Posted on 01/08/2015 2:11:17 PM PST by SeekAndFind
I’ve noticed the same misplaced analysis on ‘cause and effect’ on oil/gas prices movements recently by other ‘experts’. I’m not economist, but it seems to me that the substantial rise in oil/gas prices back in the 2006/2007 time frame began to pinch consumer budgets which contributed to the start of mortgage delinquencies. It was only after the crisis hit and the ‘great recession’ was underway that oil/gas prices declined.
Before the collapse of 2008 and housing crisis,interest rates were rising.There was a slow down in the rate of increase in the money supply also.Velocity of the m1 stock also peaked and had turned down. Prices of houses had peaked and were turning down.These were other signs that the expansion phase had peaked.Total non-farm payrolls had peaked, and the unemployment rate had already started rising.Bush was passing tax rebates to stimulate the economy.
Is there a financial contraction happening now? Is the money supply slowing down? Is there a credit crunch developing? Are interest rates rising? Are banks failing? Are business going bankrupt?
Yes, equity shares.
If you want to buy more, you can't. If you want to sell them, you can't. If you want to pledge them for a loan, you can't.
If all the shareholders vote to increase their dividend, won't work. If they all vote for a share of the earnings, no luck. If they all vote to increase interest rates, nope. If they all vote to decrease interest rates, ditto.
their rate of return on their shares is guaranteed, paid first,
Paid first....guaranteed....sounds like a bond.
with any profits left over being paid into the Treasury.
Now that sounds like equity shares.
At any event, it is a hybrid sort of thing, sort of like a mule...
Yeah, kind of.
Oh, now I see Mitch’s confusion, oil tanked after the crisis, just like interest rates did.
He somehow feels that because they’ve dropped now, that is going to cause a crisis? LOL!
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Yes the drop in oil prices is a mitigating force to financial crises.
On the other hand, the wild fluctuations must indicate something is not right. One day we have a huge drop because oil is tanking. The next day, oil is still tanking, but the Fed indicates continuing aggression in the stimulus game and it soars again. The next day, it tanks because China isn't doing as good as predicted. The following day, 277 people are found to be without jobs so it tanks again.
The market has been co-opted by the microsecond traders who are very good at making a profit on upticks and down-ticks so they manufacture lots of both while they bleed the capital from the little guy.
Traders have been driving the market for a long time. Nothing new there other than improvements in tools and ability to trade faster etc. An individual investor has no chance against these guys and their machines when it comes to day trading IMO. Maybe some can but it requires serious attention. Individual investors need to know enough to ride out these peaks and troughs via well diversified index ETFs and seek out megatrends. Wild fluctuations are not fun but one has to deal with it if you want to play. With interest rates so low money really has nowhere else to go except stocks. this game will cash and burn and one has to be prepared for it
Ping
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