The economy theme park thread... featuring the stock market rollercoaster

[Pharoh]

Originally Posted by kvrdave

I would like to see a poll that asks whether or not people think the market would be worse or better right now if the bailout didn't "save" us.

The real problems would be worse.

[kvrdave]

I didn't ask that.

[Ranger]

If the fed cut the rate yet again at the end of the month, won't this cause another bubble? The housing bubble started when the rate was 1% - we're getting close to that again.

[kvrdave]

Originally Posted by Ranger

If the fed cut the rate yet again at the end of the month, won't this cause another bubble? The housing bubble started when the rate was 1% - we're getting close to that again.

Only if prices fall enough that people start buying at a higher level, and the rate doesn't go up to help keep that at bay.

[kvrdave]

Anyone know of a stock site that let's you rank a number of stocks based on price/book ratio?

[Pharoh]

Originally Posted by kvrdave

I didn't ask that.

I know you didn't, but what you asked is almost irrelevant to me.

However, I firmly believe the market would be lower, and considerably. We would have had more failures, no lending, more margin calls and forced sales, not to mention much more mutual fund and 401k withdrawals.

[classicman2]

Originally Posted by orangecrush18

Don't worry. The price of gas and heating oils won't go back down to the same levels it was back when oil was cheap, so people will still want a better energy policy.

People already want it. It's the politicians (primarily Democrats) that don't want it.

[al_bundy]

Originally Posted by Ranger

If the fed cut the rate yet again at the end of the month, won't this cause another bubble? The housing bubble started when the rate was 1% - we're getting close to that again.

bubble was due to poor lending, not low rates

[classicman2]

Originally Posted by Pharoh

I know you didn't, but what you asked is almost irrelevant to me.

However, I firmly believe the market would be lower, and considerably. We would have had more failures, no lending, more margin calls and forced sales, not to mention much more mutual fund and 401k withdrawals.

I believe a number of Wall Streets don't don't agree with you.

[kvrdave]

Originally Posted by Pharoh

I know you didn't, but what you asked is almost irrelevant to me.

Well now you've hurt my feelings. Good day to you, sir!

[Pharoh]

Originally Posted by kvrdave

Well now you've hurt my feelings. Good day to you, sir!

Sorry aobut that Dave. Your question is valid, just the underlying issues matter much more to me.

[Pharoh]

Originally Posted by classicman2

I believe a number of Wall Streets don't don't agree with you.

I am sure there are some, (and remember I am not a market guy), but I really haven't heard of any claiming that the market would be better, that the causes of this sell-off would have been mitigated.

[Pharoh]

Originally Posted by Venusian

But the higher it is priced at, the less money funds and other investors theoretically recoup. Right?

People will know waht they owe so it can come off the sheets...but what is there isn't money to come off the sheets. This debt could theoretically bankrupt even more people/companies, right?

Originally Posted by Pharoh

It is a good possibility that not all holder will be able to cover the difference between the value set today and the par value of the bond. My belief though is that the largest holders of this debt have the capability to make good, and that it has been accounted for already.

What will be the ultimate payout be? $50B? Or even much less?

[classicman2]

Originally Posted by Pharoh

I am sure there are some, (and remember I am not a market guy), but I really haven't heard of any claiming that the market would be better, that the causes of this sell-off would have been mitigated.

I gather from the ones that are critical is that they believe the 'panic button' was pushed too soon.

I don't have a clue as to who is right. I guess time will tell.

[al_bundy]

everyone is comparing this to 1929 but there is a professor at william and mary who says it's more like 1873 which was way worse.

i think Japan's 1989 bubble was like 1873 as well because it was real estate and not industrial

[Birrman54]

Originally Posted by al_bundy

bubble was due to poor lending, not low rates

why the poor lending if not for artificially low rates?

[classicman2]

Me thinks you exaggerateth a little too much by the use of the pronoun 'everyone.'

Would you care to amend your post?

[Thor Simpson]

It's more like the Boston Tea Party. Throwing valuable tea into the harbor... the HARBOR i tell you!

[kvrdave]

Originally Posted by Pharoh

What will be the ultimate payout be? $50B? Or even much less?

Even that answer changes with the market, as it changes with the economy.

I am certainly glad I have not jumped in with new money, but I still can't believe the amount of the drop. It no longer makes any technical sense at all. The economy may not be great, but it is half of what it was. And I can't believe people think it will become half. Though it could become a self fulfilling prophecy.

Either way, I will still be buying Guitar hero World Tour in November.

[kvrdave]

Originally Posted by Birrman54

why the poor lending if not for artificially low rates?

You can have good lending practices with low rates, just as you can have bad practices at high rates. The bad practices are like "lease to own" where people had nothing invested and no reason not to walk away if they decided it wasn't for them. If everyone had a conventional loan (or had to get one), we wouldn't be in this situation, no matter where the rates were.

[RayChuang]

But all of us needs to face this salient fact: our current Federal income tax system contributed mightily to the current economic chaos.

Consider these salient facts:

1) We're spending over US$500 billion per year in compliance costs and pre-compliance economic decisions in regards to the Federal tax code.

2) The haggling over the tax code has resulted in too many politicians and fat-cat lobbyists "warping" the Federal tax code to favor narrow constituencies, frequently with detrimental results (as the sub-prime mortgage meltdown is only the latest example).

3) Richer American citizens and financial companies are willing to go through sometimes Byzantine processes of "offshoring" their liquid assets to avoid US income taxes. Why do you think some experts estimate at least US$14 TRILLION in liquid assets owned by Americans are sitting in accounts in the Bahamas, Bermuda, Grand Cayman Island, Panama, Switzerland, Singapore, etc?

4) The current tax code makes it more viable for American companies to shift as much of their operations outside the USA (why do you think Mexico has so many GM and Ford assembly lines?).

It is high time we stop this merry-go-round with our current income tax system and start all over again with a consumption-based tax system like FairTax. Given that FairTax has no personal income tax, no withholding with paychecks, and no corporate taxes, it would give a MASSIVE enticement to bring trillions of dollars in liquidity back to the USA, effectively ending our economic crisis in a matter of a few weeks! And because there's no more corporate income and payroll taxes, there's all the incentive to keep goods production in the USA, providing a huge economic boon to the depressed Rust Belt as blue-collar jobs return to the USA under more favorable tax circumstances.

[orangecrush]

Originally Posted by classicman2

People already want it. It's the politicians (primarily Democrats) that don't want it.

I am hoping that enough people are mad about the bailout and we have a large number of non-incumbents winning. I don't know if the bailout was the worst or best thing in the world, but if we get a large number of new senators and congressmen out of the passage, that is a plus in my book.

[X]

Originally Posted by RayChuang

But all of us needs to face this salient fact: our current Federal income tax system contributed mightily to the current economic chaos.

Consider these salient facts:

1) We're spending over US$500 billion per year in compliance costs and pre-compliance economic decisions in regards to the Federal tax code.

2) The haggling over the tax code has resulted in too many politicians and fat-cat lobbyists "warping" the Federal tax code to favor narrow constituencies, frequently with detrimental results (as the sub-prime mortgage meltdown is only the latest example).

3) Richer American citizens and financial companies are willing to go through sometimes Byzantine processes of "offshoring" their liquid assets to avoid US income taxes. Why do you think some experts estimate at least US$14 TRILLION in liquid assets owned by Americans are sitting in accounts in the Bahamas, Bermuda, Grand Cayman Island, Panama, Switzerland, Singapore, etc?

4) The current tax code makes it more viable for American companies to shift as much of their operations outside the USA (why do you think Mexico has so many GM and Ford assembly lines?).

It is high time we stop this merry-go-round with our current income tax system and start all over again with a consumption-based tax system like FairTax. Given that FairTax has no personal income tax, no withholding with paychecks, and no corporate taxes, it would give a MASSIVE enticement to bring trillions of dollars in liquidity back to the USA, effectively ending our economic crisis in a matter of a few weeks! And because there's no more corporate income and payroll taxes, there's all the incentive to keep goods production in the USA, providing a huge economic boon to the depressed Rust Belt as blue-collar jobs return to the USA under more favorable economic conditions.

I agree with the factors that weigh on our economy that you listed above. Especially the part about money staying offshore. And people even complain when tax rates are reduced as an enticement to bring it back here. But I'm not sure a consumption tax would do the job.

With modern transportation it seems to me that a consumption tax would not get revenue from people who could afford to purchase goods outside of the U.S. Say a rich person buys a yacht and registers it in a foreign country. Or buys expensive art. Or even people purchasing goods from foreign sources through the internet.

It seems the model of people going to different states to buy cigarettes would apply here. We would have to have every single item brought into this country inspected, even those that come into private docks. So the heavy burden of the taxes would fall on those who spend most of their money on food, clothes, services, etc.

[Birrman54]

Originally Posted by kvrdave

You can have good lending practices with low rates, just as you can have bad practices at high rates. The bad practices are like "lease to own" where people had nothing invested and no reason not to walk away if they decided it wasn't for them. If everyone had a conventional loan (or had to get one), we wouldn't be in this situation, no matter where the rates were.

well sure, but wouldn't the Fed keeping rates at 'below' market levels make it more likely for poor lending practices to occur due to the inflated money supply? The money has got to go somewhere.

[kvrdave]

Originally Posted by Birrman54

well sure, but wouldn't the Fed keeping rates at 'below' market levels make it more likely for poor lending practices to occur due to the inflated money supply? The money has got to go somewhere.

Certainly that would have helped, but I don't know that it makes it more likely for poor lending practices to occur. It would have lessened people getting loans because the payment would have been higher, or it might have kept real estate prices down, but I don't see how poor lending practices would change based on the rate. you probably only change the amount of people getting sucked in, which is also a good thing, but doesn't really affect the practices employed by lenders.