The US Stock Market-House of Cards

Discussion in 'The Club House' started by alsaqr, Mar 16, 2020.

  1. alsaqr

    alsaqr Well-Known Member Supporter

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    The US stock market has been on shaky ground for a couple years. The market was drastically overvalued and oversold. Some believe the DJIA is the bellwether indicator of the US economy, they would be wrong.

    What good is low employment when many work at dead end low paying jobs? One study showed 44 percent of US full time wage earners made less than $18,000 per year. Many have no health insurance. Millions of families are one or two pay checks from disaster.

    https://www.brookings.edu/blog/the-...yment-isnt-worth-much-if-the-jobs-barely-pay/

    For years the rise in the market was due to low interest rates and heavy borrowing. Despite those low interest rates, many US corporations are in debt up to their butts; this is especially true of energy companies. Shares of Chesapeake Energy were trading at 19 cents this morning. Last week i bought shares at 15 cents. If the company recovers i'll do well. If not, i'll lose a few hundred dollars.

    The coronavirus thing has had a profound effect on the stock market. Disney has closed many venues, some casinos have closed, conventions have been cancelled. Ports have laid off workers because the ships ain't coming from China.

    Fort Sill recently disallowed the families of soldiers graduating from courses to attend the ceremonies. One Lawton hotel had $12,000 in cancellations in one day.

    The Saudi oil guru broke an agreement with Russia to limit production and will pull out the stops on 1 April, 2020. That is a direct threat to US oil production; many drilling companies are mortgaged to the hilt.

    In the September- October time frame last year the feds began shoring up the stock market, using tactics last seen about ten years ago. Last week the feds made a heroic effort to prop up the stock market. Despite that effort the DOW opened ten percent lower today. Now the white house wants congressional authority to loan your tax money to individual US companies. Yep, the white house would choose which companies should survive and which would tank.

    Trump did something last week i like, he cut an executive order decreeing drugs be manufactured in the USA. This came after China threatened to cut off drugs made in that country.
     
    Last edited: Mar 16, 2020
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  2. RaySendero

    RaySendero Active Member

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    President Trump had achieved what was believed impossible.
    This low of unemployment, this low of inflation and this great of increase in GDP combined at the same time!

    Then along comes this virus. The stock markets not just in US around the world starts reacting to panic of A VIRUS. The panic surrounding this virus has done real economic harm. But these markets are not reacting to economic fundamentals yet - Its still emotion and accompanying day-trading.

    I really think if the exchanges would stop "short-selling" for say week at a time as apposed to temporarily suspending all trading it would be more setting. This would take these day traders out of the picture that are feeding on people's emotions.
     

  3. Mister Dave

    Mister Dave Well-Known Member

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    Nail on the head.

    The uptick rule needs to be reinstated.

    https://en.wikipedia.org/wiki/Uptick_rule
     
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  4. alsaqr

    alsaqr Well-Known Member Supporter

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    As early as September, 2019 the fed realized the stock market was shaky. The fed instituted "repo" operations for the first time in ten years.

    https://markets.businessinsider.com...ce=markets&utm_medium=ingest#what-are-repos-1

    The tanking of the stock market ain't all due to coronavirus. The energy sector is in bad shape. Many US companies are leveraged to the hilt. A downturn in the stock market will lower dividends, make some companies unable to make loan payments when due. That will result in their bond rating being downgraded to junk status.

    Boeing is being hammered. The latest iteration of the 737 has been grounded for one year. No one knows when, if ever, those planes will fly again.

    "Boeing itself helped sow doubt this week: According to AFP banking sources, the aircraft manufacturer drew on the full $14 billion credit line it only just secured from banks last month.


    That request gave the impression the company is strapped for cash, said Ken Herbert at Canaccord Genuity."

    Auto stocks are way down. Gold is holding steady and will soon rise.

    https://www.msn.com/en-us/money/com...ed-by-dual-crises/ar-BB11conw?ocid=spartandhp

    Yep, despite heroic operations, time outs and other stuff the market remains very shaky. Hope it don't happen, but this one could be much worse than the 2008 crash.
     
  5. towboater

    towboater Well-Known Member

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    I don't trust anything the fed says.
     
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  6. Mercator

    Mercator Well-Known Member

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    Or any financial advisor.

    Correction to alsaqr. Full employment means a lot. It means people are not on welfare, and the taxpayer money can be spent on something else say defense or cyber security.
    Minimum wage is rarely a dead end. If you are motivated and hard working —and granted lucky enough— you will climb up the ladder. I did.
     
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  7. alsaqr

    alsaqr Well-Known Member Supporter

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    If you are motivated and hard working —and granted lucky enough— you will climb up the ladder. I did."

    So did i. Got off my butt at age 45, went to college between overseas jobs, got two masters degrees, including an MBA. Started my own company and made a fortune. Sold my company for huge bucks. Am still in demand as a consultant and developer of work plans: That pays $80+ per hour.

    However, the playing field has drastically changed from the days we climbed the ladder to success. There are relatively few chances in advancement unless one has a degree in something.

    Yep, the definitions of employed, unemployed and full employment have even changed. If the truth were known the real US unemployment rate nationally is over 7 percent.

    Some financial gurus believe the notion that the 30 companies that make up the DJIA are representative of the US economy is voodoo. i tend to agree.

    https://money.cnn.com/data/dow30/
     
  8. Mister Dave

    Mister Dave Well-Known Member

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    Never take financial advice from strangers on the internet.

    Or anyone on TV for that matter......
     
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  9. locutus

    locutus Well-Known Member Supporter

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    QFT!!!

    You nailed it, Merc!!!
     
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  10. partdeux

    partdeux Well-Known Member Supporter

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    MArket has been overpriced for years, without a correction. One of the common metrics is EPS... except that number has been bastardized for year with corporate buy backs. And buying back your own stocks has a tendency to drive up the stock price. I did a study for my MBA finance class on stock performance 3-5 years after corporate stock buy back, and those companies always under performed companies that didn't participate.

    My projection, Dow at 15,000
     
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  11. alsaqr

    alsaqr Well-Known Member Supporter

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    Methinks that's about right. A broker i know thinks it will stabilize at 12,000-15,000.
     
  12. Ghost1958

    Ghost1958 Well-Known Member

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    Dont have a penny in the stock market.
    Never have, Never will
     
  13. Rentacop

    Rentacop Well-Known Member

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    A lot of the quotes in the Philosophy thread deal with economics . If we had a true free market , it would be absurd for the government to control interest rates . Interest is a price and should be determined by supply and demand like any other price . Artificially low interest rates and inflation drive people into the riskier investments in the stock market so stock prices go artificially high . It is a recipe for trouble .
     
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  14. crash11049

    crash11049 Well-Known Member Supporter

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    I have invested heavily in brass and lead, mostly in shooting sporting clays.
    Haven't earned a dime , but have had a he## of a good time.
    Very worthwhile investment I think.
     
  15. danf_fl

    danf_fl Retired Supporter

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    If we are getting headaches from our stock market, what about the Chinese and European stock markets? Are they experiencing the same? How did they stabilize?
     
  16. RaySendero

    RaySendero Active Member

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    How did the under-performing companies
    get the to money to buy back their stock?
     
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  17. alsaqr

    alsaqr Well-Known Member Supporter

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  18. locutus

    locutus Well-Known Member Supporter

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    The market is simple.
    When it's up, sell.
    When it's down, buy.
    When it's falling, hold!

    I've bought just over $8K worth of ETFs in the last few days. Best buying opportunity in years.
     
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  19. alsaqr

    alsaqr Well-Known Member Supporter

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  20. RaySendero

    RaySendero Active Member

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    Then why is anyone surprised - Its no revelation that:
    A company that makes bad decisions would continue to make bad decisions?!
     
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