True Or False? Bigger The Boom, Bigger The Bust? (capitalism, percentage, credit card)
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You can’t “crash” if you never left the ground. And yes, that’s what a correction is. The longer and more deeply reality is distorted, the more painful the snap back to it is.
Of course its true. If the index goes from 1 to 2 and then back to 1, thats a smaller boom-bust than if it goesl 1 to 3 and then back to 1. Same end result. If it doesn't go back to 1, it's not a bust.
But then, booms and busts are only on paper, and just rearrage the distribution of aggregate wealth, which remains more or less constrant. They have winners and losers, and a boom or bust in the counting houses is not necessarily a boom or bust on your dining room table.
It's always a boom for the rich and a bust for the poor, with a few outliers who prove the rule..
Ironically it seems that the usually people who spend the most time "getting scared" and expend the most energy warning everyone about the impending crash are the ones who don't invest in the stock market because they choose not to or have no money to invest.
Of course there is risk in equities, and the bigger total market capitalization is the greater the loss would be for a given percentage pullback.
Yes, ME, I'm very spooked by what's been going on lately. But not as much by what you'd think would scare me. Equities are making 1,000 moves at record paces, and have been for the past 4 years. Do I think it's overvalued? Absolutely. Kool Aide is a flowing.
But what scares me is the debt, and who holds it. We've leveraged the past 10 years with China's money. Of the $14T, China has roughly $12 of it. Our debt amount is what scares me, and it keeps going up with more and more being added. With a net population growth rate of approximately 6,000 people per day, we have to find a better way to support that economically. How? I don't know. But we've been leaning heavily on the company credit card for 10 years and now at the mercy of a frienemy.
There is an equilibrium to everything, and it can be difficult to find it when the majority don't want to deal with it. At 25,000+, I'd say we're not at it. In my job, part of my bonus can be in deferred stock that pays out over a few years at the then current strike price. Currently at it's 10 year high, I decided to take less bonus but in cash instead.
I'm spooked by worldwide retrenchment and rampant nationalism. Rich countries are increasingly hostile to immigration from poorer countries. International institutions are being respected less and less, and central banks are outright hated. The post-war consensus is under populist assault. Meanwhile, productivity-gains are asymptoting, or flat-lining. R&D investment - public or private - is waning. The pace of innovation seems to be slowing down, and in those areas where it remains vibrant - say, robotics or the misnamed "artificial intelligence" - there's outright derision and scorn lobbed against the innovations and the innovators.
Worldwide, markets are just now recovering to their 2007 highs; in US dollar-terms, they're not yet there. And did I mention an overvalued US dollar?
Well, no. There's also such a thing as pent-up demand. Annual GDP growth since 2009 has been under 2.5%, and it averaged 0.5% during GWB's second term. Meanwhile, the average annual growth since the end of World War II has been around 3%. In the Reagan years, we had average Annual GDP growth of 3.4%. In Clinton's term, it was 4%. We had short, mild recessions in 1990 and 2001, but nothing to counter essentially two decades of strong economic growth.
So, in truth, there's some ground to be made up from the past twelve years of either slower-growth or negative growth economies.
Some sort of correction is around the corner... I've seen inklings lately of a tech correction. Apple and Netflix in particular... their earnings reports lately just don't seem to fit their outsized responsibility of the last couple years' market gains.
When was the last time Apple did something really awesome? 2007 last I checked. When will Netflix become the new cable TV and people start cutting THAT cord? I'm not convinced their $12 a month subscriptions are really paying for all the heavy production they're now doing
The nature of capitalism is to have downturns now and then, it's inevitable. I don't see a 2008 style crisis coming, however.
Yes, ME, I'm very spooked by what's been going on lately. But not as much by what you'd think would scare me. Equities are making 1,000 moves at record paces, and have been for the past 4 years. Do I think it's overvalued? Absolutely. Kool Aide is a flowing.
But what scares me is the debt, and who holds it. We've leveraged the past 10 years with China's money. Of the $14T, China has roughly $12 of it. Our debt amount is what scares me, and it keeps going up with more and more being added. With a net population growth rate of approximately 6,000 people per day, we have to find a better way to support that economically. How? I don't know. But we've been leaning heavily on the company credit card for 10 years and now at the mercy of a frienemy.
There is an equilibrium to everything, and it can be difficult to find it when the majority don't want to deal with it. At 25,000+, I'd say we're not at it. In my job, part of my bonus can be in deferred stock that pays out over a few years at the then current strike price. Currently at it's 10 year high, I decided to take less bonus but in cash instead.
The nation's debt load is the least of my worries. If we default, trust me, we'll be given a 2nd or 3rd chance.
Look at Argentina, they've defaulted on their national debt 8X times now, and all it takes is a new leader, with austerity promises, and they line right up to buy the new debt. Over and over and over again!
I worry more about the inevitable nuclear holocaust, not knowing when it's going to happen!
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