The Stock Market Dive

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The Stock Market Dive

Postby Dave Roberts » Wed Feb 07, 2018 10:16 am

I'm intrigued by the absence of one element in the discussion of the recent dive of the Dow and other indices of stock value. I am no expert on economics having only taken a couple of economics related courses in my educational career, but it seems that the issue here just might be spawned by the recent tax cuts signed into law. The tax law created an additional $1.5-trillion in federal debt (even though optimists believe it will eventually be paid by economic expansion as the "job creators" share their wealth). In the short-term, it requires that the Treasury sell obligations of the US government that have to have a high enough interest rate to attract the investment. Unless the Federal Reserve manipulates the money supply by printing more money, thus devaluing the currency, the finite supply has to come from somewhere. In order to obtain that supply of money, could it not be withdrawn from stocks by people anticipating that the market had about reached its height, in the hope of holding onto their gains in the safety of Treasury Notes? If so, is this not the result of that tax bill? That at least seems to fit most of the economics I was taught. What do you think?
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Re: The Stock Market Dive

Postby William Thornton » Wed Feb 07, 2018 11:45 am

Dave Roberts wrote:I'm intrigued by the absence of one element in the discussion of the recent dive of the Dow and other indices of stock value. I am no expert on economics having only taken a couple of economics related courses in my educational career, but it seems that the issue here just might be spawned by the recent tax cuts signed into law. The tax law created an additional $1.5-trillion in federal debt (even though optimists believe it will eventually be paid by economic expansion as the "job creators" share their wealth). In the short-term, it requires that the Treasury sell obligations of the US government that have to have a high enough interest rate to attract the investment. Unless the Federal Reserve manipulates the money supply by printing more money, thus devaluing the currency, the finite supply has to come from somewhere. In order to obtain that supply of money, could it not be withdrawn from stocks by people anticipating that the market had about reached its height, in the hope of holding onto their gains in the safety of Treasury Notes? If so, is this not the result of that tax bill? That at least seems to fit most of the economics I was taught. What do you think?


I don't think you are correct here. The tax bill has been positive for the SM and will continue to be. The market has risen spectacularly since Trmp's election. Investors take profits. If investors start flooding into T-bills or other safe, low interest, instruments then the market will drop spectacularly. The business climate is light years more positive under Trump. Inflation may bump up. I wouldn't read any grand thing into the 4-5% drop in the past week.

One thing's for certain, Dems are heavily invested in economic bad news. Here's the headline: "Americans lose hundreds of billions in Dow decline, Democrats ecstatic"
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Re: The Stock Market Dive

Postby Dave Roberts » Wed Feb 07, 2018 12:14 pm

William Thornton wrote:
Dave Roberts wrote:I'm intrigued by the absence of one element in the discussion of the recent dive of the Dow and other indices of stock value. I am no expert on economics having only taken a couple of economics related courses in my educational career, but it seems that the issue here just might be spawned by the recent tax cuts signed into law. The tax law created an additional $1.5-trillion in federal debt (even though optimists believe it will eventually be paid by economic expansion as the "job creators" share their wealth). In the short-term, it requires that the Treasury sell obligations of the US government that have to have a high enough interest rate to attract the investment. Unless the Federal Reserve manipulates the money supply by printing more money, thus devaluing the currency, the finite supply has to come from somewhere. In order to obtain that supply of money, could it not be withdrawn from stocks by people anticipating that the market had about reached its height, in the hope of holding onto their gains in the safety of Treasury Notes? If so, is this not the result of that tax bill? That at least seems to fit most of the economics I was taught. What do you think?


I don't think you are correct here. The tax bill has been positive for the SM and will continue to be. The market has risen spectacularly since Trmp's election. Investors take profits. If investors start flooding into T-bills or other safe, low interest, instruments then the market will drop spectacularly. The business climate is light years more positive under Trump. Inflation may bump up. I wouldn't read any grand thing into the 4-5% drop in the past week.

One thing's for certain, Dems are heavily invested in economic bad news. Here's the headline: "Americans lose hundreds of billions in Dow decline, Democrats ecstatic"


Funny, I have yet to see an ecstatic Democrat over his or her retirement losing money. If you still believe that trickle-down economics works for anyone but the top few, set out two extra buckets to catch the drippings while you buy that ocean front property in Arizona.
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Re: The Stock Market Dive

Postby Dave Roberts » Wed Feb 07, 2018 12:41 pm

There is an interesting follow-up story out of DC today. I cannot vouch for its veracity, but it raised more questions.

http://washingtonpress.com/2018/01/31/cbo-just-confirmed-trumps-tax-cuts-already-blowing-deficit/
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Re: The Stock Market Dive

Postby William Thornton » Wed Feb 07, 2018 1:03 pm

Dems are heavily invested in the economy going south so that their election plans are bolstered. Obama was king of deficits.
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Re: The Stock Market Dive

Postby Dave Roberts » Wed Feb 07, 2018 1:13 pm

William Thornton wrote:Dems are heavily invested in the economy going south so that their election plans are bolstered. Obama was king of deficits.


Funny, but it last went south on W's watch, and the biggest deficits were in Obama's first two years when the budget had been prepared by W.
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Re: The Stock Market Dive

Postby Haruo » Wed Feb 07, 2018 4:00 pm

Yeah, Obama inherited a disaster that required spending to avoid depression, and after the first two years his budgets drastically reduced their deficits before more or less levelling off the last couple years. But it's an open question how much any president really has to do with the budget, which after all is hammered out by Congress.

On the other hand, the downtick in the markets Friday and Monday was chickenfeed compared with that in 2015, percentagewise, wasn't it?

I'm hearing a lot of suggestions that the positive results of the new tax bill are fueling the downturn in stock prices. I'll check back after the 16th, when my opinion of the stock markets will be solidified.
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Re: The Stock Market Dive

Postby Sandy » Wed Feb 07, 2018 5:45 pm

William Thornton wrote:I don't think you are correct here. The tax bill has been positive for the SM and will continue to be. The market has risen spectacularly since Trmp's election. Investors take profits. If investors start flooding into T-bills or other safe, low interest, instruments then the market will drop spectacularly. The business climate is light years more positive under Trump. Inflation may bump up. I wouldn't read any grand thing into the 4-5% drop in the past week.

One thing's for certain, Dems are heavily invested in economic bad news. Here's the headline: "Americans lose hundreds of billions in Dow decline, Democrats ecstatic"


:lol:

The stock market rise, and drops in unemployment since Obama left office are still largely attributable to his economic policy, most of which hasn't been changed under Trump. The government is still operating on continuing resolutions dating back to 2014, and the record setting, continuous job growth that began under President Obama continued through the first eight or nine months of Trump's term. It's started to slow down a bit lately, because of some moves made by the Fed,and some of the orange headed buffoon's executive orders, and rescinding of orders, but Trump economic policy to the point that the tax cut for the wealthy was passed was a zero.

Stock market crashes of the magnitude of this one, and the one that triggered the Bush recession, have been historically generated by similar factors, mainly cutting the taxes of the wealthy. Look back across American economic history. The wealthy get their taxes cut, the economy slows down, the stock market recedes. Raise taxes on the wealthy, and you get a roaring economy, such as that which occurred under the last two Democratic presidents.

William's biased comments about the Democrats are just sour grapes. Not worth the space they've required to post. I guess the fact that public opinion is so tilted in their favor, he's a bit miffed about it.
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Re: The Stock Market Dive

Postby William Thornton » Wed Feb 07, 2018 7:43 pm

My old friend Sandy's seems quite gleeful'over bad economic news. Obama and dems spent 8 years blaming bush and will spend the next 8 taking credit for trump. What a great country.
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Re: The Stock Market Dive

Postby Sandy » Wed Feb 07, 2018 9:07 pm

William Thornton wrote:My old friend Sandy's seems quite gleeful'over bad economic news. Obama and dems spent 8 years blaming bush and will spend the next 8 taking credit for trump. What a great country.


They won't have to spend 8 years doing much of anything regarding Trump. He's not gonna last that long. Seems like a majority of Americans blamed Bush, given the way they voted. Nothing wrong with tooting a little of your own horn, given the contrast between the success of Democratic economic policy under Clinton and Obama. Looks like we've come to a time when Trump's success has to stand on his own policy, not the foundation that Obama built, and the signs are showing he can't handle it.
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