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Old 03-18-2017, 07:12 PM
willthrill81 willthrill81 is offline
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Originally Posted by tblount View Post
I've never understood where the money goes when there is a crash. Do people just sit on cash that they got out of the market when the run on the market started? The only way that I know of to destroy money is to give it to the government.
The money literally evaporates. It disappears.

The price for a share of stock, say Apple, is the point which the market has collectively determined is the 'right' price. If more people think it should be higher than lower, then the price goes up, and vice versa.

In a correction (more precise than a crash, which the market has really never done as that implies it went to zero), the market collectively says that stocks are worth less than they were before. Therefore, the total value of the market drops, and the 'dollars' just disappear.

Imagine that you bought your house for $100,000 and, over time, its assessed value went up to $200,000. Then there was a real estate downturn and your home lost 40% of its value. That means it is now worth $120,000. What happened to that $80,000 of equity you had? It went poof into thin air. If this happened to everyone, then all of those 'dollars' in everyone's equity also went poof.

Now let's say that you sold your house before the downturn and pocketed the $200,000. The person who bought it then lost $80,000 in equity. You could argue that the $80,000 is in your pocket, which is obviously true, but $80,000 still just disappeared because the market has collectively revalued the asset at $80,000 less than before.

This is difficult for some to understand, especially since many think that 'the elite' make money regardless, but the latter is simply false. Certainly a few people make money in a market downturn, but think of all the people who trail the market when it's in an upward cycle as it has been for the last nine years.

Regarding the OP, people make predictions of this sort all the time. They are all B.S. To consistently make such predictions, one would literally have to know the future of all the variables involved in the stock market, which are literally millions (at a minimum every single person invested in stocks).
Old 03-18-2017, 07:31 PM
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In addition to what will ^ said...

This is the problem with derivatives... People use the "value" of an "asset " that doesn't really exist to make further investments or loans and that's where systemic problems start with the dominoes
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Old 03-18-2017, 11:09 PM
willthrill81 willthrill81 is offline
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In addition to what will ^ said...

This is the problem with derivatives... People use the "value" of an "asset " that doesn't really exist to make further investments or loans and that's where systemic problems start with the dominoes
And beyond that, money is literally created with consumers' willingness to go into debt. If consumers weren't willing to go into further debt collectively, the money supply would actually start contracting and deflation would begin.

That's why the national debt will never be paid down. It would mean that our money supply is shrinking, deflation would set in, and debtors would be screwed from the top right on down the line.

Even the mighty Fed Reserve can't do anything about that. They were loaning money to banks left and right after 2008 literally begging them to loan it out. But the banks largely gave them the middle finger and said that they wanted to keep it for their emergency fund. We're just now starting to see them start to open up the coffers somewhat.
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Old 03-20-2017, 11:09 AM
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Quote:
Originally Posted by tblount View Post
I've never understood where the money goes when there is a crash. Do people just sit on cash that they got out of the market when the run on the market started? The only way that I know of to destroy money is to give it to the government.
Where does the money go in a crash? As I learned when I was a young broker back in the early 1970s is that it goes out of the market when a demographic gets scared.

Today we have millions of baby boomers that have their 401k’s stuffed to the gills with investments. These 401k’s are their pension funds. All it will take is black swan event to “scare” boomers. The effect of the scare will be seen in net redemptions of mutual funds and things like ETF’s price drop.

The traditional gauge of the black swan will be in a correction level in an index. A10% or less correction in the index will indicate normal market correction patterns. A greater than 10% correction in the index will indicate a severe correction. A greater than 20% correction in the index will indicate that markets are in bear market territory.

My head broker told me in the 1970's what people do after a black swan, they will:
- some have weak hands and will dump all they own at the first big scare.
- others will sit on losses expecting a 10% normal market correction. These people have buy and hold built into them.
- many will begin to become worried in a severe market correction and start selling their big losers. Selling increases as the indexes approach the 20% correction level.
- bear market territory above the 20% correction level with big swings in the indexes may induce “panic selling”.

I saw this happen live in 73-74. By late 1974 panic selling was in full bloom. The sales of stocks went in a multitude of places. They wanted treasuries, corporate bonds, some municipal bonds, cash (waiting to buy stocks back later) or utility stocks. They wanted anywhere it was “safe”. People do the same things today with a few more options.
Old 03-20-2017, 04:19 PM
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I've watched these 'Gurus' for a lot of years. It's a hit or miss thing and I've never read any of them to make me think they are prophets. This guy says the Dow might go up to $22,000 and it might go down to $14,000.

Uh huh, I'll do him one better. It might go up to $25,000 and it might get as low as $8,000. Send me money and I'll do savvy investing for you and take my cut whether it goes up or down.

I'll try to remember to bump this thread on his May date and see which direction the market 'corrected'.

I don't think a black swan event happens very often. We all know the dangers of investing (and the benefits). Prices go up temptingly and they fall drastically. People blind themselves to the possibilities and believe whatever huckster they want to and then claim no one could ever see it coming.

Now I'd consider a black swan event something like a series of solar flares that causes the proverbial EMP to knock out electrical facilities all over the world. Truly unpredictable.
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Old 03-20-2017, 04:37 PM
aus_sprite aus_sprite is offline
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[QUOTE=rabbitone;13995290]They wanted anywhere it was “safe”/QUOTE]

Unfortunately most 'safe haven' assets are no longer safe. Not even PMs.

Part IV of our Banking Act here in Aus permits the calling in of all gold (except nusimatics) at a moment's notice. It is presently suspended, but can be reinstated at a blink of an eye without recourse to parliamentary debate.

Real estate, apart from being illiquid and non-fungible, can be taxed to high heaven by the government when scrabbling for money. Rest assured they will, if Roman Empire history is anything to go on.

Most other 'safe haven' classes suffer from a lack of fungibility, liquidity or both.

The only really 'safe' investment is to invest in yourself - skills, experience, knowledge, community links, physical and psychological resilience. These qualities allow you to seize opportunities when Mr Market offers them, with a vastly reduced risk profile.
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Old 03-20-2017, 05:12 PM
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Originally Posted by aus_sprite View Post
Unfortunately most 'safe haven' assets are no longer safe. Not even PMs.

Part IV of our Banking Act here in Aus permits the calling in of all gold (except nusimatics) at a moment's notice. It is presently suspended, but can be reinstated at a blink of an eye without recourse to parliamentary debate.
That's true in the USA too.

Eventho there is no current law to reinstate, our country did it in 1933 (and then revalued a year later) without much effort, so they could do it again.

still, I like having a small amount of silver, just in case. I hope to have a small amount of gold someday soon.
Old 03-20-2017, 05:42 PM
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Originally Posted by LordOpie View Post
That's true in the USA too.

Eventho there is no current law to reinstate, our country did it in 1933 (and then revalued a year later) without much effort, so they could do it again.

still, I like having a small amount of silver, just in case. I hope to have a small amount of gold someday soon.
Farms and businesses aren't safe either. Obama wrote an order giving the government the ability to take over private assets if it was deemed to be a matter of national security, remember?
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Old 03-20-2017, 06:59 PM
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Farms and businesses aren't safe either. Obama wrote an order giving the government the ability to take over private assets if it was deemed to be a matter of national security, remember?
I think that's been in effect for several presidents?
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Old 03-20-2017, 07:07 PM
badbass58 badbass58 is offline
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Been hearing things like this for a while now.
Old 03-20-2017, 07:26 PM
willthrill81 willthrill81 is offline
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Farms and businesses aren't safe either. Obama wrote an order giving the government the ability to take over private assets if it was deemed to be a matter of national security, remember?
If it's deemed a matter of national security, all bets are off in the view of TPTB, including Constitutional rights. In martial law, anything goes. But truth be told, they don't want that. They want to keep their sheep quiet, fat, happy, and productive. Status quo achieves that.

Regarding the confiscation of PMs, I must say that I'm not quite sure what happened to mine. Gifts, boating accidents, theft....they're just so hard to hang on to.
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Old 03-21-2017, 07:26 PM
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Originally Posted by rabbitone View Post
I don’t know about a Dow of 14,800? Or 26,000? However, I am not buying anymore and I expect some downward action starting in May. We will see how nervous the coming debt ceiling fight makes people...
"sell in May and go away..."

http://www.cnbc.com/2016/04/29/it-so...od-advice.html

"Rhyming couplets can rarely be expected to serve as sound investment advice. But "sell in May and go away" may be a prominent exception.

"This old saying was proposed in the past … and it actually wasn't looked at until probably the late '90s. We looked at it, and indeed, it is persistent and it's economically just as strong as it was then," University of Miami associate professor Michael Fuerst told CNBC's "Trading Nation" this week.

Fuerst, along with fellow University of Miami professors Sandro Andrade and Vidhi Chhaochharia, reported in a 2012 paper that stock returns were 10 percent higher in the November-to-April half of the year than in the May-to-October period.

Importantly, this result isn't solely based on historical American stock returns. In that case, the academics could be making the all-too-common mistake of "proving" an adage by using the same evidence that was used to bring about that line of thinking.

Rather, they examined returns across 37 markets within a 14-year time period that was not tested in a prior paper that also found support for the sell in May effect."
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