Cyprus

[The-Shoveler]

Basically,

long live Homer Simpson

[spdrun]

“Most Americans” would be painlessly euthanized in a just world.(*) (Yeah, I live in this country, but the only reason NYC is tolerable is that about half of its residents weren’t born in the good ‘ol US of A.)

Basically, inflation helps the stupid at the expense of the thrifty.

(*)- gullible fucktards who got exactly what they voted for in year 2000. 10 years of war, billions spent, debt run up, tax cuts for the rich with no one having the b@lls to say “no”, cuts to transportation and education, and now a closet tax on middle class savers via inflation. WAY TO FUCKING GO!

[SK in CV]

[quote=livinincali]
Japan has been trying to push their market higher for 20 years. Ben Bernanke didn’t stop the market from dropping more than 50% in 2008. The people that are pushing the market higher are those that now naively believe in a power that Bernanke doesn’t really have. They’ll eventually get slaughtered in the popping of the bubble like they always do. Might need to go a lot higher first, I can’t tell you when it will happen, just that it will. The only sure thing from the fed is that they can always create a bubble somewhere and they never see it until after the fact.[/quote]

I have to disagree about there being a bubble in the market right now. If there was, the market would be 20-25% higher than it is. By historic levels, it’s currently valued pretty average based on earnings. That doesn’t mean that we’re not in for a technical correction, but that’s substantially different than a bubble bursting. And even if there is a significant business slowdown, even in hindsight, that wouldn’t be indicative of a bubble. Current earnings are real.

I do have great concerns though, that the economy will falter. The US economy has never survived the levels of spending cuts by both federal and state governments of the last 3 years without a recession. And that’s before the spending cuts that the sequester will bring. We can quantify the dismal failures of austerity in Europe, and fortunately have not yet been dramatically effected by US austerity. It’s very possible we will. And soon.

[SK in CV]

[quote=spdrun]”Most Americans” would be painlessly euthanized in a just world.(*) (Yeah, I live in this country, but the only reason NYC is tolerable is that about half of its residents weren’t born in the good ‘ol US of A.)

Basically, inflation helps the stupid at the expense of the thrifty.

(*)- gullible fucktards who got exactly what they voted for in year 2000. 10 years of war, billions spent, debt run up, tax cuts for the rich with no one having the b@lls to say “no”, cuts to transportation and education, and now a closet tax on middle class savers via inflation. WAY TO FUCKING GO![/quote]

With all due respect, you have no idea what bad inflation feels like.

[spdrun]

Be a hell of a buying opportunity. Then we’ll have a year till mid-term elections and a possible way out of some of the cuts. Win for “us”, eventual win for this country if people get fed up with the current band of clowns in Congress.

Yeah, I’m cold and cynical that way.

[livinincali]

[quote=SK in CV]
I have to disagree about there being a bubble in the market right now. If there was, the market would be 20-25% higher than it is. By historic levels, it’s currently valued pretty average based on earnings. That doesn’t mean that we’re not in for a technical correction, but that’s substantially different than a bubble bursting. And even if there is a significant business slowdown, even in hindsight, that wouldn’t be indicative of a bubble. Current earnings are real.
[/quote]

Was there a bubble in the stock market based on earnings or valuations in 2007. I remember people saying the market wouldn’t be effected by sub prime because it wasn’t significantly overvalued. Of course we saw what happened. I don’t think the bubble is in stocks per say. It’s probably somewhere in the bond space, but when that bubble pops in the bond space it’s going to have devastating impacts on the stock market just like it has the previous 2 times. This stuff is interconnected, decoupling is a myth.

[spdrun]

SK in CV –
Agreed that we’re not seeing bad inflation now. But they’re trying to re-inflate things that should NOT be re-inflated, namely the housing bubble. Yeppers. Good idea. Let’s put housing in acceptable areas out of reach of the 20 and early 30 somethings once again. Remember when it was NORMAL for people to buy homes in their late 20s, often on one income?

Basically, they’re trying to keep middle-class people on the treadmill indefinitely, rather than letting living costs drop to levels where a comfortable life WITHOUT over-exertion is possible.

Also, they’re assuming that systems behave linearly. Keep pumping, pumping, pumping and they may get a sudden response (aka bad inflation) within a very short time. Think of a mechanical system that’s stuck. You keep applying more and more force till it un-sticks, and you can end up with a very exaggerated response in the other direction. Any engineer can see and understand that.

[SK in CV]

[quote=spdrun]SK in CV –
Agreed that we’re not seeing bad inflation now. But they’re trying to re-inflate things that should NOT be re-inflated, namely the housing bubble. Yeppers. Good idea. Let’s put housing in acceptable areas out of reach of the 20 and early 30 somethings once again. Remember when it was NORMAL for people to buy homes in their late 20s, often on one income?

[/quote]

No, I don’t remember those days. They were before my time. Particularly in California. And I’m closer to twice your age than I am to your age.

[The-Shoveler]

The low inflation we have experienced since 1990 in not normal for the U.S.A.
It is mostly caused by not having minimum wage tied to any inflation gage and the change in 1981 to remove asset prices from CPI (you only need to rent, no one needs to own, well that is the thinking behind this change, you like it?).
Also China has helped to kill low skilled jobs and keep inflation artificially low (remember this is what we use to calculate 90% of inflation now),

[spdrun]

Put it this way — the value of the home where I grew up has increased by about a factor of 2.5 since the 90s, with average incomes in the area maybe doubling. My mom bought it in early 90s and paid it off on one income. This was always considered a “good” town in NJ, so gentrification doesn’t really play into it. Note that value was probably closer to 3.5x the 90s value at the height of the bubble.

Re-inflating the bubble, at least in “my” part of NJ, would do more harm than good unless incomes jump dramatically. (Don’t see that happening in the near term.)

[spdrun]

Low inflation? Fuel was $1.50/gal in 2003. Now it’s $3.50+/gal. Look at food prices. Inflation is plenty high — it’s just “hidden” by the goniffs at the Fed.

One of the few saving graces of the current situation IS low housing cost.

[The-Shoveler]

Yes that’s why they removed energy costs as well.

5-7% is more normal. 10% is just moderate for 90% of the world. An yes I did live through this and it was a lot more fun than the last 10 years.

[SK in CV]

[quote=livinincali]
Was there a bubble in the stock market based on earnings or valuations in 2007. I remember people saying the market wouldn’t be effected by sub prime because it wasn’t significantly overvalued. Of course we saw what happened. I don’t think the bubble is in stocks per say. It’s probably somewhere in the bond space, but when that bubble pops in the bond space it’s going to have devastating impacts on the stock market just like it has the previous 2 times. This stuff is interconnected, decoupling is a myth.[/quote]

PE’s were higher than now in 2007, but not astronomically. Until the bottom fell out of earnings. If I remember correctly from Schiller’s in depth analysis, we’re still at least 10% below cyclical PE when the market began its fall in Sept ’07.

I’ve heard predictions of the bond bubble popping for more than a decade now, maybe even two. It really can’t be called prescient when something is predicted for that long and it doesn’t happen.

[livinincali]

[quote=SK in CV]
I’ve heard predictions of the bond bubble popping for more than a decade now, maybe even two. It really can’t be called prescient when something is predicted for that long and it doesn’t happen.[/quote]

Alright, perhaps I should say debt bubble rather than bond bubble although most debt has been securitized as a bond these days. What does this total debt chart look like to you?

It could certainly get bigger before it pops but it most certainly will pop one way or another. Maybe we have a few more years. I don’t know, but it sure looks like a bubble to me.

[SK in CV]

livinincali…we must have been talking about two different bond bubbles. I was talking about valuation of government long-term bonds, which have been in a bull market for 30 years.

You’re apparently talking about the increase in debt over the last 60 years. It’s a concern. Not an emergency. I’m a bit confused by it though, what is the source? Not sure what GSE debt is doing in there. It would essentially be counting the same debt twice.

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