Dollar/stks crisis
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Started by wglassfo - Nov. 28, 2019, 12:35 p.m.

Was at our, should say my wife's financial advisor on our once a yr update and any adjustments to the portfolio

I commented the stk market goes in cycles and this cycle could not last forever. He agreed and explained the adjustments made for a stk market de-valuation of perhaps 15-20 %. I also rubbed a bit of salt in when last yr I said I thought Barrick gold mining stk was the place to be. Yes it did very well in 2019

However, back to a cyclic stk market. I just read an article that says the Fed is trapped into forever QE so long as the gov't keeps spending more money than revenue which, any sane person would know, will be forever. The Fed says QE it isn't forever and it isn't QE. Do they think we can't think for ourselves??? Yes they may give it a rest for a short time but they will be forced to go back to QE. Does anybody know what else they can do?? If you have a solution then please step forward because nobody else has any idea of another solution. Gov't spending has to be financed some how.

Now Bernie and many other Dems tell us the rich will pay for gov't spending. What planet does Bernie and all the free stuff Dems come from??? At least Joe isn't going around promising free stuff

Forgetting the Dems promises of free stuff, just looking at past performance by congress and the increasing obligations of the gov't for SS, medicare and all kinds of promised saftey nets will expand gov't debt, which the Fed is the only game in town to make that money appear, from out of no where. Do you think I will buy a USA bond?? or other outside investors. In sufficient quantities to finance your deficit spending. Come on, give your head a shake and 3 lashes with a wet noodle

Thus the Fed will increase it's balance sheet as it buys gov't bonds then actually forces the banks to accept this cash from thin air and the banks in turn by stks. Like what else can the banks buy. I wish they would buy corn, beans etc but there is extreme risk doing that whilst stks are much safer. Stks go up

But are stks safer???

What happens when investors lose confidence in the gov't ability to even pay int on the debt.  You say that will never happen. Well the EU isn't exactly a small entity and we see negative interest in so many countries, which by default, this is why you have a  strong USD. But the printing of digital money to buy bonds  exceeds the GDP of the USA and it will only increase. When investors realize the bonds are merely a method of monetizing the debt, then they may think to them selves??

Is it possible the USA may go into partial default? No way Hossay you say. Now it is true, no investor will lose all their money buying bonds as the gov't has some revenue, but the hair cut could be extreme as we have seen in other countries. Would you want to take  chance on losing only parrt of your money. I didn't think so.

So long as the banks buy stks all is good. If the bond market should falter then the dollar also falters and the banks money falters and then the stk market falters. See how it works. It all starts with the ability of the USA gov't to pay it's debts. If there is a hiccup, then the dominoes start to fall over and we have all done that domino row and watched the dominoes fall down. This will lead to a devaluation of stk values which will hit those with paper profits hard, and of course as our investor told us, if stks lose more than 15% of value then he will head for the exit. Don't you think other investors have a number that is the time to head for the exit. That is when the exit door gets very crowded and the bid drops quickly, as investors all try to unload stks at approx the same time. So the market closes for a short time but eventually it has to re-open

This will eventually lead to inflation as the digital money from thin air loses investor confidence and prices of consumrer goods increase 

When the dust settles the stk marke will have gone too far in one direction, [down] just as it probably will keep going up short term
 Short term could be yrs. months, weeks but eventually you can't rack up more debt than your ability to re-pay at least the int. and if int goes negative then the dollar is monetized and investors catch on very quickly

No matter how you bake this cake, this will not end well

We just don't know when

By the way, just so you know, we are with drawing our paper profits and leaving the portfolio the same size in value

Do you agree. with my post and/or our decision to with draw paper profits

We are not good investors with the ability to buy low and sell high. Mostly it happens the other way, if I did it with real money. Just jotting down buy and sell on a piece of paper has told me i would not succeed

Comments
By metmike - Nov. 28, 2019, 2:13 p.m.
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Great points Wayne.

I don't trade stocks and can't predict the stock market but agree it's overvalued and will collapse lower one day. Not if but when is the question.

On the Federal debt. I believe that we will eventually have to suffer accountability and it will be severe.

The time to pay down the debt is during times of prosperity........like RIGHT NOW.

When we have the next recession or depression, this is the time to rack up debt using short term policies to save the economy/country which require tremendous borrowing/debt increases.

When we are close to being maxed out on the national debt with regards to it being a major anchor on the economy, which we seem to be close to, it affords us fewer choices for creating stimulation packages to pick the economy up. 

Deficits

https://www.marketforum.com/forum/topic/41667/


I'm a constant optimist on most things but not this one.  Our politicians mainly care  about  being re elected.   Spending money now  to give voters stuff is very popular and gets votes today.

It puts the financial burden on future generations.............actually, the sheet will hit the fan in much less time than a generation(30 years by many standards).