[QatzelOk]

If the North American economy collapses, it might be less expensive for poorer countries to acquire resources for two reasons:

First, their currencies will increase in value as the US dollar nosedives.

Second, the US and its allies will have less money to destroy poorer countries in order to rip off their resources and sign unfair trade deals with them.

So there's a major upside to the Western economy in free-fall.

[Stormsmith]

If the North American economy collapses, it might be less expensive for poorer countries to acquire resources for two reasons: First, their currencies will increase in value as the US dollar nosedives.

Maybe, maybe not. The USA is the largest consumer in the world. Who's going to buy the poor countries exports?

Second, the US and its allies will have less money to destroy poorer countries in order to rip off their resources and sign unfair trade deals with them.

They're broke now. They can't afford wars. Besides, stealing natural resources as war booty is prohibited by the Geneva Convention, however companies like Tillerson's ExxonMobil regularly wrangle their way into oil etc by way of complicity with its government, eg Ivory Coast, Libya. Halliburton probably ripped off the States more than iraq, but that was more opportunistic than causal.

[Hindsite]

It's all good, I'm stocking dollars in my mattress.

Don't do that. Putting it in a bank where you can draw at least 0.01% interest is better.
If you will not need the money for a year or two, you can put it in CDs where you can get 1.5% or better without worrying about losing. That is what I do.

[Rancid]

Don't do that. Putting it in a bank where you can draw at least 0.01% interest is better.
If you will not need the money for a year or two, you can put it in CDs where you can get 1.5% or better without worrying about losing. That is what I do.

I wasn't being serious when I said that.

[Igor Antunov]

Don't do that. Putting it in a bank where you can draw at least 0.01% interest is better.

Unless he has $1,000,000 to put away, that's completely redundant. Fuck banks. They make millions off your paltry 100,000 and throw you dimes. You're better off investing 20% of your savings into bitcoin and keeping the rest on ice in your bribe satchel.

[Torus34]

A quick peek at the DJIA for the past decade will suggest a simple correction, bringing the market back to a point close to the long-term trend line. That a correction was coming could be easily predicted by the p/e ratio. The 'when' was the only unknown.

The market's volatility will dampen down now and the Fed will do what must be done to prepare for the next crisis.* Those moves can be predicted by the level of inflation, the prime barometer for monetary rate increases.

There may be some crocodile tears shed over the loss of paper profits, but few will suffer much long-term injury.

"The most dangerous enemy of the economy is reality." Zachariah Grimble.

* The chart of unemployment levels, 1948 to the present, can provide a rough indication of the next 'when'.

[Rancid]

It's generally accepted that the market has been overbought. Then you have people that keep saying the bond market is a bubble and this could be the beginning of the bubble bursting.

Fundamentally, the economy still looks good, so it's not unreasonable to think it's still just a correction.

[Crantag]

It's generally accepted that the market has been overbought. Then you have people that keep saying the bond market is a bubble and this could be the beginning of the bubble bursting.

Fundamentally, the economy still looks good, so it's not unreasonable to think it's still just a correction.

I don't think anything about the economy looks 'fundamentally good'. That phrase seems to me like pundit claptrap that actually mean nothing at all.

Here is a potential explanatory narrative which has been forming itself in my mind. The huge spike in the stock market after the election of Trump accompanied by Republican majorities in the House and Senate was due to 2 factors. The main factor is that it was a relatively improbable event from the standpoint of the market. It is the improbable (from the standpoint of the collective consciousness among large speculators) which causes large market moves on the spot of exogenous information, which is broadly speaking basically a function of the 'casino' nature of the equity markets--the 'betting' nature of particular positions and transactions.

What was the substance of the spike? By now, we all know (though we also knew at the time--those of us who cared to read the financial press). It was the tax cut, which the market immediately priced in, on what was essentially their 'insider knowledge' on the near certainty of the tax cut being passed. Secondarily, the forthcoming cuts to regulation also became priced in.

Cutting taxes and cutting regulations are both the equivalent of pouring gasoline on a fire. With respect to tax cuts: every single quarterly or annual financial statement compiled by every single company, includes as one of the most key pieces of information, the balance sheet line 'EBITDA'. This stands for 'Earnings Before Interest, Taxes, Depreciation and Amortization'. This is the formula for calculating profits. Therefore, cutting taxes directly influences this formula. The removal of taxes thus becomes a direct transfer to share holders, through this financial infrastructure. It directly effects share prices upwardly, by directly defining profits up.

Regulations are pretty self explanatory. If you are shitting in a river, and a regulation is passed saying you must bag your shit and pay a truck driver to haul it to a land fill, and then a new regulation comes along repealing that last regulation, you are going to save a little money on now once again not paying the trucker. That's the basic principal. Now, expand 'shitting in a river' to as many examples you would like to think of, which are relevant to particular companies and/or industries.

From this standpoint, the cashing in of the bets on Trump/Republican election victories occurred on the spot of those victories. They were thus priced in, and a hostage situation ensued, whereby the collective will of the market became an overarching driver for the tax cuts being pushed through, lest the market should collapse on their not being actualized due to the actions taken on the markets' lofty initial expectations.

In the mean time, the supercharged stock market drove investment across the economy, resulting in artificially enhanced aggregate effective demand, I would guess especially for capital goods and services, but also probably to lesser extent for other items, including wage goods (just a guess). Thus, the unexpected wage growth may itself be a function (at least to an extent significant enough to warrant consideration) of the excesses within the financial sector.

The bond market bubble would seem largely a function of the Fed's 0%-interest rate policy, in place ever since the last collapse. The demand for bonds as a function of the overcharged stock market, and desire for the sanguine alternative to stocks, and indeed merely the speculative nature of the financial sector, has led to significant money flowing into bonds. The effects of trading on bonds is more complex than stocks. What we seem have is a situation where persistent demand for bonds (mostly driven by the high returns on stocks--you take 100, turn it into 150 in a week, and buy 150 in bonds, where one week ago you might've only bought 100 worth, in lieu of that 50 in stock market gambling winnings). So therefore, the bond market becomes artificially inflated.

The over-inflated bond market complicates the job of the Fed considerably, and this is especially the case given that interest rates are already at 0% (and have been for years). They cannot go any lower. Nonetheless, to respond to inflation, the conventional policy is for the Fed to raise interest rates. Well and good. But wait, there's that bond bubble. If you raise interest rates now, bond yields will go higher (some audacious speculators are hoping for yields like 7%--or so I have heard, while engaging in self-harm by listening to Bloomberg Radio sometimes lately). Rising bond yields will slay the frenzied stock market activity. The activity on the stock market is bad, because it's frenzied, but we have a completely irrational economic arrangement, whereby the collapse of a stock bubble causes a bunch of economic hardship, because everybody's savings are now tied to the great Wall Street Casino.

There are additional circumstances at play. I think the Trump cabal has a simplistic view of economics, and they think that pursuing a weak dollar policy will lead to a surge in US exports, while they might not fully appreciate the complete spectrum of the effects that pursuing a weak dollar might have. Also, some of the declines in equity prices are directly attributable to the new tax code, because it included a large one-time payment on the part of many companies, which has actually resulted in quarterly losses, revealed at the time of the publications of their quarterly earnings reports. These days, many companies are reporting.

So, I don't have any advice, but what I am doing is I am flying to China on the 20th of this month, in order to start a new job there. I have some new student loans, and fortune might divine that when I eventually convert some of my Renminbi to pay off my loans, the US Dollar will have by than sufficiently depreciated vis-a-vis the Chinese Renminbi, so that the loans may in the end prove profitable, in some respects.

Please don't misunderstand this as my grand design to benefit if the US goes down, I worry about my friends and family who have equities and bonds, in the events of market downturns, and I am not actively engaged in speculation, much less speculation against the US. However, I use finance--though hopefully only do so sensibly. I see engaging with contemporary finance essentially as taking a boxing match, where the main goal is just to hit and not get hit. I suppose I am fortunate that I use to box.

[Rancid]

....

Earnings as reported by companies are strong, unemployment is low, wages are doing well. Are you saying this is all a manufactured bubble?

What is the course of economic events that will cause a collapse? Can you walk us through that?

[Crantag]

Earnings as reported by companies are strong, unemployment is low, wages are doing well. Are you saying this is all a manufactured bubble?

What is the course of economic events that will cause a collapse? Can you walk us through that?

I never said this was a manufactured bubble. 'Manufactured bubble' is a bit of an oxymoron to me, bubbles are self-perpetuating.

I described what I see as some of the mechanisms at play behind the current situation as I see it, as I have been observing.

You are asking non-sequitur questions. The basic process for a collapse will be the coming-to-a-head of the contradictions. The triggering mechanism might be the collapse of the bond market. Such is the situation some people are nervous about, in any case. This would occur if the situation occurring right now, where there is substantial money flowing into bonds, becomes reversed to where money is flowing out of bonds. Nobody can predict how this will occur, but one potential catalyst to it could broadly speaking ultimately amount to a retrenchment of 'confidence' in the US economy. At the present, there are potentially forthcoming circumstances which will lead to bond yields going still higher, especially the raising of interest rates.

Bonds don't move the same way that stocks do, and such expectations will not cause people to buy bonds now. Contrarily, they will cause people to hold off on buying bonds, until such a time as the yields rise. But, the key matter for consideration is not the nominal rate of bond yields, but rather the ratio of yields to equity prices, because high equity yields can be used to finance bond purchases at a given yield, and so cashing out on high stock prices to purchase bonds even at a lower yield may be more profitable. Of course, these sorts of decisions are executed on the back of thoroughgoing mathematical modeling.

In the nearer term, the market might might turn upward, but we are at a point in time right this moment where nobody can really be too sure what will happen.

[Drlee]

The government always has different options to deal with the economy. It's not Trump's fault if the economy is running out of steam, but he has different options to deal with it.

I will just comment on this thusly.

Moving on.

I really enjoyed Crantag's post. I am persuaded he is on to something. So at my age a stock market crash could be devastating if I was talking money out for daily expenses. I am still working so I am not. Many of my retired friends are scared shitless. They should be. Trump already deployed one of his biggest weapons to stimulate the economy. He cut taxes. As has been said, this is already baked in. Interest rates are already essentially zero so this could get bumpy.

In harder times we tend to spend a great deal of time figuring out how to limit damage to investments. I want to offer something else.

Before I retired from the Army 25 years ago, I was under the impression that stuff I buy had a price. When I got home from the Army my brother had a furniture store and I spent a goodly amount of time there. I was amazed to find out that people actively haggled prices. And not just a little. A lot. I saw a merchant who was bartering and everyone wins. So if someone wanted a sofa and it was priced at $1000 on a 50% mark, rather than sell him the sofa on the floor the merchant would sell the same one on "special order" for a 25% mark. Cash on the barrel head. The merchant gets his money up front. There is no 3% lost to accepting a credit card. The merchant still has the floor stock to sell or sell from. The customer gets a brand new piece for a very substantial savings. Simple enough.

So then I saw a guy who needed a new air conditioner. He was quoted $5100.00 for the new install. Plus tax. So he asked the air conditioning contractor this question. "You said $5100.00. How many hundred dollar bills is that?" I almost fell over when the contractor asked. "You mean green pieces of paper?" "Yes." "38". I was thunderstruck. The $5100 was the best bid. Add to that $420.00 in sales tax and you have an installed price of $5520.00. My friend just got that for $3800.00. A savings of $1720.00. That is real money. How much? It is more than the bank interest on $250,000.00 for a year. It is about the t-bill return on a one year note at $100,000.00. It is not taxable because it is not income. It is simply money spent. What is in it for the contractor? He installed it in the evening by himself. He paid no taxes on the amount. If he is in a 25% tax bracket he kept almost as much money. He took the parts (I would guess) as a cost of doing business and showed no income against the costs. (That is illegal of course but what a business owner does about his/her business plan is not the customer's concern. It is only conjecture anyway. The merchant may well have paid entirely fairly and just made less. He might have. Right? If the parts were only $2K and he provided the labor himself, he made a nice $1800.00 for two evenings work. Whatever.

My point is that there is real value to cash money. Green pieces of paper as the guy said. Who does it hurt if when you are at your mechanic and he quotes you $400.00 for a brake job to ask, "If I pay you in greenback dollars what kind of a discount can I get?"

I pay my credit cards in full every month without fail. I am fortunate to be able to do it. I use the cards for the reward miles (I have almost a million points on one card) but because I am not using them for credit they are, to my budget, just cash anyway. To a merchant they are a 3% plus or minus a little drag on profits. But suppose that I only was able to save that 3% on the stuff I buy. It would be a considerable amount of money at the end of the year.

So I always have a chunk of money in my pocket. At least several hundred dollars and more if I am going to spend more on something big. Cash is a great thing.

I can say this with some certainty. I will save far more this year paying for stuff with cash than I would earn on the interest on the same cash in any kind of safe savings account.

I get that many people do not have the money to pay cash. That is too bad. But if you do have the money it is a great way to essentially make money on your expenses. Remember they are going to be expenses no matter how you pay for them. We all know about tightening the belt. God knows I spent many a day with not a penny to my name back in the day. But cutting the cost of everyday expenses is a big deal.

Now if you want we can talk about coupons. Every time you set out to shop at a store hit their website to see if they have a coupon. I bought a new coffee pot the other night and a quick search at the register saved me $35.00 because of a 20% off online coupon. I get AARP rates on hotels and if that is not cheaper I check AAA or (because I am a retired soldier) military and government rates. Being a veteran gets you 10% off of everything at Home Depot or Lowes. I bought a washer and dryer on sale the other day and saved $200.00 that way. (And the lower sales tax adds to the savings by the way.)

I am not cheap. The wine I am drinking tonight cost more than my first car but I even buy that by the case. So here is a no-shit story. I wanted to buy a $1200.00 bottle of wine for a very special occasion. (I am not in the habit of doing that but on this very rare occasion... The principle is the same even if less.) If I buy 12 bottles I get 10% off. So since that was $120.00 for the first bottle, I just picked out 11 more $10.00 bottles and they were essentially free. If you know what you are doing there are some great bottles of wine in the $10.00 range. But the principle is the same. And if you are buying your everyday drinkers anyway, always buy your special occasion wines when you do. You will end up with a couple of free bottles of something.

So I guess my point is that there are ways to not participate in the "system" on occasion and on almost every one of the others there are ways to save money. The old saw, "A penny saved....." is absolutely true.

[Crantag]

I don't have any advice give myself, mostly because I feel like I'm too inexperienced to offer any.

Upton Sinclair started out The Book of Life: Mind and Body as follows:

The writer of this book has been in this world some forty-two years. That may not seem long to some, but it is long enough to have made many painful mistakes, and to have learned much from them.

I'm not yet forty-two years in this world, and I think much less experienced at my age than Sinclair.

The one advice-like thing I said though involved treating finance like boxing.

But actually, it's probably more so to suggest that one consider it as possibly prudent to be proactively engaged in their financial livelihoods, though strictly within (and preferably enhanced through) the parameters of one's capabilities, as well as their bases in skill and knowledge, networks, feasible opportunities, etc.

Sorry for that word salad, but I'm just trying to adapt and learn myself. In fact, in the past two years since I left Japan, I've just got by working many hours (mostly labor) and traveling to get work the entire time. That included an initial foray in Alaska, and I also drove across the entire US and back in it. But that's just been my personal approach to things, as I've realized that my experience with travel could be something I could draw on.

Also, that was a fascinating post by @Drlee.

[Hindsite]

It's generally accepted that the market has been overbought. Then you have people that keep saying the bond market is a bubble and this could be the beginning of the bubble bursting.

Fundamentally, the economy still looks good, so it's not unreasonable to think it's still just a correction.

I have never bought any stocks because I was afraid of losing my hard earned money. It seems something like gambling to me. I think many decided to take their winnings or profits before an expected rise in interests rates and inflation from higher wages and more money being brought into the country, etc. The next day after the market drop, others probably decided they better take their profits too. Then others decided to get on the bandwagon. But then some will see this as a time to buy as the price of stocks they want to invest in go down. That is why I think we may see the market going up and down like a roller coaster for sometime. But I am just guessing, probably like everyone else on here.

[Godstud]

If you think that the stock market is fast and easy money, then you are mistaken. You make money only by long-term investments, and you can't get worried about market fluctuations every time they occur. A person freaking out and selling their shares because of this market turn, will likely lose more money if they simply remain calm, and wait for things to return to normal.

You also can set out to purchase stocks with high dividend returns, and you can always set it up to limit a loss or gain, on any stock. Eg. sell a $100 share when it hits $80/share.

Having a securities company do it FOR you is good, as well, since they only make money when they make YOU money. I do this and can confidently say that I've gotten about 8% return/year for the last 25 years. I am extremely happy with my investments, and I can choose to make suggestions, or invest in specific companies, if I so choose.

[Hindsite]

Having a securities company do it FOR you is good, as well, since they only make money when they make YOU money. I do this and can confidently say that I've gotten about 8% return/year for the last 25 years. I am extremely happy with my investments, and I can choose to make suggestions, or invest in specific companies, if I so choose.

You mean you are stupid enough to actually trust people in that sh*thole country with your money?
I hope you can afford to lose it.

[Crantag]

If you think that the stock market is fast and easy money, then you are mistaken. You make money only by long-term investments, and you can't get worried about market fluctuations every time they occur. A person freaking out and selling their shares because of this market turn, will likely lose more money if they simply remain calm, and wait for things to return to normal.

You also can set out to purchase stocks with high dividend returns, and you can always set it up to limit a loss or gain, on any stock. Eg. sell a $100 share when it hits $80/share.

Having a securities company do it FOR you is good, as well, since they only make money when they make YOU money. I do this and can confidently say that I've gotten about 8% return/year for the last 25 years. I am extremely happy with my investments, and I can choose to make suggestions, or invest in specific companies, if I so choose.

That seems generally good in theory, but it also seems a bit less good if for example you were approaching retirement around 2000 and you had a lot vested in NASDAQ. Economists in their continuing pursuit of offensive jargon one-upsmanship call this kind of thing "longevity risk". (The term essentially refers to the potential adverse consequences, particularly in the way of retirement income assurance, of the coincidental demand on the part of people for their cash which is dependent on investments to finance their living and the volatile nature of the stock market. It is a mismatch between the usefulness of investments for liquidity and the subjectivity of such financial investments to unpredictability).




What wasn't entirely accidental though is the ascendance of the stock market as basically the only game in town. I'm afraid to research what CDs use to pay for example, because it might make me want to cry.

[Godstud]

You mean you are stupid enough to actually trust people in that sh*thole country with your money?

Do you even know anything about the stock market?

You're ignorant of it, so you should simply stop talking about it.

[Hindsite]

Now Canada's a shithole? Are all Americans so numb in the noggin?

No, I was referring to where you live. Didn't you say it was Thailand of Taiwan or some sh*thole country in southeast Asia? Why do you keep bringing up Canada all the time? Are you planning to move there now? I wouldn't want to live up there in that cold weather. That would be a stupid choice too.

[Godstud]

I have most of my investments in Canada, and the USA, and I am far smarter than you could ever possibly hope to be, especially when it comes to being smart with my investments.

Stick to talking about the things you know best: racism, hating the poor, and crazy religion.

I know most Americans are poorly educated and haven't travelled, so they call other countries shitholes, even though they don't know the names, let alone anything else about them. It's a sad and pathetic insight into American exceptionalism, and ethnocentrism.

[Crantag]

When I think about it, there could be a release valve, and it involves the direction in which things are going anyway. This is really just conjecture, but if the Fed simultaneously raises interest rates and floods the bond market, it could also dampen the upward pressure on bond yields, I suppose. Flooding the bond market is in line both with a weak dollar and high deficits and high debt anyway.

However, flooding the bond market is of essentially the opposite effect monetarily to increasing interest rates. So, it is like when a doctor uses two medicines to treat an ailment, though the side effects of the one enhances the symptom which the other is intended to treat.

Moreover, the approach I just mentioned also has a name, which is 'quantitative easing'. It's actually I believe originally a Japanese word, 量的緩和 (ryouteki.kanwa). I feel like the US could be entering a 'compound recession', ala Japan in the 1990s, and typified by a long slump. Any predictions about post-Monday are mere predictions. I'm feeling in my gut like next week we are going to see more red.