patrick.net

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.

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?

Become a Realtor.

jvolstad says

Become a Realtor.

Good answer!

APOCALYPSEFUCKisShostikovitch says

From here on out, everyone I talk to says they'll use any excuse to start shooting.

what if there is no stock market crash?

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

The FED has spent 6 trillion dollars, how much more can they do without the world losing confidence in the dollar?

They have been able to get away with it because of the fact that the dollar is held as the reserve currency and that there are a lot of dollars floating around. Plus as bad a shape as the dollar is in the rest are in worse shape.

The other factor is that the credit market has shrunk so the only inflation in the stock market is coming from the FED.

When the confidence in the dollar is lost the FED will have to print that much more as other countries will no longer buy US treasuries.

The BRICS is a sign of this lack of confidence in the dollar.

indigenous says

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

The FED has spent 6 trillion dollars, how much more can they do without the world losing confidence in the dollar?

They have been able to get away with it because of the fact that the dollar is held as the reserve currency and that there are a lot of dollars floating around. Plus as bad a shape as the dollar is in the rest are in worse shape.

The other factor is that the credit market has shrunk so the only inflation in the stock market is coming from the FED.

When the confidence in the dollar is lost the FED will have to print that much more as other countries will no longer buy US treasuries.

The BRICS is a sign of this lack of confidence in the dollar.

Correct- I am surprised there is still confidence in the dollar after the rounds of QE. I suppose the taper is designed to give some appearance of fiscal responsibility even though it is a small amount and is still expanding the Fed's balance sheet at a 800 billion a year rate!

But if there is a crash I think markets would be hard pressed to buy based on even more Fed money printing.
The poll shows just one person who would elect to reinvest in the stock market after the next crash

APOCALYPSEFUCKisShostikovitch says

Call it Crazy says

Maybe watch the Wall Street dudes jump off of their buildings??

Shoot at them on the way down!

Why do you hate using the word Skeet?

APOCALYPSEFUCKisShostikovitch says

Call it Crazy says

Maybe watch the Wall Street dudes jump off of their buildings??

Shoot at them on the way down!

If you hit one, you will win a teddy bear.

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?

The last crash was an opportunity to learn something and not repeat the same mistakes.
The right thing to do would be to stay calm and start buying at capitulation.
The stock market will fully recover and go higher as always.

control point says

ndigenous 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?

Good question, wherever the return is the best, maybe just cash? if inflation heats up maybe gold, foreign stock markets, real estate.

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.

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?

Hookers and blow. Both are going to get very expensive.

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?

Where did it go last crash?
When stock prices fall that value simply vanishes
Does any money on the sidelines come back to the stock market is the poll question or does it stay in cash or move to real estate or other assets

Strategist says

The last crash was an opportunity to learn something and not repeat the same mistakes.

The right thing to do would be to stay calm and start buying at capitulation.

The stock market will fully recover and go higher as always.

If you read the original post - pre 1987 stocks didnt always recover

smaulgld 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?

Where did it go last crash?

When stock prices fall that value simply vanishes

Does any money on the sidelines come back to the stock market is the poll question or does it stay in cash or move to real estate or other assets

Depends on how such a crash affects the local price of RE.

I'll bet a lot of people here had wished they had thrown everything they had into something, anything OTHER than cash in 2009.

The same thing I do every time the price of Oil and Energy kills the world's markets.

Laugh like hell and hope they learned their lesson, "This Time".

CaptainShuddup says

The same thing I do every time the price of Oil and Energy kills the world's markets.

Laugh like hell and hope they learned their lesson, "This Time".

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

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.