I do feel nervous about the market since I'm not an investment god, like Dougster.
I was just looking at the CAPE index which gives an approximate feel for the overall price-earnings ratio of the S&P500 (not the NASDAQ). It shows the market valuation just a hair below 1929 levels and well below year 2000. So not nearly as overvalued as the dot-com period, but still scary high. Bond yields also suck, with (for example) 10yr investment-grade corporates paying about 3.0% (if you're lucky). So finding a place for new money seems tricky.
As SJG mentioned, I also worry about a correction before the election. If there's anything that could wipe out Hillary, it would be a stock market crash or a severe downturn in the economy.
"What if you bought a fixed % of your monthly income every month since then?"
-------------------
Good idea, but with caveats:
(1) Don't cash out at the bottom of the big U-curve. Duh!
(2) Don't squander your dividends on strippers, weed, and cocaine.
(3) If the GOP/SCOTUS repeals Obamacare, don't retire early or lose your job. Or just don't get sick.
Slightly overvalued, but will likely go up a bit more before going down.
Just remember on e the mainstream media starts reporting on the market, it's in the late phase of the bull run.
Sadly there aren't any great investment choices right now. Bonds pay shit yields. Stocks are somewhat overvalued. Commodities? Risky for non experts. Real estate may still have some gas in the tank in some markets?
I saw right way during the dot com boom how bad the situation was. We had just come out of a recession, and now money was flowing into dot com stocks like crazy. That money had always been there, its just that investors were scared. But now they were pouring money into stuff where there wasn't even a plan for who they would turn black ink. The soaring NASDAQ was a sign of serious economic unhealthy. It meant that there were no longer any better things to invest in.
There is also something else going on which is just like pre-collapse dot com. People are over bidding on houses. They want to make sure they get it, presumably before the price goes up, so they over bid.
But why doesn't the seller just ask for more? They almost always have prof. realtors involved. Just ask for more.
Well the truth is, the seller wants it to clear soon because no one knows what will happen.
Back in the dot com boom much was made of the fact that SJSU profs could not only not afford to buy, they could not afford to rent. Actually, very few people can afford it.
The local swells always see real estate inflation as good, and often they are able to get local government to spend public funds, buying into the bubbles and try to extend them.
But eventually, lots of people find themselves upside down in mortgages. Now they don't come right out and admit it though. Real estate is an imperfect market. They just say the market is slow. "Oh no, the price hasn't come down. Its just that if I wanted to sell it for what I bought it at it might take 10 years."
Aside from how screwy this obviously is, there is still another aspect. Radical real estate inflation means that our currency is unstable. It has echoes of Weimar, before total implosion and disaster.
So @Dougster, in this new order of speculators you're envisioning, where no one needs to do any work, but they get citizenship pay and investors make all the decisions, how many boom and bust cycles will there be per decade?
SJG
Btw, JamesSTD, viewership of financial media is at multi-year lows and if you actually watched it you would know that their opinion is about the same as the TUSCL. No surprise. Where do you think the TUSCL consensus get their opinions - from the media whether they are cognizant of it themselves or not.
I dig your permabull enthusiasm.
Valuations are above historical means right now. That doesn't mean it's a bubble or we're DOOMED. But long term markets do tend to normalize.
I realize my moderate positions confuse you, as you tend to view things very black and white.
Ah, yes, your moderate position like RICK is a shitty stock (up 20% since you said that). Or "double taxation is a myth". I guess if by "moderate" you mean "wrong@ then yes you have some very "moderate" views, indeed.
And there is nothing confusing about your position. You just repeat what it is fashionable to say - because it's the Democratic Party line or you otherwise absorbed it from the media with no real understanding.
SJG: "Radical real estate inflation means that our currency is unstable. It has echoes of Weimar, before total implosion and disaster."
Oh my! Weimar! And we all know what came after that. (Absolutely DOOMED!)
SJG: " in this new order of speculators you're envisioning, where no one needs to do any work, but they get citizenship pay and investors make all the decisions, how many boom and bust cycles will there be per decade?"
I have suggested that a basic income society is maybe 15y off. That does, indeed, mean nobody would "need" to work. Kind of the whole point. But I believe most people still would want to to make more money beyond the basic income level. And, yes, I do believe investment/decision making skills are going to become more and more important going forward if you want to beat the basic income level. I would also work on form a solid a base of investment capital now especially in this bull market still in its early stages.
As for "boom and bust cycles" per decade - doubt there will be any in the next decade. Sure we'll have 10-20% dips now and then, but can't imagine any genuine "busts". At least in equities. Of course other markets will have them, especially thinly traded ones but that's just the way thing go.
Alot of risk has been taken out of the system (not to be confused with RickyBoy's The System, of course) since 2008 due to increased regulation and more active central banks.
So, I was thinking this morning, in addition to JamesSTD's rather extremely negative statements about certainly stock tickers that then went on to perform very well, and his extreme "double taxation is a myth" statement which is complete non-sense, what on earth could have lead anyone to believe he has every made anything other than moderate statements which "confuse" people who want to see things in black and white.
Could it be more extreme statements in addition to those I mentioned in the previous paragraph? Like saying that the current market levels are due to low interest rates and once they rise we are toast? Or could it be saying that what we have now is a market bubble a la 1999-2000? How could it be that because JamesSTD has made extreme statements people have come to think he says extreme things? Could it really be that two months/two days have really changed him to being solidly moderate now? Or does he still have the same views but doesn't want to express them until there are a few headlines in his favor feeding his confirmation bias? Or stevie-girl comes back and organizes a grand-ol' fashion TUSCL circle-jerk for him to participate in? I guess it's good if the evidence really did cause him to moderate his views, but the real test will be if really does remain "moderate" if a headline or two come out favoring more "black and white" views.
Even in 2008 it wasn't as bad as it got played out to be. The market was way too oversold as indicated by P/E ratio. This can be verified by the market recovery to recent highs, and as you pointed out there are systems in place for safety nets. In 2008-2010 they beefed up those systems that were never in place back in tye1930's, like FDIC, unemployment payments, social security/disability, etc. Sonas a whole the recession was a serious but not overheling situation that the media circle jerks played it out to be, and now fast forward to present day retardation of pundits, the overblown predictions of what could happen are fueling even more unnecessary fear among a nearly efficient market. Why else would billions of investors still be participating in markets? It's because it's all tied to commerce, and what trend do you find in respects to the cost of goods and services? It goes up over time, just like our investments go up over time. With inflation so low it is hard to imagine anything but continued growth over 5, 10, 20 years.
^^^ Agree. One thing it goes to show you is the overwhelming importance of the product cycle. People often wonder why news, looked at in the big picture, has no discernible impact on market trends. It's because it's the importance of the product cycle that trumps everything else including:
which political party is in power,
who the president is, (Black? White? Cuban? Female? Market does not care)
what wars are going,
what some Islamic Fundamentalist fuckhead said promising terror attacks,
whether the top capital gains tax is 20% or 22%,
whether the minimum wage is $10 or $15,
whether we have ObamaCare or not,
stevie-girl opinions on things,
what the buzz is on ZeroHedge, Libertarian, or Democratic blogs
whether we follow policies Ayn Rand would favor or not (just kidding that one actually would matter, but it's academic since they would never be implemented...)
Other things a secular bull market will plow right through:
a) real estate got a bit over-speculated in
b) derivatives got a little nutty for a while
c) the combination of a) and b)
Dougster-
I don't see anything even remotely controversial about James' statement that market valuations typical return to historical norms over the long run. Right now we're way more than 10- or 20% above average historical valuations -- more like 60- or 70-% (using 10yr trailing earnings).
Also your claim the "product cycle" trumps everything just doesn't hit home with me. It completely leaves out the near-random fluctuations created by irrational human behavior. Not trying to pick a fight with you: As an outsider to finance, try to convince me that we're in a secular bull market, rather than another bubble driven by low interest rates and irrational investors.
Uhm Dougster,
We haven't had a single decade without multiple booms and busts since 1980. The money that used to be collected in taxes is now being used to cause booms, and the associated busts.
So to say that we are in the early stages of a Bull market would certainly sound to be just a way of trying to draw more money into the speculative arena, as also would calls for people to learn "investing skills".
If you say that people would receive citizenship pay, but they probably would want to earn additional money on top of that, this gets to a well recognized problem. Frank Lloyd Wright decried the fact that housing costs always inflate to soak up any gains in income at the bottom end.
And in fact today the bottom end of the rental market remains tied to the minimum wage and disability payments. So if people are to also be getting citizenship pay, this still won't improve their condition.
There are all sorts of things wrong with our political and economic system, anyone of which could trigger another deep recession. But still underlying these is the issue which surfaced in the first world wide recession, 1873, that of over production. Various bubbles can last for a while, but eventually the demand generated by people who can pay is saturated. So then their is a crash.
The boom and bust style of economics is driven by speculators. All it does is concentrate expansion in one interval, like say a few years. But then this is made up for in a comparable interval of contraction. Overall, the pain, suffering, and waste caused by this system more than outweighs any potential benefits.
SJG
Because you're missing the fact that PE can get back to average in more than one way. Prices could fall but earnings can rise.
Also I think old PEs were based on the old pace of the product cycle but it is now becoming faster. The main way to know we are in a secular bull market is to see how readily dips get bought up and what the large long term money is doing. They last became very active in October 2014 in the mid 1800s when Stevie-girl was screaming the loudest. That information is all public. One reason I had no fear about going tagainst her and near all of TUSCL at the time. So maybe we are 10% overvalued. Who gives a fuck if your downside risk is 10%?
So that's how you know from fundamentals and market activity.
In terms of mass psychology just watch the financial media and read the blogs. Everyone says exactly the same thing. Stocks are overvalued now due to QE and low interest rates and we better be careful of a significant correction once rate do rise.
If we were at the top of a bubble consensus would be that now is a great time to get in but you better hurry before its too late to get in.
The exact details of how the media invariably gets things exactly wrong is something I don't know all the details of. In particular if there is conspiracy involved or if it's more passive and just good poker playing. I'm inclined to believe the latter.
@SJG: I don't understand what you are proposing to do about the problems you allege with financial markets beyond what is currently done. You have quite a bit about your personal projects but at the same time you say it is not anti-capitalist. Are you thinking your business model just becomes the norm and people lose interest in finance or do think some pro-active changes in finance laws are required? If so what do you have in mind beyond what is already there.
Too many people don't invest even a little for the future. Simply take a few dollars each pay period or each month, and buy stock that you believe in or even a standard mutual fund that is benched against the S and P. Such a simple formula if everyone would do it, but why don't they. They perceive they could lose $$ because markets are rigged and untrustworthy. This misconception is furthest from the truth.
Just keep feeding the pig(piggy bank) consistently and keep a little for your SC adventures to blow off steam from dealing with your boss(wife) and you all will be happy you did by the time your too tired of working 5 days a week.
Simple formula but some circle jerkers would rather become pundits utilizing critical analysis. Critical analysis doesn't solve problems, but taking action does. Investing = Action.
Could all this stock market talk here on tuscl discussion boards be, in itself, an indicator of a market top?
Never forget that both the bond and forex markets dwarf the stock markets. I don't know a thing about the bond market but I do see some nasty things happening in forex markets that suggest serious pain in the future for world stock markets.
There might be some market talk on TUSCL but it is all extremely pessimistic. Hardly a sign of a top.
@art: what specifically in the forex market worries you?
@Dougster,
The rolling devaluations taking place around the world are a serious danger. Abe in Japan is actively using yen devaluation as a means of introducing inflation into the Japanese economy. It seems not to be working. Other nations are doing the same and even more will feel forced to follow suit. Nothing good can come from this 'beggar thy neighbour' policy.
The first signs of the coming troubles in the stock markets are the reduced profits being reported by US multinationals caused by rising USD cross rates with virtually all other currencies. Falling profits = lower multiples = lower stock prices = reduced investor confidence = less money going into stock markets = even lower stock prices.
Do you remember the consequences of the currency crises in the mid-1990s? A collapse in the Thai baht and other emerging market currencies had wide ranging consequences even in North America. Long Term Capital??..........hedgies and central bankers were shitting bricks the size of gold ingots. And these were just minor currencies.
What happens if confidence in the Japanese yen collapses? Even worse, what happens if the euro disintegrates?
@art: I'm with you that we should see increasing FX volatility. That's my biggest bet right now, in fact. Even bigger than TWTR. But it's not that bold a statement given that we were at historic lows last year.
I don't see any further devaluations being necessary. The Euro had a huge correction from its hugely overvalued levels and that will help their economies, which will attract money to their markets which will bolster their currencies. In fact their markets are already quite happy about it and rallying. Same with the nikkie.
U.S. rate hikes should do the job of devaluations by other central banks for them.
The investment flow is definitely favoring Japan and Europe right now over the U.S. So I'm not worried about them.
I also believe the U.S. Economic Boom is just getting going and is perfectly capable carrying the entire world.
As for corporate earnings - yes the dollar rallied quickly and I think the surprise was the earnings came in as well as they did. I think that is why we are getting a market rally now.
It just looks like a typical earnings season to me. Some big misses like INTC. Some huge beats like MSFT and GS and CAT. Some washes like FB. Still plenty to come this week.
Only thing that would worry me is if oil cannot continue its bounce. If it can all should be well. The USD has been even stronger in the past than it is now and neither the U.S. nor the rest of the world fell apart because of it.
Earnings can rise? No shit! You mean I can buy over valued stock and then just assume that its value will still rise. What a plan!
How to fix the problems in the financial markets? The problems are caused because people keep putting their money into them. Stop putting money in and the problems are fixed.
You can't con honest people, just the dishonest ones.
SJG
Yeah, and people have been saying they're overvalued every day since 2009 and the crash is "any day now". I'll wait for some evidence until I get all Fraidy Cat. Heck, I would love to even hear an argument with any semblance of sense of why this "bust" is going to happen.
Well there does seem to be some sense of proportionality to it. People will keep feeding the bubble until it grows to maybe a bit more than previous levels. But having reached that, it does seem like the Obama Boom is getting hear the breaking point.
I mentioned before that the over bidding on houses, not seen since the last months of the dot com boom, has started again.
Now of course the Mercury News boosts, as it always does.
"Hot real estate market like not seen since the dot com boom, buyers overbidding."
Okay, but you could take it a different way. Yes, there has been radical real estate inflation. But why are people selling as they are?
"Owners dumping real estate at below market prices, what do they know that we don't know?"
Which perspective is more correct?
Well for one thing, I have observed that those doing the over bidding are usually really young. Getting the property deed in hand means more to them than anything. It has a symbolic and a moral value for them.
As I see it, buying high, let alone over bidding, is real stupid.
Now for the sellers, panicking is never good. But sometimes it happens.
Either way, you can tell that something is wrong with these sorts of transactions. Realtors usually tell people to expect one round of dickering. So something here is wrong, and where there has been prior precedent, this type of situation didn't last long.
Uhm Dougster, I remember you explaining that you've been helped along by a few of these booms. How many booms was that, and over what time frame?
Now, I assume that you had the basic investment skill of buying low and selling high. How would that be applied today?
The System
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SJG
And I am not a Fraidy Cat, because I am not in any of this. I have no interest in making money off of booms or busts.
I apply my money and my talents and ability together, into the ventures I undertake with my own associates. We don't care about booms and busts as they make very little difference in our undertakings.
We are not doomed, but if we don't stop feeding this boom and bust type of economic system we will destroy our democracy.
SJG
Could be that real estate is indeed overbid in some areas. Like NYC and SF for instance. The word is that the strengthening USD is slowing things down in NYC - since it makes it harder for foreigners to buy. A rate hike could also help. I was surprised to learn SF is even worse.
I've been helped by two booms - including the current one. If it wasn't for the first one no idea what would have happened to me. Might be living on skid row now.
Might be living on skid row, but saved by a boom?
How would this be, were you buying on margin or credit? Not supposed to do that. Were you working on commission only? What was the deal?
When Elizabeth Warren's father died, her mother took a minimum wage job in a department store and was with that able to support herself and her 3 kids and pay the mortgage. This is the way America was. Everyone benefited, it was not winners versus losers. People didn't have to gamble. Mainstream TV news did not even report on the stock market as it was seen as something akin to gambling.
These two booms, over what time interval did these occur, and how many booms per decade do you think we should be expecting to see in the future?
In Silicon Valley, during the last months of the dot com boom, home buyers were bidding over the asking price, so that they wouldn't get cut out. I think this is very strange, because the seller could just ask for much more and expect to dicker. So you could say that what was actually going on is that the sellers wanted to bail, and fast.
The dot com bubble broke soon after the over bidding started.
Well now, it has started again!
SJG
Louisiana, Napoleonic Code
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Ah, no, I had no money to invest back then. I mean I don't think I would have landed my first job if it had not been for the boom at the time. Once I was a few month into that, all the risk was gone. But if hadn't been for that break?
Would I have gotten something else and eventually around to where I am now? Seems doubtful. How bad would it have gotten? Hard to know, but I think there's a good chance I could have ended up either in n the bottom 1% or underground even... Can't get into the details of that story too much since it's one I like to tell around the clubs.
That's a really touching story about Elizabeth Warren, btw, but the 60s was filled with plenty of market speculation.
"Come on Wall Street. Don't be late. There's plenty of money to be bad. By supplying the armies with the tools of its trade. And it's one, two, three, what are we fighting for?"
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That 30 year Long Boom of 2015 lasted longer than I'd expected.
Only way to stop the busts is to refuse to support the booms.
Ponzi Schemes they are, they always depend on misrepresentation and living beyond one's means. So as the amount of money they need to take it to keep going grows geometrically, they always will crash. The longer they go on, the more the innocent people who are hurt. So the sooner the last one crashes the better!
BRING IT ON BABY!
Just don't walk close to high rises, as their might be leapers!
And has Dougster started boosting for the boom of 2023 yet?
SJG
"Look Out Below"
This is the headline for today's Mercury News. I take it literally too. Stay off the sidewalks going past high rises. If you must go past them, then walk down the center of the street.
The bigger the boom, the deeper the bust. So the longer the 2015 boom went on, the more the innocent people who get harmed. No one in the stock market is innocent. But when these busts happen, innocent people lose their jobs because the busts are deeper than what should be steady state. Only way to even lessen these busts is to refuse to support the booms.
If all the speculators jumped, then we would be spared more boom and bust cycles. But we know this won't happen.
I am now concerned about Dougster. He knew this was coming. Maybe he was very far extended on margin. Even though he is one of THEM, he is also one of US. If I knew how to get to him, I'd tell him not to jump.
Arnie, how many people are like me and loved this show:
[view link]
"Arnie Nuvo, a longtime blue collar employee at the fictitious Continental Flange Company, who overnight was promoted to an executive position. The story lines mainly focused on this fish-out-of-water situation, and on Arnie's sometimes-problematic relationship with his well-meaning but wealthy and eccentric boss, Hamilton Majors Jr. "
And we also learned that the Senior Hamilton Majors had leaped to his death when the stock market crashed in 1929.
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SJG
I would think with these nearly decade busts (and they seem to be quicker and quicker) people would have more savings in their pockets... but I read maybe a month ago there are a majority of people with none!
Well my 401k and other accounts are back to 2013 levels. it sucks.
Feels like I'm playing in a casino and got screwed. Still hoping for a bounce.
It's not that I made that much in 2015 though.
I do have faster Internet now so one good thing.
I think I might just stay away from strip clubs and save my money a lot longer now.
"I would think with these nearly decade busts (and they seem to be quicker and quicker) people would have more savings in their pockets... but I read maybe a month ago there are a majority of people with none!"
That would make sense, but we are always being blitz with people telling us we have to get into the stock market. I hope Dougster is okay too. But he was one of the Ponzi scheme promoters.
SJG
There is nothing Ponzi related to owning a portion of companies that do business globally. That's what you get when participating in the equity markets. That and a 100% historical probability that whenever the markets go down, they eventually get back to their previous highs and then go higher. Any planner will tell an investor to keep what they need to pay for expenses over the next 5 years or so out of the market, because 100% of the times markets have recovered yet sometimes it takes 5 years to do so. Ponzi schemes don't recover.
With the likes of Dougster and his "ilk" as u so like to call it SJG, smart people are investing in the markets that won't use those funds likely for severa years in the future, so anyone earning a paycheck would encourage the market to go down as they buy in cheaper, so long as they have cash resources to carry them for the next 5-10 years.
I'm not sure where u got your distorted views of the market, but they're thick with "Chicken Little" fear mongering. Did you help run Obama's original presidential campaign?
A barrel of oil is only $33.55 today. A year from now, it is predicted to be $38. The average joe has more disposable income in their pocket due to cheaper gasoline, and goods can be delivered to market cheaper due to cheaper diesel. On paper, the economy should be getting better due to cheap oil. But it is not, and this is what is scary.
I sold off alot of my "play" portfolio and just kept a few defensive stocks and a few blue chip stocks. If we get a new president that is not a socialist, be ready to buy back in.
What makes it Ponzi is that there are always some distorted representations in play. It may not pertain to any one specific company. It can be just about the economy as a whole, causing a comprehensive bubble to form. But as this means people are living beyond their means, or employed in a sector which will be contracting, the good times won't last.
Here where I live muni officials have hired consultants from the Harvard School of Business to try and use the Super Bowl to extend a real estate Ponzi scheme. And yes, highly distorted representations are being made, and with local government covertly behind them.
And these Ponzi schemes always crash because to keep on going the amount of money they need to continue to take in rises geometrically.
I did and do support Obama, but the one I voted for in the 2008 primary was someone to the left of at least what Obama says, Dennis Kucinich of Ohio. If not him, I would have voted for John Edwards of North Carolina.
"If we get a new president that is not a socialist, be ready to buy back in."
Well 2016 is of course when the bubble had to burst because Republicans want to win this next election. These are basically the same people who made money off of 7 years of an inflating bubble, now getting out so that they can blame a crash on the Democrats.
No matter which side wins, there will be another bubble, fueled by the same money, and then another bust. Each bust makes our country worse, and so does each bubble. The only way to stop the busts is to refuse to support the bubbles.
If only we could get a socialist President, then maybe for once since 1980 we would have economic stability and social progress.
Our country's period of highest growth was during the Eisenhower and Kennedy years. The money which fuels our current pattern of boom and bust cycles is simply that which used to be collected via progressive income tax.
SJG
Dizzy Gillespie Blues for Max
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SJG, it is hypocritical of you to be touting socialism on a strip club website. Strip clubs are the epitome of capitalism. Women are motivated to dance by profit. Do you really think they would dance on your lap for free? In a truly socialist society, everyone would be guaranteed a decent job/wage and there would be no economic deprivation motivating a woman to strip. There is no bubble when there is less government, less regulations, and more freedom.
Next....
To SJG there are many things wrong with the market but it is not a Ponzi scheme. There are manipulations by some that skew the principles of capitalism but overall the free markets have been the engine of progress and prosperity in the USA allowing those with better ideas to move forward while discarding the dead weight that slows us down. Bubbles are a natural part of the cycle and allow beginners to get in on the system. You really need to get out and see the real world, before you pontificate on subjects that you know nothing about nor even have the experience to form such unqualified opinions and generalizations.
NYSE is the opposite of a bubble! It is the most highly regulated market in history, so SJG when you compare the market to a Ponzi scheme that is where the holes in your remarks begin. Kinda like Swiss cheese!
@Sinclair,
Simply earning a living is not the same as Capitalism. Rather, that is when public policy is being manipulated specifically to give capitalists control of labor, materials, and markets. Think British East India Company.
Some would call this Crony Capialisim, but the problem is that there has never been any other kind.
@Twentyfive,
You would have of course no way of knowing this, but I've been involved in or connected to boom and bust cycle after boom and bust cycle. Here in California of course the real racket has always been real estate. The main effect of the other stuff is felt there.
Anytime there are misrepresentations being made, and they are being bolstered by a geometrically increasing flow of money, you have a Ponzi scheme.
No, it may not be just one person running it, but it still amounts to the same thing.
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Expert on media, Douglas Rushkoff explains why he decided that he would sit out the dot com boom and instead write about something else, Judaism. He did not want to contribute to the what was for that time the biggest Ponzi scheme ever, a NASDAQ Ponzi scheme.
Meat72,
NYSE does have regulations, about accounting, disclosure, and truthful financials. But this can never stop people from buying in and driving prices up just because they see other people doing the same, and hence giving companies outstanding share valuations which are not supported by their business prospects and which are completely unsustainable.
And then anytime people are getting money out of this, you will see economic expansion, driven by nothing other than great expectations and people feeling like they can at least for the moment live beyond their means.
What was the first to collapse once the dot com boom in investor confidence blew up?
Local BMW and Porsche dealerships.
SJG
^^^^^^^"Anytime there are misrepresentations being made, and they are being bolstered by a geometrically increasing flow of money, you have a Ponzi scheme."^^^^^^
WTF is a geometrically increasing flow of money ?
A Ponzi is a simple basic scam (also known as a Pyramid Scam or scheme) where the newest investors reimburse the older investors until there are no more investors to repay latest group to buy in. ( just FYI that is where the expression get in on the ground floor originated.) nothing about the legitimate stock markets are a Ponzi, rather it is based on generally sound and accepted business practices, bubbles occur by willing buyers bidding prices up to a level where it cannot be sustained by normal business practices. That is where a bust originates. The big problem is the government in an effort to protect investors overreaches and worsens the damage by favoring one group (last cycle it was the banks) over another by not realizing all money is equal, but all investors differ and the smarter ones generally come out ahead. There can be more than one favorable outcome as long as profitability can be sustained.
Geometrically increasing means that their is some doubling rate. So like say on the average, for every 1 person making money off of the scam, there might be 1000 new suckers who have to be taken in.
But then for those 1000 to make money, it will take another million. Eventually this becomes impossible to continue, so it crashes hard.
"newest investors reimburse the older investors until there are no more investors to repay latest group to buy in."
Yes, but unfortunately things like real estate prices or the prices on the stock market can be manipulated the same way!!!
"that is where the expression get in on the ground floor originated"
This is usually seen as applying to legitimate business. But the problem is that there never has been a hard line between fraud and legitimate business.
In the case of Multi Level Marketing, like Amway, the FTC has gotten court decisions putting it at 25%.. Not more than 25% of the clients can be those being enlisted as dealers, or it is fraud.
But this is still full of holes and impossible to enforce.
Stock market and real estate prices are mostly driven by the fact that people see prices going up, and so they figure they have to jump in. That is all it is, insanity.
Remember that recently it was announced that here in Silicon Valley, over bidding on real estate had started again. People were bidding more than the asking price, so that they didn't lose out. Crazy!!
But this is also what had showed the end of the dot com boom was in sight. Because if buyers are over bidding, you could take it a different way. You could say that though the prices were high, sellers were under asking. The sellers saw it different from the buyers, and they just wanted to get out.
Maybe today this real estate bubble has started to go? Not sure.
The longer the bubbles go and the bigger they get, the more the innocent people hurt in the recessions that follow. Only way to stop the busts is to refuse to support the bubbles.
SJG
^^^^ Things only have value relative to what the folks who want them are willing to pay, if you don't want something it has no value to you, so don't buy in. Regardless that does not make something a Ponzi, you have a bad habit of stating stupid shit over and over. Just because you say it doesn't make, it right a bubble bursts because the perceived value has been overtaken by market forces sometimes caused by outside influences other times because it lacks sustainability. If you look at the history of markets real estate, stock market, commodities, etc. each time they crashed they came back and went even higher than before, so my friend chicken little hollering that the sky is falling don't make it so that is the last I am going to say about your numbskull theories about economics .
Real Estate, the Stock Market, these are all subject to price manipulations. In California the main scam has always been real estate, starting with the Gold Rush. Flyers were sent out all over the country promising easy riches by gold mining. So zillions of people came here. Most no one made any money except the promoters, realtors, the people who sold picks and shovels, ran the saloons, and oh yes, Levi-Strauss.
And it also brought enough Anglos here to out vote the Latinos, who wanted a separate country and had fought for this with their lives, and to petition for statehood.
It is still going on today, nothing has changed. Trying to keep a real estate Ponzi scheme going, a huge construction boom, very similar to the one that took down Savings and Loans in Texas in the 1980's.
Consultants hired from the Harvard School of Business, and a committee chaired by three City Council Members, to use every means available to promote the City.
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Ponzi schemes are illegal because they are based on misrepresentation, and because the longer they go on, the more the innocent people who are hurt in the recessions which follow.
SJG
Ok SJG, but please with your insight tell us where the market is headed in 1 year, 3 year, 5 year, and 10 year time horizons separately. I personally will hold you accountable for your predictions, or at least I would remind you of what you predicted over a time horizon and not the latest headline.
You tell me, or Dougster tell me, cause it is the guys creating these bubbles who drive it.
The probability is that there will be another bubble, which will crest in 2023, and then crash for the 2024 election.
But I personally do not care as I won't have anything whatsoever to do with it. The busts hurt, and the booms hurt too. The only way to stop the busts is to refuse to support the booms.
SJG
The Nasdaq will be over 7,000 by year 2020, and it will be around 9,000 in the year 2025. What it does between that time is immaterial as these booms and busts you refer to are always an overstatement. Your busts are only based on too much fear when too many people head for the exits at the same time.
Meat ask the idiot if Levi Strauss & co. is a Ponzi scheme or Caterpillar or John Deere they manufacture the modern equivalent of picks and shovels and without the so called Ponzi scheme where would they be ? How would they raise money to manufacture and build new facilities just using one sector of the market. How would the real estate market get funding to build housing for his zillions of people how would those people get fed without Safeway or other food markets ? The list goes on and on .All you are doing is humoring a blithering idiot responding to his inane rantings.
"Your busts are only based on too much fear when too many people head for the exits at the same time."
Both the booms and the busts are based on emotional over reaction. Only way to stop the busts is to refuse to support the booms. But both do still hurt people. People lose their jobs and companies go under during busts. And then during booms stuff which should be funded gets forgotten about, as housing and office space become unaffordable. Both hurt!
Levi Strauss, Caterpillar, John Deere and Safeway are not Ponzi schemes.
But California's 1849 Gold Rush was grossly exaggerated hype and the vast majority of the miners who came got far less that what they would have gotten if they'd just stayed back where ever they came from and taken what ever wage labor was available.
The people who made money off of the Gold Rush were those who promoted it, and realtors, and those who sold picks and shovels, and Levi-Strauss.
If Nasdaq and NYSE could stay below some sensible values, then that would mean that our country is better off. People have better things to use their money for than gambling. People are investing in themselves.
Right now where I am, there is a serious Ponzi scheme underway, and it involves local government.
I want to learn more about this man:
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Cleared 22 Meg from his first two companies.
Dougster: learn those investing skills early
Meat72; Indexed funds
Is that what this guy had done? Is that what he did after? I doubt it.
Clearing that much money just by applying his own abilities for a few years, and probably starting with nothing. And doing what with that first money?
1. $1Meg McLaren F1
2. First airplane, starting him up the experience and certification ladder to get to his current jet.
3. House in BelAire.
#3 I have no interest in. I want to live in a loft conversion in a big city, and then at an airport community in the middle of nowhere. But when Musk bought that house he was probably still married.
Probably Musk has never had a job in his life, and I want to understand what it is that really makes him different from me.
Great people invest their talents and their money in themselves. They only invest in other things when they have so much money that it is no longer possible to invest it all in themselves. So they become venture capitalists. But of the sort who only fund people that they know. This is not the most well known sort.
Now yes, most of the people who partake of these booms, they are just the herd, they are followers. I'm not interested in them at all. They are part of the problem.
SJG
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