6 ms·

I honestly don't know how we've been in a bull market this long. Trump's been turning a lot of economic knobs and the market hasn't really responded drastically

I honestly don't know how we've been in a bull market this long. Trump's been turning a lot of economic knobs and the market hasn't really responded drastically like it has in the past. When it does crash, it's going to crash hard. Just my opinion.

AznHisoka 7y ago
Why would it crash hard unless interest rates go up by a significant amount? The financial industry is filled with tons of money that is looking for returns - it's just not going not sit in a bank and let inflation rot its value. If there's a downturn, it will be very temporary as Wall Street is so anxious/trigger happy. They'll immediately get greedy and buy any dips. Everyday, there is new money flowing into the system automatically, without any conscious decision. It's coming from 401Ks, IRAs, etc. That money needs to be put into action.
- westpfelia 7y ago
  Unless the fed raises interest rates by 15% in one day raising interest rates dont cause crashes. Interest rates are raised partly in effort to stem the damage caused by economic downturns.
- michaelt 7y ago
  Same as any crash: If people think the market is going to do worse than a bank account in the near term, they sell. If enough people agree, it's a self-fulfilling prophecy.
  - stillbourne 7y ago
    Market Crashes are not that simple. More often than not they are a form of liquidity crisis on debt instruments that are poorly designed and lack the advertised returns after long term investment. Typically these bonds have low security collateral and high risk. In 2008 this was related to the subprime mortgage bubble, the coming bubble is sometimes referred to as the everything bubble. This will probably be escalated by the Trump Tax Cuts as many in the middle class ended up paying more in the last year than in previous years due to punitive removal of certain deductions designed to punish blue states.
    - javagram 7y ago
      > as many in the middle class ended up paying more in the last year than in previous years due to punitive removal of certain deductions designed to punish blue states. This is basically a politically-motivated myth. https://www.nytimes.com/2019/04/14/business/economy/income-tax-cut.html?smid=nytcore-ios-share https://www.nytimes.com/2019/04/14/business/economy/income-t... 80-90% of households making above $50k/year got a tax cut, yes, including residents of blue states that have their SALT capped.
      - stillbourne 7y ago
        Most of my co-workers who own a home paid additional taxes than we did last year. For a politically motivated myth it sure looks like $1.5k more than paid last year.
        javagram 7y ago
        Feels like an anecdote v data situation. Are you sure your coworkers are even right in believing they paid more? The article I linked shows vast number of middle class people somehow ended up under the impression they paid more even when they actually had paid less.
        stillbourne 7y ago
        I'm not going to ask them to take a picture of this years vs last years returns and I am aware that an anecdote is not data but I can assure you when most people are expecting a return and get hit with a significant out of pocket debit instead they were quite upset. Out of an office of 10 people, 6 own a home, at least 2 of my coworkers I know for a fact complained that when last year they had a refund, this year they had to pay. I don't know about the others I can't ask because most people are working from home today.
        astura 7y ago
        Getting a refund or owing at the end of the year has diddly squat to do with amount or percentage of taxes paid. Are you sure it wasn't due to your company messing up withholdings in 2018? What state do you live in and how much is average property tax in your area? For reference we live in a blue state and own a home and my family made approx $3k more in 2018 vs 2017 yet we paid $1k less in taxes in 2018. We went from itemizing to taking the standard deduction.
- lambdasquirrel 7y ago
  Every dollar in issues debt is effectively multiplied. When you turn back the knobs even a little bit, you’d be surprised by the amount of contraction. The “dodgy” money being described is more or less the froth that ends up at the very top. The danger is that with such a long bull market, only God knows how many non-survivable companies there are beyond the Ubers and Lyfts. What’s unsustainable will have to end eventually. Pushing money into the system doesn’t make the economy magically better by itself.
- stillbourne 7y ago
  Did you even bother reading the article? It basically states that we haven't learned out lessons from 2008. Was the 2008 crash because of fed interest rates? No, it was because of poorly designed high-interest junk bonds. The article says the same behavior that caused the market to tank in 2008 in happening again. Furthermore, if we take a look at past crashes we can see that there has been quite a few that were caused by the same issue, the early 80s Savings and Loan Crisis, the 89 bust of the high-yield bond market, the Dot Com Bubble of the early 2000s, and the Financial crisis of 2008 we all caused by Junk Bonds NOT the Fed. Additionally the idea that new money flowing into the system from 401Ks, IRAs, etc is extremely naive. These are long term investment instruments sure but as they are generally not actively managed they are not immune to fluctuations in the market and the market is not immune to people who have the misfortune to retiring in an economic bust. I have observed this in the second person as my grandfather was well to do before 2008, did not listen to my advice to allocate his retirement money to a guaranteed interest plan until after the market hit bottom (which was the wrong time to do that) he basically lost 500k.
  - maimeowmeow 7y ago
    My take is that financial crises only happen on years that contain 8, 9, 0, but you should be more careful if the year ends in those numbers. Looks like 2020 is going to be an unfortunant year.
  - zzzzzzzza 7y ago
    the big reason why the economy cyles is due to speculative cycle in land values, the booms/busts that aren't, are more like tulip bulb manias than real recessions/depressions you could fix it by raising land value taxes high enough to extract all land rent and thus almost eliminating land speculation. At the same time you could get rid of most of our other taxes like capital gains and income taxes.
    - AnimalMuppet 7y ago
      > the big reason why the economy cyles is due to speculative cycle in land values Baloney. The last one was, true. The Great Depression wasn't land, though - it was the stock market. And rents these days don't primarily come from land. Your land value tax fits the economy of a few centuries ago, where the income primarily came from land, but it doesn't fit today, where the income primarily comes from other kinds of assets. (The value of the land it occupies is not how Amazon makes money.) All your land tax would do is penalize land compared to other asset classes. And, since you are wrong in your first point (that economic cycles are driven by speculation in land), you would do this for no good reason. That's probably not going to end well.
- tobltobs 7y ago
  > It's coming from 401Ks, IRAs, etc. That money needs to be put into action. Not too long anymore then we will reach Peak 401K.
- roenxi 7y ago
  > Why would it crash hard unless interest rates go up by a significant amount? The 2008-era crisis in theory should have resulted in a whole heap of financial managers taking their companies bankrupt/to a place of horrid returns and being blacklisted from ever managing a lemonade stand. But they were bailed out, so now they got promotions instead for record returns or whatever it is they've been doing since. Since the finance industry has substantial control over what everyone else does, that leaks out into the real world. So, the intuition is that the system is being corrupted and people with no ability to make good decisions are being put in charge. At some point that should boil over. You can fit math models to that and guess which metric will blow out first. I'm not sure how much I buy that argument; people have an incredible ability to put up with suboptimal circumstances. But when you put idiots in charge there is always a risk that they do something spectacularly stupid so my personal guess is at some point the pensions crack and trigger something. It is a spectator sport in a way. Maybe America is productive enough that they can cope with a few bad eggs in the financial markets. Maybe the taxpayers can shoulder all burdens! POSTSCRIPT Just for fun, veering off topic. https://en.wikipedia.org/wiki/List_of_bank_mergers_in_the_United_States https://en.wikipedia.org/wiki/List_of_bank_mergers_in_the_Un... My interpretation is that something went wrong with bank regulation in the late 70s or early 80s. That is when the too-big-to-fail snowball started rolling; since then the stresses in the system seem to have been building. 2008 was a nasty blow.
  - mtberatwork 7y ago
    > something went wrong with bank regulation in the late 70s or early 80s. I'm assuming you are referring to the repeal of Glass-Steagall?
    - ovi256 7y ago
      That was in 1999.
      - mtberatwork 7y ago
        Ahh, thanks! You are correct. I had thought that some initial provisions were repealed in the 80s.
- benj111 7y ago
  You could say this at any time. If anything the danger is increased because there isn't room to cut rates because they are already low. It isn't long since organisations were happy to pay central banks to have their money stored safely.
deleted 7y ago
[deleted]

AznHisoka 7y ago

Why would it crash hard unless interest rates go up by a significant amount? The financial industry is filled with tons of money that is looking for returns - it's just not going not sit in a bank and let inflation rot its value. If there's a downturn, it will be very temporary as Wall Street is so anxious/trigger happy. They'll immediately get greedy and buy any dips. Everyday, there is new money flowing into the system automatically, without any conscious decision. It's coming from 401Ks, IRAs, etc. That money needs to be put into action.

westpfelia 7y ago
Unless the fed raises interest rates by 15% in one day raising interest rates dont cause crashes. Interest rates are raised partly in effort to stem the damage caused by economic downturns.
michaelt 7y ago
Same as any crash: If people think the market is going to do worse than a bank account in the near term, they sell. If enough people agree, it's a self-fulfilling prophecy.
- stillbourne 7y ago
  Market Crashes are not that simple. More often than not they are a form of liquidity crisis on debt instruments that are poorly designed and lack the advertised returns after long term investment. Typically these bonds have low security collateral and high risk. In 2008 this was related to the subprime mortgage bubble, the coming bubble is sometimes referred to as the everything bubble. This will probably be escalated by the Trump Tax Cuts as many in the middle class ended up paying more in the last year than in previous years due to punitive removal of certain deductions designed to punish blue states.
  - javagram 7y ago
    > as many in the middle class ended up paying more in the last year than in previous years due to punitive removal of certain deductions designed to punish blue states. This is basically a politically-motivated myth. https://www.nytimes.com/2019/04/14/business/economy/income-tax-cut.html?smid=nytcore-ios-share https://www.nytimes.com/2019/04/14/business/economy/income-t... 80-90% of households making above $50k/year got a tax cut, yes, including residents of blue states that have their SALT capped.
    - stillbourne 7y ago
      Most of my co-workers who own a home paid additional taxes than we did last year. For a politically motivated myth it sure looks like $1.5k more than paid last year.
      - javagram 7y ago
        Feels like an anecdote v data situation. Are you sure your coworkers are even right in believing they paid more? The article I linked shows vast number of middle class people somehow ended up under the impression they paid more even when they actually had paid less.
        stillbourne 7y ago
        I'm not going to ask them to take a picture of this years vs last years returns and I am aware that an anecdote is not data but I can assure you when most people are expecting a return and get hit with a significant out of pocket debit instead they were quite upset. Out of an office of 10 people, 6 own a home, at least 2 of my coworkers I know for a fact complained that when last year they had a refund, this year they had to pay. I don't know about the others I can't ask because most people are working from home today.
        astura 7y ago
        Getting a refund or owing at the end of the year has diddly squat to do with amount or percentage of taxes paid. Are you sure it wasn't due to your company messing up withholdings in 2018? What state do you live in and how much is average property tax in your area? For reference we live in a blue state and own a home and my family made approx $3k more in 2018 vs 2017 yet we paid $1k less in taxes in 2018. We went from itemizing to taking the standard deduction.
lambdasquirrel 7y ago
Every dollar in issues debt is effectively multiplied. When you turn back the knobs even a little bit, you’d be surprised by the amount of contraction. The “dodgy” money being described is more or less the froth that ends up at the very top. The danger is that with such a long bull market, only God knows how many non-survivable companies there are beyond the Ubers and Lyfts. What’s unsustainable will have to end eventually. Pushing money into the system doesn’t make the economy magically better by itself.
stillbourne 7y ago
Did you even bother reading the article? It basically states that we haven't learned out lessons from 2008. Was the 2008 crash because of fed interest rates? No, it was because of poorly designed high-interest junk bonds. The article says the same behavior that caused the market to tank in 2008 in happening again. Furthermore, if we take a look at past crashes we can see that there has been quite a few that were caused by the same issue, the early 80s Savings and Loan Crisis, the 89 bust of the high-yield bond market, the Dot Com Bubble of the early 2000s, and the Financial crisis of 2008 we all caused by Junk Bonds NOT the Fed. Additionally the idea that new money flowing into the system from 401Ks, IRAs, etc is extremely naive. These are long term investment instruments sure but as they are generally not actively managed they are not immune to fluctuations in the market and the market is not immune to people who have the misfortune to retiring in an economic bust. I have observed this in the second person as my grandfather was well to do before 2008, did not listen to my advice to allocate his retirement money to a guaranteed interest plan until after the market hit bottom (which was the wrong time to do that) he basically lost 500k.
- maimeowmeow 7y ago
  My take is that financial crises only happen on years that contain 8, 9, 0, but you should be more careful if the year ends in those numbers. Looks like 2020 is going to be an unfortunant year.
- zzzzzzzza 7y ago
  the big reason why the economy cyles is due to speculative cycle in land values, the booms/busts that aren't, are more like tulip bulb manias than real recessions/depressions you could fix it by raising land value taxes high enough to extract all land rent and thus almost eliminating land speculation. At the same time you could get rid of most of our other taxes like capital gains and income taxes.
  - AnimalMuppet 7y ago
    > the big reason why the economy cyles is due to speculative cycle in land values Baloney. The last one was, true. The Great Depression wasn't land, though - it was the stock market. And rents these days don't primarily come from land. Your land value tax fits the economy of a few centuries ago, where the income primarily came from land, but it doesn't fit today, where the income primarily comes from other kinds of assets. (The value of the land it occupies is not how Amazon makes money.) All your land tax would do is penalize land compared to other asset classes. And, since you are wrong in your first point (that economic cycles are driven by speculation in land), you would do this for no good reason. That's probably not going to end well.
tobltobs 7y ago
> It's coming from 401Ks, IRAs, etc. That money needs to be put into action. Not too long anymore then we will reach Peak 401K.
roenxi 7y ago
> Why would it crash hard unless interest rates go up by a significant amount? The 2008-era crisis in theory should have resulted in a whole heap of financial managers taking their companies bankrupt/to a place of horrid returns and being blacklisted from ever managing a lemonade stand. But they were bailed out, so now they got promotions instead for record returns or whatever it is they've been doing since. Since the finance industry has substantial control over what everyone else does, that leaks out into the real world. So, the intuition is that the system is being corrupted and people with no ability to make good decisions are being put in charge. At some point that should boil over. You can fit math models to that and guess which metric will blow out first. I'm not sure how much I buy that argument; people have an incredible ability to put up with suboptimal circumstances. But when you put idiots in charge there is always a risk that they do something spectacularly stupid so my personal guess is at some point the pensions crack and trigger something. It is a spectator sport in a way. Maybe America is productive enough that they can cope with a few bad eggs in the financial markets. Maybe the taxpayers can shoulder all burdens! POSTSCRIPT Just for fun, veering off topic. https://en.wikipedia.org/wiki/List_of_bank_mergers_in_the_United_States https://en.wikipedia.org/wiki/List_of_bank_mergers_in_the_Un... My interpretation is that something went wrong with bank regulation in the late 70s or early 80s. That is when the too-big-to-fail snowball started rolling; since then the stresses in the system seem to have been building. 2008 was a nasty blow.
- mtberatwork 7y ago
  > something went wrong with bank regulation in the late 70s or early 80s. I'm assuming you are referring to the repeal of Glass-Steagall?
  - ovi256 7y ago
    That was in 1999.
    - mtberatwork 7y ago
      Ahh, thanks! You are correct. I had thought that some initial provisions were repealed in the 80s.
benj111 7y ago
You could say this at any time. If anything the danger is increased because there isn't room to cut rates because they are already low. It isn't long since organisations were happy to pay central banks to have their money stored safely.

deleted 7y ago

[deleted]