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DOW Jones - Another "All time high" closing!


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#1 Blaster man

Blaster man

Posted 07 March 2013 - 10:22 PM

http://www.cnbc.com/id/100532619

For reference, two days ago the Dow closed above the level it topped out at before the recession. Yesterday it beat that close and today beat yesterday's close.

Some people are shouting "BUBBLE BUBBLE BUBBLE". I for one do not believe this is a bubble. The stock price is based on the profits the company's are making and they're making MASSIVE PROFITS without hiring back the employees they laid off. People have complained that the gulf between the rich and poor has been getting a lot worse, wait another year or two and watch how it accelerates out of this. We're going to see Dow 20,000 before the end of the decade.

#2 joeboosauce

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    Snarf! Get in the...

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Posted 07 March 2013 - 11:00 PM

Hate to burst your bubble! (pun intended!) Maybe this will burst the bubble!

Student Debt Is Perfectly Following the Financial Meltdown Script

Just when the stock market recovers and public optimism returns and you start to lose faith in the power of American capitalism to constantly repeat its past mistakes in the form of foreseeable boom-and-bust cycles that always end in massive losses, the system steps up to reinforce your belief in humanity's fundamental unwillingness to learn from past mistakes, ever. Hello, looming student loan meltdown!

You may recall the last financial meltdown we had, less than five years ago, occurred when the system issued too much housing debt to people unable to repay it, and then packaged that debt into securities and sold it off to investors hungry for "yield" who didn't really care about how fundamentally sound that debt was, like a game of debt hot potato, so that every single layer of person involved in the process was only concerned about their own short term gain, and no one had much incentive to stand up and point out that the whole thing was bound to crumble. Now, the exact same process is happening with our nation's huge and ultimately unsustainable pile of student loans. Not to worry—everything is different this time.

The WSJ reports today on just how well student debt is following the script: it's being bundled and sold off as securities to yield-hungry investors, despite its inherent riskiness. Just like those subprime housing loans were! Who cares? Dance until the music stops!

"SLM Corp., SLM +4.22% the largest U.S. student lender, last week sold $1.1 billion of securities backed by private student loans. Demand for the riskiest bunch-those that will lose money first if the loans go bad-was 15 times greater than the supply, people familiar with the deal said...

Investors' hunger for risky loans shows the lengths they are willing to go to generate returns in a period when interest rates are hovering near record lows."

Note that just last week we received our latest update on the ever-growing shakiness of America's student debt load—balances are going up, along with delinquencies. It's all getting worse at the exact same time that investors are piling in. What timing! What flair! What perfectly predictable repetition!

This is all the product of trained investment professionals. Have no fear: they've been through this before.
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#3 Javery

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    Drug-Dealer-Keeper-Awayer

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Posted 07 March 2013 - 11:06 PM

College tuition is disgusting.

Due to getting shafted from the crash 5 years ago I only invest in private companies nowadays and hope for the best.

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#4 Blaster man

Blaster man

Posted 08 March 2013 - 01:00 AM

Hate to burst your bubble! (pun intended!) Maybe this will burst the bubble!

Student Debt Is Perfectly Following the Financial Meltdown Script

Just when the stock market recovers and public optimism returns and you start to lose faith in the power of American capitalism to constantly repeat its past mistakes in the form of foreseeable boom-and-bust cycles that always end in massive losses, the system steps up to reinforce your belief in humanity's fundamental unwillingness to learn from past mistakes, ever. Hello, looming student loan meltdown!

You may recall the last financial meltdown we had, less than five years ago, occurred when the system issued too much housing debt to people unable to repay it, and then packaged that debt into securities and sold it off to investors hungry for "yield" who didn't really care about how fundamentally sound that debt was, like a game of debt hot potato, so that every single layer of person involved in the process was only concerned about their own short term gain, and no one had much incentive to stand up and point out that the whole thing was bound to crumble. Now, the exact same process is happening with our nation's huge and ultimately unsustainable pile of student loans. Not to worry—everything is different this time.

The WSJ reports today on just how well student debt is following the script: it's being bundled and sold off as securities to yield-hungry investors, despite its inherent riskiness. Just like those subprime housing loans were! Who cares? Dance until the music stops!

"SLM Corp., SLM +4.22% the largest U.S. student lender, last week sold $1.1 billion of securities backed by private student loans. Demand for the riskiest bunch-those that will lose money first if the loans go bad-was 15 times greater than the supply, people familiar with the deal said...

Investors' hunger for risky loans shows the lengths they are willing to go to generate returns in a period when interest rates are hovering near record lows."

Note that just last week we received our latest update on the ever-growing shakiness of America's student debt load—balances are going up, along with delinquencies. It's all getting worse at the exact same time that investors are piling in. What timing! What flair! What perfectly predictable repetition!

This is all the product of trained investment professionals. Have no fear: they've been through this before.


Problems with the student debt argument are as follows:
1. These people aren't paying the loans because they can't afford to. They can't afford to make loan payments and therefore are not contributing to the earnings of these companies and have no relation to stocks.
2. Student loans are not treated like other debt. There is no bubble in student loan debt because it must be repaid. There is no way to get it forgiven and bankruptcy does not effect it. Your tax refunds and wages can be garnished in the same way a dead beat parent has garnishments happen.

In short, student loans will be repaid weather you like it or not.

I should throw in, your claim makes no reference to company profits. Explain the relevance. The article is not implying that company profits will fall but that somehow (unexplained) these debts won't be repaid. 1.2 billion in securities is nothing. It's a joke compared to the housing market.

The article is nothing but sensationalist nonsense to get clicks by the uneducated. The comments below it pretty much go over what I mention above and a few other things such as subprime mortgage debt was an order of magnitude greater than these loans they're describing. Also take into consideration that about half of student loan debt is owed to the federal government and 75-80 billion dollars is absolutely nothing next to the current federal debt of 14 trillion (1 trillion is the same as on thousand billions so 14 trillion is the same as a pile of a billion dollars 14,000 times). The federal government has debt problems but this would barely do anything and that's assuming that 100% of them defaulted which is not going to happen.

I reiterate. Nonsense article for the uneducated people prone to running around thinking the sky is falling.

Edited by Blaster man, 08 March 2013 - 01:14 AM.


#5 Clak

Clak

    Made of star stuff.

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Posted 08 March 2013 - 04:15 AM

The real burst of the bubble is that if adjusted for inflation, the Dow is still technically down.

http://www.washingto...w-high-is-fake/

http://www.npr.org/b...tter-if-it-were
Think of how stupid the average person is, and realize half of them are stupider than that. -George Carlin

“Never argue with stupid people, they will drag you down to their level and then beat you with experience.” -Mark Twain

“When a great genius appears in the world you may know him by this sign; that the dunces are all in confederacy against him." -Jonathon Swift

#6 joeboosauce

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Posted 08 March 2013 - 05:27 PM

Problems with the student debt argument are as follows:
1. These people aren't paying the loans because they can't afford to. They can't afford to make loan payments and therefore are not contributing to the earnings of these companies and have no relation to stocks.
2. Student loans are not treated like other debt. There is no bubble in student loan debt because it must be repaid. There is no way to get it forgiven and bankruptcy does not effect it. Your tax refunds and wages can be garnished in the same way a dead beat parent has garnishments happen.

In short, student loans will be repaid weather you like it or not.

I should throw in, your claim makes no reference to company profits. Explain the relevance. The article is not implying that company profits will fall but that somehow (unexplained) these debts won't be repaid. 1.2 billion in securities is nothing. It's a joke compared to the housing market.

The article is nothing but sensationalist nonsense to get clicks by the uneducated. The comments below it pretty much go over what I mention above and a few other things such as subprime mortgage debt was an order of magnitude greater than these loans they're describing. Also take into consideration that about half of student loan debt is owed to the federal government and 75-80 billion dollars is absolutely nothing next to the current federal debt of 14 trillion (1 trillion is the same as on thousand billions so 14 trillion is the same as a pile of a billion dollars 14,000 times). The federal government has debt problems but this would barely do anything and that's assuming that 100% of them defaulted which is not going to happen.

I reiterate. Nonsense article for the uneducated people prone to running around thinking the sky is falling.


Looks like you missed the part about PRIVATE loans being repackaged and sold off. Now, of course, according to the law one can't free get rid of this debt via bankruptcy. So what? If the debt can't be repaid then so what if its still attached to a name? Job prospects for college grads are weak. Unemployment is high (talking about actual unemployment and not fuzzy math). Job pay is less. You know how many debtors default, are in forbearance or deferment? Its debt that will have to be written off regardless of how much the law says the debt is still there to be acquired. You can't just keep churning out "debt" in an economy and hold of payments to service that debt. Give Sallie Mae and see how easy it is to get forebearance/deferment and ask them if more or less people are doing that since 08. Yes, thats a sign of a very healthy economy.
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#7 Blaster man

Blaster man

Posted 08 March 2013 - 08:35 PM

Looks like you missed the part about PRIVATE loans being repackaged and sold off. Now, of course, according to the law one can't free get rid of this debt via bankruptcy. So what? If the debt can't be repaid then so what if its still attached to a name? Job prospects for college grads are weak. Unemployment is high (talking about actual unemployment and not fuzzy math). Job pay is less. You know how many debtors default, are in forbearance or deferment? Its debt that will have to be written off regardless of how much the law says the debt is still there to be acquired. You can't just keep churning out "debt" in an economy and hold of payments to service that debt. Give Sallie Mae and see how easy it is to get forebearance/deferment and ask them if more or less people are doing that since 08. Yes, thats a sign of a very healthy economy.


I saw the part about private loans being repackaged. They were talking about Salie Mae there. Those loans cannot be discharged in bankruptcy and will eventually be paid off. There are only around 100 billion in these loans of which a few billion are securitized. There was a TRILLION in the housing market like that. That's a thousand billion's. I'll reiterate, this article is nonsense. I'm keeping my investments in the market. I hope for your sake your 401k isn't in bonds. THE SKY IS FALLING!



"Job creation broke out in February, with the economy creating a net 236,000 new jobs as the unemployment rate fell to 7.7 percent."
http://www.cnbc.com/id/100537494

Unemployment bottomed out a couple years ago and sort of stagnated. It's looking like this year we'll finally see an acceleration of job growth. We could easily be in the 6.X range by year's end.

This "the sky is falling, student loans are going to destroy the economy" thing is just playing on the fears of the uneducated. It simply isn't going to happen. They can securitize the debt all day long and it doesn't make a bit of difference. If anything it's GOOD that they securitize it as that gives the lender (salie mae in this case) some of the profits up front and allows them to put out more loans. For the investors it's great since this can't be discharged in bankruptcy and they're guaranteed by the federal government. The investor gets a steady stream of guaranteed revenue and profits and the lender takes a chunk of the profit right away and then lends out the money again.

To put it bluntly, if you're not in the stock market right now you're missing out. If you have your retirement in bond funds, you're fucking up.

Edited by Blaster man, 08 March 2013 - 08:49 PM.


#8 Blaster man

Blaster man

Posted 08 March 2013 - 09:50 PM

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#9 BillyBob29

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Posted 25 March 2013 - 06:06 AM

First of all stock prices are not determined by profits. Profit is just one measure of many that is used to determine a fair value for a company's stock. In the end, it is simple supply and demand. If you have more buyers than sellers for a stock, regardless of the profits of the company, the value of the stock will go up.

The markets are at or near all time highs not because of corporate profits but because the Fed has made stocks the only game in town. The tactics used by the Fed to "stimulate economic growth" have resulted in increased risk taking in stocks simply because you really can't get a decent return anywhere else. The Fed has killed bond/treasury markets, effectively pushing more money into stocks. Since the amount of stock avaliable to purchase in publicly traded companies isn't actually growing due to so many companies buying back their own stock with their excess cash, instead of doing something worthwhile like increasing wages, you have more money chasing fewer assets.......more demand than supply. That means prices go up.

Could this be a bubble? Sure it could be but we won't really know until the Fed stops their purchasing program and there is less noise in the global financial markets. Overall valuation paints the markets in general as fairly valued compared to historical standards, certainly nowhere near as pricey as the 2000 era market tops but then again current valuations aren't exactly cheap either.

Mainstreet is once again starting to notice stocks and history shows us that when the average Joe gets into something, it is near the end of the run. The uninformed investor is always the last one to the game and always the one holding the bag when the trend changes. Just in recent years we have seen this occur in the inernet bubble, the real estate bubble, to a smaller extent gold and now we are starting to see the average joe get excited about stocks again.

As a trader, I follow the trend and the trend is currently headed higher, you simply can't argue this. However, the custom trend indicator signal I use on all time frames from tick charts to monthly charts is currently hitting levels on daily, weekly and monthly timeframes that have resulted in signficant corrections in recent years. For exmaple, current reading on the monthly chart of 60, has not been seen since July 2007, shortly before the market top. I'm not saying this is a market top but it is certainly something I am watching.

PS.....the DOW is not the index to watch. It represents such a small amount of companies (30) and doesn't reflect all industries, not to mention there is very little money, relatively speaking, that is directly tied to the index itself where as trillions of dollars are directly tied to the S&P 500.

#10 speedracer

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Posted 25 March 2013 - 10:28 AM

PS.....the DOW is not the index to watch. It represents such a small amount of companies (30) and doesn't reflect all industries, not to mention there is very little money, relatively speaking, that is directly tied to the index itself where as trillions of dollars are directly tied to the S&P 500.

And the weight is completely messed up. The Dow is used because it was always used. As an actual measuring stick it is awful, awful, awful.

Just wanted to make sure this was repeated. You would have a hard time making a measure of the total performance of the market worse than the Dow.
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#11 Clak

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Posted 25 March 2013 - 03:38 PM

Glad somebody else finally said that. You had most major news outlets rabling about the DOW climbing higher, without questioning why that's important, or if it really even is higher with inflation is taken into account.
Think of how stupid the average person is, and realize half of them are stupider than that. -George Carlin

“Never argue with stupid people, they will drag you down to their level and then beat you with experience.” -Mark Twain

“When a great genius appears in the world you may know him by this sign; that the dunces are all in confederacy against him." -Jonathon Swift

#12 willardhaven

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Posted 25 March 2013 - 05:30 PM

Honestly I've kept a big chunk of my savings in a liquid account waiting for another dip. I think this might come after the artificial real estate boom but I'm no expert.

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