Comments on: Economy volatility a hurdle for stocks http://blogs.reuters.com/great-debate/2010/03/23/economy-volatility-a-hurdle-for-stocks/ Thu, 21 Jul 2016 07:57:19 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: yr2009 http://blogs.reuters.com/great-debate/2010/03/23/economy-volatility-a-hurdle-for-stocks/#comment-29513 Wed, 24 Mar 2010 12:38:20 +0000 http://blogs.reuters.com/great-debate/?p=6865#comment-29513 Good article, and I enjoyed reading the comments posted by CrisisMaven, Kina and Story_Burn.

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By: Story_Burn http://blogs.reuters.com/great-debate/2010/03/23/economy-volatility-a-hurdle-for-stocks/#comment-29511 Wed, 24 Mar 2010 11:02:06 +0000 http://blogs.reuters.com/great-debate/?p=6865#comment-29511 This is a jobless recovery with companies making huge money on exports and international growth, boosting 2010 earnings guidance, buying back their own stock and pursuing M&A. Stocks can continue to go up with the consumer still in the toilet. At least for the next month or two

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By: Kina http://blogs.reuters.com/great-debate/2010/03/23/economy-volatility-a-hurdle-for-stocks/#comment-29510 Wed, 24 Mar 2010 10:39:04 +0000 http://blogs.reuters.com/great-debate/?p=6865#comment-29510 Credit is not money. It vanishes with people’s ability to repay and the subsequent devaluation in asset prices when it is the whole country in the same boat.

The credit may be on the ‘books’ but a great percentage of it (if it were honestly accounted) is bad debt.

The boom times were funded entirely by credit (who had real money they hadn’t spent?), the crash saw most highly leveraged, no cash and now no ability to borrow. So where is the money or ‘credit worthiness’ going to come that will be a resurgence in consumer demand?

That multi billions of vanish credit that sustained the boom times is gone and there is nothing to replace it except the average pay check – after servicing debt. But of course fear will make people save.

There has to be a huge contraction in the consumer economy that formerly kept the engines running.

The USA has yet to reach the maximum of its problems in my personal opinion.

We have seen the ominous signs with a failure or recovery in the residential housing market (and certainly builders are going to unemployed for a long time). People are not buying because – banks wont lend, they dont want to buy, the expect prices to drop further…ie deflationary elements at play.

The big problem comes when commercial real estate loans come for roll over this year and next. Loans taken out at the peak of the market – maximum borrowings against maximum valuations. Gulp!! And now not only are those valuations through the floor…who is renting to provide revenue to even service interest?

We have already seen instances of commercial real estate borrowers walk away from their loans, leaving the loss to the banks. This is going to accelerate through this year and it will have flow through effects on the residential markets as well as you would expect.

Bank lending will contract even more, more failures, more unemployment…and so forth. It sounds terrible, it will be terrible. It is simply remarkable that people could think a trillion dollars of credit could disappear and the economy just cruise back to recovery.

The stock market is insane, we all know it, it being artificially inflated but with no volume. It will have a spectacular crash at the end of this.

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By: CrisisMaven http://blogs.reuters.com/great-debate/2010/03/23/economy-volatility-a-hurdle-for-stocks/#comment-29500 Tue, 23 Mar 2010 17:06:41 +0000 http://blogs.reuters.com/great-debate/?p=6865#comment-29500 “something like that confidence has come back” – I wouldn’t say confidence, would call it the “Great Desperation” where other investments have become perceivedly riskier and investors don’t really reflexect about returns but future appreciation (“bubble”) profits – much like in the housing market whoever bought their seventh house on credit was not even not going to live in it, he/she even knew that it would never pay for itself – they purely thought prices would rise further. The same can nw be seen in stock markets, like prior to 2000 – everyone hopes shares will go up until they sell. That will be the second disaster after housing. While this clearly shows the detrimental effects of inflation, central banks stoke a “fear of deflation” as a ruse by central banks to keep inflating the money supply. For deflation to seriously happen, not only the current extreme credit expansion by the central banks and states (through “quantitative easing”, stimulus packages, monetising and then spending national debt etc.) but also the money that was released into the economy PRIOR to the collapse would have to be “mopped up” again. This is nowhere to be seen nor would it be technically possible (confiscation aside) so we will rather see inflation than deflation and for another while rising stock prices as this money has nowhere to go.

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