Would someone mind updating me on the economy?

[Nemo128]

People around the office keep CNN on the IPTV just to watch the DJIA drop... I find it sad that it's so amusing to them.

 

[Tomorrow]

Sorry, I was actually defending you then. A lot of modern-day conservatives look at the things I mention as liberal hippy talk and disregard any attempt to question the authority. Trust me, I have no problem with people who believe in real freedom.

I didn't say it out of emotion. It's based in the skewing of facts that we're fed on a daily basis by the likes of Bill O'Really? and Ann Coooolder...

HOWEVER, I must thank you for all your responses. I'll admit, I made a presumption about you that I am fully apologetic for.

You and TLS both have such a handle on the facts and historical significance of the situation, more people should be listening to the likes of you two and less to the finger-pointing we are getting from the establishment. You managed to take a complex path to destruction and turn it into CliffNotes that a child could understand... which means many of our elected officials would still be in the dark.

Truly many thanks for a great read.

Thanks for the kind comments, Nemo. I must say that TLS takes the high road more than I. I'm more on the emotional Chicken Little path ... "The Sky Is Falling ". I'd really rather read his hopeful stuff than mine.

As for my poliltical leanings...don't confuse me with being either a conservative or liberal. 'Anti-establishment' was the term used back in the '60s and is still applicable.

As far as your reply to the issue of American business owners vis a vis the talking head commentators, they're all the same, left and right leaning...all biased...all opinionated...each filled with equal measures of their own egos and their half-truth messages. Symmetry. You need not state what you did, when it could also easily be said that "American business owners provide jobs and benefits to his 'own people' (chattel, Nemo?) and no one thanks him/her enough."

 

[MDS]

I don't understand the stock market very well, but it seems like its just dependent on how much money people take in and out... but where does the money go when it goes down or up? If I put in 17 dollars and the stock goes down to 10... where does the 7 dollars go?

It goes to money heaven.

A share of stock is fractional ownership of a company. One would purchase stock to share in the success of the company by an increase in the value of the shares and/or from dividends payed on the stock. The 'value' of the stock does not depend on supply and demand like physical goods - it fluctuates with the ratio of buyers to sellers.

Investors constantly evaluate the prospects of the company to determine what the stock is 'worth'. There are many ways to do so: P/E ratio (price to earnings), price to book value, dividend yield, and on and on. If you buy one share for $17 and the next bid is $10 and you sell, your $7 is gone. The $7 didn't go to someone else, it disappears. Remember - it's an auction market.

Mid-year, the city appraised my house at $249,000 and change. At the end of the year when it came time to pay property taxes, it had been reevaluated to $238,000. That $11,000 didn't go to anyone - it disappears - and my net worth (assets minus liabilities) declined by the same amount.

Bear Stearns was the first shoe to drop and it's easy to understand why they went under. Their assets were mostly securities tied to housing where the house values were greatly inflated. They used borrowed money to increase their holdings (leverage). When home values declined, their 'assets' were worth less BUT the debt remains. Leveraged 33 to 1, if the value of the assets decline ~$3, you are insolvent (because now your assets are worth $97 and you still owe $97).

 

[MidnightSensi]

You paid that person 17 dollars for the stock. That's where your 17 dollars went. Just like you paid the 200 for the subwoofer to the person you bought it from. Stock is bought from someone. Just like your sub.

Economics consists of two basic curves.

The supply curve and the Demand curve

The value of any thing is determined by where those two curves intersect. When the value drops below the current market price then a surplus of that product is created.

When the value exceeds the current market price then a shortage is created.

In order for a stock to decrease in value their must be surplus of shares. And for it to increase in value their must be a shortage of shares.

A surplus of shares are created by people selling the stock.

A shortage is created by people buying the stock.

Whenever someone sells the stock they get cash in return.

The reason the market dropped so much is that many people have sold their stocks and gotten cash in return. In fact almost half the value of the market has been turned into cash. As a result their is plenty of available cash on hand. Couple that with the increased money supply and you have a very well supported financial situation. Support points in the market are basically points where the growth started. previously. For example in 2001 you see a dip and in 98 you see a dip. we are at 98 which is two support points back.

When the market reaches that point the worst of the market slide is usually over. There is still ripples but the big hit is done. I think there has been a bit of overreaction to the situation, but that's usual.

I do understand that part of it, but I'm going back to what TLS said about commerce versus trade. Shouldn't the stock market be kind of like Vegas and the real effort be in actually making stuff?

I'm sure my questions are childish to someone who gets it, but, I really do appreciate the help. Le'mme know when I'm just helpless on this and I'll stop.

 

[Nemo128]

As far as your reply to the issue of American business owners vis a vis the talking head commentators, they're all the same, left and right leaning...all biased...all opinionated...each filled with equal measures of their own egos and their half-truth messages.

Absolutely, it's the same excrement being dumped from different cranial rectums.

 

[lsiberian]

I do understand that part of it, but I'm going back to what TLS said about commerce versus trade. Shouldn't the stock market be kind of like Vegas and the real effort be in actually making stuff?

I'm sure my questions are childish to someone who gets it, but, I really do appreciate the help. Le'mme know when I'm just helpless on this and I'll stop.

Vegas is far more predictable than the stock market. This is why I can play craps better than most people.

The stock market was invented as a way for people to raise capital for large expenditures. For example building a oil well can take more money than one person has. So he gets investors to help him. The stock market is a very disciplined overly regulated version of that on a greater scale. I still found it funny when people where bashing Exxon for getting rich and they got asked the question of who owns Exxon. The answer is a lot of people and chances are if you own a mutual fund Exxon is in that fund.

This method is very good for technology and innovation as demonstrated in the many advances of the 19th, 20th and 21st century. But the problem is that it tends to focus on efficiency so much that it marginalizes the bottom workers. The hope is that the benefits of the technology will drip down to the marginalized. The idea is that if you shift the standard of living of the rich high enough then the lives of the poor will improve. In reality Poverty has always been a problem, but it is further exposed by the divide between the marginalized and the upper class. One of our current problems is that the upper class to marginalized gap has widened instead of the marginalized to upper class gap remaining the same. Of course you will here justifications for this. I used to be racism. Now it's other things. The reality is that we have no more right to our resources than anyone else. Because we never created the raw resources. God did that. Many people have been able to point this out and live it out. You just don't hear about them. I know numerous folks that are doing everything they can to help the marginalized. Instead of blaming them for being born on the wrong side of the river or the town.

If you ever want to see this disparity. I suggest a trip to Hati. There is a rich part of Hati and an absolute impoverished side. Kids are born everyday with no choice or hope for a better life. It's heart breaking and eye opening. However in the midst of these conditions you will find those who have found joy and happiness in their simple life. Being content is great gain.

 

[lsiberian]

It goes to money heaven.

A share of stock is fractional ownership of a company. One would purchase stock to share in the success of the company by an increase in the value of the shares and/or from dividends payed on the stock. The 'value' of the stock does not depend on supply and demand like physical goods - it fluctuates with the ratio of buyers to sellers.

Investors constantly evaluate the prospects of the company to determine what the stock is 'worth'. There are many ways to do so: P/E ratio (price to earnings), price to book value, dividend yield, and on and on. If you buy one share for $17 and the next bid is $10 and you sell, your $7 is gone. The $7 didn't go to someone else, it disappears. Remember - it's an auction market.

Mid-year, the city appraised my house at $249,000 and change. At the end of the year when it came time to pay property taxes, it had been reevaluated to $238,000. That $11,000 didn't go to anyone - it disappears - and my net worth (assets minus liabilities) declined by the same amount.

Bear Stearns was the first shoe to drop and it's easy to understand why they went under. Their assets were mostly securities tied to housing where the house values were greatly inflated. They used borrowed money to increase their holdings (leverage). When home values declined, their 'assets' were worth less BUT the debt remains. Leveraged 33 to 1, if the value of the assets decline ~$3, you are insolvent (because now your assets are worth $97 and you still owe $97).

Remember the best thing to invest in is a good growing product. The companies to invest in are the places you see busy. Walk around the mall. And notice the busy stores. Those are the places to invest.

If you see empty stores. Then don't invest in those.

Another good way to invest. Is by investing in the companies you use. For example if you bank with Bank A then invest in Bank A. If you buy Onkyo receivers invest in Onkyo. And so forth.

The final way is to use Mutual funds. Pick one that has reasonable growth over a period of time. Spikes either way are not a good sign. 1 hit wonders never last.

 

[majorloser]

Say Hello to 1997

Dow Jones drops below 7,000 points.

The Dow last closed below 7,000 on May 1, 1997 and hadn't finished at this level since April 25, 1997.

Am I allowed to panic now?

 

[MidnightSensi]

Dow Jones drops below 7,000 points.

The Dow last closed below 7,000 on May 1, 1997 and hadn't finished at this level since April 25, 1997.

Am I allowed to panic now?

I'm sure feeling the heat.

I came home on Friday and there was a notice on my door: the landlord hasn't been paying his mortgage and now he is going into foreclosure. So I have to move soon. Luckly my office is zoned and setup for work-live, but, it still really sucks. I just got all moved in. I guess the only upside is my office has no neighbors so I can pack some serious bass... but, I'm pretty bummed, plus it'll cost me some real money (moving expenses, etc.).


Speaking of that, and related to the economy, what's with these mortgage bailout plans? I mean, if my landlord can't make the payment at 8% hows he gunna make it at 4%? I don't see how that does anything but push back foreclosures. These people took calculated (or not so calculated) risks, and now they don't want to accept the downside? That means that since my landlord went into foreclosure, I will pay for it by having to move on the front end, and then on the back end I'll have to pay for it in taxes if some sort of plan passes. So, I, the guy who only buys what he can afford, gets double-screwed while they get the double-benefit.

 

[Tomorrow]

I'm sure feeling the heat.
So, I, the guy who only buys what he can afford, gets double-screwed while they get the double-benefit.

I'm truly sorry to hear of your situation, Sensi.

That was a first class description of Bushbama Economics in action.

 

[Davemcc]

Speaking of that, and related to the economy, what's with these mortgage bailout plans? I mean, if my landlord can't make the payment at 8% hows he gunna make it at 4%? I don't see how that does anything but push back foreclosures. These people took calculated (or not so calculated) risks, and now they don't want to accept the downside? That means that since my landlord went into foreclosure, I will pay for it by having to move on the front end, and then on the back end I'll have to pay for it in taxes if some sort of plan passes. So, I, the guy who only buys what he can afford, gets double-screwed while they get the double-benefit.

That sounds pretty accurate and I'm sorry to see you got caught in the middle of it. That was a nice place, too.

 

[rnatalli]

So, I, the guy who only buys what he can afford, gets double-screwed while they get the double-benefit.

Consider this, if the home next door goes into foreclosure, your home value plummets. It's a rat race and it sucks.

 

[MidnightSensi]

That sounds pretty accurate and I'm sorry to see you got caught in the middle of it. That was a nice place, too.

Yeah, I'm pretty bummed. I'll take pictures of where I'm going once I start setting it up later this month, it's more like a bunker. So, no view, but, no neighbors either.... so, my pity gift to myself is some new gear to go shake some rafters with with some help from the crew in the DIY forum. So, I think I'm going to weather the storm in my bunker/office... I own it, so no landlord, and its zoned for work and living so I can live there as long as I like.

I was thinking of buying out this apartment from the bank, because I do like it, but they'll probably only sell it for 1/3 of its mortgage, which is still expensive. Plus building fees/maintenance is 550 bucks a month... and my question is... if all these apartments go into foreclosure and no one is in the building...who is gunna pay the maintenance? I'd rather just bugger off and not deal with what that outcome would be. And this building only has like 25 places, I can't imagine these giant condo buildings down here once all these people go broke. The buildings will go broke, because no one will be able to pay the maintenance fees.

 

[Davemcc]

I own it, so no landlord,

It sucks that you met your responsibilities in the transaction, yet you're the one that has to suffer the consequences. Still, it's not the worst thing that could happen to a guy that gets evicted. I'm actually getting excited for you but I have a vision in my head of a Manhattan Style loft with 20ft ceilings and rows of huge windows. Your reality may vary, I don't know...need pics.

 

[TLS Guy]

Yeah, I'm pretty bummed. I'll take pictures of where I'm going once I start setting it up later this month, it's more like a bunker. So, no view, but, no neighbors either.... so, my pity gift to myself is some new gear to go shake some rafters with with some help from the crew in the DIY forum. So, I think I'm going to weather the storm in my bunker/office... I own it, so no landlord, and its zoned for work and living so I can live there as long as I like.

I was thinking of buying out this apartment from the bank, because I do like it, but they'll probably only sell it for 1/3 of its mortgage, which is still expensive. Plus building fees/maintenance is 550 bucks a month... and my question is... if all these apartments go into foreclosure and no one is in the building...who is gunna pay the maintenance? I'd rather just bugger off and not deal with what that outcome would be. And this building only has like 25 places, I can't imagine these giant condo buildings down here once all these people go broke. The buildings will go broke, because no one will be able to pay the maintenance fees.

You got that one right Sensi!

I'm terrified that this common interest community I bought into in Eagan MN, will get foreclosure blight. There are not many units for sale right now, but they do not sell despite the price being attractive. I bought this one, at what I thought was good price last June, but the tax valuation has already dropped slightly below what I paid for it. If we get a lot of empty bank owned foreclosed units, the owners that are left can have a lot of exposure.

The news has not got better since I last posted. Things are going South fast in Eastern Europe. They are emerging markets, coming out of the yolk of Soviet influence. We encouraged and invested in them, and were content to buy cheap goods from them also, especially shoes from Hungary. Now Western capital has moved out and left them high and dry.

In Hungary things are getting really desperate, as bad or worse, than the thirties here. A few like Slovenia are on the Euro, however most have been prevented.

The President of Hungary has appealed for help from the EU. That disastrous body has given them the cold shoulder.

It seems to me old Europe is committed to repeating the same mistakes. The trouble that has so often engulfed the world has so often started in that region and my well again. They I fear will be driven back under the influence of the Russian Bear.

 

[Tomorrow]

You got that one right Sensi!

I'm terrified that this common interest community I bought into in Eagan MN, will get foreclosure blight. There are not many units for sale right now, but they do not sell despite the price being attractive. I bought this one, at what I thought was good price last June, but the tax valuation has already dropped slightly below what I paid for it. If we get a lot of empty bank owned foreclosed units, the owners that are left can have a lot of exposure.

The news has not got better since I last posted. Things are going South fast in Eastern Europe. They are emerging markets, coming out of the yolk of Soviet influence. We encouraged and invested in them, and were content to buy cheap goods from them also, especially shoes from Hungary. Now Western capital has moved out and left them high and dry.

In Hungary things are getting really desperate, as bad or worse, than the thirties here. A few like Slovenia are on the Euro, however most have been prevented.

The President of Hungary has appealed for help from the EU. That disastrous body has given them the cold shoulder.

It seems to me old Europe is committed to repeating the same mistakes. The trouble that has so often engulfed the world has so often started in that region and my well again. They I fear will be driven back under the influence of the Russian Bear.

Well said, Mark.

I think you'll all find this short article in the Atlantic to be very enlightening. http://business.theatlantic.com/2009/02/protectionism_and_the_stimulus_the_spirit_of_smoot-hawley_lives_on_in_stimulus_bills_buy_american_la.php. The Smoot-Hawley (Hawley, our major Oregon contribution to the beginning of WWII) Bill basically set into motion the economic machine that forged the financial chaos in Germany in the late '30's. This of course gave rise to Hitler and his cronnies in the Third Reich along with Germany's fervent nationalism and racism.

Two years ago, I saw 1927 all over again. Today I see 1937 all over again. There is huge potential trouble a-brewin' if we don't stop this economic protectionism and/or turn around our economy. As I stated earlier, it's in times of economic hardship that wars are brought and fought. And quick solutions (or preparations) are much more important this time around as it truly is a world economy.

 

[lsiberian]

Well said, Mark.

I think you'll all find this short article in the Atlantic to be very enlightening. http://business.theatlantic.com/2009/02/protectionism_and_the_stimulus_the_spirit_of_smoot-hawley_lives_on_in_stimulus_bills_buy_american_la.php. The Smoot-Hawley (Hawley, our major Oregon contribution to the beginning of WWII) Bill basically set into motion the economic machine that forged the financial chaos in Germany in the late '30's. This of course gave rise to Hitler and his cronnies in the Third Reich along with Germany's fervent nationalism and racism.

Two years ago, I saw 1927 all over again. Today I see 1937 all over again. There is huge potential trouble a-brewin' if we don't stop this economic protectionism and/or turn around our economy. As I stated earlier, it's in times of economic hardship that wars are brought and fought. And quick solutions (or preparations) are much more important this time around as it truly is a world economy.

Europe has been poorly mismanaged over the last few years. So it's no surprise to see the fallout of that. I think we are still ok, but the media needs to stop perpetuating the situation.

 

[Tomorrow]

Europe has been poorly mismanaged over the last few years. So it's no surprise to see the fallout of that. I think we are still ok, but the media needs to stop perpetuating the situation.

I couldn't agree more.

 

[majorloser]

"Economy Fell Off A Cliff"

"It's fallen off a cliff," Warren Buffett said. "Not only has the economy slowed down a lot, but people have really changed their habits like I haven't seen."


http://www.newsday.com/business/ny-bc-buffett-economy0309mar09,0,3486286.story

 

[alexwakelin]

I work for a college, and we broke our all time enrollment record for the Spring semester. However, due to state budget cuts things are getting a bit ridiculous here. Hot water heaters are getting shut off, restrooms will no longer have paper towels, no one is allowed to have a personal mini frige in their office, thermostats are getting turned down in the winter and up in the summer, etc. The good news is that we have met our budget without laying anyone off, but eventually there will be no where else to cut money but by letting people go.