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  • #316
    Thanx for the link. I'm more pessimistic than that (but that should be no surprise, now should it... ).

    Really wonder what the current account adjustment will do to the US economy....
    “Now we declare… that the law-making power or the first and real effective source of law is the people or the body of citizens or the prevailing part of the people according to its election or its will expressed in general convention by vote, commanding or deciding that something be done or omitted in regard to human civil acts under penalty or temporal punishment….” (Marsilius of Padua, „Defensor Pacis“, AD 1324)

    Comment

    • #317
      Originally posted by GP


      What speciafically? I've already heard you blame the CB broadly. What ACTION?
      If you wanna pin him down you have to make short posts with just that question in it.

      Comment

      • #318
        GP:

        "Do a DCF and look at the how much value come in different years."

        Tell that to the daytraders or Abby Cohen. Seriously, that's all nice and well, but stock markets can turn into pyramid schemes for a while, and the speculators can take over.

        "What speciafically? I've already heard you blame the CB broadly. What ACTION?"

        There is an equilibrium interest rate that balances lendings and borrowings. In a fractional reserve system a CB and "its" banking system can force the rate below that, you get a credit bubble and a lot of unsustainable demand.

        "I think that the moral hazard issue with currency devaluations (specific bailouts....not Fed money levers) is the bigger concern."

        What do you mean ?

        "Also, even if the Fed juices the money supply when there is trouble, the markets still have to beleive that the policy is sustainable."

        And they overwhelmingly believed into the powers of the Fed.

        "Investors are capable of bidding up stocks without one bit of extra money supply. Just by believing the stocks are worth more. For instance because of false expectaions of future earnings."

        Well not quite. We've seen higher prices and higher volumes, so there is more transaction money involved. But it does not take a rise in overall money supply, yes. Extra money around just makes it easier.
        “Now we declare… that the law-making power or the first and real effective source of law is the people or the body of citizens or the prevailing part of the people according to its election or its will expressed in general convention by vote, commanding or deciding that something be done or omitted in regard to human civil acts under penalty or temporal punishment….” (Marsilius of Padua, „Defensor Pacis“, AD 1324)

        Comment

        • #319
          "1.5% would be the long-term rate from 2005"

          How do you come up with the 1.5% number?
          I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

          Comment

          • #320
            Originally posted by HershOstropoler
            GP:

            "Do a DCF and look at the how much value come in different years."

            Tell that to the daytraders or Abby Cohen. Seriously, that's all nice and well, but stock markets can turn into pyramid schemes for a while, and the speculators can take over.
            Irrelevant. The market has a fair amount of volatiility i it. So what. Sure it can delude itself and go off into a speculation overprice situation. But it corrects fine. And for all the times it goes up like that from mutual daytraders, there are plenty of times when daytraders lose their shirts. Besides do you really think that daytraders drive a 4 year long over-price rise in stocks? Boggles the mind. Much more likley to be from false evaluation of the Internet potential. You also might want to look at the random walk potential for booms and busts. There is a great thought experiment involoving coin flipping in the Brealey and Myers book (orthodox stuff...Roland....read it before dismissing it. You are likley to learn something...at a minimum you will sharpen your views...at a max you will change some.)

            "What speciafically? I've already heard you blame the CB broadly. What ACTION?"

            There is an equilibrium interest rate that balances lendings and borrowings. In a fractional reserve system a CB and "its" banking system can force the rate below that, you get a credit bubble and a lot of unsustainable demand.
            This is a short term effect. To drive the overall index up, the market must believe that sustainable economic improvements are likely. They believed in the internet and the New Economy hype. Let them be silly on their own, Roland. It's a free market.

            What do you mean ?
            Maybe not directly related to our discussion, but I find moral hazard associated with things like Mexico bailout, etc. more troubling than interest rate tweaking.

            And they overwhelmingly believed into the powers of the Fed.
            They believed the Internet would have some magical water-transmutation properties.




            Well not quite. We've seen higher prices and higher volumes, so there is more transaction money involved. But it does not take a rise in overall money supply, yes. Extra money around just makes it easier.
            You can have higher trading volume and higher prices without one cent of extra money supply. Here...lets trade stuff back and forth like Amos and Andy.


            (DANSed some comments.)

            Comment

            • #321
              "Sure it can delude itself and go off into a speculation overprice situation. But it corrects fine."

              Yup. But I still don't know what's your point. You still seem to think I want the CB to target stock prices. It shouldn't. It should care about economic balance. Stock prices going gaga can just be one symptom of a brewing problem.

              "Let them be silly on their own, Roland. It's a free market."

              Let them. All I ask is the CB not to create bubble economies, and not to subsidise the speculators with bailouts.

              "Maybe not directly related to our discussion, but I find moral hazard associated with things like Mexico bailout, etc. more troubling than interest rate tweaking."

              It is directly related. Whether it's the Fed, treasury or IMF, their main purpose is to subsidise the players in the financial system.

              "They believed the Internet would have some magical water-transmutation properties."

              That too. And that Uncle Alan has the Midas touch.

              "Here...lets trade stuff back and forth like Amos and Andy."

              How would that create higher prices ?
              “Now we declare… that the law-making power or the first and real effective source of law is the people or the body of citizens or the prevailing part of the people according to its election or its will expressed in general convention by vote, commanding or deciding that something be done or omitted in regard to human civil acts under penalty or temporal punishment….” (Marsilius of Padua, „Defensor Pacis“, AD 1324)

              Comment

              • #322
                Predictions '03

                Hey guys, it's a good time for Predictions '03!

                My first prediction is US GDP growth and unemployment EOY.: 3.4%, 5.6% respectively.

                Germany will experience a double-dip (or another dip) into recession.

                The S&P 500 will experience another negative year, marking a not-often-seen 4 years in a row in negative territory. Let's say -5%. But there will be a "bin Laden bounce" after he meets the ultimate undertaker, and some down days after a "minor" (Bali, embassy type stuff) terrorist attack.

                Inflation will stay in check worldwide. Fed may not even raise rates this year.

                Hershell will still be a bear. (Yeh, I know, but you gotta have at least one gimme! )
                I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                Comment

                • #323
                  --"How would that create higher prices ?"

                  I buy from you at 1$, you buy then from me at 2$, I then buy at 3$

                  Btw, I might be in vienna next mon-wed for the Euromoney CEE issuers&investors conference. Would be cool to have a beer and chat. How long does it take to get to salzburg? Or would you be able to come?
                  Originally posted by Serb:Please, remind me, how exactly and when exactly, Russia bullied its neighbors?
                  Originally posted by Ted Striker:Go Serb !
                  Originally posted by Pekka:If it was possible to capture the essentials of Sepultura in a dildo, I'd attach it to a bicycle and ride it up your azzes.

                  Comment

                  • #324
                    I'll get back to you later, Roland. Have a hot date. But the main issue is that the markets make their own judgement. They don't gyrate short term except because of CB actions except in a negative sense. The CB is incapable of boosting the stock market at will.

                    Comment

                    • #325
                      Originally posted by DanS
                      "1.5% would be the long-term rate from 2005"

                      How do you come up with the 1.5% number?

                      By assuming gross investment (both public and private) growth of 5% after 2004 and that the growth in capital consumption reverts to it's long-term trend of 1963-2000 (i.e. much slower than during the last two years).

                      That yields 1.5% growth in the capital stock during 2005-2010.

                      If investment grows by 7% (the average for 1991-2000) then capital stock growth will be 1.8%, and if capital consumption falls back to the pre-boom trend (rather unlikely in my opinon) then captial stock growth would be 2.2%

                      That means that, even under the most favourable assumptions, trend growth in 2005-2010 is likely to be 2.8% - with the economy going from below trend (-1.1%) in 2004 to above it (+1.3%) in 2010 that would equate to 3.2% growth in 2005-2010.

                      That would mean a very poor 2001-2010 growth performance:

                      Growth:
                      1971-1980: 3.2%
                      1981-1990: 3.2%
                      1990-2000: 3.2%
                      2001-2010: 2.8% (using the most optimistic assumptions above)
                      2001-2010: 2.0% (using the most pessimistic assumptions above)
                      Last edited by el freako; January 8, 2003, 21:46.
                      19th Century Liberal, 21st Century European

                      Comment

                      • #326
                        Roland, can you cite an academic source (say of the quality of Brealey and Myers...and the clarity as well) that proves your thesis that stock markets make short term moves (of a few years or so) because of Fed discount rates? I just don't buy it. It violates common sense and market efficiency. The markets dance a lot regardless of Fed discount rate. They are quite capable of moving up because they beleive the long term outlook is positive irrespective of the discount rate.

                        I suspect you are still a bit of a market-timer. If so...you should found a hedge fund. Or at least write an article for Journal of Finance which shows a new market innefficiancy with statistically relevance...and than all the hedge funds can trade to eliminate that.

                        Comment

                        • #327
                          Originally posted by GP
                          I'll get back to you later, Roland. Have a hot date.
                          Player.

                          Make sure you put on the jimmy sack. Double bag it if you have too.
                          We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert the Constitution. - Abraham Lincoln

                          Comment

                          • #328
                            Originally posted by Ted Striker


                            Player.

                            Make sure you put on the jimmy sack. Double bag it if you have too.
                            Didn't move that fast. BTW Lifestyles is the best. Trojans are a tad too small and tend to snarl and bind when they're being unrolled. I hate that.

                            Comment

                            • #329
                              OUCH!

                              I keep my sub well trimmed like a finely landscaped Austrian lawn, in order to avoid snarls.
                              We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert the Constitution. - Abraham Lincoln

                              Comment

                              • #330
                                Hey dude, your private mailbox is full, so I can't send to it, must be all dem biatches sending you love mail and ****.
                                We the people are the rightful masters of both Congress and the courts, not to overthrow the Constitution but to overthrow the men who pervert the Constitution. - Abraham Lincoln

                                Comment

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