Make your bet, when will stock market collapse?

[DudleySmith]

Gold and other metals haven't budged yet...
That tells me that someone (or several someone's)who are strapped for cash are dumping gold into the market and any other assets they own trying to keep the lights on.

Not really. That's possible, but it's not the only reason, there are several good reasons why that happens.

 

[DudleySmith]

.the amount of capitol flight from other countries is going to be staggering. (Pouring into the American markets).

lol that has been going on since 2007-2008. It's not 'going to be staggering', it already has been 'staggering' for 13 years or so.

 

[DudleySmith]

Personally I think the currency shufflers in the markets will continue to keep the plates spinning, the "end" will come in trade, we will see the dollar be rejected in international settlement.

Years ago when gold was at or below cost of production, China bought mines all over the globe. They also bought tankers and retrofitted them to carry ore . . . They bring the ore home and refine it.

Also, China began the Shanghai Gold Exchange which is a market based on daily settlement of physical gold, not a futures market like New York and London. the gold banks play all kinds of games pushing price down by dumping paper gold into the market; they have dumped contacts worth the annual mine output in paper to drive price down.

Already arbitrage exists between the China physical and west's paper markets and once that price point accelerates and widens, the suck of physical gold out of the west to the east will happen very fast (there really isn't much left).

All these moves have worked to allow China to amass incredible stores of gold, vastly more (I'm thinking 20X -30X) than they have declared to date. China can destroy the NY and London exchanges any time they want; when they have transferred the west's gold, they will announce their stockpile (with much publicity and fanfare) and simultaneously, China will announce a gold-backed yuan just for trade.

Instead of dollars leaving the USA, trillions of dollars will flow back as they are dumped globally as nobody will accept them in global commerce settlement.

It could be fun hough, if it happens in winter we will be able to burn those dollars for heat.

Nobody can see the future, but I've been hearing about the imminent demise of the dollar for the last 55 years; it's not only still here it's still the world's most in demand currency. As bad as its value has declined, most others have fared worse, a lot worse.

 

[JohnDB]

lol that has been going on since 2007-2008. It's not 'going to be staggering', it already has been 'staggering' for 13 years or so.

Yes but when they have hyperinflation...they seek shelter for their wealth...which in turn creates more inflation of American dollars.

 

[JohnDB]

Nobody can see the future, but I've been hearing about the imminent demise of the dollar for the last 55 years; it's not only still here it's still the world's most in demand currency. As bad as its value has declined, most others have fared worse, a lot worse.

Agreed...
But better handling of the economy is needed.
Biden put out too much stimulus too soon. That's been the beef of many on Wall Street. (Although hushed mostly)

He should have waited until the vaccines were actually rolling out instead of hearing that they were almost ready to be put up for approval. Which just happened to coincide with Biden winning the election. (What jackasses the Fed and SEC have been)

So now we have to pay the piper for an overly eager rollout. Well, we have been paying for it with shipping container shortages, shipping issues at ports, supply chain interruptions and stagflation.

All because of politics has been prioritized over health of the economy.

 

[a1623yankee]

it is only a minor part of what interest rate defines or influences.

in your situation of giant overdentedness the most important effect of the interest rate is, as you said, but without proper elaboration - to influence borrowing.

there is certain limit, a % of income/profit that a borrower can spend on debt and interest payments.
as I descrived above, you may pay the same sum having 10 times bigger debt if the interest rate is 10 times smaller.

exactly this way Central bank can reduce or promote business activity - via regulation of amount of money one has at his disposal after he pays debt and interest. - what you mention.

but when your debt is giant the issue is not about extra investment, bit about survival.

for example, let us see how much insolvent the United States of Ametica is.


for the year 2021

receipts 3,581 trillion
outlays - 7,249 trillion
deficite - 3,669 trillion

Deficite is bigger than receipts, obviously the US is an absolute bankrupt in principle, if it loses ability to finance this deficite.

The US lost its ability to finance its deficite borrowing in the market, the Fed has to print money and to borrow it to the Treasury.

This can go on only until Dollar is the World trade and reserve currency and you can trow off this excess of dollars to the rest of the World, otherwise these, dollars would have created hyperinflation already, like in Zimbabwe or Venezuela.

And since China becomes the biggest World economy in 2027, since it introduced digital Yuan in 2021 - within next several years the US Dollar will lose its World currency ststus. The US will lose ability to finance all kinds of debt just printing money...

though, it's sidestepping..
Now, In November 2021, the public debt of the United States was around 28,91 trillion US dollars.

I don't want to spend timd to find out exact composition of US public debt by terms, let us consider it to be all 7 years Treasury notes, the yild is around 1,5%.

So, if the interest rate grows by just 1 per cent, it adds 28,91 :100 x 1 = 290 billion dollars a year of extra outlays.

to curb inflation the Fed has to raise the interest rate to at least 8% ( now, next month inflation will be higher, by March it will be not less than 10%).
Let us consider the hyke to reach 11,5% (so, US government to pay extra 10% on debt) .

If the Fed is serious about curbing inflation the US government will have to spend about 2,9 trillion dollars more to pay just the interest rate!!!!

to remind,

receipts 3,581 trillion
outlays - 7,249 trillion (+2,9 trln)
deficite - 3,669 trillion (+2,9 = 6,57 trln)

deficite will be 184 % of US receipts.

The US is as a bankrupt as Zimbabwe. Fundamentally and indisputably. If the US hykes the rate the Fed has to print another 2,9 trln dollars accelerating inflation despite it hyked the rate just to finance the budget deficite. And most US economy will go bankrupt.

If it doesn't hyke the rate inflation will keep accelerating...

And all American business and households have the same situation.

Do you understand now to what an abyss the US economy is heading?

The USA was headed to the abyss the very moment that the Fed and JP Morgan and pals' debt economy was fired up and rolling. The fact that it has largely avoided the edge of the cliff thus far is only due to the clever criminal style manipulations (ie scams) of frightened Fed directors. That these scams are irrevocably rolling to ultimate disaster is a given but our so-called elected officials are utterly incapable, incompetent and thoroughly childlike in their abilities (lack thereof) to steer this nation away from its doom. The people of the USA have fallen victim to scumbag politics and the dimwit, exclusively self serving, "party of business" that has consistently aimed this nation toward its own death. Following the death scent too closely are the left wing cowards who supposedly oppose them and they will waterfall over the edge of doom chasing the right wing boogeymen dragging us and the world with them. Our LIAR politicians and so-called Big Business Leaders deserve a hearty worldwide FU and a solid roundhouse right to the tips of their nasty GREEDY noses and into their eyes!

 

[JohnDB]

All total from March low of 2020 to the highs of this year

We have lost in a week ¹/20th of the gains in that time...over a trillion dollars of value has evaporated last week. Everyone was cheering when Apple had a three trillion dollar capitalization on the daily trading value...
Today it's just 2.80 trillion.

 

[Siberian]

All total from March low of 2020 to the highs of this year

We have lost in a week ¹/20th of the gains in that time...over a trillion dollars of value has evaporated last week. Everyone was cheering when Apple had a three trillion dollar capitalization on the daily trading value...
Today it's just 2.80 trillion.

when everybody rushes to the exit everybody will finally understand that all these gains were not growth of value but inflationof stocks.

All this virtual money will be lost.

 

[JohnDB]

when everybody rushes to the exit everybody will finally understand that all these gains were not growth of value but inflationof stocks.

All this virtual money will be lost.

Less than 2% of money is actually physically printed or minted. Probably a lot less than the last time I looked (because it has never mattered)

Cash and checkable deposits is "dead money". Meaning it isn't doing anything...it doesn't matter. It's only potential to do something. Only drug dealers and prostitutes use physical cash anymore.

 

[Siberian]

Less than 2% of money is actually physically printed or minted. Probably a lot less than the last time I looked (because it has never mattered)

Cash and checkable deposits is "dead money". Meaning it isn't doing anything...it doesn't matter. It's only potential to do something. Only drug dealers and prostitutes use physical cash anymore.

saying "printing money" I of course mean non-physical money (debt) emission

 

[JohnDB]

saying "printing money" I of course mean non-physical money (debt) emission

Are you referring to bonds?
Bonds are money as well. They are a physical instrument that is traded for tangible goods no different than anything else.

If someone holds 100 million dollars worth of stable stocks they can issue a bond worth 50-60 million for them. And that 50-60 million cash spends just fine on things like yachts, houses, and golf club membership.

 

[Siberian]

Are you referring to bonds?
Bonds are money as well. They are a physical instrument that is traded for tangible goods no different than anything else.

If someone holds 100 million dollars worth of stable stocks they can issue a bond worth 50-60 million for them. And that 50-60 million cash spends just fine on things like yachts, houses, and golf club membership.

no, I am referring to M0, the Fed balance sheet.
or shit, it's the same nowadays...

 

[Siberian]

If someone holds 100 million dollars worth of stable stocks they can issue a bond worth 50-60 million for them. And that 50-60 million cash spends just fine on things like yachts, houses, and golf club membership.

and how are you going to :
1) pay interest on them if % is raised
2) cover margin call if today your stocks are worth 100 mln and then suddenly fall to 50 mln? and your debt is 60 plus interest?

the 2nd point is the most vital for coming months...

 

[JohnDB]

no, I am referring to M0, the Fed balance sheet.
or shit, it's the same nowadays...

The federal government issues treasury notes...they are a listed commodity and usable as collateral. 2 yr, 10 yr, and 30 year notes are all listed on the exchanges and their yields are watched...they aren't variable rates. ROFL.

You really don't seem to understand economics very well.

 

[JohnDB]

and how are you going to :
1) pay interest on them if % is raised
2) cover margin call if today your stocks are worth 100 mln and then suddenly fall to 50 mln? and your debt is 60 plus interest?

the 2nd point is the most vital for coming months...

Usually you don't borrow to the limit of the value of your stocks.

Margin rates are different but usually related to how much you can borrow.

Let's create another example shall we?

Say for example I had a million dollars in my retirement portfolio but outside the normal tax structures of retirement portfolios. (Not that uncommon)

So I borrowed $500K and bought the limit of what I could of NVDIA or Apple stocks.

And depending on which I bought...I either tripled my money or doubled it this past year.
Even though I might have lost 5% these past two weeks I can settle that debt quite easily. I either have another million or half million dollars to pay interest (1%) fees and pocket the rest.
So...
Now that interest rates are climbing...
And risk is usually calculated between 3-9%and sometimes all the way out to 14% in addition for risk/reward investment calculations...those higher interest rates are also figured in for any borrowed money. Meaning that I am going to be more selective in what I invest in.
There's not going to be any margin call for the money I've borrowed. Provided that I've been prudent in what I invest in and that the lenders agree with my choices. They aren't going to complain or whine.
Now if I started off buying Micron when it was $90/share the first time last spring/summer...then they might have something to say when it dropped to 55/share...but with the current Market conditions they aren't going to say anything at all.

 

[Siberian]

The federal government issues treasury notes...they are a listed commodity and usable as collateral. 2 yr, 10 yr, and 30 year notes are all listed on the exchanges and their yields are watched...they aren't variable rates. ROFL.

You really don't seem to understand economics very well.

I rather have animpression that you are trying to demonstrate what you know on economy without it being tied to the issue or to what I say

Treasury notes are bought by the Fed using this very "printed" or emitted money.
This emitted money can be used to finance government's budget deficite via buying Treasury notes, or via buying subprime mortgage debt from banks, or buying various kinds of debt, including bonds, or buying even stocks as Japan has been doing for a long time, Europe probably has just started to do and it's to be checked if the US started doing it too.

I don't want to sound as lecturing you ar make our discussion confrontational in any way, but I tend to think you don't quite understand what MO means and how the Fed prints money

otherwise you would not have pointed at something secondary ignoring my excessive clarification that saying printing money I mean M0 .

 

[JohnDB]

I rather have animpression that you are trying to demonstrate what you know on economy without it being tied to the issue or to what I say

Treasury notes are bought by the Fed using this very "printed" or emitted money.
This emitted money can be used to finance government's budget deficite via buying Treasury notes, or via buying subprime mortgage debt from banks, or buying various kinds of debt, including bonds, or buying even stocks as Japan has been doing for a long time, Europe probably has just started to do and it's to be checked if the US started doing it too.

I don't want to sound as lecturing you ar make our discussion confrontational in any way, but I tend to think you don't quite understand what MO means and how the Fed prints money

otherwise you would not have pointed at something secondary ignoring my excessive clarification that saying printing money I mean M0 .

Well you obviously don't know what you are talking about.
And it's rather difficult to speak to someone who knows something very poorly.

M1, M2, and M3 money is all money.

I have no clue what M0 money you are referring to. Certainly doesn't exist in English classes.... maybe that Siberian snow has corrupted your brain.

 

[JohnDB]

Ok. I found a reference...

And M⁰ is a worthless number. Nobody pays attention to it. We have a system of the Federal Reserve that keeps the money flowing.
Now in Russia? They shut down every day for Vodka... you have an equivalent but like I said...they shut down for vodka and pretty blondes crossing the street. Also if chocolate shows up in the local grocery store.

 

[Siberian]

Usually you don't borrow to the limit of the value of your stocks.

Margin rates are different but usually related to how much you can borrow.

We'll definitely return to your example later, but I see you don't understand my point in my example, I have to explain it gurther.

I don't trade and don't have stocks, I am just interested in economy, so you may correct me in exact figures.

I presume collateral for a loan is usually about 80%, is it correct for the US?

It means that having stocks worth 100 mln dollars your limit of credit would be 80 mln.

You got it. But stocks fall by 20%. No, let it be even 5%. It means your collateral now is worth 76 mln and the bank comes to you with demand to either add some stocks worth 4 mln or pay the same sum in money.

If you got not 80 mln but let us say 60 mln - you proposed this sum - so, it means a credit worth 60 mln requires collateral worth 75 mln. You allocated 75 mln of your stocks as collateral.

Then, if stocks drop by 20%, then 75 mln f collateral turn into 60 mln, and if collateral must be 80% of price of stocks then your collateral is now worth 48 mln.
The margin is 12 mln.

25 mln of stocks now are worth 20 mln.If you usecthem as collateral they will be 20 mln x80% =16 mln.

Well, you will survive 20% drop, you wil still have about 5 mln of stocks not used as collateral.
Though, I forgot about the interest...

So, summing up, if you have stocks worth 100 mln and made a debt worth 60 mln maximum what you can afford yourself is 20% drop.
If more - you will go bankrupt.

The US stock market grew by e, 5 times since 2008, if I remember correctly.
It dropped by around 20% in autumn 2018, after the Fed started tightening, did it?

I mean you are all doomed in both ways.
If the Fed keeps printing money inflation will gradually turn into hyperinflation which will kill you.
If the Fed starts tightening the stock market will collapse creating a giant wave of margin calls as it was in 2008.

Very simple, there is no way out of current situation.

 

[Siberian]

Well you obviously don't know what you are talking about.
And it's rather difficult to speak to someone who knows something very poorly.

M1, M2, and M3 money is all money.

I have no clue what M0 money you are referring to. Certainly doesn't exist in English classes.... maybe that Siberian snow has corrupted your brain.

John, leave Siberian snow and my brain alone, if you are a serious investor don't spoil my attempts to seriously explain to you how you will lose your money

Of course M1, M2 and M3 are all money. And a dog is an animal, and even a cat is
But what the Fed prints is basic money, M0 which creates all other Ms, being put into financial system.
Simply put, look at the Fed's balanxe sheet.
This is exactly money which the Fed "prints".