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Stock market - look up above

Just to clarify, if the Euro collapses:
1. The USD rallies, Stocks/Bonds fall, Gold rallies
2. US economy sees deflation
3. Fed will print like crazy trying to stop deflation
4. If deflation happens the economy enters a depression for 3-10 years

Is that correct?

Also, if the euro collapses, would that kill any US banks?
I would assume any US bank holding euros would go bankrupt?

1. The USD rallies some during a crisis because it's the USD but against other currencies outside of the Euro, it may not rally much if any. Of course it will rally against the Euro, but unless you are buying goods from Europe that may not impact your life much. The Swiss franc, currently pegged, the euro, would greatly increase in value if the peg was dropped (more so than the dollar IMO). The dollar's relationship with bonds/stocks is not nearly as direct as people think. I would not assume a stronger dollar vs the euro would have a meaningful effect either way.

2. We are still seeing very low inflation in most categories. This has more to do with real estate and domestic velocity of money/other macro points than the dollar.

3. Fed doesn't "print" much money; this is a misnomer. They primarily swap assets and extend lines of credit. This can* cause inflation if improperly handled but the velocity of money is so low it's very difficult to induce inflation. A simple and relevant example is loaning a bank with a strong balance sheet an extra 100m dollars that does not want to lend. The money sits in a bank account. If the fed had given them 10 trillion dollars - and all it did was sit in a bank account - there would be zero inflation. Many firms simply returned the money the fed lent out.

4. Deflation makes growth extremely difficult but it doesn't necessarily have to get to a depression. Someone would have to severely miss manage the economy/government for that to happen (which is certainly possible, if not somewhat likely). We'll hit our wall when our interest rates rise and we are unable to respond. This 'unlikely' scenario is happening all over Europe and will soon spread to Japan.
 
More questions

In what scenarios would US interest rates rise? I assume they would rise to fight inflation? Is there any other scenario in which they would rise?

I ask because I've been hesitant about some real estate investments because I see the following scenario:

-People not looking at actual price, but payments instead.
-If interest rates go up, actual selling price must decrease to maintain payment status quo.
-If I buy now with "historic" interest rates, I feel that when rates increase I will be losing equity, as the payment status quo cannot be broken, due to real wages not increasing.

The only scenario that I see this not being an issue, is if interest rates are going up due to inflation. In that case, the housing prices should inflate as well, for a net zero effect.

Is there a scenario in which rates increase, but without inflation, and therefore equity is wiped out to maintain monthly payment status quo?

Thanks for edumacations :biggrin:
 
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Is there a scenario in which rates increase, but without inflation, and therefore equity is wiped out to maintain monthly payment status quo?

I have the same question/concern. I'm a little worried if I buy a house now that it might be worth 50% in 5 years. But like you said, depends on inflation. If inflation kicks up, you're better off not being in cash. How much inflation does it take to wipe out 50% of your money in 5 years? 8% or so? Could happen...

IMO you have to assume things will always revert to their historic average eventually. Interest rates are 0.09% now, they were what, 16% in the 80s? That would destroy house prices. Even if they only go back up to 6%....
The only exception is Japan.

Personally, I'm thinking I'm still going to buy a rental. Just looking for a extremely good deal. Interest rates could take decades to play out.


Historic US averages:

interest_rate_chart.gif



Japan:

Japan_Inflation_Rate_Historical_1956_2011.png
 
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Any guess on the direction of Greek election?
Will Greece stay within E.U. or out?
Any thoughts on this topic?

I'm curious what everyone else thinks.

IMO, I don't see how it's possible for greece to stay in the euro.
I was looking through youtube over the weekend and saw Paul Krugman talking about it who said the same. If they try to stay, their economy will never improve. If they leave the euro, there could be light at the end of the tunnel in a decade or two. I'm not 100% what his logic is there, but I'm assuming if they leave the euro they'll print money and basically default and start over iceland style. Could be wrong there, that's my guess at the 'solution'. If they stay in the euro, the 'solution' is for everyone else to print money(or borrow printed money), to give to them. But that can't go on forever. I don't see that lasting.
Regardless, you have to feel bad for them, seems like Greece is entering a depression. They're really bad off.

Equally concerning is the rest of Europe. It sounds to me like all of them are just as bad off. Not a revelation, we've known this for 4-5 years now, but it's like a slow motion train wreck.

The next question is if Greece leaves, does it all fall apart? And can Spain keep it together?
 
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Any guess on the direction of Greek election?

Will Greece stay within E.U. or out?

Any thoughts on this topic?

There are a million ways this could turn out; too many to write about.

It's way, way more complex than Greece. Greece itself is almost a non-factor at this point. It's bankrupt, severely defaulted on its debt, and is in complete shambles.

The issue is can Spain and Italy sell their bonds in the open market A) at reasonable interest rates and or B) can the ECB purchase enough of said bonds to keep them at reasonable interest rates.

Both of these options need to occur until the two nations curb/make progress on their debt load. Will this be in 2 years or 20? Germany is the powerhouse of the region but it's not in that great of shape itself. If you include all its obligations the nation is not in good condition financially. Germany does NOT want Greece out of the Euro. The entire reason Germany is on the Euro is because the low labor productivity/indebted countries average out the exchange rate. The more weak countries they expel, the higher the Euro goes against the franc/USD/yen and the entire scheme will have been in vain. Greece is so cognizant of this one of the significant political parties has publicly stated Germany needs to simply continually give them money so they can retire early, pay no taxes, etc. If Germany refuses, Greece will tell its citizens to put all their funds in non greek banks (in euros), bring back out the Drachma at 2 or 3:1 the Euro, then the citizens bring the money back. All the banks (aka french and german) holding Greek bonds of any kind are DECIMATED over night.

Guess who pays for bank collapses in Europe's banking system? The state. The system is not separated like ours although we obviously bailed our banks out as well (voluntarily). Greeks know if Germany and France let them collapse into complete chaos, they'll have to bail out their banks to the tune of hundreds of billions of Euros to clean up the mess. There is no solution.

The ECB can NOT continually bail out two of the 10 largest economies in the globe - politically or economically. Italy and Spain must figure out a way to sell their debt at 6% or below on their own and they have to do it yesterday.

I'll add a final note. There is one way to cure the massive over indebtedness of Europe - inflation. But ironically who is writing the checks and* has the most political power? Germany. And which country more than any other is absolutely terrorized by the mere mention of high inflation? Germany.
 
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Thanks for your reply!

I think next week we're going to see huge swings in the stock market, either up or down. Options trader will use this opprotunity to make big money imo...
 
I'll add a final note. There is one way to cure the massive over indebtedness of Europe - inflation.

Uncover 'Plan A' for America....
They say they don't want massive inflation, but they're saying that so that people still buy bonds at 0% interest.
Seems the smartest move MIGHT be to leverage to the hilt. Take out the biggest mortgage on the planet at 3% interest and wait for inflation to make you a "millionaire"....
 
anyone buying nke at these levels?
 
I haven't tracked nke, but anyone in Sprint stock?
It's on a tear right now. Every week it's up another 5%.
Seems like Sprint is back on their game with the best phones, unlimited data, equal call quality and coverage for far cheaper. Just a matter of time....
I'm debating selling my Sprint stock at $5(~75% gain) or seeing if it will go to $10(~350% gain).

5 year:

s


6 month:

s
 
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jond - Congrats on your holding in S. Nice move to the upside with volume today.

Thanks :)
I have a stock widget on my phone which updates every hour. I looked down and saw 20% up and I thought it must be broke! Pretty cool...

I think Sprint is in a good spot.
People are leaving AT&T because they're tired on not being able to get cell coverage and not having unlimited data and it's no longer the ONLY iPhone provider.
People are leaving VZ because it's a recession and VZ is expensive and doesn't have unlimited data.

Sprint is set as the value play for people trying to save $20-30 a month. It's like playing Walmart or McDonalds during a recession.
It will be interesting when the new iPhone comes out in a few months. THAT will be when a lot of people make a move IMO.

We'll see. I say all that and it will drop 50% today, lol.
 
if FB goes below 20 I'll be taking a long look.
 
if FB goes below 20 I'll be taking a long look.

I would do some good DD on it....
What stock price would equal a trailing PE equal to Apple or Google(companies who actually make money).
I think the answer is $5 per share, but I could be wrong...

And even if you bought at $5 per share, that seems like to me you're paying top price for it with no room for grow.
I would look to buy facebook closer to $2.00/share, but who knows....
 
I would do some good DD on it....
What stock price would equal a trailing PE equal to Apple or Google(companies who actually make money).
I think the answer is $5 per share, but I could be wrong...

And even if you bought at $5 per share, that seems like to me you're paying top price for it with no room for grow.
I would look to buy facebook closer to $2.00/share, but who knows....

Lol thats why I need to keep my day job,you are 10 times better at analysis then me:redface:
 
I would do some good DD on it....
What stock price would equal a trailing PE equal to Apple or Google(companies who actually make money).
I think the answer is $5 per share, but I could be wrong...

And even if you bought at $5 per share, that seems like to me you're paying top price for it with no room for grow.
I would look to buy facebook closer to $2.00/share, but who knows....

Correct. FB is utterly overvalued at any price >$5.
 
This really depends on if FB can quickly and effectively come up with a good mobile strategy. If they can then the street could pump up the stock price again regardless of valuation.

Would you pay $120,000 for a Honda Civic? That's what you're doing buying facebook with a P/E of 80. Most people say to never buy stocks over a 20 P/E Apple's PE is 14, googles is 18. 80 is ridiculous.
I agree though, figuring out a way to push ads onto phones is key to their success. That might make their stock attractive once it gets to $3-4.
 
This really depends on if FB can quickly and effectively come up with a good mobile strategy. If they can then the street could pump up the stock price again regardless of valuation.

I couldn't care less about their mobile strategy. In order to make $20 a fair price, they need to at least quadruple their expected earnings.

What concerns me is the amount of time and effort people spend trying to buy these garbage stocks because they are in the news, trendy, their kids use it, etc.

Even in today's grossly over valued market, you'd be better off building positions in 100's of energy stocks, dozens of industrials (see CAT's earnings recenty?), or even preferred shares/fixed income closed end funds than wasting time on Facebook. Facebook is not just a gamble - it's a stupid gamble and the hype has cost a lot of small time "investors" (I have another name for it but I'll remain polite) a lot of money. Everyone was having a near orgy purchasing FB but very few came out in public afterwards about their (probably massive) losses.

The purpose of owning stocks is to make money. If you can't tell how, when, and why a company's stock is going to rise (99.99% cannot, including me in at least 50% of cases and I traded millions of shares on the NYSE, AMEX, etc.) you'd better be focusing a lot on yield and determining if that yield is sustainable and under what conditions it'll deteriorate.
 
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wise words sahtt ! My biggest problem is i have a hard time selling winners:redface: most likely blind greed,and also selling losers..false hopes:frown:
 
wise words sahtt ! My biggest problem is i have a hard time selling winners:redface: most likely blind greed,and also selling losers..false hopes:frown:

Good way to handle your situation is setup limit and stop loss order so your risk and reward is clearly defined when entering a trade. Or setup your own trading rules, but the hard part is the discipline.
 
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