Financial topics

[The Grey Badger]

Ha Ha ... The global housing bubble started way before 1990's.

My neighbor, aged mid 90's, bought his house in late 1930's for $1000. Now its worth over $3 million.

In 1854 you could buy up to 320 acres at $1.25 per acre in Oregon. Similar situations applied to land in Australia, Canada, New Zealand etc.

In Rome land price inflation and currency debasement have been recorded for a 2500 year period.

"... During the fifty-year interval ending with the rule of Claudius Victorinus in A.D. 268, the silver content of the Roman coin fell to one five-thousandth of its original level."

"... by A.D. 305 the process of currency debasement had begun again. By the turn of the century, this process had produced a two-thousand-percent increase in the price of gold in terms of denarii"

http://mises.org/story/3498

The long-term trend is inflation and prices in Rome are still rising.
.

Jason - since you're looking at that sort of time scale, one excellent book is "The Long Wave" by David Hackett Fischer. He charted prices of basic commodities from as early as there were decent records on them, meaning starting sometime in the High Middle Ages, with excursions into the Classical world, which kept better records than the Dark Ages for sure. His data is so precise I was able to pinpoint the Siege of Athens just from looking at the chart!

And yes, we're at the tail end of another Great Wave of Inflation. He proved that to my satisfaction. And they all start at about the same price level that the previous one ended at, barring a major civilization crash.

[John]

-- S&P 500 breaches 1080

I took my loss today, as what is going on looks nothing like what
I expected (for example, look how much gold and silver went up
today and how low the dollar is - I had predicted that would not
happen). Shorting this bear market rally destroyed almost 8% of my
net worth. The S&P is up 13.5% from where I started shorting.

Analyzing my psychology heading into this exercise in Maximum
Ruin (which has probably been gleaned by anyone reading this
thread): First, I had made some money in the previous bubble from
2003 until 2007, although I did sell everything 1-2 years before
their respective highs (real estate, stocks, etc). Then I was
short at the top of the stock market in 2007 and made some money
there. And, as we know from the forum, I made a little money last
Fall buying and selling stocks. So I hadn't lost a dime going
into this exercise. I think what can happen in such cases is that
a person becomes overconfident and doesn't consider their actions
carefully enough. In addition, the overconfidence results in the
failure to take the actions that one knows should be taken. I
knew that I should be in safe cash and tangibles and should not
be fooling with the market.

As I watched my money get destroyed today, I told myself over and
over that this will be the last time I ever speculate. I realized
that the actions that had led to my previous success (or perhaps
luck would be a better word) were based on similar thinking to
what had led to taking the short position to begin with, but that
I was basically standing in front of a tsunami that I had
incorrectly identified. As we stated the other day, this market
environment is nothing like that which existed previous to the
crisis (and perhaps will be less similar to the past generational
crisis than anticipated). During that time, it always seemed like
the market would forgive your errors and let you out gently.

Generally, the country hasn't learned this lesson yet, but this
small exercise in Maximum Ruin gives me a taste of what is coming
and how people are going to feel when it is over. It's going to
be a very different world once this market crashes for real. Of
course, having an understanding of what is coming makes all the
difference because we all know that the days of easy money are
over and once your savings are lost it will be impossible to
recover them. One of the big problems I see is that our leaders
have convinced many that the days of easy money are not over,
when in fact they most likely are. Without that knowledge, losing
this money probably wouldn't have bothered me much. For example,
about 12 years ago, I lost about 20% of my money in the market.
At that time, it didn't bother me nearly as much as losing 8%
today and, in fact, I hadn't ever calculated the percentage until
just recently. Looking back on that now, I must have been
nuts....

When Higgenbotham posted this, almost exactly a month ago, I feared
that he would regret it. He had planned to stay short until the S&P
reached 1080, and here he was taking his loss when the S&P was at
1065. At that time, it seemed that the stock market rally was
ending, and that the S&P index would start falling from 1065.

Well, it turns out that Higgie's intuition was right. This new stock
market bubble continues to grow, and the S&P 500 index has just
reached 1084.

John

[Higgenbotham]

-- S&P 500 breaches 1080

John

1080 has acted as a dividing line over the past month. Today it finally hopped over 1080 and took off.

Whether that means it goes higher from here, I have no idea. My feeling is that the stock market has gone from being a casino to being a carnival.

If the banks have taken TARP money and gambled on the stock market as others have suggested (and that seems like a reasonable conclusion), the public should stay away and let the banks take the hit when the market collapses. Unfortunately, the pension funds will probably continue to buy in and many workers will lose most of their retirement money.

[Jason]

Did anyone else notice the graph in "Exhibit A" is seriously flawed in representing true price increases?

For the USA, it shows a house price increase from 100 to 210 (i.e. price doubling) in the period 1970-2006.

One house I bought in 1981 sold for twice its purchase price two years later. Another was sold for 3.5 times purchase price after 10 years. Houses in the suburb I grew up in cost $10,000 in 1970, you would be lucky to find anything under $500k there today.

In 1970, the median price of a single-family home in California was $26,000. In 38 years these homes have seen a 2,165% increase, to a median price of $588,970 in 2008

The house price boom was well established, long before "greedy, nihilistic Gen-Xers led by greedy, incompetent Boomers" arrived on the scene.

John, presenting such inaccurate, unrealistic data completely undermines what you are trying to prove.

"The Grey Badger" - thanks I'll read "The Long Wave" by David Hackett Fischer as you recommended.
.

[Witchiepoo]

When you buy "shorts," is there a time limit on when the stock prices have to drop for you to make money?

[Higgenbotham]

When you buy "shorts," is there a time limit on when the stock prices have to drop for you to make money?

The short answer is no except for options.

If you short stock index futures, the contracts have expiration dates and need to be rolled over.

If you buy inverse ETFs, you can hold those as long as you want.

If you short individual stocks, there is no time limit but you are borrowing shares and the lender can recall the securities at any time.

if you buy put options, those have expiration dates.

[wvbill]

When you buy "shorts," is there a time limit on when the stock prices have to drop for you to make money?

The short answer is no except for options.

If you short stock index futures, the contracts have expiration dates and need to be rolled over.

If you buy inverse ETFs, you can hold those as long as you want.

If you short individual stocks, there is no time limit but you are borrowing shares and the lender can recall the securities at any time.

if you buy put options, those have expiration dates.

Also--if you short a stock, you must do so in a margin account and if the price goes up (you are losing money) you can get a margin call to put up more money. This is not the case with the other methods mentioned. Much depends on your time frame and desired leverage. There are also inverse mutual funds tied to indexes--these have both pros and cons versus comparable ETF's.

[shoshin]

This humorous piece from the NYTimes seems to have generational dynamics written all over it, what do you think John?

http://www.nytimes.com/2009/10/14/opini ... illin.html


And another question for you....if the banks took the bailout money and invested it in the stock market, why are Treasuries still yielding such low interest?...is someone else buying them (the Chinese)?....

[aedens]

After Hours: 37.47 2.91 (8.42%) 6:55pm ET

Will close tomorrow's hedge. My max was 1090 sp500 I was looking for.
Along winter ahead be carefull.

http://garyscommonsense.blogspot.com/

The Australian dollar rose to a 14-month high, trading at 92.01 U.S. cents at 1:32 p.m. in Sydney, from 91.50 cents yesterday in New York. The two-year government bond yield gained to 4.77 percent from 4.63 percent.
http://generationaldynamics.com/forum/v ... 2070#p4271
Emptor: Note chart carefully
http://www.debtdeflation.com/blogs/

[aedens]

http://www.finviz.com/insidertrading.as ... ctionValue

Im out - good hunting, back in the spring. I cannot see a technical or fundamental trade given the landscape.

Hubris inflicts lasting pain. Disipline over conviction must prevail or all is lost Washington. The left and the right are wrong.
Since the Consumers is shattered by your historical ineptitude may your creator judge since the honest are afficted and you
deny justice to the common man. So few, for so long have lowered the eyes of honest guidance to indifference. A heavy price
indeed extracted.

After Hours: 37.47 2.91 (8.42%) 6:55pm ET 10/15/09

Last Trade: 38.11 Trade Time: Oct 16 Change: 3.55 10.27%