Jobs report

[FLVOL69]

No, they don't. Look at the housing bubble. Free market capitalism rejected sub-prime. That's why the government had to step in and start guaranteeing loans after threatening the banks.

Bubbles happen with two factors: 1) reckless monetary policy and 2) market distortion created by government intervention.

Bingo

 

[Vol8188]

No, they don't. Look at the housing bubble. Free market capitalism rejected sub-prime. That's why the government had to step in and start guaranteeing loans after threatening the banks.

Bubbles happen with two factors: 1) reckless monetary policy and 2) market distortion created by government intervention.

Bubbles occur even in unregulated markets, primarily do to human psychology. We assume the value of something that has been rising will continue to rise.

Look at amazons stock. It's selling for over 500 times it's current earnings. Why? Because the stock has been going up, so others assume it will continue to go up forever. That's a massive bubble waiting to burst.

Have you never heard of the tulip bubble? It had nothing to do with government, and everything to do with irrational human behavior.

 

[Vol8188]

No, they don't. Look at the housing bubble. Free market capitalism rejected sub-prime. That's why the government had to step in and start guaranteeing loans after threatening the banks.

Bubbles happen with two factors: 1) reckless monetary policy and 2) market distortion created by government intervention.

The tech bubble was another great example. People were paying up to 1000 times earnings for technology stocks, simple because they believed in the companies upside. Nothin to do with government intervention.

 

[Gannon Goodson]

The tech bubble was another great example. People were paying up to 1000 times earnings for technology stocks, simple because they believed in the companies upside. Nothin to do with government intervention.

Yeah, that was reckless monetary policy encouraged by government. How? Artificially suppressing interest rates thereby encouraging debt and speculation.

Investors aren't irrational. Irrationality is created by the illusion of economic expansion. Investors didn't simply believe in the upside of dotcom stocks; they knew the government wouldn't allow the market to crash. In other words, THEY KNEW THE GOVERNMENT WOULD INTERVENE. It's why people put their money in the bank without thinking twice about it. The government isn't going to allow the bank to lose your money because they're insured by the taxpayer. The stock market is insured by the federal government, and that's one of the principle reasons we have stock market bubbles. If Barry Obama came out tomorrow and signed a law passed by Congress that it's now illegal to bail out any private company and the Fed is turning off the printing press, the market would implode.

So, let me educate you once again. Bubbles are created by two factors: 1) reckless monetary policy and 2) government intervention/market distortion.

Learn it. Live it. Love it.

 

[Vol8188]

Yeah, that was reckless monetary policy encouraged by government. How? Artificially suppressing interest rates thereby encouraging debt and speculation.

Investors aren't irrational. Irrationality is created by the illusion of economic expansion. Investors didn't simply believe in the upside of dotcom stocks; they knew the government wouldn't allow the market to crash. In other words, THEY KNEW THE GOVERNMENT WOULD INTERVENE. It's why people put their money in the bank without thinking twice about it. The government isn't going to allow the bank to lose your money because they're insured by the taxpayer. The stock market is insured by the federal government, and that's one of the principle reasons we have stock market bubbles. If Barry Obama came out tomorrow and signed a law passed by Congress that it's now illegal to bail out any private company and the Fed is turning off the printing press, the market would implode.

So, let me educate you once again. Bubbles are created by two factors: 1) reckless monetary policy and 2) government intervention/market distortion.

Learn it. Live it. Love it.

Bubbles are created by irrational market behavior. There are plenty of companies worth buying for 15 times earnings or less, there is no rational for buying Amazon at nearly 600 times their earnings.

And you never mentioned the tulip bubble. What government policies cause these two things?

 

[Gannon Goodson]

Bubbles are created by irrational market behavior. There are plenty of companies worth buying for 15 times earnings or less, there is no rational for buying Amazon at nearly 600 times their earnings.

And you never mentioned the tulip bubble. What government policies cause these two things?

Inflation. The Bank of Amsterdam did exactly what the Federal Reserve is doing today: creating money out of thin air.

This isn't that complicated if you understand sound economic theory and reject the kindergarten economics of John Maynard Keynes.

 

[Vol8188]

Inflation. The Bank of Amsterdam did exactly what the Federal Reserve is doing today: creating money out of thin air.

This isn't that complicated if you understand sound economic theory and reject the kindergarten economics of John Maynard Keynes.

The economics theory of Keynes is far more sound because people simply do not actual rationally concerning money.

 

[Gannon Goodson]

The economics theory of Keynes is far more sound because people simply do not actual rationally concerning money.

The Austrians were explaining the business cycle two centuries before Keynes came along. Money represents a store of value, so the creation of paper money (the garbage in your wallet) has no intrinsic value. It's just paper with ink. This is what creates all the malinvestment -- as in your tulip mania argument -- and distorts economic thinking -- as in your economic thinking about Keynes.

Stick to high school education. That seems appropriate considering the abject morons coming out of America's government schools.

 

[Obsessed]

The Austrians were explaining the business cycle two centuries before Keynes came along. Money represents a store of value, so the creation of paper money (the garbage in your wallet) has no intrinsic value. It's just paper with ink. This is what creates all the malinvestment -- as in your tulip mania argument -- and distorts economic thinking -- as in your economic thinking about Keynes.

Stick to high school education. That seems appropriate considering the abject morons coming out of America's government schools.

When this crap finally blows- there are going to be a lot of confused and butt-hurt people.

My gut is telling me that this administration along with the far left dems are doing this on purpose. Should a R take the White House, they will pull the plug and let it collapse.

This is orchestrated.

 

[Vol8188]

The Austrians were explaining the business cycle two centuries before Keynes came along. Money represents a store of value, so the creation of paper money (the garbage in your wallet) has no intrinsic value. It's just paper with ink. This is what creates all the malinvestment -- as in your tulip mania argument -- and distorts economic thinking -- as in your economic thinking about Keynes.

Stick to high school education. That seems appropriate considering the abject morons coming out of America's government schools.

Are you capable of forming an argument without personal attacks?

 

[Gramps]

When this crap finally blows- there are going to be a lot of confused and butt-hurt people.

My gut is telling me that this administration along with the far left dems are doing this on purpose. Should a R take the White House, they will pull the plug and let it collapse.

This is orchestrated.

Do you sincerely believe the R's are more financially responsible than the Dems?

 

[Obsessed]

Do you sincerely believe the R's are more financially responsible than the Dems?

No. I believe this whole damn thing is to take us down.

Do I believe there are some people who would do much better than most, sure.

Ron Paul for one. Ben Carson for another. Both of these would straighten this crap out and expose the corruption and put people on prison. The power to be can't have that, hence the circus we continually get in DC. This crap is orchestrated gramps.

 

[Gannon Goodson]

Are you capable of forming an argument without personal attacks?

What do you think my first paragraph was? I've already argued this point with you. In fact, I made two points repeatedly and demonstrated how and why the government distorts free market capitalism. You seem to think markets and investors are irrational. They are not. They are highly intelligent and, most importantly, fearful. They do not want to lose money.

I don't need an economics lecture from a high school government drone union goon. I do this for a living.

Bubbles are the creation of government, not the investor or the private sector. People don't want to pay more money for college. They do because the government interfered by subsidizing student loans. People don't want to pay more for gas, but they do because the Fed is printing so much money and we're using that fake monopoly money (the U.S. dollar) to fill up our tanks. People don't want the government to grow, but they can and do because the Fed prints money and lends it to the government in the form of Treasury purchases. Investors want a return on said investments, but it's difficult with artificially suppressed interest rates, thereby driving investors starving for yield into riskier assets.

Our problems are very easily explained by the Austrians. It's not some abstract concept based on fear or "irrationality" as you still claim.

 

[Vol8188]

What do you think my first paragraph was? I've already argued this point with you. In fact, I made two points repeatedly and demonstrated how and why the government distorts free market capitalism. You seem to think markets and investors are irrational. They are not. They are highly intelligent and, most importantly, fearful. They do not want to lose money.

I don't need an economics lecture from a high school government drone union goon. I do this for a living.

Bubbles are the creation of government, not the investor or the private sector. People don't want to pay more money for college. They do because the government interfered by subsidizing student loans. People don't want to pay more for gas, but they do because the Fed is printing so much money and we're using that fake monopoly money (the U.S. dollar) to fill up our tanks. People don't want the government to grow, but they can and do because the Fed prints money and lends it to the government in the form of Treasury purchases. Investors want a return on said investments, but it's difficult with artificially suppressed interest rates, thereby driving investors starving for yield into riskier assets.

Our problems are very easily explained by the Austrians. It's not some abstract concept based on fear or "irrationality" as you still claim.

The difference here is that you are convinced only the government can form an economic bubble, which is simply not true.

Not every consumer acts rationally. Interest rates are low, but not low enough to entice people to pay 563 times earnings for a company.

That's like saying a taco stand that made 1000 net profit is worth half a million. It's absurd and irrational.

 

[Gannon Goodson]

The difference here is that you are convinced only the government can form an economic bubble, which is simply not true.

Not every consumer acts rationally. Interest rates are low, but not low enough to entice people to pay 563 times earnings for a company.

That's like saying a taco stand that made 1000 net profit is worth half a million. It's absurd and irrational.

Investors can't pay without inflation (the expansion of money and credit). These valuations don't exist without the spigot from the Fed. You're still not understanding this simple concept. The response from investors always requires an action first.

 

[Vol8188]

Investors can't pay without inflation (the expansion of money and credit). These valuations don't exist without the spigot from the Fed. You're still not understanding this simple concept. The response from investors always requires an action first.

Inflation? Unless inflation is 500%, how inflation cause such an absurd price?

 

[volinbham]

there is no rational for buying Amazon at nearly 600 times their earnings.

There is a rational reason - if you believe earnings will catch up to the market cap value.

The irrationality (if you want to call it that) is the inability to vet real opportunities from ideas that simply won't work (e.g. Webvan).

I agree that a herd mentality develops but it is typically by sector. The "Tech" crash was both money rushing into poor Internet businesses AND massive forward revenue to tech companies because of Y2K. Tech spending was artificially high in the late 90s to fix the problem and as a result tech budgets took a nose dive since so many companies had made massive investments in new IT.

I agree bubbles can occur without government intervention but also agree that government actions can cause or inflate bubbles as they are doing right now with student loans.

 

[Vol8188]

There is a rational reason - if you believe earnings will catch up to the market cap value.

The irrationality (if you want to call it that) is the inability to vet real opportunities from ideas that simply won't work (e.g. Webvan).

I agree that a herd mentality develops but it is typically by sector. The "Tech" crash was both money rushing into poor Internet businesses AND massive forward revenue to tech companies because of Y2K. Tech spending was artificially high in the late 90s to fix the problem and as a result tech budgets took a nose dive since so many companies had made massive investments in new IT.

I agree bubbles can occur without government intervention but also agree that government actions can cause or inflate bubbles as they are doing right now with student loans.

But how long would it take for earnings to catch up to that value? 100 years?

The bottom paragraph is exactly what I'm saying. Can the government create bubbles, absolutely. Does this mean all bubbles are created by the government, of course not.

 

[37L1]

Or mortgages like the last one.

 

[volinbham]

But how long would it take for earnings to catch up to that value? 100 years?

No not at all. Let's say earnings are 10 cent/share in the early days of Amazon. Sixty bucks a share would be 600x. Now why would earnings be only 10 cent/share for a young company? Big burn rate and/or low market penetration. Exactly the case with Amazon. They sacrificed early profits for massive footprint and market domination. Once revenues scale and costs level profit per share jumps dramatically and the price/earnings ratio normalizes.

No one expects companies to continually trade at those massive multiples but so long as the scalability upside potential is real then those kinds of multiples are okay for savvy buyers.

 

[Sandvol]

The difference here is that you are convinced only the government can form an economic bubble, which is simply not true.

Not every consumer acts rationally. Interest rates are low, but not low enough to entice people to pay 563 times earnings for a company.

That's like saying a taco stand that made 1000 net profit is worth half a million. It's absurd and irrational.

Governments are just a component of the herd. The government is us. They are the worst actors of the herd and always the slowest and last to act but to say the government creates bubbles would be to say that only one component of the herd creates bubbles. Although the bubble manifests itself in debt it really is a function of social mood. Herd psychology is dependent on two human emotions-fear and optimism.

 

[Gannon Goodson]

Inflation? Unless inflation is 500%, how inflation cause such an absurd price?

What do you mean 500% inflation? I don't think you understand what inflation is and how it works. Despite what they teach in the universities, inflation is not the rise in prices of goods and services. That's certainly one of the symptoms of inflation, but not inflation itself.

 

[Vol8188]

What do you mean 500% inflation? I don't think you understand what inflation is and how it works. Despite what they teach in the universities, inflation is not the rise in prices of goods and services. That's certainly one of the symptoms of inflation, but not inflation itself.

Then explain how inflation accounts for a speculative bubble that causes a stock to sell for over 500 times it's earnings.

 

[Gannon Goodson]

Then explain how inflation accounts for a speculative bubble that causes a stock to sell for over 500 times it's earnings.

Because investors are moving both new money and recycled dollars into specific assets. After the dotcom bubble burst, the Fed decided to fight the recession by cranking up the printing press and lowering interest rates. New money combined with record low rates went in to the real estate market and moved away from things like bonds and commodities. All it takes is the initial rise for other investors to move their money into one or a few assets. Investors need yield; otherwise it sits and collects dust (for lack of a better phrase). If they can get yield in an overvalued stock, then that is what they will buy. Of course, that stock wouldn't be overvalued had the Fed not provided liquidity. Where are they getting the money to speculate with? Are investors going to barter for a specific stock? What you have after that is a domino effect.

When you say a stock is selling over 500 times its earnings -- which isn't even close to typical for the average inflated asset -- you're talking about one or a few stocks; not the entire market. Other stocks, bonds, and money market instruments suffer.

 

[CNCVol88]

Because investors are moving both new money and recycled dollars into specific assets. After the dotcom bubble burst, the Fed decided to fight the recession by cranking up the printing press and lowering interest rates. New money combined with record low rates went in to the real estate market and moved away from things like bonds and commodities. All it takes is the initial rise for other investors to move their money into one or a few assets. Investors need yield; otherwise it sits and collects dust (for lack of a better phrase). If they can get yield in an overvalued stock, then that is what they will buy. Of course, that stock wouldn't be overvalued had the Fed not provided liquidity. Where are they getting the money to speculate with? Are investors going to barter for a specific stock? What you have after that is a domino effect.

When you say a stock is selling over 500 times its earnings -- which isn't even close to typical for the average inflated asset -- you're talking about one or a few stocks; not the entire market. Other stocks, bonds, and money market instruments suffer.

There are some things I take as a grain of salt with you GG, but given your profession, economics is never one of them.