patrick.net

smaulgld says

Institutional investors selling their shares buy other shares

From whom do they buy these other shares?

Heraclitusstudent says

If all companies collectively decide to keep all cash they earn and not invest, then there is no productive use for it for the simple reason that the rest of the economy is starved.

If they return cash to shareholders, and the cash returns in the economy, as spending or investment, then productive use will appear.

That is all true. I am objecting to the ineffectiveness of the QE program that doesn't change the underlying fundamentals of the market that the companies are working in (as you mention the rest of the economy is starved) and only serves to juice the stock price by encouraging share buy backs.
Yes, some of the money ends up back in the economy but most of it stays in the stock market and in concentrated hands.

Heraclitusstudent says

Institutional investors selling their shares buy other shares

From whom do they buy these other shares?

other institutional shareholders- or actually high frequency bots run by institutional shareholders

Heraclitusstudent says

No. The value of shares is dependent on their number. Less of them means they are more valuable. Just because they are worth more, doesn't mean shares are overvalued. This has nothing to do with performance.

right the value of the shares is dependent on their number- fewer makes them worth more per share.

But that does make them overvalued as the earnings per share (one method of valuing shares) is artificially boosted by the removal of a certain amount of shares via the company buying back their shares and driving the price higher even though the company didn't earn more nominal dollars, but rather had more earnings per (reduced number) of shares.

hat Happens when The Fed and China Stop Buying U.S. Treasuries?

Presumably interest rates go up...

smaulgld says

From whom do they buy these other shares?

other institutional shareholders- or actually high frequency bots run by institutional shareholders

Yes but at any given time, there a fixed amount of shares on the market. If someone buys them from cash, at the other end of the "buy from" chain there is someone selling and not buying.

- either with an investor taking money out of the market to finance whatever they are doing
- or maybe with an IPO, or a company selling new shares to raise cash. Meaning this is an investment in a new company, i.e. in the economy.

Heraclitusstudent says

I am objecting to the ineffectiveness of the QE program that doesn't change the underlying fundamentals of the market that the companies are working in (as you mention the rest of the economy is starved) and only serves to juice the stock price by encouraging share buy backs.

Yes, some of the money ends up back in the economy but most of it stays in the stock market and in concentrated hands.

All true, again as I wrote above
"I am objecting to the ineffectiveness of the QE program that doesn't change the underlying fundamentals of the market that the companies are working in (as you mention the rest of the economy is starved) and only serves to juice the stock price by encouraging share buy backs.
Yes, some of the money ends up back in the economy but most of it stays in the stock market and in concentrated hands."

smaulgld says

Yes, some of the money ends up back in the economy but most of it stays in the stock market and in concentrated hands."

On that front, share buyback are a step in the right direction. Like people buying home cash. This is part of the healing process. The new cash is used to plug old holes.

Heraclitusstudent says

This is part of the healing process

arguably there are better ways for the economy to heal than for the Fed to print $4 trillion to lower interest rates so companies can buy back their shares to boost the stock market

The Fed will never stop buying. If they run out of space in their SQL tables (digital money), making them bigger is not a problem. I've done it a number of time professionally. And I'm not even a DBA!

jvolstad says

The Fed will never stop buying.

Print until they can print no more

What do you fellers think of this possibility?

/?p=1243305

indigenous says

What do you fellers think of this possibility?

/?p=1243305

I think you about hope for the best and prepare for the worst

Rickards says
The mistakes have already been made. The instability is already in the system. We’re just waiting for that catalyst that I call the snowflake that starts the avalanche. You don’t worry about the snowflakes; you worry about the snow and that it’s unstable and it’s just waiting to collapse.

Bubbabear says

it’s just waiting to collapse.

The guys I listen to say cash is king. This guy is saying that cash is going to be replaced by SDRs (world money put out by the IMF) He says the new reserve currency.

He indicates that Buffet is investing in hard assets like the Burlington RR and dumping cash. I thought I heard a while back that Buffet was heavy with cash?

Unless the FED is in cahoots with the IMF it would seem they would fight this. OTOH if no one has confidence in any currency the IMF may be able to step in?

indigenous says

Unless the FED is in cahoots with the IMF it would seem they would fight this. OTOH if no one has confidence in any currency the IMF may be able to step in?

IMF won't because the fed will protect it's interests just as Japan will. The one screwed is the EU central bank. When the EU breaks, each country's central bank comes back and the fed will protect its world reserve status.

Bubbabear says

The fed will protect its world reserve status.

What happens when the melt down starts?

indigenous says

Unless the FED is in cahoots with the IMF it would seem they would fight this. OTOH if no one has confidence in any currency the IMF may be able to step in?

The only way SDRs makes sense is the Fed gets too over extended (possible) and the IMF has SDRs with a clean balance sheet to bail out the dollar.
Cash would make no sense if the Fed and treasuries crumble-stocks and tangible assets would be the way to go then

Bubbabear says

Rickards says

The mistakes have already been made. The instability is already in the system. We’re just waiting for that catalyst that I call the snowflake that starts the avalanche. You don’t worry about the snowflakes; you worry about the snow and that it’s unstable and it’s just waiting to collapse.

You cant just print $4 trillion, buy trillions worth of useless mortgage back securities from otherwise bankrupt banks, fund 90% of the US government deficit spending and expect everything to be fine.

Call it Crazy says

That's the part that makes me wonder.... When does the curtain get pulled back and people see this "recovery" for what it really is??? All this artificial propping up has to blow up at some point, doesn't it??

To this day people think that FDR was a great president who saved the US. It amazes me how people can be brainwashed. Especially when they deify the president. At least half of Mt Rushmore is literally laughable.

smaulgld says

The only way SDRs makes sense is the Fed gets too over extended (possible) and the IMF has SDRs with a clean balance sheet to bail out the dollar.

Rickards was saying that the IMF is leveraged 3 to 1 where as the FED is leveraged 80 to 1.

Kind of absurd, I wonder how they arrive at that conclusion, what is a derivative worth. He also said derivatives for the most part should be banned. Seems to me that Darwins law would fix that if no bailouts. Certainly with GS or MS

A different reason to own gold?

indigenous says

Kind of absurd, I wonder how they arrive at that conclusion, what is a derivative worth. He also said derivatives for the most part should be banned. Seems to me that Darwins law would fix that if no bailouts. Certainly with GS or MS

A different reason to own gold?

The advantage of gold or any asset that you own outright is that it is not someone else's liability.

indigenous says

To this day people think that FDR was a great president who saved the US. It amazes me how people can be brainwashed. Especially when they deify the president. At least half of Mt Rushmore is literally laughable.

I am writing a book on the Presidents from the point of view that "great" presidents were the ones that abused their powers the most

Call it Crazy says

That's the part that makes me wonder.... When does the curtain get pulled back and people see this "recovery" for what it really is??? All this artificial propping up has to blow up at some point, doesn't it??

Eventually that is the concept of kicking the can down the road for as long as you can then turning over the tables when you can kick no longer

smaulgld says

"great" presidents were the ones that abused their powers the most

I was listening to something yesterday about Teddy Roosevelt, suffice to say Mark Twain said he was insane. He wanted to get the congressional medal of honor to make amends for his father who bought his service in the Civil War. I guess back then you could pay for a proxy. Anyway Clinton gave him the Congressional Medal of Honor posthumously. That asshole is such a hick he could shit on anything, said TR was his favorite president.

I will take a Clinton with zero integrity over an ideologue any day.

This guy has his PHD in history, is an Austrian, might be interesting to you regarding some of these "deities", you should hear what he has to say about Lincoln.

http://www.schiffradio.com/pg/jsp/verticals/archive.jsp

smaulgld says

You cant just print $4 trillion, buy trillions worth of useless mortgage back securities from otherwise bankrupt banks, fund 90% of the US government deficit spending and expect everything to be fine.

Obligatory:

The Zimbabwe people must be pretty good at math?

indigenous says

This guy has his PHD in history, is an Austrian, might be interesting to you regarding some of these "deities", you should hear what he has to say about Lincoln.

http://www.schiffradio.com/pg/jsp/verticals/archive.jsp

Thanks I finally got to listen to this

indigenous says

What happens when the melt down starts?

What will trigger a meltdown?

smaulgld says

Eventually that is the concept of kicking the can down the road for as long as you can then turning over the tables when you can kick no longer

You assume that no problem can get solved over time in a better way than they would be in one shot.

Heraclitusstudent says

indigenous says

What happens when the melt down starts?

What will trigger a meltdown?

That is a good question.
probably an event that drives home the realization that dollar/US Treasury scheme can't be sustained

Call it Crazy says

When does the curtain get pulled back and people see this "recovery" for what it really is??? All this artificial propping up has to blow up at some point, doesn't it??

Or when does the artificial propping up become the real thing?

There is a dynamic at work: One good result lead to more good results. Every problem fixed, even temporarily, makes it easier to fix other problems. At what point the chain reaction starts on the right side.

Heraclitusstudent says

Or when does the artificial propping up become the real thing?

There is a dynamic at work: One good result lead to more good results. Every problem fixed, even temporarily, makes it easier to fix other problems. At what point the chain reaction starts on the right side.

Yep maybe you can step in the same river twice and find it as good and the same as ever, but I doubt it

smaulgld says

the realization that dollar/US Treasury scheme can't be sustained

Yesterday we discussed the fact that the US debt held by the fed might as well be forgotten.

What US treasury scheme can't be sustained?

smaulgld says

Yep maybe you can step in the same river twice and find it as good and the same as ever, but I doubt it

That's the point, is it not?: the river is not the same.

I'm a housing bear in the long term. But there are many ways housing can go down.

It can go down, in a relative way, in a booming economy.

Heraclitusstudent says

Yesterday we discussed the fact that the US debt held by the fed might as well be forgotten.

What US treasury scheme can't be sustained?

International acceptance of the printing of dollars to satisfy previously issued and ever growing U.S debt obligations

Heraclitusstudent says

What will trigger a meltdown?

Money is a symbol that people have confidence in, when that confidence is broken the herd stampedes. The trigger could be anything. In 2007 it was a change in overnight lending rates that caused Jeff Imelt to cry wolf to Paulson. One day someone said to the tulip bulb buyers your tulip bulbs are not worth that much and boom tulip bubble is over.

The thing that is obvious is the bubble. WE HAVE A BIG ASS BUBBLE.

smaulgld says

International acceptance of the printing of dollars to satisfy previously issued and ever growing U.S debt obligations

You think the dollar status is at risk? Look at the Yen, the Yuan, the Euro, the GBP, the Swiss Franc. The dollar is by far the best kid in town.

What is at risk - and should be at risk - is the low value of currencies of countries like China.

indigenous says

The trigger could be anything. In 2007 it was a change in overnight lending rates that caused Jeff Imelt to cry wolf to Paulson. One day someone said to the tulip bulb buyers your tulip bulbs are not worth that much and boom tulip bubble is over.

The thing that is obvious is the bubble. WE HAVE A BIG ASS BUBBLE.

In 2007 it was the bust of a housing bubble based on massive fraud and unsustainable credit growth. Credit had been moving weaker hands for years. The money been thrown around at that time was unpayable debt.

Now this unpayable credit has been replaced by new base money. A huge black hole of debt has met the infinite source of green paper, and the hole has lost: it has been filled, mostly. There is the difference: base money will not be defaulted upon.

All that's missing for the economy to actually boom, is the money to actually circulate.

And it's a very brave assertion to say it won't happen.

It's a very brave assertion to think we HAVE TO fall back into a deflationary spiral with the extra base money that's sloshing around.

Heraclitusstudent says

You assume that no problem can get solved over time in a better way than they would be in one shot.

It's hard to solve a problem when each successive "solution" pushes you closer to the cliff

Heraclitusstudent says

That's the point, is it not?: the river is not the same.

I'm a housing bear in the long term. But there are many ways housing can go down.

It can go down, in a relative way, in a booming economy.

Housing should not drive the economy, but rather be reflective of the health of the economy-ie people have good jobs and can afford to buy houses.