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You can give a dying man a shot of adrenalin, and he may actually perk up and feel better for a little while--but he's still going to die. Giving him adrenaline doesn't do anything to cure what is ailing him. That's what the Fed is doing--giving shots of adrenaline. The underlying problems: rampant speculation, overleveraging, overconsumption of depleting resources--they are still reaping their deadly effects. Until Americans and their business and government leadership are willing to confront those problems--and actually DO something about them, we are going to continue to squander our future. The coming generation(s) will hate us for what we are going to them.
or it might be as simple as a short covering rally ignited in the stock index futures...stock market lows are generally made during times of pervasive fear...
I agree. This is a stock market low caused by pervasive fear. The good news is that if we are at a low, it will go up. (apparently investors believe this if they are covering their shorts right now)
"Most often, traders cover their shorts whenever they speculate that the securities will rise" Short Covering
Quote:
Originally Posted by MileHi5
Many people on this forum currently favor the option of renting rather than investing in a home. I'd be interested to know your thoughts on what other investments you see as less risky than real estate.
We are getting set to move from NZ to Colorado next month and at this stage prefer to buy our own home. If we go down the renting road, it poses the problem of how to keep our hard earned money safe in such a volatile market.
In NZ, with interest rates so high, having money on term deposit at over 9% pa is a damn good safe option. Not so in USA with interest rates falling - another .75 points today.
Your thoughts?
In general, people on this forum are negative and they are feeding off each other. There is a detailed discussion complete with trend graphs on the last 3 or 4 pages. If you are here for the long term, my opinion is that you are much better off buying than renting. What is known is that prices have recently fallen and that put many people into a panic. When values have recently risen, people don't want to miss the boat and will overbuy. I prefer to buck the trend and buy now because even if we have not hit rock bottom, in the long term it is still real estate and compared to last year it is a good deal. There will always be more people and the same amount of land.
Quote:
Originally Posted by Bob from down south
And so the dollar carry trade was born...
As I step back and look at the big picture, I note that even after today's rather odd 400 point increase, the Dow is only a few percent ahead of where it was in 1999.
Is that the worst thing you could find about this good news?
Lehman reports a 53% hit to quarterly profits with God-knows what still hiding in their off-balance sheet septic tank, and the street cheers like they discovered a way to turn water into oil.
Maybe the people who put their money where their mouth is have already factored into the price the fact that quarterly profits would be down. They estimated that the profits would be down more than 53%. So the 53% was lower than expectations. If you know more than them, there is always shorts and puts. The good news is that the risks taken by the lending institutions have already been factored into the price of their stocks and the market is still strong.
In the long term, gravity still wins. We're a long way from out of the woods.
Does that mean that at some point, my property will be worth nothing? If you think gravity controls the stock market, you should take both physics and economics classes.
Quote:
Originally Posted by Bideshi
The market has spiked after each rate decrease, but for only a day or so and then down it goes further. The drugs aint working no mo.
Another negative post about positive news. In the past, at least there was actually negative aspects of the news that was being posted in a biased manner. What will you say if we find out that we didn't quite hit a recession even though we went through this lesson the whole country got about ARM's and debt ratios?
Quote:
Originally Posted by jazzlover
The underlying problems: rampant speculation, overleveraging, overconsumption of depleting resources--they are still reaping their deadly effects.
Rampant speculation goes both ways. Negative speculation is the reason Lehman stock went up yesterday. Think about it. Look at the situation more objectively.
I don't think we have to worry too much about overleveraging for a while after the lessons of the last few months. "Creditworthy people can't get good loans." Have I read this negative statement on this thread before? Isn't this the exact opposite of overleveraging? You people are actually arguing with each other and the only thing you can agree on is that things are bad.
Economics - The study of the production, distribution, and consumption of LIMITED RESOURCES. It has been that way since the beginning of societies, and the whiners were making overconsumption argument. Complaints about the "overconsumption of depleting resources" demonstrate to me a lack of understanding of economics as well as an "I am always a victim" attitude.
Come on people, I'm not asking you to put on blinders, but when the market goes up 400 points, why do ALL the posts have to be negative? At this point, I have to suspect other motives.....maybe political?
A recession is a decline in the gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year. Have we even had a single quarter of negative real economic growth? The fact that we have not (in the face of all the negative news vigorously reported on this thread) shows the real strength and resilience of the economies of this great world, nation and state.
You're thinking in dollars. If you factor in the decline in the value of the dollar, you're upside down.
She might have you on this one Multitrak since your house is paid for, but since we live in the USA, when you sell, you can still spend those extra dollars pretty much the same - especially if you buy products made in the USA For most people, the declining dollar means that they will pay for their home loans with dollars that have less value. Since the homes are paid in future dollars, the burden to pay the house off is decreased... while rents will continue to increase. Should I buy or rent?
She might have you on this one Multitrak since your house is paid for, but since we live in the USA, when you sell, you can still spend those extra dollars pretty much the same
Yep.....it'll just take twice as many of them to pay your gas bill, food bill, fill up the car, etc......
Yep.....it'll just take twice as many of them to pay your gas bill, food bill, fill up the car, etc......
I think you are confusing the consumer price index with the value of the dollar compared to foreign currency. What I can't figure out is whether you are doing it intentionally to make it sound worse than it is or if you are just confused. The good news is that the CPI is not going up nearly as fast as the dollar is going down compared to say the Euro.
You're thinking in dollars. If you factor in the decline in the value of the dollar, you're upside down.
true, but not if i'm short the dollar index or long euro futures equivalent to the home purchase price. i try to think in terms of hedges, especially with large tag items and cash savings, thus minimizing risk exposure and preserving wealth. when my algo models indicate that the dollar has reached a low basis world currencies, then i'll cover the hedges. folks should learn to think globally...currency devaluations (and taxes) impact the bottom line in a big way.
Barchart.com - Charts - DXM8 U.S. DOLLAR INDEX June 2008 FINEX (http://charts3.barchart.com/chart.asp?jav=adv&vol=Y&grid=Y&divd=Y&org=stk&sym= DXM8&data=H&code=BSTK&evnt=adv - broken link)
I guess there's no need for anyone to worry about overleveraging, since everyone learned their lesson...in 1925, then again in 1929...and then again in 2000. No way we'd see a brokerage with 80+ years in the business fold in a barrage of margin calls after living through those, right?
I read yesterday that JP Morgan is currently leveraged at 74:1...no worries there, matey!
Yesterday's 420 point gain was a lot of panicked short covering and irrational exuberance. Now that folks have had a chance to sit down and realize that there really is no fundamental improvement in the grim economic situation, reality is absolutely going to set in again.
I failed to note that yesterday's Dow, even after a 420-point crack-induced rocket shot, was actually significantly below the 1999 peak in real (inflation adjusted) terms...and only a few percent above the nominal value reached in '99. So the wider market has moved sideways for 9 years.
For those contemplating a buy/rent decision now, well, whatever you can buy today, you will very likely be able to buy for much less in six months. Even assuming that fed govt action can get lenders lending again, the NINJA (no documented income, no job, no assets) loans with nothing down using an inflated broker-tainted interest-conflicted appraisal are a thing of the past. Without a sizeable increase in incomes, the income distribution does not line up with the market pricing distribution, meaning that there are not nearly enough buyers with incomes large enough to qualify for loans anywhere near the distribution of market prices. And that's assuming no recession-induced job losses impairing family balance sheets, which is a pretty rosy assumption at this moment.
Until house prices are in line with incomes, and broadly speaking that means median price at ~2.8 times median income, the vector is going to be south. Gravity wins. Prices have to come down in absence of stunt-man loan products that are inherently unsustainable.
And with fuel prices pushing over $4 a gallon, many irrationally optimistic and reality-challenged people are going to be discovering the reality of limited resources in the only terms they apparently can understand (an empty wallet at month's end). Ten mpg SUVs, decisions to live over an hour commute from work, and living in super-sized McMansions with super-sized utility bills won't make for a bright future. But even though the future's not so bright, they may still need to wear shades (so the process server and/or repo man doesn't recognize them).
Yep.....it'll just take twice as many of them to pay your gas bill, food bill, fill up the car, etc......
and
Quote:
Originally Posted by Bagz
I think you are confusing the consumer price index with the value of the dollar compared to foreign currency.
hypothetical...if someone from europe wants to buy a house in the u.s., then they can either buy more house or buy an equivalent house and pay less here than in europe since their euros are worth more. otoh, if i sell my house and cover my euro hedge, then i can buy an equivalent house (with inflation being equal) in europe with the dollars from my house sale and the dollars from my euro hedge. but if sell my house in oklahoma and buy an equivalent house in denver, then the only price differential i'll pay is the greater price appreciation for the house in co vs. the price appreciation in oklahoma. so in the u.s., dollars are dollars since both are affected to the same degree by inflation less the regional price appreciation differences. take those same unhedged dollars out of country to europe, then you're underwater and you have to bring more dollars to the table if you want to purchase an equivalent house there.
A recession is a decline in the gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year. Have we even had a single quarter of negative real economic growth? The fact that we have not (in the face of all the negative news vigorously reported on this thread) shows the real strength and resilience of the economies of this great world, nation and state.
We usually only have the data proving we're in a recession long after the fact.
We probably are in an economic recession right now. I differ from most of the posters on this forum in that I don't believe this recession (if that's what it is) is fundamentally different from other recent recessions. As they say, "it's called the business cycle, not the business ramp." Markets go up, and markets go down. This is just the business as usual.
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(apparently investors believe this if they are covering their shorts right now) 
inflation or dollar devaluation?
