Nasdaq Index Reaches 5000 for First Time Since 2000
bloomberg.com
bloomberg.com
Edit: Here's a brief explanation using the DJIA as an example http://www.npr.org/blogs/money/2013/03/05/173515767/the-dow-...
As far as I can tell, the only reason this saga continues is because of the marketing hype it builds. Most of the people I know who watch only mainstream news all believe that we are going to have a massive crash that will completely kill our country in a few years.
When you actually ignore the hype and look at purely the numbers you'll see that the US is doing incredible compared to the rest of the world right now. The Euro is crashing, Russia is in ruins, Saudi Arabia's OPEC squeeze is now hurting all of the other "US enemies" while the net effect of the oil crisis on the US is mostly zero-sum.
I'm incredibly bullish on the US right now. Sure we'll probably have another small crash in the next few years but we'll recover quickly and keep on surging for the foreseeable future. That's the nature of market cycles! It's super easy to be negative and for some reason that's the cool trend for people to take right now but frankly the macro-view of the facts say differently.
All this happens in the background as the can gets kicked down the road again and again but courts are starting to push back forcing cities and states to pay.
Then you have the Chicago experiment, where the public unions are ganging up to put one of their own into the mayor slot so they can pay their members what they are "owed". As in, the power of the public employee unions may come to the point where they run their cities top to bottom and the payout will damage the economy.
So be bullish, Europe is already suffering through their own pay the piper with Greece as the first in line. Liberalism will collapse like communism for the same reasons, you cannot promise people everything and not pay up.
A market crash may or may not happen on its own, there is definitely some very overvalued companies out there; Uber and Tesla come to mind; but watch carefully the play in courts as the tax man will be coming hard and businesses are the first to pay because they are easy to brand as evil
However, I think the promises made to that generation must be considered. In many cases, working for the government is less cash salary in exchange for other benefits. For example, I make $87k working for the state but was offered $110k+bonus at Microsoft. Why the difference? The state can compensate me in additional non-monetary ways, which make up the difference of the value proposition. If that ceases to be true, so be it, and I will seek employment else; but don't try to go back in time and retroactively revoke something earned.
If those promised, contracted benefits are taken away with the swipe of a pen, why should that be a legal or moral thing to do? I'm ok with saying "moving forward, we won't be offering pensions to anyone new", but to go back in time and invalidate the contracted benefit from past work? It's like if you contract with someone and say "work for a month and I will pay for $5000." Then at the end of the month, you say "Well, I don't have the money. That's too bad." Of course that would be a violation and the courts would step in. Should it be any different with the state?
This is how basic income will begin, a critical mass of retirees who either lost pensions through company fraud, municipal bankruptcy, or who never even had a pension in the first place. All it takes is a few southern populists to throw off the chains of fiscal conservatism and the money will flow.
Greece will never happen here, because we can print as much money as we want. We have spent trillions in Iraq and interest rates haven't even gone up. We could easily put trillions into the hands of the poorest Americans and the Fed would still be able to sell debt below 5% interest.
The Fed doesn't sell debt, the Treasury does. The Fed buys Treasury debt at below market interest rates with its magical money printing machine, and that is the problem.
That's because they're set by the Fed and not allowed to fluctuate according to market pressure. Surely you knew this?
It's the same reason why, some argue, the Fed can't raise rates now (because of leveraged derivatives).
The rest of the world absorbs a sizable portion of US inflation because of that reserve standard. Fair or not, that is how it works and will continue to for at least several decades. Every other country on earth is partially subsidizing US fiscal irresponsibility.
The Fed can raise rates, and the US Govt can afford to pay another $500 billion on interest that would be incurred. It wouldn't be pretty, spending would either have to be frozen for five years to allow tax revenues to catch up, or the Fed would have to pay the bill for an extended period of time (again, at part cost to the rest of the world reliant on the dollar).
The Fed keeps rates low because its in their best interest; they are owners, they want inflation to be as low as possible. As long as they can sell enough debt at current rate they would never raise interest rates. The same reason a company who could sell plenty of debt at 5% wouldn't raise their rate to 7%.
No, most newly issued government debt in the US, EU and Japan is now bought by their respective central banks at below fair market interest rates.
Consider that some European banks now charge savers and pay borrowers [1]. Do you really think that a fair market would accept negative interest rates?!
1. http://www.nytimes.com/2015/02/28/business/dealbook/in-europ...
In short, pension liability "concerns" are often an effort to create an artificial budget crisis to use for political purposes, rather than an actual crisis. When you have to estimate costs 75 years into the future (as the Post Office is required to), the numbers look big, but you also have 75 years to bring in the revenue to pay for it.
Well, for an anti-hyper, there's a ton of spin right there ;)
The Euro is not crashing, it's pretty stable against most currencies except (re)surgent USD and GBP. It has some structural issues to overcome, not unlike USD, but "crashing" it is not.
Could you tell me what MainStream Media on Earth has been predicting the crash of the US economy for 7 years? To me the MSM seem to have been cheerleading the Fed all along. Haven't they been making fun of Peter Schiff all along or am I living in a parallel universe?
And if you're so good with numbers and are up for a challenge, you could try and explain the horrible numbers that get posted daily on zerohedge. They need educated Keynesians such as yourself to disabuse them of those horrible graphs they keep showing.
Zerohedge hasn't published a positive sentiment in years. I know some of the guys that post there and they really do profit from stirring up the hype.
They haven't published a positive sentiment in 7 years of ZIRP? You don't say?
And they profit from stirring up the hype? OMG, call the profit police. This "they profit from it" argument does not work with capitalists. I'd hope they profit from doing what they do, because that means they'll be in business that much longer. I am not against anyone profiting from speaking their mind. I am endowed with critical thinking skills and I can judge their arguments for what they are.
This is one of the reasons, and there are many more. If you held a Nasdaq ETF from 2000 until now, you would have had to wait to 15 years to make back most of your gains. The Nikkei has been even worse... http://www.bloomberg.com/quote/NKY:IND
That doesn't mean everyone should try to add alternative investments, I think most people should hold ETF's. But rather most people should not blindly follow the dogma of holding an ETF that represents the market regardless of market conditions.
I can't believe I'm going to recommend a Tony Robbins book, but his latest book on investing is actually pretty good, actually you just need to read chapters 5 and 6 to save you some time.
I'd recommend most people check out his "All Seasons" portfolio that he got from Ray Dalio. I mean if you can get Ray Dalio's expertise working for you, you've got a great chance of having things work out for you!
https://www.pwlcapital.com/en/Advisor/Ottawa/Cameron-Passmor...
EDIT Wow, based on the downvotes this struck a nerve. I don't think I said anything wrong here, do people just not want a balanced view?
If you'd been investing let's say starting 2000 in a 401k, you put in money at regular intervals. So you were buying the whole way down and up.
You wouldn't simply have "held" a NASDAQ ETF.
However, when evaluating a course of action, I think looking at the upper and lower bounds of possible outcomes is a very wise thing to do, so in that sense it's relevant...
There are many stratagies where you would have gotten significant returns over that time period. EX: If you held say 50% nasdaq and 50% cash and then rebalanced your portfolio you would have been well ahead of the curve.
When it comes to investments, boring is a feature.
Not if you buy at regular intervals. If you had, say, $10K in a Nasdaq ETF in 2000, and invested the same amount at regular intervals between then and now, you'd have a 95% profit by now.
Do not interrupt the discussion to meta-discuss the scoring system.
Add to that the fact that Apple's share price has exploded to become the largest company on earth... and voilà, the Nasdaq reaches the 5000 mark.
>An unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity. Quantitative easing is considered when short-term interest rates are at or approaching zero, and does not involve the printing of new banknotes.
So if suddenly, a new player shows up in the markets buying trillions of dollars worth of securities, due to the law of supply and demand, one can expect price of stocks to go up. You can check out the Feds balance sheet here [1]. Check out "Securities held outright" [2], yeah, that's 4.3 trillion with a "t". This figure used to be on the billions before the financial crisis [3], which means that the Fed flooded secondary markets (stock exchanges among them) with more than 3 trillion dollars, to put this into perspective, this the value of all the goods and services that the US produces in 2 months, or two and a half years in the case of Mexico.
So yeah, the causality between QE and inflation of stock prices seems very plausible.
Disclaimer: Central banking operations is not one of my main strengths, so you are more than welcome to fact check, correct or complete my comment.
[1] Web: http://www.federalreserve.gov/releases/h41/current/ PDF: http://www.federalreserve.gov/releases/h41/current/h41.pdf
[2] The amount of securities held by Federal Reserve Banks. This quantity is the cumulative result of permanent open market operations: outright purchases or sales of securities, conducted by the Federal Reserve. Section 14 of the Federal Reserve Act defines the securities that the Federal Reserve is authorized to buy and sell.
> which means that the Fed flooded secondary markets (stock exchanges among them) with more than 3 trillion dollars
QE does not involve buying stocks. QE decreases bond yields making stocks relatively attractive vs. bonds.