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stock_creeper
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  • The Free Market is the Best Path to Prosperity [Edit or Delete]4 comments
    Sep 28, 2011 3:19 PM
    The free market wins yet again
    The DJIA is up 500 points in     three days on merely the prospect of a European TARP, so when it actually happens it will rally another 1000 points all the way back to 12800.

    Why are bailouts so effective compared to job creation plans and other forms of stimulus? Because when you have a crisis of confidence like what happened in 2008 and now in Greece interest rates plunge. This makes the cost of the bailout essentially free for countries with reserve currency status such as the USA and Eurozone. The bailout provides an instant infusion of liquidity that immediately sends the markets higher and improves confidence until economic fundamentals take over.

    That's what happened in 2008 when TARP was passed. There was extreme negativity, doom & gloom and subsequently short term interest rates went to zero  and long term rates plunged. This made passing the $750 billion nearly effortless from a fiscal perspective. With the bad assets negated (and changing the mark-to-market rules) the economy began to stabilize in the 1st quarter of 2009.


    On April 9, 2009, FASB issued the official update to FAS 157[20] that eases the mark-to-market rules when the market is unsteady or inactive. Early adopters were allowed to apply the ruling as of March 15, 2009, and the rest as of June 15, 2009. 

    Companies that were immune the recession such as IBM, Apple, McDonald's, Google, and Amazon began reporting quarter after quarter of blowout profits and earnings and attention focused to how undervalued the market was and pro-growth monetary policy, and no one cared about moral hazard or kicking the can down the road. Risk taking, stocks, web 2.0, Silicon Valley, wealth creation, and bonuses made a huge comeback. Virtually every pundit dismissed TARP and three years later there's no evidence of a relapse. Now Europe has its crisis...and guess what..the solution is yet another TARP. Free money always saves the day. 

    A bailout, in summary, doesn't fix the underlying problems of risk taking, leverage, or speculation. What it does is calm the markets until fundamentals (profits & earnings) kicks in. The short term and long term nominal gains in assets classes (such as stocks, real estate, and commodities) from a massive bailout more than compensates for the cost of the bailout. Because it's free money income taxes don't have to go up to fund it. 

    Sometimes you need to privatize gains and socialize losses if it's in the best interests of the economy.

    The rich, the knowledge workers do a better job allocating their capitol in the most optimal way for economic growth than the middle class, so they deserve more tax cuts.
    It's not such a big deal when ppl fall between the cracks when their contributions to the economy wern't important to begin with.


    In the word of Kudlow, the free market capitalism is the best path to prosperity.
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  •  
    I guess we will see how those fundamentals "kick in" at 8:30 and see if we continue to buy HOPE like we blindly have in the last 2 years. Im not convinced the the market will rally more than 1 day off the EU's monetizing. We like to think that its a privilege reserved only for us.
    29 Sep 2011, 06:25 AM Reply Like
  •  
    9/29
    bidu -13.42
    pcln-29.54
    nflx-15.85
    amzn--10.62
    aapl-6.2

    An absolutely horrible day for these stocks today.And there is going to be further margin selling in Oct.Many of these stocks will be great buys down another %40
    I hope that you got out earlier as i told you.And if you think your house is going up.Ha.Ha.
    You can safely buy the s+p @ 600 within 18 months.
    29 Sep 2011, 02:14 PM Reply Like
  •  
    Margin calls ,margin calls.help get me out at any price.I am going to load up the wagon and buy when you turn bearish.By the way when you have to sell your house because of your gambling losses with the ultra high mometum stocks,give me call.I have to do something with the money that i am making hand over fist from longs like you.Can you spell forced sale?
    29 Sep 2011, 03:20 PM Reply Like
  •  
    To the tune of climb every mountain,let us have a sing along
    Sell every rally ,buy every put

    I would appreciate it if you would stop writing articles stating your ridiculous drivel.Some innocent investors are going to get fleeced because they do not know enough to separate the wheat from your ignorant chaff
    29 Sep 2011, 03:27 PM Reply Like
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