Fascinating thread. Well written and thanks to the participants.
My feeling on the depression is that it began in 2008 and it's still fairly strong. There are a lot of differences between this one and the previous. The US is now a developed economy rather than an agricultural economy and my memory of previous century's depressions (as opposed to business downturns) is that while they are world-wide, they hit the developing world a lot harder. This apparently happens because it is in the developing world where over development is more likely to take place.
The next huge change from the previous depression is that we're no longer on a gold standard and the Fed has been printing sufficient money to cancel the decrease in economic activity that would otherwise result from rich people not spending money. (The St. Louis Fed has some nice charts on the "velocity of money" that explain this really well. It appears to me that they're running the whole show rather competently.)
The basic fact of this depression is that rich people suddenly prefer cash to other assets. That appears to be what's going on. This is in contrast to the usual old-fashioned business recession which were caused by slight excesses in inventory.
When I look at leading stocks I do not see blow-off top prices. Instead I see 3% dividends (in an interest rate environment dang near close to zero) on what I would nearly classify as growth stocks. Accordingly, I've been buying "value" stocks on dips. My biggest mistakes have been not holding them long enough. I'm trying to keep them for a few days now.
The 2008 collapse was partly due to hedge funds that had bought huge amounts of value stocks and sold short really high priced stocks. Their trades went against them and when they got stopped out, they had to exit their positions and this drove value stocks even lower while driving the puffs higher. This was described in detail in the book "The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed it". It seems to me that the market still hasn't recovered much from that. Value stocks are still ridiculously cheap.
My liberal friends seem to be content to have a large percentage of their pay sent into mutual funds. They're convinced that there will be money in their accounts when it's time for them to retire. On this I have my doubts, it seems to me that if everybody is retired with good income, who is going to flip the burgers? The baby boom just seems too big a cohort to comfortably retire at the same time. Instead, I expect to see a lot of them working minimum wage jobs to stay afloat.
My conservative friends, both highly educated and high school dropouts, are convinced that gold is going to zoom and that stocks are going to crash. But when I ask them about their reasoning, I can't help but conclude that they are seriously wrong. A book that pretty much expresses their reasoning is: "The Death of Money: The Coming Collapse of the International Monetary System". That book claims that the collapse will be due to deflation or inflation but they can't quite make up their mind. Hey, if the economy can't make up its mind about which type of collapse to pursue that means it didn't collapse.
If a Republican gets elected president in 2016, I wonder if the sentiments will reverse...
My feeling on the depression is that it began in 2008 and it's still fairly strong. There are a lot of differences between this one and the previous. The US is now a developed economy rather than an agricultural economy and my memory of previous century's depressions (as opposed to business downturns) is that while they are world-wide, they hit the developing world a lot harder. This apparently happens because it is in the developing world where over development is more likely to take place.
The next huge change from the previous depression is that we're no longer on a gold standard and the Fed has been printing sufficient money to cancel the decrease in economic activity that would otherwise result from rich people not spending money. (The St. Louis Fed has some nice charts on the "velocity of money" that explain this really well. It appears to me that they're running the whole show rather competently.)
The basic fact of this depression is that rich people suddenly prefer cash to other assets. That appears to be what's going on. This is in contrast to the usual old-fashioned business recession which were caused by slight excesses in inventory.
When I look at leading stocks I do not see blow-off top prices. Instead I see 3% dividends (in an interest rate environment dang near close to zero) on what I would nearly classify as growth stocks. Accordingly, I've been buying "value" stocks on dips. My biggest mistakes have been not holding them long enough. I'm trying to keep them for a few days now.
The 2008 collapse was partly due to hedge funds that had bought huge amounts of value stocks and sold short really high priced stocks. Their trades went against them and when they got stopped out, they had to exit their positions and this drove value stocks even lower while driving the puffs higher. This was described in detail in the book "The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed it". It seems to me that the market still hasn't recovered much from that. Value stocks are still ridiculously cheap.
My liberal friends seem to be content to have a large percentage of their pay sent into mutual funds. They're convinced that there will be money in their accounts when it's time for them to retire. On this I have my doubts, it seems to me that if everybody is retired with good income, who is going to flip the burgers? The baby boom just seems too big a cohort to comfortably retire at the same time. Instead, I expect to see a lot of them working minimum wage jobs to stay afloat.
My conservative friends, both highly educated and high school dropouts, are convinced that gold is going to zoom and that stocks are going to crash. But when I ask them about their reasoning, I can't help but conclude that they are seriously wrong. A book that pretty much expresses their reasoning is: "The Death of Money: The Coming Collapse of the International Monetary System". That book claims that the collapse will be due to deflation or inflation but they can't quite make up their mind. Hey, if the economy can't make up its mind about which type of collapse to pursue that means it didn't collapse.
If a Republican gets elected president in 2016, I wonder if the sentiments will reverse...
