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#11 pdx5

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Posted 04 January 2007 - 01:06 PM

Lets try to explode a few myths.. Stock transactions, margin or not, do NOT change liquidity. The dollars simply go from account A (buyer) to account B(seller). The US savings rate is also a red herring. Instead of putting money in the bank, where for example I get less than 1% at Bank of America, people are putting their excess dollars in stocks, real estate and precious metals. This activity does not show up in the "US savings rate" for obvious reasons. The only major player able to create "liquidity" is the Fed who can authorize banks to give out loans via Repo's. But that to actually add to liquidity, someone has to be willing to borrow from the bank. During the recent housing boom, the banks lowered the levels to qualify for loans and created a lot of "liquidity". But note that the borrower is obligated to pay the loan back and the bank is obligated to pay the Fed back. If housing continues to shrink, some of these loans will go on default thereby casing a chain reaction in loss of liquidity due to loan writeoffs. The Fed can not create liquidity single handedly but needs a willing borrower able & willing to complete the process by taking a loan out.

Edited by pdx5, 04 January 2007 - 01:10 PM.

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#12 IndexTrader

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Posted 04 January 2007 - 01:28 PM

Evidently all those people who went to work over the last few years who now have 401K's, etc etc don't count? Not to mention additional retirement savings by baby boomers. Just in case someone doesn't know, the end of the baby boom was born in 1964. That means they are turning 43. The lead edge is about 61. This is a huge chunk of the population moving into peak earning years, and focused on retirement.

This goes way beyond a simple margin account.

IT



I'm under the theory that as the Boomers reach retirement, more and more will sell their stocks, Funds, etc. and move into cash. there will not be the buyers there, hence prices will fall.

Thoughts?


Maybe so....I think it's possible. But right now the age is 43 to 61...no one has officially retired yet.

IT

#13 jawndissedi

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Posted 04 January 2007 - 01:47 PM

Lets try to explode a few myths..

Stock transactions, margin or not, do NOT change liquidity. The dollars simply
go from account A (buyer) to account B(seller).

The US savings rate is also a red herring. Instead of putting money in the bank,
where for example I get less than 1% at Bank of America, people are putting
their excess dollars in stocks, real estate and precious metals. This activity
does not show up in the "US savings rate" for obvious reasons.

The only major player able to create "liquidity" is the Fed who can authorize
banks to give out loans via Repo's. But that to actually add to liquidity, someone
has to be willing to borrow from the bank. During the recent housing boom, the
banks lowered the levels to qualify for loans and created a lot of "liquidity".

But note that the borrower is obligated to pay the loan back and the bank is obligated
to pay the Fed back. If housing continues to shrink, some of these loans will go on
default thereby casing a chain reaction in loss of liquidity due to loan writeoffs. The Fed
can not create liquidity single handedly but needs a willing borrower able & willing to
complete the process by taking a loan out.


Exactly right. :)
Da nile is more than a river in Egypt.

#14 IndexTrader

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Posted 04 January 2007 - 01:57 PM

Greenie is right about liquidity. If you find his explanation insufficient, click here for John Hussman's more lengthy analysis.


I think Greenie is wrong. See above. I'll take your word for what Hussman has to say about it....no time to read the entire piece right now. But then again, Hussman has been wrong for some time about the market....see his performance at your link.

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#15 spielchekr

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Posted 04 January 2007 - 02:07 PM

Evidently all those people who went to work over the last few years who now have 401K's, etc etc don't count? Not to mention additional retirement savings by baby boomers. Just in case someone doesn't know, the end of the baby boom was born in 1964. That means they are turning 43. The lead edge is about 61. This is a huge chunk of the population moving into peak earning years, and focused on retirement.

This goes way beyond a simple margin account.

IT



I'm under the theory that as the Boomers reach retirement, more and more will sell their stocks, Funds, etc. and move into cash. there will not be the buyers there, hence prices will fall.

Thoughts?


Young baby boomers from distant and prosperous lands will buy. We hope.

#16 jawndissedi

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Posted 04 January 2007 - 02:22 PM

Greenie is right about liquidity. If you find his explanation insufficient, click here for John Hussman's more lengthy analysis.


I think Greenie is wrong. See above. I'll take your word for what Hussman has to say about it....no time to read the entire piece right now. But then again, Hussman has been wrong for some time about the market....see his performance at your link.

IT

Hussman's ST or even IT performance has nothing to do with the validity of his observations about liquidity or the relevance of those observations to trading in general. You need to acquaint yourself with this premise.

Edited by jawndissedi, 04 January 2007 - 02:23 PM.

Da nile is more than a river in Egypt.

#17 IndexTrader

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Posted 04 January 2007 - 02:43 PM

Greenie is right about liquidity. If you find his explanation insufficient, click here for John Hussman's more lengthy analysis.


I think Greenie is wrong. See above. I'll take your word for what Hussman has to say about it....no time to read the entire piece right now. But then again, Hussman has been wrong for some time about the market....see his performance at your link.

IT

Hussman's ST or even IT performance has nothing to do with the validity of his observations about liquidity or the relevance of those observations to trading in general. You need to acquaint yourself with this premise.



:lol: You could say the same thing about a professor. But I thought we were all here to make money. Correct me if I'm wrong.

IT

#18 fib_1618

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Posted 04 January 2007 - 03:03 PM

Hussman's ST or even IT performance has nothing to do with the validity of his observations about liquidity or the relevance of those observations to trading in general.

This kind of thinking goes along the lines of those who will give you the answer to a problem (whether perceived or actual), and when this answer doesn't work out, these same folks will then go on to tell you that at least "they tried".

In any event, all of the ideas brought forth in this thread have very little to do with the stock market's liquidity factor - what actually makes prices either rise or fall...money that is actually in the system that have a direct effect on rising or sinking prices. The very best overall gauge for this has always been the cumulative A/D line, and in this area, things continue to look fine and dandy.

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#19 OEXCHAOS

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Posted 04 January 2007 - 03:18 PM

Evidently all those people who went to work over the last few years who now have 401K's, etc etc don't count? Not to mention additional retirement savings by baby boomers. Just in case someone doesn't know, the end of the baby boom was born in 1964. That means they are turning 43. The lead edge is about 61. This is a huge chunk of the population moving into peak earning years, and focused on retirement.
This goes way beyond a simple margin account.
IT


Meanwhile--and more relevant to us, there's fewer and fewer US stocks to invest in (and most of us won't place any significant wealth in any other market).



Then, there's the incredible flexibility of financing options. There was a time when you got a car loan from GMAC or your credit union and you got a 30 year fixed mortgage. Cripes, I can't even tell you how many varieties of financing options there are and they're relatively inexpensive.

And then there's the freedom of movement of funds. Any old person can readily exchange money around the world with the touch of a button.

Now, this can change (and probably will), but RIGHT NOW, we've got more liquidity generally than at any time in history.

Mark

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#20 NAV

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Posted 04 January 2007 - 03:47 PM

World is not awash in liquidity - Jeeze !!. No time in history has this amount of liquidity been created and been sloshing around the globe. However, i agree that it's a myth that Fed has created this ocean of liquidty. It's generated by the world wide boom and the easy credit policies by the banks around the globe and at the same time, the younger generations' willingness to embrace credit and to work their butts off to meet the credit obligations. Most folks i meet today ask me the same question - "What's the best place to invest my money ?". That one question debunks the myth that there's no savings today !. Savings as reported today is a old concept. If one is talking about savings in the checking/savings account, then the argument is true. I have virtually zero savings in my checking or savings account. It scattered around in my 401K, IRA, Taxable brokerage accounts, Home, Other real estate investments, Bonds etc. If someone looks at my checking/savings account, i am all indebted with zero savings !! :(

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