Dow Down 777 - Guess Who's At Fault?

[dr_mabeuse]

Why does everyone here keep talking like the Dems are not just as corrupt as the Reps? They are just as bad, just as stupid and only care for themselves. A plague on both houses.

Simple explanation: I you make less than $169,000 a year, you have NO representation in Washington. They only serve the tax bracket they are in and the higher one they want to get into to!

Mainly because the Republicans have been in charge for the last 8 years, so this is a Republican economy, a Republican value system, a Republican culture, a Republican War, a Republican justice system, a Republican zeitgeist.

When the Democrats get in, it'll be time to bitch about them.

 

[trysail]

"First rate men will not canvass mobs and, if they did, the mobs would not elect the first rate man."

-Lord Robert Cecil, Third Marquess of Salisbury
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Humans are always in search of certainty in the face of uncertainty; that is why many of us are vulnerable to political and religious messiahs. Prophets, demagogues, politicians, salesmen, and evangelists are astute in their knowledge that people hungry for answers can easily be manipulated by the illusory promise of definitive answers to unanswerable questions. Mencken wrote entire books on this human tendency.

-Trysail
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"Frederick the Great, asked why he gave commissions in the Prussian army only to Junker, replied simply, 'Because they will not lie and cannot be bought.' "

-H. L. Mencken

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"You cannot help the poor by destroying the rich.
You cannot strengthen the weak by weakening the strong.
You cannot bring about prosperity by discouraging thrift.
You cannot lift the wage earner up by pulling the wage payer down.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away men's initiative and independence.
You cannot help men permanently by doing for them, what they could and should do for themselves."

-Abraham Lincoln

 

[trysail]

"If you don't know who you are, the stock market is an expensive place to find out."

I wish I'd written that. Unfortunately, I can't take the credit. The author was "Adam Smith" the nom de plume of George Gilder.

However, I will take credit ( and expect it to be given ) for the following:
The stock market is not a good place for codependents.

 

[Stella_Omega]

Talk about a non-sequeteur!
Destroying what rich, trysail?

Does some fucking ignorant wanker robber baron deserve special consideration now, because he's got all of MY money?

Don't worry, the rich won't allow themselves to be destroyed. or taxed, or held accountable.

 

[DesertPirate]

Mainly because the Republicans have been in charge for the last 8 years, so this is a Republican economy, a Republican value system, a Republican culture, a Republican War, a Republican justice system, a Republican zeitgeist.

When the Democrats get in, it'll be time to bitch about them.

Except that Clinton had the rules rewritten allowing the marginal loans. and his cronies ran Freddie and Fannie until 2004. That is the source of the meltdown. Barney Frank said in 03 that there was no problem and they should buy more of those loans. Which of the Dems, upon becoming the Chair of the various Banking and Financial Committees started warning us about the problem?
They are equally guilty as the SEC Chair and everyone else in oversight for the last 13 years!
McCain tried to help change things in 05.

 

[Selena_Kitt]

Talk about a non-sequeteur!
Destroying what rich, trysail?

Does some fucking ignorant wanker robber baron deserve special consideration now, because he's got all of MY money?

Don't worry, the rich won't allow themselves to be destroyed. or taxed, or held accountable.

This is how trickle down economics works.

It doesn't.

 

[xssve]

I agree with everything you said, although I am puzzled by your segue into high school education in the last paragraph. I still remember hearing letters on Ken Burns' Civil War documentary that were written by "average" soldiers and yet were astonishing for their erudition and knowledge.

So you're blaming the stock market's plunge on Monday on the country's colleges?

Frankly, I don't think that "blame" plays into it. I get tired of watching the stock market go up and down, with everyone hanging on each day's closing as if it were the best indication of the health of our economy. Why do financial advisers always tell us to take a long-term approach and then get on TV and tell us why everything's so bad in the short term?

The bailout failed because a strange coalition of far-left liberals, far-right conservatives, and cowards afraid of not getting re-elected didn't vote for it. "Investors" didn't like that news; the stock market tanked. On Tuesday it shot back up. Now it's going back down. What's on TV?

Uh, because they listen to republican agitprop and can't tell it's bullshit?

The question we need to be asking is why do we need a bailout? That the bailout was not rushed through no questions asked like the administration wanted, and probably planned, is to a me a sign that at least a few people have woken up.

 

[xssve]

"You elect doofuses, you get to live in doofus-land. That's how things work".

-- dr_mabeuse


Gotta be my new line 2.

 

[trysail]

Talk about a non-sequeteur!
Destroying what rich, trysail?

Does some fucking ignorant wanker robber baron deserve special consideration now, because he's got all of MY money?

Don't worry, the rich won't allow themselves to be destroyed. or taxed, or held accountable.

Stella, you'll just have to ask that old railroad corporate attorney, "Honest" Abe exactly what he meant.

If that "fucking ignorant wanker robber baron" has all of YOUR money, it seems reasonable to ask, "How?" If he got it through fraud, that's a matter for the legal system. Where are Ken Lay, Jeff Skilling and Dennis Koslowski (among many others) these days? Speaking of which, where IS Marc Rich these days?

You are correct; the "rich" (an undefined term [ See: http://forum.literotica.com/showthread.php?t=542853 ] and I'll be damned if I can define it) can hardly be expected to sit back and say, "Please destroy me. Please tax me more." One percent (1%) of the population is already paying fifty percent (50%) of Federal personal income taxes.

As for accountability (and I have to assume you're referring to issues of corporate governance), I join you in looking in disgust and anger at the use of unaccounted-for management stock options ( which, by the way, dear old Congress interfered to uphold in 1992 ), preposterous levels of compensation and obscene severance agreements. I always, always vote my proxies against them— that's a shareholder's prerogative.

It took more than a decade of Warren Buffett (and a lot of other people— including even ME) railing against unaccounted-for management stock options to undo the damage that Congress did in that area.

 

[trysail]

They keep doing this shit. Goddamnit, where is the line-item veto?
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(Fair Use Excerpt)

Oct. 1 (Bloomberg) -- Rose City Archery Inc., an Oregon company that makes arrows used by children, hit a bull's-eye with Senate legislation that would rescue Wall Street banks.

Senators attached a provision repealing a 39-cent excise tax on wooden arrows designed for children to an historic $700 billion financial-markets rescue that passed tonight by a vote of 74-25. The provision, originally proposed by Oregon senators Ron Wyden and Gordon Smith, will save manufacturers such as Rose City Archery in Myrtle Point, Oregon, about $200,000 a year.

It's one of dozens of tax breaks benefiting Hollywood producers, stock-car racetrack owners and Virgin Islands rum- makers included in the broader legislation in an effort to win support from House Republicans, whose defection contributed to a rejection of an earlier version of the legislation two days ago on a 228-205 vote.

``This is how Washington works,'' said Keith Ashdown, chief investigator at Taxpayers for Common Sense, a Washington research group. ``A big pot of pork is their recipe for final passage.''

Representatives for Wyden, a Democrat, and Smith, a Republican, didn't immediately return calls. Jerry Dishion, president of Rose City Archery, was in meetings and unavailable to comment, a receptionist at the company said.

Most of the provisions are part of a package of provisions known as ``extenders'' because they are renewed for only a few years at a time.

Research Tax Credit

Popular with lawmakers, the provisions include a research tax credit worth about $8.3 billion a year for companies such as Microsoft Corp. and Harley-Davidson Inc., and subsidies for the overseas financial services earnings of U.S.-based multinational corporations such as General Electric Co. and Citigroup Inc.

The tax package also would spare 24 million American households from a scheduled increase in the alternative minimum tax amounting to $62 billion this year and renew about $17 billion of incentives to promote energy production from renewable sources such as solar and wind.

Other, smaller provisions, such as one that will save Nascar track builders $109 million this year, have been staples of the tax code since 2004 or earlier. They periodically expire and are renewed, and include hundreds of millions of dollars of tax incentives for companies that invest on Indian reservations, in the District of Columbia, and American Samoa. Other breaks would subsidize renovations of restaurant franchises and cut import duties on wool and wood.

Break for Filmmakers

Several others are new provisions, including two tax breaks worth $478 million over the next decade for movie and television producers who shoot films in the United States. The legislation would allow filmmakers to qualify for a 3 percentage-point reduction from the 35 percent top tax rate approved in 2004 for domestic manufacturers.

The arrows provision seeks to reverse an anomaly in a 2004 law that created the 39 cent excise tax on the weapons. Intended the levy more expensive arrows, the tax also applies to arrows used by Boy Scouts and other youth organizations that cost about 30 cents a piece. Ten manufacturers in nine U.S. states stand to benefit from the change, according to a description of the legislation from Wyden's office.

Michael Steel, a spokesman for House Minority Leader John Boehner, said the inclusion of the tax breaks ``will increase the appeal of the package for our members.''

The Congressional Budget Office said today the tax provisions will add about $112 billion to budget deficits over the next five years because the legislation doesn't contain enough offsetting revenue increases to keep the budget balanced.

The biggest revenue-raising provision in the bill would cost managers of hedge funds about $25 billion over the next decade by prohibiting an accounting technique they currently use to defer for as long as 10 years U.S. taxes on their income earned in foreign countries, usually tax havens such as the Cayman Islands.

 

[TE999]

Senators and Congressmen absolutely cannot resist pork barreling no matter what bill comes before them...snakes slither, flies eat shit, politicians add pork.

If they were writing a bill to take Christ from the cross, they'd have a proviso in there to aid the nail manufacturing and timber lobbies.

 

[XXplorher]

Who gets fucked first when we all roll over? Blahdeddly blah, blah.

I just feel bad for how insulting this is to all those who earned the country before us. Go roll over in some other fucking country. Seriously.

 

[voluptuary_manque]

Okay, the DOW is down 34% from its high last year. Every pundit is howling. But . . . what is Warren Buffet doing? Hmmmm? Kiddies, he's buying! Now Wall Street is full of people who all think that they're smarter than he is but who's the world's richest man? And he's buying? So, assuming that you have any spare cash at all, what should you be doing?

Old Wall Street Saw: Buy when everyone else selling and sell when everyone else is buying.

Wah-hey!

 

[rgraham666]

This, unfortunately, presumes that you have money to buy.

Which is is generally not the case. Many people are now far more worried about putting food on the table, gassing their cars, paying their mortgages and sending their kids to university than whether they can get stocks cheap.

 

[voluptuary_manque]

This, unfortunately, presumes that you have money to buy.

Which is is generally not the case. Many people are now far more worried about putting food on the table, gassing their cars, paying their mortgages and sending their kids to university than whether they can get stocks cheap.

Got it in one! I know what I should be doing but can't.

 

[Sandy_Fox]

Got it in one! I know what I should be doing but can't.

Take a mortgage against your house!

 

[JAMESBJOHNSON]

VM

Tis true.

But Buffett isnt paying inflated prices for the stock, and he's exploiting institutional investors who need the money to operate colleges, hospitals, schools, and local police/fire departments or pay pensions.

Buffett is a scavenger.

 

[trysail]

I don't agree with every single point of the following but it is "roughly right." Scribed by a person of my acquaintence who shall go nameless:


"Financial assets are the present value of future cash flows. Even if cash flows next year are zero, a financial asset has value based on cash flows beyond next year. While the stock market seems to hint to us daily that every company is going out of business tomorrow or soon after, most companies are in fine shape to withstand a very harsh recession. Stocks don’t have to wait until a recession ends to go up. They will bottom when the present value of future cash flows bottom. That is a function of two factors. One is timing. The closer we get to the uptick, the more the asset will be worth. Second, the sooner investors accurately recalibrate the cash flows, the sooner stocks will rise. Clearly cyclical companies have been undergoing such a process. Is it over? I don’t know but I suspect that most solid companies capable of withstanding the credit crunch (i.e. those well financed today with secure cash flows and little debt coming due soon) have adequately discounted the most reasonable drastic changes in the discounted cash flow model.

That’s the good news.

The bad news relates to money flows. I have talked about forced selling by hedge funds over the past few weeks. But I haven’t discussed mutual funds. Equity funds that invest in U.S. companies had net outflows of $22 billion in September. That is an enormous number. It helps explain the horrid September performance. Funds that invest internationally had outflows of $24 billion. This is a worldwide selloff. However, as bad as those numbers seem, they pale against the outflows just for the week ended October 8. In that week alone, U.S. equity funds had a net outflow of $27.3 billion, a monthly rate of over $100 billion, while foreign funds had a net outflow of $16 billion. In other words, the net outflow last week was just about equal to the net outflow in September. A half of 1% of all equity mutual funds assets in the U.S. were liquidated in one week. That doesn’t sound like a lot but it is huge. Total daily volume of NYSE listed stocks is only a little over $100 billion on a busy day.

When one puts in an order to sell a mutual fund, those orders are executed at net asset value (NAV) based on the closing price. When you see a huge volume of orders at the close (these “sell or buy on close” orders are entered prior to 3:40 PM), it is often a mutual fund who must liquidate shares in order to meet the sell orders. If the fund owns 1% positions in 100 stocks, it will sell a piece of each to meet liquidations. Thus, at times like these, there is a huge and relentless bias to sell stock and much of that selling is concentrated at the close of trading assuming the panic stays in place and the public remains heavy net sellers. Indeed, heavy selling one day reinforces panic the next. It is self-perpetuating.

So how does it end? There is no precision and no formula. If one looks at technical measures, we are as oversold as the market has been in decades and the VIX volatility/fear reading is as high as it has ever been. But at some point, value and rationality will overtake emotion. There is a point where dividend yields will command staying the course. There will be a point where investors still in the market will stop panicking.

I can’t tell you when. But I can offer a few hints to back up my point. When oil prices began to rise at an accelerated pace last fall, no one believed they would get over $80 per barrel. But then they sailed through $80, $90 and even $100, a level some big shot analysts were predicting. But oil didn’t stop there. Before all was said and done, oil was near $150, analysts were predicting $200 and TV commentators were talking about $5 gasoline.

Today we are back near $80 and still falling and gas will soon be less than $3 per gallon again. If you read what I wrote when oil was rising, rational explanation said the marginal cost to produce a barrel of oil never got above $75 and thus any price above $90 couldn’t be supported with logic. That didn’t stop oil from reaching $147. Why $147 and not $207? Because we ran out of hysterical buyers. When traders saw this, they began to liquidate positions. Soon, sellers began to dominate buyers. It went full circle.

That will happen to stocks as well. I don’t know if this market will stop today or go down another 10% or 30%. But I do know that stocks will seek fair value when the panic ends.

For some stocks, that might mean rallies of 50% or more. But for some stocks, the new low prices may be a more accurate indicator of value than the old ones. Some banks, brokers, etc. have been permanently damaged, fractured by toxic assets, excess leverage and crippling dilution. The auto industry is saddled with debt, pension liabilities and way too much capacity. But please remember that Americans won’t give up cars. We might not see 16 million units sold in one year again but we will see sales of 13 million or more. Someone will make money in the auto business once the dust settles. We will still need computers, networking gear, clothes, heating oil, airlines, railroads, and retail stores. We will still work in offices and take vacations to exciting resorts. Great companies grab big chunks of market share in bad times. In good times when everyone has access to money, it is harder to gain share. Therefore, look for the best companies with the best balance sheets. They may not flourish in today’s economy but they will shine tomorrow.

Remember present value of future cash flows. Today’s cash flows may be down but for many surviving companies, tomorrow’s will end up a lot higher.

Futures point to a lower opening. I wish I could be hopeful over the next couple of days but I don’t see how we can avoid continued panic liquidation on a Friday or over the weekend. Thus, if I had to guess, and trying to predict an emotional hurricane is just a guess, I would think that stocks will be lower Monday evening than they are today. [trysail note: attempting to forecast the short-run course of any market is a fool's game and I disagree with the attempt— I would prefer that he hadn't engaged in this idiocy.] But value always wins out in the long run. Values today are incredible but I understand fully that some can’t tolerate the near term pain in order to realize the intermediate term value. "

 

[trysail]

... Buffett ... he's exploiting institutional investors who need the money to operate colleges, hospitals, schools, and local police/fire departments or pay pensions.

Buffett is a scavenger.

How so? Please to explain. Nobody forces any of these people to behave stupidly.


"Buy when others are fearful."

 

[JAMESBJOHNSON]

TRYSAIL

We agree. People are mostly stupid. Buffet obviously understands that people are stupid to buy stock thats too leveraged. He counts on it happening, so he's a predator just like the croc that waits at the ford for antelope to cross. His scheme isnt genius, its common sense.

If school boards and mosquito control districts and pension funds had any brains they'd buy stock for its earnings NOT to gamble with.

RULE OF THUMB: When the light-bulb clicks on in your brain, it really means youre the last to know.

 

[Varian P]

VM

Tis true.

But Buffett isnt paying inflated prices for the stock, and he's exploiting institutional investors who need the money to operate colleges, hospitals, schools, and local police/fire departments or pay pensions.

Buffett is a scavenger.

Yes. Buffet and anyone who's buying into the market now, at the bargain basement prices we're looking at this week, is profiting off the losses of others.

On the other hand, the scavengers investing now are infusing the market with cash and confidence, which will, ultimately, help revive it.

 

[The_Fool]

Only buy stock that you are willing to hold onto for the next five years. Only use funds that you won't need for the next five years. Damn. Don't have any.

 

[Svenskaflicka]

When I read the title of this thread, my first reaction was that they were going to somehow find a way to blame gay and lesbian people for this. Too.

 

[rgraham666]

They don't need to. They're already blaming the blacks and Hispanics.

 

[Svenskaflicka]

Oh, it's their turn now to be the scapegoats? I can't keep up with today's trends.