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This is an ''artificial bull market''


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#11 da_cheif

da_cheif

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Posted 09 May 2021 - 10:45 PM

 

 

 

andr99, just only 13 months ago, the market took a serious swan dive, from 3000 to 2250.

So the market does NOT go up and up CONTINUOUSLY. There will be serious dips.
If I knew when the next serious dip gonna happen, I would not be blogging here cuz I would be on my yacht cheer.gif

Right now I am watching interest rates carefully. When inflation shows up, and interest rates move up,

we gonna have a serious dip. Until then enjoy the party. 

Well said, interest rates are indicating interesting things and so far the market is ignoring it.  Do think volatility is gonna hit again just needs a catalyst! 

 

i think it was the spring of 80 or 81......rates exploded and those so called anal ists cudnt understand why the market exploded at the same time.......

 

Conditions in the the early 80's were very different from today.  The 70's saw stag-flation, stagnant growth with high inflation.  Carter made Paul Volker the Fed chairman in '78, and he started raising rates, and raised and raised, until the prime lending rate was 15%.  That produced a BAD recession in 81 - 82, but it succeeded is breaking the back of high persistent inflation that had been killing the standard of living across the US.  The market did proceed on a very good bull market, the the basis was very low valuation of the market, the market PE was around 10ish following the recession.  That recession saw a restructuring of the economy, the steel industry in the US died and was taken over by Japan.  Remember Johnstown, PA., the poster child of the Rust Belt.  Also, the IBM PC was introduced to corporate America in 1981, changing business forever, dramatically improving worker productivity.  Spreadsheet software, Visicalc, then Lotus 1-2-3, then MS Excel did amazing things for productivity, along with MS Word, AutoCad.  Oil started the decade at $35 a barrel, ended the decade at $10 a barrel; much of that was due to govt. mandated fuel economy standards, and high prices brought online new sources just when demand was flat to down.  I was a victim of that in the Louisiana oil patch, but it got me to Houston and a new industry, so it turned out well for me.  DarpaNet was developed by the military and became the forerunner of today's internet.  The 80's saw the beginning of robotics replacing humans in manufacturing, satellite telephony, email, containerized shipping to defeat theft on the loading docks, supertankers to increase shipping efficiency.  And interest rates generally were coming down, after the Volker peak of rates early in the 80's which did kill inflation at the cost of a terrible recession.

 

Today we have a very richly valued market on a PE basis, and rates that are historically low.  I don't see a technological revolution coming in the next 10 years that will transform the workplace to the same extent as occurred in the 80's. Artificial Intelligence is out there, but AI has been around since the late 80's.  I worked with it a bit in the late 80's, and then it was mostly just a decision tree.  I'm sure it has evolved, but its evolution has been slow.

 

Yes rates went up in the late 70's and early 80's (80 - 81), but during the hard recession in 81 - 82, rates started coming down after the recession started and inflation was coming down.

 

I think Reagan kept Paul Volker as fed chair, for a second term, so the consensus must have been that inducing a recession was the correct move to break the back of inflation.  I just checked, Volker served 8 years, appointed by Carter, retained by Reagan.  That will tell you how bad high persistent inflation is, worth a hard recession to cure it.  Do you see a person with the cajones to do that today?  I don't.  But, the economy can get into a position where your only choices are 1) a bad choice, and 2) a worse choice.

 

One of my concerns is that our experiment with Modern Monetary Theory (MMT) will fail, and we'll be faced with such a choice.  Name a nation that has successfully operated their economy under MMT for over 50 years.  What was the state of that economy following that period?

 

obviously none of that has never and is not now have anything to do with the market.....