Stock markets doom !

[SysError]

I've enjoyed reading your post. So you didn't write it all for nothing.

Thanks.

So not a complete waste I guess.

I should say that I just went back to read and re-fresh my memory on what the heck I said the other day in those three posts.  I see that I got a little more caustic with just about every other paragraph or major section.

There was no need for me to be so polemic.  I could have, and I should have, made my points with a little more civility.

I apologize if I offended anyone.


(Other than that, I noticed, in some sense, that I had a tendency, on occasion, to use far too many clauses and parentheticals).

[DmonSlyr]

Violator, I'm enjoying this discussion.

Let's do a thought experiment please.

3 guys absolutely equally qualified apply for one position.  One guy says he will do it for 19 an hour and the other 2 say they will do it for 20 an hour.  The 19 an hour guy is hired.  Whom has determined the value of that job?


3 guys equally qualified apply for 3 positions exactly the same.  One guy says he will do it for 19 an hour and the other 2 say they will do it for 20 an hour.  All are hired at the proposed rate they asked for.  The first day of work while at lunch, they have a discussion and the 19 an hour guy finds out he is being paid less.  Who's fault is is that he is paid less?  Is he legally or morally entitled to demand the extra 1 hour an hour his buddies are getting?

3 guys equally qualified apply for one position.  All of them say they will do it for 20 an hour and they discuss this among themselves and agree not to take less.  The employer declines to hire any of the because he wants to pay 19 and hour and tells them, "I will keep looking for someone who will do it for 19 an hour".  They all go home an tell their wives they did not get the job because it paid 5% less than what they wanted.  One of the guys wife says,"You have been out of work for 6 months.  Get your butt back there right now and take that job for 19 an hour.  Who determined the value of that job?

I'll think on this a bit. My mind is turned off this weekend. But that does bring some good points, I'll confess. Might as well ask for 15 and see what you can really get away with. Ehh

[CptTrips]

These are kinda long, but some of you might be in to it.
I'm a big fan of this guy, even though he has gotten the crap beat out of him the last 6 years for being too bearish.  I think he has a better grasp on whats going on than most.  I think he just couldn't make himself believe the Fed would actually keep doing what its been doing since 2009.  In his defense, it is without historic precedence. Also, I believe he will be proven right in the next year or two.

https://www.youtube.com/watch?v=TYkCaUB1BQY
https://www.youtube.com/watch?v=wmUCjOjOeCo

Wab

[CptTrips]

Annnnnnd now they finally admit that ZIRP doesn't even help that much in promoting growth:

http://www.cnbc.com/2015/09/06/g-20-says-low-rates-not-enough-to-boost-growth-is-split-on-chinas-yuan.html

Seems to me they just signaled a rate hike for Sept.

They may not have promoted growth, but they have inflated a dangerous equities bubble and promoted insane malinvestment.
1. ZIRP has closed off yield from every other safe investment so a boat load of money has been poured into the market that should have never been there.  That puts pressure on stock prices to rise because of increased demand.  The second that ends, that money will flow right back out to bonds, CDs, etc.  Well some of it any way.  The portion they don't lose as the market craters before they can get out.

2.  ZIRP has made corporate earnings seem higher than they really are by lowering their carrying costs.  That has allowed supported higher stock prices because it makes their P/E look better. 

3.  ZIRP has kept borrowing costs so low that corps have started engaging in insane malinvestment like debt-financed stock buyback to keep inflating their stock prices.  Hint: this is very popular with the company executives who want to unload their stock options at good prices.  Nice of the stockholders to take on all that debt so the CEO can get cash.

4.  ZIRP has created a deadly level of complacency in the market.  After 6 years, some younger people in the industry have come to believe that is normal.  I've had people tell me it's the "new normal" and we can expect ZIRP for another decade at least.  This makes people believe that the market is now under the Fed protection and will never go down significantly, only up, up, up!  They are mistaken.

The sad part is, I think they did the right thing in 2008-2011 with ZIRP.  After 2011 they should have VERY VERY slowly started tapering off.
I agree with the need to pump money in to the economy to help stimulate things.  However instead I would have liked to have seen us:

Rebuild every interstate hi-way bridge
Rebuild/expand every major airport
Lay gigabit fiber to every household
Convert every coal-fired electrical plant to gas
Create a Apollo type project to revolutionize battery technology
ect, etc.

All these things could have pumped Gov money into a lagging economy (yes, I'm a moderate keynesian) without as many of the bad effect of ZIRP-4-ever.  And the is would all be great investments that would pay for themselves over time in increased productivity.

The other sad part is I think the pain is baked into the cake at this point.
I don't see any way of avoiding the reckoning now. 
And I think the reckoning is coming soon. 

Please.  Review your investment portfolios now and make sure they are balanced for your risk tolerance and time horizon.

Wab

[zack1234]

Has Western civilisation collapsed yet?

Come on North Korea buck your ideas up.

Come on Mel Gibson about time we had another blame the Redcoats give us our pitchfork film.

[Meatwad]

That movie was rubbish 

[zack1234]

Billy Elliot?

[Bruv119]

Billy Elliot?

have you seen him in the series washingtons spies? found that series a good watch on prime.

[Brooke]

Rebuild every interstate hi-way bridge
Rebuild/expand every major airport
Lay gigabit fiber to every household
Convert every coal-fired electrical plant to gas
Create a Apollo type project to revolutionize battery technology
ect, etc.

These would all result in enormous boondoggle government spending and waste -- Solyndra times 1000 -- and it would suck the life out of any other productive investments as everyone scrambles to catch the gravy train.

[CptTrips]

These would all result in enormous boondoggle government spending and waste -- Solyndra times 1000 -- and it would suck the life out of any other productive investments as everyone scrambles to catch the gravy train.

That's always a risk. 

Out of curiosity, do you consider the government support of the transcontinental railroad, and the Apollo space program, or the building of the interstate hi-way system as pointless wastes of money?

 

[zack1234]

Maynard Keynes was defo a wrong un

Your all a bunch of radicals and i have reported the lot of ya!

I now have a Lambretta sx180 and a Vespa Gts.

[DmonSlyr]

Violator, I'm enjoying this discussion.

Let's do a thought experiment please.

3 guys absolutely equally qualified apply for one position.  One guy says he will do it for 19 an hour and the other 2 say they will do it for 20 an hour.  The 19 an hour guy is hired.  Whom has determined the value of that job?


3 guys equally qualified apply for 3 positions exactly the same.  One guy says he will do it for 19 an hour and the other 2 say they will do it for 20 an hour.  All are hired at the proposed rate they asked for.  The first day of work while at lunch, they have a discussion and the 19 an hour guy finds out he is being paid less.  Who's fault is is that he is paid less?  Is he legally or morally entitled to demand the extra 1 hour an hour his buddies are getting?

3 guys equally qualified apply for one position.  All of them say they will do it for 20 an hour and they discuss this among themselves and agree not to take less.  The employer declines to hire any of the because he wants to pay 19 and hour and tells them, "I will keep looking for someone who will do it for 19 an hour".  They all go home an tell their wives they did not get the job because it paid 5% less than what they wanted.  One of the guys wife says,"You have been out of work for 6 months.  Get your butt back there right now and take that job for 19 an hour.  Who determined the value of that job?

Alright, now that my mind is turned on, let me discuss the situations and why this is teetering on not being sustainable in the long run.

The way I look at it is this, given how quiet companies are about how much they are willing to pay, essentially they do set the market value of the job given that they will only absolutely pay a person X amount no matter how qualified that person is. So, person 1 and 2 would never actually know person 3 undercut them for the job. Now, market value says if there is a saturated job market for that specific job, they can ultimately higher for less given that there are so many people applying for the same job. There are younger people who would ask for a lot less given experience, while there are people in the same field with 10 years experience who ask for more. It is up to the companies discretion to hire a young cheap employee for twice as less or to higher a skilled experienced worker who understands the job well. Now, when you compare skills, some jobs really aren't that difficult, so doing it for 10 years would reap a lower asking value/experience since any ole person can come by and learn the job. So as the market gets more and more saturated while the skills aren't as difficult, the price for that labor goes down and down.

Now that we have an influx of immigrants who are coming to America to better their lives by "working" in a country that pays a lot higher, they do not understand the value of a position, just as much as a young person doesn't value a position yet. So they come in and take a lot of labor jobs demanding really low wages because it's higher than what their country was offering. So we have a an influx in the job market which is becoming more and more saturated. This creates cheap labor for employers because they can get away with offering low wages to immigrants who will accept anything almost. This essentially lowers the market value of the job but does not lower the skills needed to perform it. Therefore, you are getting the same skilled labor for twice as less with double the workers while the company makes higher revs and net profits from it. (It looks great on paper).

So, lets look at how getting a college education or getting an education in general about any subject will over time devalue based on this concept.
College students are now learning skills that took some people 10 years to achieve. Those college students do not understand the value of the job, they immediately go out searching for work at a "real" job. These students only have 6 months before they have to start paying loans off, they take a decent office job for 30K a year before realizing this is not even going to be close to making enough to really "live". The person who has spent 10 years learning the profession loses his job due to downsizing, he goes out and tries to find a job for 50K a year. Well, since companies are now hiring college graduates for a lot cheaper, they will not need to pay this guy 50K a year even though he is probably more experienced. This guy is out of a job for 6 months before his wife comes complaining for him to accept a cheaper value. So he now accepts a job for 45K even though he was worth 50k before. He now has to cut expenses and his livelyhood since he has to accept the lower pay. Now, imagine this happening to every profession out there. Overtime more and more people are getting degrees and accepting positions that completely undermine what the old standards were since they have no idea what they were valued at to begin with. This pushes the wages down and people into lowered skilled positions which undervalues skills as a whole.

So instead of doing what professional sports do and hiring the best athletes for grand amounts who will produce. Companies instead are doing everything they can to lower the value of skills in the workforce. If they undervalue the skills it takes to do the job, they can offer what ever they want knowing someone will accept it. Instead of making the position more competitive based on skilled performance, they are making it more competitive based on who will accept the cheapest pay. If they did this in football or baseball, no one would watch sports anymore because most of the teams would suck as no one would have the drive to become a professional athlete anymore. If you aren't a humanitarian, what is the point of striving to be something if you know the position ain't going to pay well anyway? 4 things are happening, 1. an influx of college students who will accept cheap wages by being undermined in the workforce, 2. A slew of people who just don't see any reason to strive for something because there are no incentives.  IE, its better to live off the government because I can make almost as much without having to anything instead of working hard and barely getting anything anyway, might as well sell drugs, 3. Automation. 4. Off shoring labor.  So we are creating more poverty (as the poor get pushed out of positions or don't want to work) while the working class gets devalued by the influx of under appreciated college students X automation which causes people to have to choose new careers, immigrant labor which steals easier skilled work for a lot cheaper, and offshoring labor which only benefits the company but not the economy.

This will happen for so long that in the end companies will not be making any more profits because people don't have the money to spend, they will offshore their labor to countries with even cheaper labor to make a profit, eventually prices will have to increase based on supply restraints, however the market as a whole will shrink in their home country because people will not be able to afford the products anymore. This is a huge chain reaction that will take time to accumulate and is happening as we speak. Products will become less quality and as a whole society will devalue and the standard of living will decline. If companies do not start giving back by adding wage incentives to their employees or offering better wages  as a whole, our society will end up turning into a Walmart economy where only the top dogs make any real wages. It wont be a fun society to live in.

[Aspen]

Thats some serious glass-half-full thinking.  Our economy is dramatically different than it used to be but there is opportunity everywhere.  With the internet and smart phones, an individual can have a business with a world wide presence in about a week.  If labor rates are below market due to corporate greed, Government safety nets, too much immigration,  the Feds using a dull pencil or the wage fairy running out of pixy dust, then scoop up some of that "cheap" labor and start producing.

My four closest friends are all either college drop-outs or just skipped it, all own their own business and all are pretty successful.  One has a trucking company, one is directional driller (horizontally under roads, rivers, etc), one is a TV personality/pro-staffer in a recreation industry and the other sold his garage-born product business to a conglomerate and semi-retired at 45.  They all came from zero family money, all took huge, "that will never work" risks and they all sacrificed a bunch to get things rolling.  The semi-retired guy lived in the first tiny warehouse space he rented, joined a gym so he could take showers and slept on a mattress with his business partner for a couple weeks until they got classy and both had their own mattresses on the floor. 

They all also failed miserably in a prior venture or two and worked any crap job they could to pay off debts & continue eating while they shifted gears.

Yes, there are a zillion things wrong or unfair about our economy, regulations, taxation, immigration, Federal reserve system, etc, etc, etc.  Andy Dufresne was right when he said "I guess it comes down to a simple choice, really. Get busy living or get busy dying."

[Ripsnort]

Alright, now that my mind is turned on, let me discuss the situations and why this is teetering on not being sustainable in the long run.

The way I look at it is this, given how quiet companies are about how much they are willing to pay, essentially they do set the market value of the job given that they will only absolutely pay a person X amount no matter how qualified that person is. So, person 1 and 2 would never actually know person 3 undercut them for the job. Now, market value says if there is a saturated job market for that specific job, they can ultimately higher for less given that there are so many people applying for the same job. There are younger people who would ask for a lot less given experience, while there are people in the same field with 10 years experience who ask for more. It is up to the companies discretion to hire a young cheap employee for twice as less or to higher a skilled experienced worker who understands the job well. Now, when you compare skills, some jobs really aren't that difficult, so doing it for 10 years would reap a lower asking value/experience since any ole person can come by and learn the job. So as the market gets more and more saturated while the skills aren't as difficult, the price for that labor goes down and down.

Now that we have an influx of immigrants who are coming to America to better their lives by "working" in a country that pays a lot higher, they do not understand the value of a position, just as much as a young person doesn't value a position yet. So they come in and take a lot of labor jobs demanding really low wages because it's higher than what their country was offering. So we have a an influx in the job market which is becoming more and more saturated. This creates cheap labor for employers because they can get away with offering low wages to immigrants who will accept anything almost. This essentially lowers the market value of the job but does not lower the skills needed to perform it. Therefore, you are getting the same skilled labor for twice as less with double the workers while the company makes higher revs and net profits from it. (It looks great on paper).

So, lets look at how getting a college education or getting an education in general about any subject will over time devalue based on this concept.
College students are now learning skills that took some people 10 years to achieve. Those college students do not understand the value of the job, they immediately go out searching for work at a "real" job. These students only have 6 months before they have to start paying loans off, they take a decent office job for 30K a year before realizing this is not even going to be close to making enough to really "live". The person who has spent 10 years learning the profession loses his job due to downsizing, he goes out and tries to find a job for 50K a year. Well, since companies are now hiring college graduates for a lot cheaper, they will not need to pay this guy 50K a year even though he is probably more experienced. This guy is out of a job for 6 months before his wife comes complaining for him to accept a cheaper value. So he now accepts a job for 45K even though he was worth 50k before. He now has to cut expenses and his livelyhood since he has to accept the lower pay. Now, imagine this happening to every profession out there. Overtime more and more people are getting degrees and accepting positions that completely undermine what the old standards were since they have no idea what they were valued at to begin with. This pushes the wages down and people into lowered skilled positions which undervalues skills as a whole.

So instead of doing what professional sports do and hiring the best athletes for grand amounts who will produce. Companies instead are doing everything they can to lower the value of skills in the workforce. If they undervalue the skills it takes to do the job, they can offer what ever they want knowing someone will accept it. Instead of making the position more competitive based on skilled performance, they are making it more competitive based on who will accept the cheapest pay. If they did this in football or baseball, no one would watch sports anymore because most of the teams would suck as no one would have the drive to become a professional athlete anymore. If you aren't a humanitarian, what is the point of striving to be something if you know the position ain't going to pay well anyway? 4 things are happening, 1. an influx of college students who will accept cheap wages by being undermined in the workforce, 2. A slew of people who just don't see any reason to strive for something because there are no incentives.  IE, its better to live off the government because I can make almost as much without having to anything instead of working hard and barely getting anything anyway, might as well sell drugs, 3. Automation. 4. Off shoring labor.  So we are creating more poverty (as the poor get pushed out of positions or don't want to work) while the working class gets devalued by the influx of under appreciated college students X automation which causes people to have to choose new careers, immigrant labor which steals easier skilled work for a lot cheaper, and offshoring labor which only benefits the company but not the economy.

This will happen for so long that in the end companies will not be making any more profits because people don't have the money to spend, they will offshore their labor to countries with even cheaper labor to make a profit, eventually prices will have to increase based on supply restraints, however the market as a whole will shrink in their home country because people will not be able to afford the products anymore. This is a huge chain reaction that will take time to accumulate and is happening as we speak. Products will become less quality and as a whole society will devalue and the standard of living will decline. If companies do not start giving back by adding wage incentives to their employees or offering better wages  as a whole, our society will end up turning into a Walmart economy where only the top dogs make any real wages. It wont be a fun society to live in.

HOLY DEBBIE DOWNER BATMAN!!!!

You know, a fellow told this same story, plus or minus other 'current events" occurring in the 1960's and my Dad essentially blew him off regarding the market volatility.  Dad retired in 1987 at age 57 with $800k invest in the market and some good 'cash' in the bank, along with his 40 acres and new home.

Today he is 85, net worth is 2.7 million (lost 5% in the last 2 weeks, big squealing deal )

Bottom line, prepare not only your life for the worst case scenario, but your portfolio as well.
There are Preppers like Dad for emergency situations at home, and in his investments.
I'm certainly glad he's been my teacher.

[DmonSlyr]

Yeah, I realize this sounds like a grostesque situation. It probably won't get that bad. I just see a grim structure approaching if we cannot maintain a status quo in the work force of paying full time independent workers a semi livable wage who work in multinational multibillion dollar companies. It's the first step to prosperity in a nation to gain momentum. You also have to realize that not everyone can own or operate a busineses. There are people who do much better at specific job functions and we should appreciate that.

I have finally began investing in companies this year in the stock market and I've got to say its been pretty interesting and very volital, wish I had 10K to play with.  It's exciting to finally be able to grow money. I plan to be very good at investing. My goal is to be able to play the stock market until I can save to possibly go all in and start a business or just play stocks all day. That is a tough transition to make I imagine. It's always been a dream of mine. Haven't decided on a product either and I think I need more experience.  Luckily, I got an accounting Job and I've really learned how to disect a business. I plan to do everything I can to stay afloat in this society in a prosperous way by reaching higher goals I've set and to save and Invest. I do my best to sticking to worrying only about me and to be my best, but I see something happening  and I don't quite know how it's going to effect our socitey and market in the next 15 years.