patrick.net

smaulgld says

Where did it go last crash?

Bonds, debt liquidation, and cash.

indigenous says

Good question, wherever the return is the best, maybe just cash?

You think that during a crash caused by a confidence crisis in the dollar, investors are going to go to dollars?

control point says

smaulgld says

Where did it go last crash?

Bonds, debt liquidation, and cash.

And back into the stock market

smaulgld says

And back into the stock market

After the crash was over.

indigenous says

That is not likely to happen now because of fracking and China's appetite for commodities cooling off.

Yet Oil can't manage to squeak past $93 go figure.

Oil could be 50 cents a barrel to produce, and it would still trade above $90, because that is has been funding all of the risk since 2008. As well as the official energy policy to keep the poor depressed and dependent on "Entitlements". God forbid the Global economy should rebound and the Liberals find them selves odd man out, standing alongside Zillionares while bitching about the 1%.

Listen I've said and I stand firm by it, we'll see 13K DOW before we see even $80 bbl Oil in 2014.

control point says

indigenous says

Good question, wherever the return is the best, maybe just cash?

You think that during a crash caused by a confidence crisis in the dollar, investors are going to go to dollars?

Contradictory huh, it seems to me that there are 2 scenarios.

The FED has printed 6 trillion and yet we have relatively little inflation WTF? This is because the credit market has shrunk because there is very little lending. There is deflationary pressure caused by technology and lower demand especially in China.

The other is that inflation finally does start occurring and the FED has to raise the interest rates to stave off inflation. When that occurs the debt service instantly consumes at least 1/3 of the revenues. So the FED has to inflate or cut back on spending which would include entitlements at which point the SHTF so the FED would have to inflate.

If anyone has a better explanation I'm all ears.

indigenous says

The FED has printed 6 trillion and yet we have relatively little inflation WTF?

Maybe FED printing does not lead to inflation in and of itself.

This is a different conversation, however. I just don't how you can think that there is an inevitable crisis caused by hyperinflation, and during that crisis, investors will flee to dollars. If anything, I would want to own as little currency and as much means of production as possible during periods of high inflation. And so would a rational investor.

control point says

indigenous says

The FED has printed 6 trillion and yet we have relatively little inflation WTF?

Maybe FED printing does not lead to inflation in and of itself.

This is a different conversation, however. I just don't how you can think that there is an inevitable crisis caused by hyperinflation, and during that crisis, investors will flee to dollars. If anything, I would want to own as little currency and as much means of production as possible during periods of high inflation. And so would a rational investor.

During significant inflation no one is going to keep cash.

But when the FED has printed 6 trillion you have to ask where is the inflation? When lending starts again there is a good chance of this, I would have to think?

CaptainShuddup says

indigenous says

That is not likely to happen now because of fracking and China's appetite for commodities cooling off.

Yet Oil can't manage to squeak past $93 go figure.

Oil could be 50 cents a barrel to produce, and it would still trade above $90, because that is has been funding all of the risk since 2008. As well as the official energy policy to keep the poor depressed and dependent on "Entitlements". God forbid the Global economy should rebound and the Liberals find them selves odd man out, standing alongside Zillionares while bitching about the 1%.

Don't know, but there is a lot of deflationary pressure right now, with the US projected to produce as much oil as Saudi Arabia by 2016 and a lot less demand for commodities because of China's economy. It could be a while before the market (main st) gets any more dead.

indigenous says

When that occurs the debt service instantly consumes at least 1/3 of the revenues.

Is the debt a variable rate or fixed? I'd think it was fixed, so why would that impact the debt service?

CL says

indigenous says

When that occurs the debt service instantly consumes at least 1/3 of the revenues.

Is the debt a variable rate or fixed? I'd think it was fixed, so why would that impact the debt service?

Don't know. The experts are saying that the interest will effect it so I guess it has to rolled over one way or another at the current rate

control point says

smaulgld says

And back into the stock market

After the crash was over.

Correct and the question still remains-will that happen again-are the circumstances the same, can the fed pull off another market "put" or have they already expended themselves with QE?

HEY YOU says

control point says

indigenous says

From what I read it will be catastrophic along with the bond market.

Where is the money going to go? Out of stocks, out of bonds - to what?

To overpaying for overpriced houses.

Maybe it goes no where-just sits in cash-hard to drive home sales and prices higher if people have less money after a stock market crash

control point says

indigenous says

Good question, wherever the return is the best, maybe just cash?

You think that during a crash caused by a confidence crisis in the dollar, investors are going to go to dollars?

If that is the reason for the crash, then gold, silver, foreign currencies and crypto currencies would be the places dollars would flow, not dollar positions or treasury bonds

CL says

indigenous says

When that occurs the debt service instantly consumes at least 1/3 of the revenues.

Is the debt a variable rate or fixed? I'd think it was fixed, so why would that impact the debt service?

Its fixed but much of it is short term and will be needed to be rolled over at higher rates

indigenous says

Don't know. The experts are saying that the interest will effect it so I
guess it has to rolled over one way or another at the current rate

Most federal debt is fixed rate (except TIPS and EE bonds for example), however - it is variable term. That is, when bonds/bills/notes mature they must be paid, and the Treasury must sell additional bonds/bills/notes to pay the old debt (unless they have cash, which as we know they do not as there is a deficit)

And they publish a report that outlines the debt by average interest rate and time to matuirty.

November 2013 unaudited here:
http://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_nov13.pdf

What you find is that about 12% of Debt is held in long term (over 10 year) Bonds. About 20% is held in very short term notes (less than 1 year) or TIPS. And the balance is held in medium term bills (1 to 10 years)

So if interest rates rise, yes, the average interest rate paid on debt will rise. But it will not be as bad as you think - for the past 5 years, old high interest 30 year debt (orginated in the early 1980s at 10%+) has matured - muting the effect of lowering interest rates. The same thing will occur in the next several years - short and medium term debt will be renewed at higher interest rates, but there will be a backlog of older debt also rolling off that was sold before the past 5 years at higher interest rates than we have today - or will likely have in the next several years.

And if interest rates continue to climb it will be a trailing indicator of inflation, which is an indicator of increased demand in a growing economy.

control point says

but there will be a backlog of older debt also rolling off that was sold before the past 5 years at higher interest rates than we have today - or will likely have in the next several years.

What percentage of the debt is this?

control point says

So if interest rates rise, yes, the average interest rate paid on debt will rise. But it will not be as bad as you think

This all makes sense. And, if a lot of the debt has been accrued in the last decade, a lot won't rollover until the next decade I reckon.

And if a large chunk of that is internal debt, then the increase in interest means that American people or business or whatever will simply get a higher return, which makes it relatively moot, right?

indigenous says

What percentage of the debt is this?

Page 21.

Its almost 2 years old but doubtful the profile has changed much. In fact in the face of all time low interest rates, would think they attempted to extend the life of debt on renewal if possible.

http://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Documents/TBAC%20Discussion%20Charts%20Feb%202012.pdf

About a third has maturity date of 5 years or greater.

I don't think there will be a general crash, but I think a lot of big cap stocks will be revalued.

The buying opportunity is in small caps.

control point says

indigenous says

From what I read it will be catastrophic along with the bond market.

Where is the money going to go? Out of stocks, out of bonds - to what?

What money? The new 6 Trillion we printed out of thin air?

I will back up the truck and buy similar to what I did during the last one. You think the way things are today that the stock market will be allowed to be held down for an extended period of time?

CL says

control point says

So if interest rates rise, yes, the average interest rate paid on debt will rise. But it will not be as bad as you think

This all makes sense. And, if a lot of the debt has been accrued in the last decade, a lot won't rollover until the next decade I reckon.

And if a large chunk of that is internal debt, then the increase in interest means that American people or business or whatever will simply get a higher return, which makes it relatively moot, right?

that is right but doesn't take into account any NEW debt that needs to be issued to cover increased borrowing costs- all of that will need to be issued at the higher rate

Analyzer says

I will back up the truck and buy similar to what I did during the last one. You think the way things are today that the stock market will be allowed to be held down for an extended period of time?

You are right, the Fed will not want to "allow" stocks to remain down BUT will they have the firepower to fix things this time?

smaulgld says

Analyzer says

I will back up the truck and buy similar to what I did during the last one. You think the way things are today that the stock market will be allowed to be held down for an extended period of time?

You are right, the Fed will not want to "allow" stocks to remain down BUT will they have the firepower to fix things this time?

Question is do they need actual firepower or merely creative accounting?

If you missed the last boat on either the stock market or housing crash, fear not there will be more to come. Just be prepared this time.

Aren't we about due for another recession anyway?

I'll do as I always do: Stockpile cash and also invest in the stock market. My investments have gone up significantly over the past 2 years. I bought some of these at the trough of the last crash when everyone else was running for the exits. Best investments I've made in years.

What is certain: crashes and bubbles are a see-saw thing and they always inflate and deflate. We are now in a new housing and possibly a stock market bubble. Both will likely pop at some point as they always have only to eventually recover. The stock market will recover much faster than housing, just as it has this latest time around.

Its all cyclical.

Analyzer says

Question is do they need actual firepower or merely creative accounting?

They used creative accounting too in addition to QE last time the creative accounting was allowing banks to mark all of their junk mortgage bonds to a higher price to make their balance sheets look better- as they Fed then printed money out of thin air to buy these junk securities from the banks!

It will respond until it won't, but I think it will for a long time to come because QE and your government is in many ways .. all that's left of your economy, it's only the faith in the dollar itself keeping the float going.
smaulgld says

everything says

No different, except now our crashes are a little more global in nature, the fed will standby, not much they can do initially being the root cause of events themselves. QE is all they really know, it will work until it doesn't.

Rates will have to stay dirt low, this will keep equities happy and good until they've exploited low interest rates to the point where the stock market will crash. What will I do?, nothing I can do.

The poll asks the question and I suppose the "nothing" answer in the poll is "stay in cash" Rates will have to stay low but can the Fed keep them low with more QE? Would the stock market respond to more QE?

smaulgld says

What Will You Do If/When The Stock Market Crashes?

Skull-fuck a banker and cultivate my yams.

control point says

About a third has maturity date of 5 years or greater.

Ok, but to put this in context all of this is rearranging the deck chairs on the Titanic, there are around 100 trillion dollars in unfunded liabilities that WILL cause huge inflation.

edvard2 says

The stock market will recover much faster than housing, just as it has this latest time around.

Its all cyclical.

Housing should recover slowly as it requires financing. Stocks can double in an hour

everything says

It will respond until it won't, but I think it will for a long time to come because QE and your government is in many ways .. all that's left of your economy, it's only the faith in the dollar itself keeping the float going.

Agree-there may be more life in the faith than we believe!

smaulgld says

everything says

It will respond until it won't, but I think it will for a long time to come because QE and your government is in many ways .. all that's left of your economy, it's only the faith in the dollar itself keeping the float going.

Agree-there may be more life in the faith then we believe!

Awesome, pretty much how I live my life on a 'wing and a prayer' and I'm not particulary religious.

Survey results so far:

If the stock market corrects more than 20% will you:

invest in the stock market 11.11% (7 votes)

remain in cash 15.87% (10 votes)

buy gold or silver 52.38% (33 votes)

buy real estate 14.29% (9 votes)

buy treasury bonds 0% (0 votes)

buy foreign currencies 1.59% (1 votes)

buy crypto currencies like bitcoin or litecoin 5% (3 votes)

Total Votes: 63

Call it Crazy says

Wasn't the list I was expecting.... some other choices are missing...

Foreign stocks are missing as are fine art and other collectibles
What else?
The main point of the survey was to flush out whether people would dive back into the stock market like they have for the past 25 years

sbh says

Then the second hard part ensues: waiting, doing nothing while nothing happens. "Reminiscences of a Stock Operator" is an entertaining read, in which he says, among many other things, he never made more than by doing nothing.

the old not to decide is to decide

indigenous says

Ok, but to put this in context all of this is rearranging the deck chairs on the Titanic, there are around 100 trillion dollars in unfunded liabilities that WILL cause huge inflation.

How so? Isn't the Fed buying assets? What is unfunded?

I didn't read all the posts I am coming in late so I am just going to reply to the OP.

If the stock market were to crash I'd buy stock as they would be so cheap. My bet is the scenario will play out like the last time. Stocks crash, people bailed and put their money into treasuries. The government bails out the banks and starts QE driving up the price of gold and silver to astronomical levels. Eventually though I believe the world will lose faith in the dollar and we'll be exposed to high inflation then hyperinflation.

It worked the last time for us but I don't think the world is going to buy it this time.