Dow Jones Up 30%..2000 Pts since innauguration

Discussion in 'Economy' started by HUGGY, Sep 17, 2009.

  1. HUGGY
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    HUGGY I Post Because I Care Supporting Member

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    I don't get it. How can the Dow make all these gains under the thumb of a Marxist?

    Your thoughts?
     
  2. Toro
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    Toro Diamond Member

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    Here's a better one:

    The Venezuelan stock market under Chavez outperformed American stock markets under Bush.

    [​IMG]

    Stocks have historically done better under Democrats than Republicans, though they do best when one party controls the White House and another controls Congress.

    This does not mean that stocks do better under Democrats. Instead, it proves that stocks do not do worse under Democrats. People who view everything politically or ideologically don't understand this, which isn't surprising.

    Stocks will do better under Obama than they did under Bush.
     
  3. HUGGY
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    HUGGY I Post Because I Care Supporting Member

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    Stocks have historically done better under Democrats than Republicans

    "Historically" isn't much of a reason. At best it is a trend.... as we say in the machining world.."a witness mark"..

    With all of the anger exprssed at the tea bagger protests one would think the world and being part of the world..the stock market would be tanking.
     
  4. Paulie
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    Paulie Platinum Member

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    The stock market typically does better after the federal reserve takes steps to lower interest rates. This time around, they created more money than they ever have before, and lowered the rate to a historically low level.

    It stands to reason that people would put their money to work now, because next year it'll be worth much less in cash. And that pattern looks like it may continue exponentially for a while.
     
  5. PLYMCO_PILGRIM
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    PLYMCO_PILGRIM Gold Member

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    They have monetized our debt so that over 2x as much paper money is in circulation. Hopefully this doesn't work out like it usually does when debt is monetized and lead to inflation.

    Either way I'm glad the stock market is doing better and I hope that these bailouts and TARP don't do what these type of programs have been historically shown to do in other economies that have tried. I hope we can be the exception to the rule and dont do like after the great depression where stocks and the economy did good for a few years then tanked again even worse (until ww2 came along)

    I'm with the OP being glad about the stock market doing good and I hope that we can somehow have a different result than has been shown to happen time and time again in other countries that have tried these tactics, including our own in the Great Depression.
     
  6. Paulie
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    Paulie Platinum Member

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    You are incorrect about the amount of paper money in circulation. The "2x" is the amount that the Fed increased the monetary base. The Fed can not directly affect the money supply in circulation, they can only increase and decrease bank reserves. The banks have to lend and/or invest those reserves for that money to enter the supply. Obviously they have not been doing much lending, instead hoarding it to strengthen their balance sheets.

    And as far as the market goes, yes I suppose it's nice to see it gaining if you're exposed to it. It's also a little scary to see it come this far without any kind of real correction. It's running on liquidity creation at this point, and I worry about another bubble.
     
  7. eagleseven
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    eagleseven Quod Erat Demonstrandum

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    As Paulie and Pilgrim have stated, in two words:

    Free Money


    When you take a drastic pro-inflation stance, you'll see it in the Dow.
     
  8. PLYMCO_PILGRIM
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    PLYMCO_PILGRIM Gold Member

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    I like it when people are pithy. That was a great post.
     
  9. Paulie
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    Paulie Platinum Member

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    My last post to you was less than pithy because I wanted to clear up your confusion about the money supply. Too many people are misinformed about monetary policy and how it works, and it ultimately makes a bad name for those who are anti-federal reserve that are fighting for some kind of real change. There's a movement, and misinformation will only hurt the process.

    No offense meant, of course.
     
  10. Toro
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    Toro Diamond Member

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    You are correct. "History" is not a good reason.

    The reason why stocks have done well over the past several months is because investors realized that the world was not going to end, stocks were dirt cheap, and the Fed is flooding the financial system with liquidity.

    Both the Bush and the Obama administrations deserve credit for saving the financial system, which was on the verge of collapse. But this has to do with actions through the Federal Reserve and the Treasury as opposed to the stimulus. The stimulus helps some but Obama's health proposal hurts, so the two are probably a wash.

    Stocks are no longer cheap. In fact, they are probably expensive now, given the fragile state of the economy. That probably means stocks won't do much for the rest of Obama's term, though they may bounce around pretty violently.

    As for the Fed, its actions have put a floor under pretty much all asset prices, including stocks and real estate. However, its actions have been massive and will almost certainly have large unintended consequences down the road.
     

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