indeed. And I've spent a week in rural Washington (Spokane). The town was decimated after a lumber mill closing, and tons of people were on welfare. Trust me dude, I've seen it myself. HUGE stretches of areas where the ONLY revenue source are Native American casinos and/or military bases, with closed down factories overlooking hills. There were some successful farmland, but that's not enough to sustain the economy of the population. Now explain to me how raising Aluminum / Steel prices is going to improve the position of towns like this? Explain to me why a trade war with China / Europe / Other countries helps at all? China just increased tariffs on Pork, Wine, dried fruits and nuts: https://www.npr.org/sections/thesalt/2018/04/02/598870076/what-chinese-tariffs-targeting-american-crops-will-mean-for-farmers https://www.npr.org/sections/thesalt/2018/04/02/598870076/wh... Good luck rust-belt / heartland. The trade war is coming. A good chunk of the rural folks have been wanting this for years. If Trump wasn't going to be elected last year, it'd only be a matter of time before some other "anti-globalist" came into power. Unfortunately for the rural folks: they're the ones who depend most heavily on exports AND imports. Increase costs of steel and aluminum makes manufacturing more difficult. Sure, it helps the US Steel industry, but there are FAR more rural towns out there who rely upon cheap steel prices for the meager manufacturing that they already have. And obviously, if China stops buying Pork / Fruits / Wine / etc. etc. from American farmers, then those farmers are going to get hurt. Its obviously lose/lose if you give it some thought. Alas, too many people are focused on the "Trade Deficit" to even care.
vowelless 9y ago
> Good time for HFT firms though, volatility is back. That's definitely true .......
cm2187 9y ago
And the Fed has barely started retiring QE [1]. If they increase the pace it will add another massive pressure on stock valuations. [1] https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
bad_user 9y ago
> Bitcoin ... show that its a gold replacement by performing well when the market goes to shit I think it should be pretty clear that Bitcoin is not a gold replacement. Neither have any intrinsic value (unlike property), except that gold has been in use for thousands of years. If the market goes to shit, then so does Bitcoin, because it's a bubble.
- djrogers 9y ago
  > Neither have any intrinsic value Gold has a million industrial, scientific, and cosmetic uses that give it intrinsic value.
  - hangonhn 9y ago
    But its use in those areas is dwarfed by its use as a store of value. Or to put it a different way, its industrial, scientific, and cosmetic usage has a far smaller effect on its price than people buying it as a stable store of value.
    - aylmao 9y ago
      I guess what the previous comment was getting at is that it at least has _some_ value outside of being a financial tool. Bitcoins aren't even physical so they are not even useful as paperweights.
  - bbatha 9y ago
    But the utility of those applications does not translate into gold’s current price. Most of gold’s value is from speculators and people using it as a wealth store.
  - ori_b 9y ago
    If that's true, why is it sitting in vaults instead of being consumed for those uses?
    - nikanj 9y ago
nikanj 9y ago
It's a lot easier to HODL your bitcoin when you don't have looming mortgage payments. When the economy gets rough, people are going to liquidate holdings in assets all across the board. With Bitcoin having no real-world value aside from being an great token for a fully-anonymous game of greater fool, the prognosis is not great. With other asset classes, there's some real-world value backing the minimum price (real estate has rent, stocks bring dividends, bonds guarantee interest payments, etc). With bitcoin, there's no real bottom for the value. In this, it's actually similar to a lot of unicorn stocks. What's the real-world value of a business that's bleeding money like no tomorrow? The P/E ratio is negative!
- 21 9y ago
  > With other asset classes, there's some real-world value backing the minimum price 90% of gold's price is investment/speculation, only 10% has real-world usage backing. I'm not sure why you discount intangibles. A lot of Apple/Adidas value is based just on their perceived brand. Bitcoin has the same thing, an intangible brand value which keeps on rising based on more people getting confortable with it.
  - nikanj 9y ago
    I think we are saying the same thing. Apple/Adidas might have inflated prices today, but they're also creating actual products, selling for actual money, in actual stores. That's the key difference. Bitcoin is as valuable as Beanie Babies. Those too had a perceived brand value, which was supposed to keep on rising forever.
    - 21 9y ago
      The fact that you or I don't value an asset doesn't mean that that's asset value must therefore be zero. I wouldn't pay 5 million dollars for Michal Jackson's glove, but some people did. That in itself makes it more valuable that let's say it's cost of manufacture. And it's valuation is rational, but in a more complicated kind of rationality than the simple ones presented in economics 101 books. I think you are a person which believes that this is a correct approach: https://en.wikipedia.org/wiki/Homo_economicus https://en.wikipedia.org/wiki/Homo_economicus I don't
this_user 9y ago
> It is starting to get ugly. Not really, to be honest. The SPX is still above the February high. We are merely back to were we were in October 2017 before the acceleration into the end of the year and the January rally. We're still up around 9% for the last 12 months. Q4 earnings have been extremely strong, and early indications suggest the same for Q1. The looming risk of a trade war seems to have spooked the market somewhat, which has resulted in a re-pricing. But, as it stands, pullbacks are still buying opportunities here as long as we don't see a large scale escalation.
- XJOKOLAT 9y ago
  LOL
- pyoung 9y ago
  The OP is saying 'there are icebergs ahead', and you are saying 'lol, nothing to worry about, we are moving at record speed!'. The recent market volatility has more to do with the debt markets than near term quarterly earnings. No one really knows how the messy combination of tax cut fueled growth, trade wars, inflation (or lack of), fed rate schedule, record US deficits, and unwinding QE will impact markets, but the general consensus is that interest rates are going to rise. The question of the day is 'how fast?'. Too fast, and it will hit the brakes on the economy. Too slow, and we may overheat (if we haven't already).
- tejohnso 9y ago
  SPX is down 7% from the February high. Are you referring to the February 2017 high? Looking from a yearly perspective, we've gone from a period of slow, stable growth to a period of uncertainty and loss, with a doubling of volatility. I think it's just as reasonable to call this the beginning of something ugly, as it is to say it's a buying opportunity.
- heurist 9y ago
  I am far from an expert in these matters so I can only quote others who seem to know more. Peter Schiff sounds like a gold salesman at times (he is afaik), but he makes the argument that rather than fixing the issues that caused the bubble that led to the Great Recession, the Fed and stimulus managed to only make it bigger. Now the market is burning itself up with expectations of economic growth under Republicans, but all they are doing is growing the deficit and putting the US deeper into a hole that it can never dig itself out of. Soon the US will be unable to acquire more debt and we'll do another round of quantitative easing, which could spiral into hyperinflation as we're forced to repay our debt by printing money. This will be terrible for the US because we've become a nation of debtors and consumers. He believes the coming recession will be worse than 2008 and that we are in the largest bubble the US has ever experienced, possibly never having even escaped the 2008 recession in the first place. He believes all this will come due before the end of Trump's term, probably within a year or two. I've heard other famous investors say a recession is likely to begin next year. These might not be in order of when he spoke: https://www.youtube.com/watch?v=1Fd58n4HhAM https://www.youtube.com/watch?v=1Fd58n4HhAM https://www.youtube.com/watch?v=WD2zcyfwdJ4 https://www.youtube.com/watch?v=WD2zcyfwdJ4 https://www.youtube.com/watch?v=5DuHWGh2GgU https://www.youtube.com/watch?v=5DuHWGh2GgU https://www.youtube.com/watch?v=03Ke9rIYGsc https://www.youtube.com/watch?v=03Ke9rIYGsc
melling 9y ago
What stocks will Warren Buffet be looking to buy once the fear sets in? How does one evaluate value the way he does?
- nikanj 9y ago
  The ones that have a business model your grandad would understand. His heuristic is somewhat naive, but he's made a lot of money by betting against the paradigm shifts and capitalistic innovations. He's basically applying systems theories to companies, and knows that the more complex a system is, the more possible failure states it has.
  - melling 9y ago
    I’m looking for a heuristic. He’ll be staying in his “Circle or Competence”, great company, evaluating companies for their “margin of safety”? He’s only looking at a handful of numbers to determine a good buy. We really should try to learn from this market movement. Warren Buffett and Charlie Munger offer decades of knowledge and wisdom.
- davidw 9y ago
  I think at this point he's able to simply buy up a lot of companies, which is an option not available to normal people.
- jacques_chester 9y ago
  > What stocks will Warren Buffet be looking to buy once the fear sets in? Whatever's a good deal when the prices drop low enough. > How does one evaluate value the way he does? It's not difficult, he and Munger consistently refer to a handful of books and themes and repeat them over and over. They do have advantages that you and I don't, however. First: they have a captive source of cheap cash in their insurance businesses. They are run strictly for underwriting profit, meaning there is always cheap float on hand to invest. Second: they don't participate in the open market a lot of the time. A lot of the B-H stable is composed of successful private businesses who sold directly, rather than being purchased via the share market. Buffet & Menger can more or less let the deals-of-a-century come to them. Third: if there's nothing good to buy, they don't. They accumulate cash and near-cash assets. This means that when the market tanks, they are one of the few groups with cash on hand to snap up bargains. This happened in a big way during 2007 and 2008.
branchless 9y ago
> Hand's up, who thought back in December that we'd see a 6 handle on bitcoin by April:( Me, because fiat currencies derive their value from the requirement to pay domestic tax in said currency. Bitcoin does not have this.

deleted 9y ago

[deleted]

ihsw2 9y ago

There is an open possibility that cash will flood into BTC/ETH as a store of value in a highly volatile S&P market, replacing traditional reservoirs (eg: Japanese/other international equities, precious metals, etc).

dragontamer 9y ago
> highly volatile S&P market Erm, S&P's implied volatility is 23.62% / 30-days. Bitcoin's volatility is over 100% / 30-days. https://www.bitmex.com/app/index/.BVOL https://www.bitmex.com/app/index/.BVOL Implied volatility and historical volatility are different, but they're at least "the same units". So please tolerate this apples-to-oranges comparison. Still, its clear that BTC is way more volatile than the S&P500, even today. In times of crisis, people move their money from high-volatility to low-volatility sources. IE: Stocks to Bonds. In times of growth, people move from low-volatility to riskier (but higher potential of gains), ie: Bonds to Stocks.
ng12 9y ago
I doubt it. Buying gold is irrational in most situations. People do it because it "feels" safe and I'd argue BTC definitely does not.
- AnimalMuppet 9y ago
  I disagree. I think gold functions, essentially, as a short on paper currencies.
  - ng12 9y ago
    I didn't say you can't make money buying gold, just that gold is driven by irrational fear.
    - AnimalMuppet 9y ago
      And I still disagree. Deciding you want a way to short paper currencies can, at times, be very rational. Does gold fulfill that function reasonably well? Yes, I think history shows that it does. So it can be very rational to buy gold. (Perhaps "short" was the wrong word. But it is where people go - with reason - when they're losing confidence in fiat currencies.)
- hyperbovine 9y ago
  Exactly. There is a reason that the BTC icon is ... a gold coin.
bmpafa 9y ago
Why BTC / ETH and not, say, bonds? I would think BTC / ETH would be anathema to someone fleeing volatility, no matter how bad the S&P got, but I am only a casual watcher of any market.
hw 9y ago
Crypto is far from being a good store of value. I'd argue it's even more volatile than the legacy markets right now. If anything, there'd be a spillover where traders and investors derisk entirely and go into fiat or the traditional store of value which is gold.
sbinthree 9y ago
No, this won't happen, fear makes people go back to old stores of value / dig in to their current ways, as opposed to seeking out new ways (usually). The circumstances that lead people to seek out new ways tend to be an absence of fear and a desire for better functionality as opposed to fear. Cryptos are much more likely than conventional securities to go to near-zero, and fearful people know that.
tedsanders 9y ago
Your comment contains a financial fallacy. Cash cannot flood "into" assets. For every buyer of an asset there is always a seller of that asset. The same number of dollars will be held regardless of the price of cryptocurrencies.
- djrogers 9y ago
  No, if I buy BTC for $1 then sell it for $2, there is now $1 more in BTC than I put in to it. If cash cannot flood 'into' an asset, then the assets value would never grow.
  - dragonwriter 9y ago
    > No, if I buy BTC for $1 then sell it for $2, there is now $1 more in BTC than I put in to it. There are no dollars in BTC, period. Dollars and BTC may both move, and in certain exchanges one may be traded for the other, but the dollars are never in BTC. (Your net worth, which you may choose to measure in dollars, may be tied up in BTC, but no actual dollars are.)
  - tedsanders 9y ago
    No worries, this is actually a pretty subtle concept because it's an instance where the properties of the aggregate are different than the properties of the individual. An individual can put cash into an asset. You can start with $1, then exchange it for BTC, and now you have $0. The amount of dollars in your accounts has gone down and the amount of BTC in your accounts has gone up. But in aggregate, this is impossible. There is a (mostly[1]) fixed supply of dollars in the world. And there is a (mostly) fixed supply of BTC in the world. When you buy BTC for $1, the $1 just moves from your account to someone else's account. Their BTC moves from their account to your account. In aggregate the amount of dollars is the same before the transaction and after. The amount of BTC is the same before the transaction and after. The reason for this is that for every buyer, there is always a seller. Every single time someone puts dollars "into" an asset, someone else is taking dollars "out of" the asset on the other side of the trade. No one has ever put dollars "into" BTC on net. Generally, prices do not go up because dollars go "into" the asset. It is fallacious to say that the stock market has gone up because dollars have gone "into" the stock market. Dollars flow through markets, they don't flow into markets. Prices reflect opinions of people making transactions, they don't reflect a history of dollars that have gone "into" an asset. To be fair, this issue is kind of pedantic and besides the main point of this thread, but I do think it's a fallacy worth being aware of. Ever since I learned of it, my financial thinking has felt clearer. [1] let's say fixed with respect to you any buy/sell transactions you may or may not execute (this would have be an asterisk, but it turned all of my text into italics)
john_moscow 9y ago
Sure, fearing overvaluation (i.e. too high price-to-earnings ratio) of stock markets, people will switch to an asset where the "earnings" part is zero by design. Sorry, but I would rather place my bets on real estate or dividend stocks (reasonably P/E'd stocks to be more precise).
this_user 9y ago
That makes no sense at all. High volatility for the SPX means +-2% a day. High volatility for crypto currencies means > 20%. Why would you try to secure your capital by moving it to something that is orders of magnitude more volatile? A store of value is by definition something that moves as little as possible.

PKop 9y ago

Gold is poised as, with stock market declines, US funding of deficits gets severely pressured. As a result, Fed will have to reverse course, sacrificing the dollar to maintain asset prices and ability to finance government. We'll see if dollar has a short term rise, though as a flight to safety, though I think unlike in past downturns, the dollar and US economy is in a much worse position.

AnimalMuppet 9y ago
How does the stock market declining affect US funding for deficits? Deficits are funded by bonds, which (almost always) move in the opposite direction from stocks. This also means that your second sentence doesn't follow. > ... though I think unlike in past downturns, the dollar and US economy is in a much worse position. I'm a bit undecided, but I fear that you are right on this one.
- PKop 9y ago
  I've been following the thesis of @LukeGromen, (here's a sampling)[0]. Here I think he covers it mostly in full [1]. Definitely worth a listen.. Also, here is a great 5 part podcast from December where he (and other Dollar bears) talk about the dollar decline[2]. Because of US dollar reserve status, government spending has been financed by foreign buying of treasuries, especially China. In recent years, they have rightly seen the fiscal situation of US, with massive liabilities, as being fixed only by devaluation of the dollar and therefore in real terms holding treasuries, or especially continuing to stockpile them not prudent. And he points out many examples of how they have recently been declining their purchases of treasuries and stockpiling gold (them and Russia). He argues their recent opening of a Oil futures market as their avenue to moving away from dollar, eventually (long long term) pushing Renminbi to gain reserve status but in medium term using gold / oil as their leverage away from dollar. On the stock market/taxes connection, he points out usually a yr over yr decline in tax receipts occurs in recessions. But last month, in the midst of an "everything bubble" (stocks, real estate, bonds, etc.) we saw a year over year decline of tax receipts. [3] Also that stock market is increasing % of GDP & most taxes paid by wealthy whose income increasingly based on stocks market returns implies a dependence at the margin of government spending on high equities valuations. [4] If the market continues to decline, and future months tax receipts decline, the "fed put" will get called into action, as China has stopped funding deficit (enough to match it's increase) so it has to be funded by rising rates in the private market. Libor shows this, as does the decline of the dollar. Here's a link his slide deck covering all of this [5]. See slide 26 for a chart showing that when tax receipts fall "enough", US quickly takes action to weaken the dollar. Slide 25 shows that declines in tax receipts usually correspond to recessions, but except recently.. [0] https://twitter.com/LukeGromen/status/978994115047231488 https://twitter.com/LukeGromen/status/978994115047231488 [1] https://www.theinvestorspodcast.com/episodes/luke-gromen/ https://www.theinvestorspodcast.com/episodes/luke-gromen/ [2] https://www.macrovoices.com/336-anatomy-of-the-u-s-dollar-end-game-part-1-of-5 https://www.macrovoices.com/336-anatomy-of-the-u-s-dollar-en... [3] https://twitter.com/LukeGromen/status/979079824567427073 https://twitter.com/LukeGromen/status/979079824567427073 [4] https://twitter.com/LukeGromen/status/979087795447894017 https://twitter.com/LukeGromen/status/979087795447894017 [5] https://www.dropbox.com/s/j86wfg79iyds85j/Luke%20Gromen%20Slide%20Deck%20for%20Parts%203%20and%204.pdf https://www.dropbox.com/s/j86wfg79iyds85j/Luke%20Gromen%20Sl...

bjelkeman-again 9y ago

What trade access does the US want in Europe that we are denying?

dragontamer 9y ago
I have no freaking idea. But its the mindset of a lot of Americans. As an American, I apologize for the ignorance of the majority of us. Unfortunately, Trump's words are resonating and many people believe Mr. Trump's point of view. EDIT: I see the downvotes. So let me challenge you with this thought. Exactly WHAT ARE THE Europeans doing to hurt the US's economy? As per the question of the direct parent of this post.
- toomuchtodo 9y ago
  Come on, this isn't the thread for it. People don't vote for Trump because they're ignorant or stupid, it's because they're desperate. And if you don't believe that's the case, I'll go spend a day in rural West Virginia with you and show you first hand. As an American, I despise the man, but fully support his efforts at tempering globalism and clamping down on H1Bs. I don't have to like him to judge his policies on a case by case basis.
  - dragontamer 9y ago
    This specific issue has nothing to do with Trump. For at LEAST the last 20 years, I've heard of people complain about "Trade Deficits" and the perils of "Globalization". Sure, Trump is an anti-globalist. But so are a TON of other people. My statements are aimed at anti-globalists in general. > And if you don't believe that's the case, I'll go spend a day in rural West Virginia with you and show you first hand. Indeed. And I've spent a week in rural Washington (Spokane). The town was decimated after a lumber mill closing, and tons of people were on welfare. Trust me dude, I've seen it myself. HUGE stretches of areas where the ONLY revenue source are Native American casinos and/or military bases, with closed down factories overlooking hills. There were some successful farmland, but that's not enough to sustain the economy of the population. Now explain to me how raising Aluminum / Steel prices is going to improve the position of towns like this? Explain to me why a trade war with China / Europe / Other countries helps at all? China just increased tariffs on Pork, Wine, dried fruits and nuts: https://www.npr.org/sections/thesalt/2018/04/02/598870076/what-chinese-tariffs-targeting-american-crops-will-mean-for-farmers https://www.npr.org/sections/thesalt/2018/04/02/598870076/wh... Good luck rust-belt / heartland. The trade war is coming. A good chunk of the rural folks have been wanting this for years. If Trump wasn't going to be elected last year, it'd only be a matter of time before some other "anti-globalist" came into power. Unfortunately for the rural folks: they're the ones who depend most heavily on exports AND imports. Increase costs of steel and aluminum makes manufacturing more difficult. Sure, it helps the US Steel industry, but there are FAR more rural towns out there who rely upon cheap steel prices for the meager manufacturing that they already have. And obviously, if China stops buying Pork / Fruits / Wine / etc. etc. from American farmers, then those farmers are going to get hurt. Its obviously lose/lose if you give it some thought. Alas, too many people are focused on the "Trade Deficit" to even care.

vowelless 9y ago

> Good time for HFT firms though, volatility is back. That's definitely true .......

cm2187 9y ago

And the Fed has barely started retiring QE [1]. If they increase the pace it will add another massive pressure on stock valuations. [1] https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

bad_user 9y ago

> Bitcoin ... show that its a gold replacement by performing well when the market goes to shit I think it should be pretty clear that Bitcoin is not a gold replacement. Neither have any intrinsic value (unlike property), except that gold has been in use for thousands of years. If the market goes to shit, then so does Bitcoin, because it's a bubble.

djrogers 9y ago
> Neither have any intrinsic value Gold has a million industrial, scientific, and cosmetic uses that give it intrinsic value.
- hangonhn 9y ago
  But its use in those areas is dwarfed by its use as a store of value. Or to put it a different way, its industrial, scientific, and cosmetic usage has a far smaller effect on its price than people buying it as a stable store of value.
  - aylmao 9y ago
    I guess what the previous comment was getting at is that it at least has _some_ value outside of being a financial tool. Bitcoins aren't even physical so they are not even useful as paperweights.
- bbatha 9y ago
  But the utility of those applications does not translate into gold’s current price. Most of gold’s value is from speculators and people using it as a wealth store.
- ori_b 9y ago
  If that's true, why is it sitting in vaults instead of being consumed for those uses?
  - nikanj 9y ago

nikanj 9y ago

It's a lot easier to HODL your bitcoin when you don't have looming mortgage payments. When the economy gets rough, people are going to liquidate holdings in assets all across the board. With Bitcoin having no real-world value aside from being an great token for a fully-anonymous game of greater fool, the prognosis is not great. With other asset classes, there's some real-world value backing the minimum price (real estate has rent, stocks bring dividends, bonds guarantee interest payments, etc). With bitcoin, there's no real bottom for the value. In this, it's actually similar to a lot of unicorn stocks. What's the real-world value of a business that's bleeding money like no tomorrow? The P/E ratio is negative!

21 9y ago
> With other asset classes, there's some real-world value backing the minimum price 90% of gold's price is investment/speculation, only 10% has real-world usage backing. I'm not sure why you discount intangibles. A lot of Apple/Adidas value is based just on their perceived brand. Bitcoin has the same thing, an intangible brand value which keeps on rising based on more people getting confortable with it.
- nikanj 9y ago
  I think we are saying the same thing. Apple/Adidas might have inflated prices today, but they're also creating actual products, selling for actual money, in actual stores. That's the key difference. Bitcoin is as valuable as Beanie Babies. Those too had a perceived brand value, which was supposed to keep on rising forever.
  - 21 9y ago
    The fact that you or I don't value an asset doesn't mean that that's asset value must therefore be zero. I wouldn't pay 5 million dollars for Michal Jackson's glove, but some people did. That in itself makes it more valuable that let's say it's cost of manufacture. And it's valuation is rational, but in a more complicated kind of rationality than the simple ones presented in economics 101 books. I think you are a person which believes that this is a correct approach: https://en.wikipedia.org/wiki/Homo_economicus https://en.wikipedia.org/wiki/Homo_economicus I don't

this_user 9y ago

> It is starting to get ugly. Not really, to be honest. The SPX is still above the February high. We are merely back to were we were in October 2017 before the acceleration into the end of the year and the January rally. We're still up around 9% for the last 12 months. Q4 earnings have been extremely strong, and early indications suggest the same for Q1. The looming risk of a trade war seems to have spooked the market somewhat, which has resulted in a re-pricing. But, as it stands, pullbacks are still buying opportunities here as long as we don't see a large scale escalation.

XJOKOLAT 9y ago
LOL
pyoung 9y ago
The OP is saying 'there are icebergs ahead', and you are saying 'lol, nothing to worry about, we are moving at record speed!'. The recent market volatility has more to do with the debt markets than near term quarterly earnings. No one really knows how the messy combination of tax cut fueled growth, trade wars, inflation (or lack of), fed rate schedule, record US deficits, and unwinding QE will impact markets, but the general consensus is that interest rates are going to rise. The question of the day is 'how fast?'. Too fast, and it will hit the brakes on the economy. Too slow, and we may overheat (if we haven't already).
tejohnso 9y ago
SPX is down 7% from the February high. Are you referring to the February 2017 high? Looking from a yearly perspective, we've gone from a period of slow, stable growth to a period of uncertainty and loss, with a doubling of volatility. I think it's just as reasonable to call this the beginning of something ugly, as it is to say it's a buying opportunity.
heurist 9y ago
I am far from an expert in these matters so I can only quote others who seem to know more. Peter Schiff sounds like a gold salesman at times (he is afaik), but he makes the argument that rather than fixing the issues that caused the bubble that led to the Great Recession, the Fed and stimulus managed to only make it bigger. Now the market is burning itself up with expectations of economic growth under Republicans, but all they are doing is growing the deficit and putting the US deeper into a hole that it can never dig itself out of. Soon the US will be unable to acquire more debt and we'll do another round of quantitative easing, which could spiral into hyperinflation as we're forced to repay our debt by printing money. This will be terrible for the US because we've become a nation of debtors and consumers. He believes the coming recession will be worse than 2008 and that we are in the largest bubble the US has ever experienced, possibly never having even escaped the 2008 recession in the first place. He believes all this will come due before the end of Trump's term, probably within a year or two. I've heard other famous investors say a recession is likely to begin next year. These might not be in order of when he spoke: https://www.youtube.com/watch?v=1Fd58n4HhAM https://www.youtube.com/watch?v=1Fd58n4HhAM https://www.youtube.com/watch?v=WD2zcyfwdJ4 https://www.youtube.com/watch?v=WD2zcyfwdJ4 https://www.youtube.com/watch?v=5DuHWGh2GgU https://www.youtube.com/watch?v=5DuHWGh2GgU https://www.youtube.com/watch?v=03Ke9rIYGsc https://www.youtube.com/watch?v=03Ke9rIYGsc

melling 9y ago

What stocks will Warren Buffet be looking to buy once the fear sets in? How does one evaluate value the way he does?

nikanj 9y ago
The ones that have a business model your grandad would understand. His heuristic is somewhat naive, but he's made a lot of money by betting against the paradigm shifts and capitalistic innovations. He's basically applying systems theories to companies, and knows that the more complex a system is, the more possible failure states it has.
- melling 9y ago
  I’m looking for a heuristic. He’ll be staying in his “Circle or Competence”, great company, evaluating companies for their “margin of safety”? He’s only looking at a handful of numbers to determine a good buy. We really should try to learn from this market movement. Warren Buffett and Charlie Munger offer decades of knowledge and wisdom.
davidw 9y ago
I think at this point he's able to simply buy up a lot of companies, which is an option not available to normal people.
jacques_chester 9y ago
> What stocks will Warren Buffet be looking to buy once the fear sets in? Whatever's a good deal when the prices drop low enough. > How does one evaluate value the way he does? It's not difficult, he and Munger consistently refer to a handful of books and themes and repeat them over and over. They do have advantages that you and I don't, however. First: they have a captive source of cheap cash in their insurance businesses. They are run strictly for underwriting profit, meaning there is always cheap float on hand to invest. Second: they don't participate in the open market a lot of the time. A lot of the B-H stable is composed of successful private businesses who sold directly, rather than being purchased via the share market. Buffet & Menger can more or less let the deals-of-a-century come to them. Third: if there's nothing good to buy, they don't. They accumulate cash and near-cash assets. This means that when the market tanks, they are one of the few groups with cash on hand to snap up bargains. This happened in a big way during 2007 and 2008.

branchless 9y ago

> Hand's up, who thought back in December that we'd see a 6 handle on bitcoin by April:( Me, because fiat currencies derive their value from the requirement to pay domestic tax in said currency. Bitcoin does not have this.