It was a roller coaster.
Posted on 01/24/2008 8:42:19 AM PST by Travis McGee
Last year you were saying that real estate was solid, the bull market would go on forever. How did that turn out, TP?
Sure, the fed can keep the addict strung out for a long time, say, with 1% rates after the dot com bubble exploded.
But all addicts die in the end, preferring addiction to the pain of withdrawal.
"Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump."
"True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late and to bring about a depression."
"Credit expansion is not a nostrum to make people happy. The boom it engenders must inevitably lead to a debacle and unhappiness."
"What is needed for a sound expansion of production is additional capital goods, not money or fiduciary media. The credit boom is built on the sands of banknotes and deposits. It must collapse."
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
~~Ludwig von Mises
You can listen to Ludwig Von, or to John "In the long run we are all dead" Maynard Keynes.
The long run is here, TP.
There's no cycle, but the last big peak came in 1938. It ended with a huge amount saving (deferred consumption) in WWII. The current debt bubble may have peaked, the bank writeoffs are a promising sign that it has. The key will be to let it slowly deflate with a short recession rather than try to pump it back up. As Mises says, do the latter and destroy the currency.
Gotta run, it’s been fun.
If you predict a recession and it takes 3 years to arrive, you're right? If it takes 7 years? 10 years? That's funny.
I predict the Cubs will win the World Series. Eventually, I'll be right. So what if it's been 100 years since the last one. LOL!
Last year you were saying that real estate was solid, the bull market would go on forever.
You'll have to show me where I said that.
The long run is here, TP.
We're all dead? Are you predicting a new great Depression? Your quotes from the 1920s sure sound like it. So what is your prediction as far as GDP? Will it shrink 10% from the peak? 20%? Put your money where your mouth is. Let's see a solid number attached to your prediction.
It was a roller coaster.
http://finance.yahoo.com/indices?e=dow_jones
It is suffering from short-term profit taking. People with lots of bucks jump on the profit wagon and jump off in a big hurry. Jumping in with $ 200,000 and jumping out with $ 225,000. They repeat this ad infinitum and then do a reverse at times: selling short for BIG profits.
This is the proverbial "Stock Market from Hell." Only the 'Big Players' with bags of excess cash can afford this game. It is market manipulation played by experts. Up, down, up, down up -- then down, up . . .
That is why people cannot reasonably expect their 401(k)s to replace a Pension Plan. Smoke and mirrors confuse the masses. And all those 'teach me to trade' seminars (selling stock trading software) only increase market volatility. Thereby increasing the risk to Moms and Pops and increasing profits for Wise Guys.
Roller coaster markets are the bane of long term investors. Long term investing is dead right now. It may not come back as a viable stock market strategy for years.
Clickity click click . . .
Yes, at the end there will be a depression, that’s my prediction. Might begin this year, or in 2 or 3 years.
I hope Von Mises and I are wrong, and that Keynes and you are right. A national economic train wreck will be terrible for all of us.
Exactly! Like Societe Generale .
Excellent! Thanks for spelling it out. What is your definition of depression? How high is unemployment? How many quarters does GDP shrink? How much does it shrink from the peak?
If this doesn't happen, do I get to laugh at you some more?
I hope Von Mises and I are wrong, and that Keynes and you are right.
Please don't compare me to Keynes.
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