Oh crap.

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Could someone please tell me whether or not the stock market is crashing? BECAUSE I WOULD REALLY LIKE TO KNOW.

I don't want this to turn into some giant who's-to-blame carnival of the absurd. I just want people better-versed in economics than I to tell me whether or not we shall face the bread lines ahh-ghain.

Okay then.

It's not in the best of shape I know, I haven't really been looking at updates of it though honestly so I'm not sure.

Yeah, it's crashing. No breadlines. It's Bush's solution to the overweight problem.

Couple different ways to explain it. The way I know best is the Austrian school thought, which blames irresponsible monetary policy for the boom-bust cycle, but the Austrians aren't exactly what you'd call mainstream.

You could try to PM AwesomelyGlorious to ask, since he is probably better-versed in economics than anyone else on this forum.

the austrian system has been pretty decent so far at predicting what will occur.

http://www.youtube.com/watch?v=8teEHdCrFqE

It has, which is ironic given the anti-empiricist leaning of Austrian thought. You have to wonder, though, why very, very few people with formal training in economics take Austrian school though very seriously. Perhaps it's because the Austrians delve too deep into normative economics?

BTW, I can't stand that video you linked to. Cramer has an annoying voice.

Last edited by Orwell on 09 Oct 2008, 4:35 pm, edited 1 time in total.

[opinion=mine]

The stock market is not crashing, but the landing is going to be a little rough for those travelling in coach.

[/opinion]

i'm not quite sure. sometimes it just strikes me as other economic models are more sexy and so that's what people go towards even though they're more risky.


so...why does wall street have a bull but no bear?

I haven't been paying much attention to the specifics. Here's what I would say about what is going on:

1) The economy will survive, this issue seems like nothing in comparison to the Great Depression. I wouldn't be surprised if we left our comfortable 4-6% unemployment rate, like right now we are at 6.1%, which isn't exactly healthy, but I doubt we will hit the double digit numbers same that the Great Depression had. I think for the most part, a major issue is just that a number of companies are suffering from their own bad risk management practices, and from speculation in housing markets(fixed rate mortgages are not suffering to the same extent as adjustable rate mortgages, and the link to adjustable rates is found in both prime and subprime mortgages, and the latter is usually used by short-term owners). The latter isn't that big of a deal, because it will only be a somewhat small percentage of owners anyway, where the majority will end up keeping their houses.
2) People are freaking out, a major change has happened and they are trying to make things work out, and I mean on both in legislation and in the markets. After all, there are large bank consolidations, some banks are going bankrupt, and a significant number of mortgages have lost value, and investors don't know what to do, while legislators want to make sure this is not as bad as it could be.(for the record, I do not envy Bernanke despite distrusting some of his stabilization efforts)
3) Despite surviving, the next year(s) may be a bit tough as our capital markets have blown some of their credibility to investors, however, strong banks are currently surviving(and gobbling up other banks) so there won't be a crash. Not only that, but a concern is that our capital markets are too large, so they might have to shrink, which will push people out of work where they might have to try to find new work.

Hopefully, I won't have to provide sources as some of these are things I have heard from professors while I am reading in class, and others are things I have found from my incessant blog readings(I probably end up skimming over about 200 blog posts a day or so). For the most part though, I will reiterate, I haven't been paying too much attention to these going ons, so don't act as if I am a guru. I certainly tried to avoid placing too much blame. I will also admit to an optimistic bias.

The Austrian system is pretty hard at using in a predictive manner, since they do not use many formal models to use for an overall analysis. I think that the ultimate problem of acceptance with the Austrian school is it's anti-empiricism. Most mainstream economists also doubt the validity of the Austrian Business Cycle. I do think that your comment on the ideological leanings of the Austrians also has some value, but I think the other factors are pretty important too. That being said, there are some relatively prominent Austrians today such as Peter Leeson, who was a guest blogger on the Freakonomics blog. http://freakonomics.blogs.nytimes.com/a ... er-leeson/

I agree with the comment on Cramer's voice.

i actually started putting money in via 401k stock funds. figured now is a great time to start putting money into the stock market...it's skimmed off my weekly salary so i'm buying at those present prices...pretty sure i'll come out ahead in the end but it'll just take a while to catch up.

Buying low is a great idea.

problem is that i'm not sure what low will consist of...i'm expecting it to be below the pre-bubble figures but i'm not sure if that means 7k or 8k or possibly 5 or 6k with the interest rate cuts since that hurt the dollar (note: i'm just using the dow as a reference since the other markets seem to mostly follow suit with it).

you definately don't want to buy on price alone.

You need to look at the company, why their price is dropping, and what their current resources will do.
Buying low just to buy low can result in thousands of dollars of debt that you'll never be able to recover, because some of those corporations aren't in a position to bounce back, and will either completely go bust or be absorbed into other companies

Well, definitely. I just mean that due to the psychological factors in play with investor decisions, that some of these stocks will likely be undervalued.

i feel fairly good about my choices. they're poised to bounce back. one is a multi-national entertainment coporate giant so i'm fairly sure that'll be safe. may even consume some of the weaker stocks. the other is a long term investment fund which looks poised to stay stout and bounce back after all is said and done.