patrick.net

stocks are rising because dollar is falling compared to other currencies. Its all the effect of inflation.

" I wonder why they do not fall " - Actually they have fallen many times. A couple things to consider, many investors are looking ahead which means some of bad news has already been priced in. There will be another fall any time but it probably wont be for the reasons you mentioned. As you say NODs and bankruptcies are on the rise but those are narrow pieces of the market being bailed out. Just six months ago I was wondering if stocks would ever go up .

So, you think my explanation 2. is correct, but it's still crazy. Consider this today's report:

Consumer credit fell by $12B in August instead of the forecast of $10B.

(http://www.bloomberg.com/apps/news?pid=20601087&sid=aO13jMuWf0M4)

Yet, MasterCard rose today by 5.13%, VISA by 3.81%.

And again number of private bankruptcies rise daily.

This is insane.

Because Fed & regulators gave all banks a free pass. Relaxed accounting rules so we can all pretend they are solvent.

In return the banks have slowed foreclosures and in some markets stopped them like Wells Fargo Atlanta recently. Of course they just suspend the process, so your DEBTS and FEES keep climbing.

I predict the head in the sand will be it for about a decade. So we have a stock market that mirrors all this fantasy and does whatever it wants. Stay out, the casino is more thoroughly rigged than it's ever been. You may run out in front of the steamroller and pick up a few nickels here and there, but the driver gets paid whether you get squished or not, so it's better not to take that risk.

Vicente says

Because Fed & regulators gave all banks a free pass. Relaxed accounting rules so we can all pretend they are solvent.

In return the banks have slowed foreclosures and in some markets stopped them like Wells Fargo Atlanta recently. Of course they just suspend the process, so your DEBTS and FEES keep climbing.

This fits with my explanation #1. However, in California there is a huge number of NODs, which means (I guess) the delayed foreclosures are on the way out. They are also in very expensive areas. Still nobody notices.

I predict the head in the sand will be it for about a decade. So we have a stock market that mirrors all this fantasy and does whatever it wants. Stay out, the casino is more thoroughly rigged than it’s ever been. You may run out in front of the steamroller and pick up a few nickels here and there, but the driver gets paid whether you get squished or not, so it’s better not to take that risk.

I still can't believe it gonna take a decade nor even more than a couple of years.

I also can't understand how US stock markets may benefit from dollar crash, since they are mostly based on US consumers.

It's still a riddle to me.

what other inflation hedges do you have ? I can't think of better inflation hedge for long term other than stocks of real good companies which produce something tangible.

Why assume inflation? It's pretty clear we've been in deflation for a couple of years. I cannot understand why people panic about inflation hedge as though it's a bomb that's ticking down to last few seconds. Japan has been in deflation since about 1990, so perhaps it's misplaced optimism that OBVIOUSLY the USA is different and things will turn around any second. I know the bankers love to scare you about inflation so you keep every dollar in circulation every second, why do people buy into this?

deflation !! US dollar can buy more tomorrow for what it can buy today...cannot believe it

Some very large items are cheaper this year than last, with houses being one very visible example. Craigslist and EBay are stuffed to the gills with people trying to get rid of stuff. Wages are stagant or dropping. Furloughs. Unemployment.

Believe it.

going by that theory ...dollar should become stonger not fall like crazy....have been following the news lately
Its hard to imagine that dollar buying power will go up...no way.. wait till all the printed money starts moving around. Stock market just got all the easy money wait till it hits the commodities and else where.

Do you buy Chinese or European goods? I spend very little these days but they are purchased with US dollars so it seems to matter little to me what the exchange rate is.

I don't know about you but most americans buy chinese made stuff from the stores.pretty soon when dollar sinks a lot, we americans need to get our ass off the couch and start producing goods for ourselves. which would mean more work for the same amount of goods in circulation or in other words more work for same pay and lower stadard of living. deflation story is now old.things are going to get expensive pretty soon.

Your reasoning boils down to "just because"

Fact is people with less money to spend CANNOT support higher prices.

For what it's worth, I think it would be a good thing if we got our asses off the couch and started producing goods for ourselves. Work is not a bad thing. Neither is self-sufficiency.

Vicente says

Your reasoning boils down to “just because”
Fact is people with less money to spend CANNOT support higher prices.

don't worry about money ...do you hear the humming sound from the printing press of FED. its late night and the press is so loud i can hear it all the way from another state to bay area :-)

Fake money propping up dead banks, none of it resulting in wage increases. This MIS-allocation of capital will lengthen the process. Without it we might be done next year but carrying a dead body we will stagger for a decade. Consumer-led economy will continue to contract.

For what it’s worth, I think it would be a good thing if we got our asses off the couch and started producing goods for ourselves. Work is not a bad thing. Neither is self-sufficiency.

Agreed. Work is all there is. If you love your work, you understand.

But a lot of people I know prefer easy street. That's what Vegas and Wall St are there for. Sadder still, is that anytime someone is fortunate enough to have made money in the stock market, equity, etc., all they talk about is early retirement or a big house or traveling the world. Same old tripe. Rarely evident is the entrepreneurial spirit that made America so great. No one wants to be uncomfortable or risk losing their ass funding an idea.

But even if every man in the US got his ass up off the couch and got busy out in his garage working on whatever great invention or concept he might have, it likely would not be made in his hometown or even in the United States. That's the rub. Manufacturing has become an anachronism in this country, and will likely remain so. We sold our empire up the river so we could have two for one.

Austinhousingbubble says

and got busy out in his garage working on whatever great invention or concept he might have

Or get your butt sued by patent trolls or corporations with vast portfolios of vague patents.....

That's where your financier comes in. You license the patents. Done all the time. It's actually probably cheaper than paying to patent something yourself, which is a heinously expensive and arduous process.

The "garage inventor" is so 1970's. Get with the now man, we "innovate" financial fraud and export that. We send all our older workers to compete for greeter jobs at WalMart.

…the “garage inventor” is so 1970’s. Get with the now man, we “innovate” financial fraud and export that.

Hehe…yeah, but once the credit crunch is the new reality, I'm hoping small-footprint businesses will outperform the mega-corporations, at least in some niche markets. From my vantage point, excessive liquidity had a terrible effect on long-term corporate strategy. More accurately put, there was no "long-term" with my company; they cannibalized product development budgets in favor of their CRE division. That "innovation" was not only a bad short move, but it ultimately undercut their core business. When execs suppose leverage is their key asset, people and ideas become "old school"--and they moved en-masse on this concept like lemmings. That's just my take on things, but I do wonder how many businesses have a parasitic relationship to leverage…that cannot continue?