Global Economy Bursting?

[Restrain]

This is the problem with the Core Inflation vs Actual Inflation. From the headline, Housing Cost Increases are the reason for a decline in actual income. For most seniors, housing costs are flat unless they did something stupid like buying a home at age 70 on a variable or negative ARM loan. What would be driving a declining income would be rapidly increasing energy costs, rising property taxes, rising food costs and other "non-core" inflationary costs. If the government actually calculated inflation realistically, the cost-of-living increases would be well beyond what the government reports. And that is why they changed the method of calculation in the first place.

 

[Workbox]

US Stocks Move Lower As Weak Data, Euro-Zone Worries Spur Caution

The only thing that is keeping this market up is the 4.5 Billion (tax dollars) that the FED keeps pumping everyday.

http://online.wsj.com/article/BT-CO-20110526-709827.html

To add, IBM just took a big intra day dump and went below the 50 day moving average. Every fund manager is in IBM and you can use IBM as a gauge of how the market feels.

 

[Randolph Kinney]

You need to pay attention the market forth - as in IPOs. Lots of IPOs now, tech has come back.

Geo-political risk has been ignored or effectively hedged, until reality catches up with the money-plays.

 

[Workbox]

You need to pay attention the market forth - as in IPOs. Lots of IPOs now, tech has come back.

Geo-political risk has been ignored or effectively hedged, until reality catches up with the money-plays.

Can you explain?

 

[Couch Potato]

This is the problem with the Core Inflation vs Actual Inflation. From the headline, Housing Cost Increases are the reason for a decline in actual income. For most seniors, housing costs are flat unless they did something stupid like buying a home at age 70 on a variable or negative ARM loan. What would be driving a declining income would be rapidly increasing energy costs, rising property taxes, rising food costs and other "non-core" inflationary costs. If the government actually calculated inflation realistically, the cost-of-living increases would be well beyond what the government reports. And that is why they changed the method of calculation in the first place.

The reason for understating inflation is to provide a method to cut federal benefit programs indirectly so congress could avoid the political consequences of such cuts.

Financially secure seniors have near flat housing costs, but taxes and insurance still cause increases as do maintenance costs. Many seniors do not own their residence so their housing costs fluctuate at market rates. As for statistics on which group represents "most seniors," I don't think they are truly relevant since it is the group that is not financially secure that depends on social security for their income.

 

[Randolph Kinney]

Can you explain?

The overall stock market has gone up to near highs. The IBM's are played already. Easy money can be made just like the dot-com bubble. AIG - U.S. Treasury have unloaded their shares to the public, same as GM - U.S. Treasury. These companies are not the same risk as other "real" companies.

Just look back to the market cycles for what happens when you see this.

The balance of fear-greed has swung in favor of greed.

Interest rates, margin requirements, asset class reallocations, risk allocations, etc., all represent expectations of risk-reward. Mis-pricing of risk caused too much money to flow into risky assets. Once the pop happens that brings reality to the asset class, money will panic out and the bubble will burst.

For example, the FDIC list of troubled banks continues to grow. How is that?

 

[Couch Potato]

The overall stock market has gone up to near highs. The IBM's are played already. Easy money can be made just like the dot-com bubble. AIG - U.S. Treasury have unloaded their shares to the public, same as GM - U.S. Treasury. These companies are not the same risk as other "real" companies.

Just look back to the market cycles for what happens when you see this.

The balance of fear-greed has swung in favor of greed.

Interest rates, margin requirements, asset class reallocations, risk allocations, etc., all represent expectations of risk-reward. Mis-pricing of risk caused too much money to flow into risky assets. Once the pop happens that brings reality to the asset class, money will panic out and the bubble will burst.

For example, the FDIC list of troubled banks continues to grow. How is that?

That is because the FDIC expects to take the money of those banks in law suits over mortgage loans.

Then the FDIC will promptly give the money back as they pay depositors of the failed banks. :new_all_coholic:

 

[prasercat]

This is the problem with the Core Inflation vs Actual Inflation. From the headline, Housing Cost Increases are the reason for a decline in actual income. For most seniors, housing costs are flat unless they did something stupid like buying a home at age 70 on a variable or negative ARM loan. What would be driving a declining income would be rapidly increasing energy costs, rising property taxes, rising food costs and other "non-core" inflationary costs. If the government actually calculated inflation realistically, the cost-of-living increases would be well beyond what the government reports. And that is why they changed the method of calculation in the first place.

Seniors are now getting about a crumb of interest on their nest eggs due to the Fed's quantitative easing, which is essentially transferring account earnings interest (which includes things like, senior accounts [Cds, Bonds, Money Market Accounts] and our national debt interest) to the too-big-too fail Wall Street-Big Bank Cartel. Yes, it is quite correct, senior income has taken a nose dive.

 

[Workbox]

The overall stock market has gone up to near highs. The IBM's are played already. Easy money can be made just like the dot-com bubble. AIG - U.S. Treasury have unloaded their shares to the public, same as GM - U.S. Treasury. These companies are not the same risk as other "real" companies.

Just look back to the market cycles for what happens when you see this.

The balance of fear-greed has swung in favor of greed.

Interest rates, margin requirements, asset class reallocations, risk allocations, etc., all represent expectations of risk-reward. Mis-pricing of risk caused too much money to flow into risky assets. Once the pop happens that brings reality to the asset class, money will panic out and the bubble will burst.

For example, the FDIC list of troubled banks continues to grow. How is that?

OH OK, I get it. I know that the S&P is still going to try to hit 1400, but this is an intra correction. This correction may give some a chance to make some nice positions. But the wait is a pain.

 

[Randolph Kinney]

QE is finished as an effective tool. QE replaced rates to zero as the Fed’s means to manage the economy. What's left?

Paper currency issued by the governments is the only policy tool left and that is implemented by exchanging currency for impaired assets (defaulted debt). That will free up balance sheets with cash on hand. What will happen to that currency trove? Loaning at fixed rates is a loser. Investing in operations to expand in this uncertain environment is suicide.

The countries running trade surpluses have to go with hard assets. More governments will adopt China's policy of using its dollars to buy impaired European sovereign debt to get rid of them. And, buy gold with them, buy oil, buy etc.