(no subject)

[gunslnger.livejournal.com]

Why the Market Meltdown is Crazy

After Thursday’s massive stock market sell-off, a lot of people are talking about how we may be experiencing another year like 2008. I’m going to get right to the point: that’s impossible.

I haven't been watching the news for a long while now, as it doesn't really affect my life much, so I'm pretty sure I'm less affected by the hype going on in the media than a lot of other people. So, to me this seems like a reasonable analysis of the situation, and the media as usual is likely not being reasonable about it. Of course, I think he's wrong on the other side. The situation isn't like 2008, but it's not going to get better soon either. People are improving their own behavior and not spending as much on credit, but the gov't isn't and that will be collapsing "soon" too. (Soon can be 10-15 years in this case.)

Comments

[dv8nation.livejournal.com]

Just more people freaking out when they don't need too. We'll get by fine on AA+, work to get AAA back and in the meantime we'll be forced to be smarter about our money.

We needed this kick in the pants.

[kardashev.livejournal.com]

lol pretty much.

[harry-beast.livejournal.com]

Was the recent spectacle of political brinkmanship, deception and general incompetence surrounding the raising of the debt ceiling a good preview of how the US will work to get its AAA back, or was that an example of being smarter with money?

[dv8nation.livejournal.com]

That was called "politics as usual."

[badlydrawnjeff.livejournal.com]

Was the recent spectacle of political brinkmanship, deception and general incompetence surrounding the raising of the debt ceiling a good preview of how the US will work to get its AAA back

Obama won't be President forever.

It's only the Street.

[sophia-sadek.livejournal.com]

When the market tanks, it is a buying opportunity for people in-the-know.

Re: It's only the Street.

[dv8nation.livejournal.com]

Or anyone with a basic idea of how to make money.

[harry-beast.livejournal.com]

... as long as they have the cash to invest. The economic situation may be better now than in 2008, but there are still a lot of unemployed people, underwater mortgages and stressed household budgets.

[prog-expat.livejournal.com]

It's safe to assume the "people in-the-know" are those with money.

If they were not...

[sophia-sadek.livejournal.com]

... in-the-know, they would not know when to hold 'em and when to fold 'em.

[ja-va.livejournal.com]

Many things can still go wrong. I was in Russia in 1998 and saw what happens when the government debt is out of control with my own eyes:
Some time in August the amount of short term government obligations on the market reached the critical point. Government at the time was issuing them like crazy and the interest reached 40% or thereabouts, so most banks got in the game and made most of their profit from government obligations. But, as it is always the case, the point was reached when some people realized that there is just no way government can be able to pay off this much in debt and the market crashed. As a result government declared that the obligations will be restructured, i.e. not paid in full as promised, and suspended the payments for a few days.
Three things happened at once-
1) Banks froze the accounts (they had too much invested in government obligations and had no funds available). Several large banks, including Incombank - one of the giants of Russian banking industry at the time- collapsed.
2) All business activity in the country froze up due to uncertainty in real value of ruble, stores became empty literally within hours, nothing was sold or bought for a few days. Many businesses went bunkrupt as a result.
3) Ruble crashed on the Forex market- from 6 rubles to a dollar it went to 20 rubles to a dollar in a few days. It never recovered and prices went up accordingly, making everyone who had rubles three times poorer by the time bank accounts were defrosted.

For those who think it can not happen in this country I can only quote Alan Greenspan, who, when asked whether US will ever be able to balance the budget, said "oh yes, we will, of course, there is no doubt, the only question is whether it will happen before the crisis in the bond market, or after" ;)

+1

[zebra24.livejournal.com]

I just want to add some colors to this picture:

Now rating of Russia just rise up to BBB and that was after 10+ years of incredible high prices for the oil, and government debt just about 10% of the GDP.

And Ruble now is stable at 27-29 per dollar.

[kardashev.livejournal.com]

I don't panic when markets take a dive anymore. I wait until they go as low as possible, buy more shares, and wait for it to go up. All it is to me is a "sale" on stock.

[zebra24.livejournal.com]

"Soon" could be 3-6 months or even weeks.

Take into account that when things are crushed only first cracks expanded slow ...