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Thread: When will the market crash: 2017 edition

  1. #1
    Administrator U-Ute's Avatar
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    When will the market crash: 2017 edition

    The market continues to climb and climb. Mainly because everyone keeps buying index stocks, floating all boats equally.

    Because not all companies are sectors are created equal.

    www.mauldineconomics.com/connecting-the-dots/one-sector-is-propping-up-the-us-stock-market

    US stock benchmarks hit new all-time highs this month, and despite rich valuations, buyers think they’ll go higher still.

    One reason for this exuberance is the growing dominance of passively indexed ETFs.

    Rather than go to the trouble of picking individual stocks, people dump their cash into index ETFs. The ETF sponsor then buys every stock in the index—even the ugly ones.

    Profit growth seems to justify this, even in the broad indexes. In its June 16 bulletin, FactSet Research estimated that combined profits in the S&P 500 companies will rise 6.5% in this year’s second quarter.

    So, “combined profits” means some companies (and sectors) performed better than average, some worse, right?

    Actually, no.

    What we really have is one sector growing profits at a gangbuster rate. The others, not so much.

  2. #2
    I fall in that trounche of investors. :shame:


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  3. #3
    https://www.usatoday.com/story/money...eed/769950001/


    Still growing at record pace. World economy, earnings, low interest rates and tax cuts fueling the run. No obvious indications of a near-term slowdown.
    “Children and dogs are as necessary to the welfare of the country as Wall Street and the railroads.” -- Harry S. Truman

    "You never soar so high as when you stoop down to help a child or an animal." -- Jewish Proverb

    "Three-time Pro Bowler Eric Weddle the most versatile, and maybe most intelligent, safety in the game." -- SI, 9/7/15, p. 107.

  4. #4
    Quote Originally Posted by mUUser View Post
    https://www.usatoday.com/story/money...eed/769950001/


    Still growing at record pace. World economy, earnings, low interest rates and tax cuts fueling the run. No obvious indications of a near-term slowdown.
    Mnuchin is right about one thing--if they dont pass tax cuts, the market will tank.

  5. #5
    Administrator U-Ute's Avatar
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    Quote Originally Posted by concerned View Post
    Mnuchin is right about one thing--if they dont pass tax cuts, the market will tank.
    Why? Because the market has priced in tax cuts already?

  6. #6
    Quote Originally Posted by U-Ute View Post
    Why? Because the market has priced in tax cuts already?
    Yes. because they have been anticipating them since November.

  7. #7
    Quote Originally Posted by concerned View Post
    Yes. because they have been anticipating them since November.
    And shouldn't the market have also anticipated that they might not pass given what has happened over the last six motnhs with other legislation?

  8. #8
    Administrator U-Ute's Avatar
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    Quote Originally Posted by concerned View Post
    Yes. because they have been anticipating them since November.
    But this run has been going on since 2008.

    runup.jpg

  9. #9
    Quote Originally Posted by U-Ute View Post
    But this run has been going on since 2008.

    runup.jpg
    Right, but the bump following the election is particularly due to corporate America's anticipation that (i) there would be tax cuts, and (ii) a roll back of regulations in a Trump administration.

  10. #10
    Quote Originally Posted by Two Utes View Post
    And shouldn't the market have also anticipated that they might not pass given what has happened over the last six motnhs with other legislation?
    Not yet apparently.

  11. #11
    Quote Originally Posted by U-Ute View Post
    But this run has been going on since 2008.

    runup.jpg
    Yes, its been a tremendous time to be in the market. Last time we saw something like this (2015 notwithstanding) was the 9 year growth from 1991-1999, which was followed by a fairly nasty 3 year correction. I think we're all a bit nervous, and that tax cut (at least at the corporate level) would certainly help keep this thing going.
    “Children and dogs are as necessary to the welfare of the country as Wall Street and the railroads.” -- Harry S. Truman

    "You never soar so high as when you stoop down to help a child or an animal." -- Jewish Proverb

    "Three-time Pro Bowler Eric Weddle the most versatile, and maybe most intelligent, safety in the game." -- SI, 9/7/15, p. 107.

  12. #12
    Administrator U-Ute's Avatar
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    Quote Originally Posted by mUUser View Post
    Yes, its been a tremendous time to be in the market. Last time we saw something like this (2015 notwithstanding) was the 9 year growth from 1991-1999, which was followed by a fairly nasty 3 year correction. I think we're all a bit nervous, and that tax cut (at least at the corporate level) would certainly help keep this thing going.
    I doubt it.

    The weaknesses in the market right now are supply side. People with mortgages and kids don't have any money left over to buy things. From what I understand, this run has less to do with underlying financials and more to do with stock buybacks. The cynic in me thinks that board members are using buybacks as a way to meet share price goals in order to get bonuses.

  13. #13
    I am not suggesting that if the market "tanks" it will go back to early 2009 levels. It is up 25% since the election, which is an astounding percentage. So even if it tanks 25% (which would be huge) it would be where it was a year ago.

  14. #14
    All that stock market growth never trickles down. The median income is still in the mid-$30k range, and nearly 70% of the population cannot weather a $1000 shock (sudden medical bill, car repair, etc).

    The economy does not have a supply problem, it has a demand problem. Companies hiring a bunch of new people to build more widgets doesn't do anything to increase the demand for widgets, all that would do is decrease the demand and drop prices for said widgets.

    This tax cut is going to be a real-world increase for single taxpayers making more than about $19k, and families making over roughly $35k. And it will be at least partly funded by cutting services to low-income people, further squeezing the people at the bottom which always further decreases the demand pull. It will punch at least an additional $2T hole in the budget (and thus the overall economy).

    As the tax cut framework currently stands, nobody (or very few) posters in this board will actually see tax reductions, and almost all of us will be affected by the loss of itemized deductions.

    Pushing through this tax cut is incredibly irresponsible. But it follows the standard ploy of privatizing the profits, while socializing the risks. Lather, rinse, repeat.

  15. #15
    Quote Originally Posted by NorthwestUteFan View Post
    All that stock market growth never trickles down. The median income is still in the mid-$30k range, and nearly 70% of the population cannot weather a $1000 shock (sudden medical bill, car repair, etc).

    The economy does not have a supply problem, it has a demand problem. Companies hiring a bunch of new people to build more widgets doesn't do anything to increase the demand for widgets, all that would do is decrease the demand and drop prices for said widgets.

    This tax cut is going to be a real-world increase for single taxpayers making more than about $19k, and families making over roughly $35k. And it will be at least partly funded by cutting services to low-income people, further squeezing the people at the bottom which always further decreases the demand pull. It will punch at least an additional $2T hole in the budget (and thus the overall economy).

    As the tax cut framework currently stands, nobody (or very few) posters in this board will actually see tax reductions, and almost all of us will be affected by the loss of itemized deductions.

    Pushing through this tax cut is incredibly irresponsible. But it follows the standard ploy of privatizing the profits, while socializing the risks. Lather, rinse, repeat.
    When President Trump did his big reveal of the tax plan details, I found it really interesting when he got to the "Death Tax" portion and the whole room irrupted in applause. As if any of them would ever be effected by any changes to the death tax. Oh to be so hindered by inheriting $5 million.

  16. #16
    Quote Originally Posted by Dwight Schr-Ute View Post
    When President Trump did his big reveal of the tax plan details, I found it really interesting when he got to the "Death Tax" portion and the whole room irrupted in applause. As if any of them would ever be effected by any changes to the death tax. Oh to be so hindered by inheriting $5 million.
    This is one of my biggest pet peeves. I'm a small government guy, but if we have to have taxes, the death tax seems to be the fairest one of all. it would encourage really rich people to spend their money, thus stimulating the economy. The people who inherit didn't earn the money. It's not their money and it never has been their money. And the person who actually earned it doesn't need it anymore. If we are going to tax, it seems this is where we should tax.

    But a stupid majority of Americans don't see it this way.

  17. #17
    Quote Originally Posted by Two Utes View Post
    This is one of my biggest pet peeves. I'm a small government guy, but if we have to have taxes, the death tax seems to be the fairest one of all. it would encourage really rich people to spend their money, thus stimulating the economy. The people who inherit didn't earn the money. It's not their money and it never has been their money. And the person who actually earned it doesn't need it anymore. If we are going to tax, it seems this is where we should tax.

    But a stupid majority of Americans don't see it this way.
    it doesnt encourage the rich to spend their money; it only encourages them to get their money out of their estates--into trusts, family corporations, savings accounts for children, etc. The number of estates that actually pay the the
    tax each year is exceedingly small--I read somewhere last year that it was about 80 estates nationwide. Somebody said, if you pay the tax you are an idiot or getting bad financial advice.

  18. #18
    Quote Originally Posted by concerned View Post
    it doesnt encourage the rich to spend their money; it only encourages them to get their money out of their estates--into trusts, family corporations, savings accounts for children, etc. The number of estates that actually pay the the
    tax each year is exceedingly small--I read somewhere last year that it was about 80 estates nationwide. Somebody said, if you pay the tax you are an idiot or getting bad financial advice.
    But distributions from trusts are generally taxable

  19. #19
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    Quote Originally Posted by NorthwestUteFan View Post
    All that stock market growth never trickles down. The median income is still in the mid-$30k range, and nearly 70% of the population cannot weather a $1000 shock (sudden medical bill, car repair, etc).

    The economy does not have a supply problem, it has a demand problem. Companies hiring a bunch of new people to build more widgets doesn't do anything to increase the demand for widgets, all that would do is decrease the demand and drop prices for said widgets.

    This tax cut is going to be a real-world increase for single taxpayers making more than about $19k, and families making over roughly $35k. And it will be at least partly funded by cutting services to low-income people, further squeezing the people at the bottom which always further decreases the demand pull. It will punch at least an additional $2T hole in the budget (and thus the overall economy).

    As the tax cut framework currently stands, nobody (or very few) posters in this board will actually see tax reductions, and almost all of us will be affected by the loss of itemized deductions.

    Pushing through this tax cut is incredibly irresponsible. But it follows the standard ploy of privatizing the profits, while socializing the risks. Lather, rinse, repeat.
    Sorry. You are right. I meant a demand problem. People can't afford to buy stuff.

  20. #20
    Administrator U-Ute's Avatar
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    Quote Originally Posted by Dwight Schr-Ute View Post
    When President Trump did his big reveal of the tax plan details, I found it really interesting when he got to the "Death Tax" portion and the whole room irrupted in applause. As if any of them would ever be effected by any changes to the death tax. Oh to be so hindered by inheriting $5 million.

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