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- stock market boom continues over 20,000 Dow
Feb 14th, 2017 at 2:37pm
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- stock market boom continues over 20,000 Dow

- are we seeing something that is historic?

- will rising stocks drive the economy forward? - economic boom?
  

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Re: - stock market boom continues over 20,000 Dow
Reply #1 - Feb 14th, 2017 at 2:41pm
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When the DJ went up over 120% during Obama's 8 years, weren't you guys saying that stock prices are meaningless?  Or that it was a bubble?

I'm happy to see stock prices rise, but I'd really like to see economic growth rise and disparity-of-wealth fall.
  

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Re: - stock market boom continues over 20,000 Dow
Reply #2 - Feb 14th, 2017 at 2:43pm
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Thanks Obama.

Greg
  

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Re: - stock market boom continues over 20,000 Dow
Reply #3 - Feb 14th, 2017 at 2:53pm
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admin wrote on Feb 14th, 2017 at 2:37pm:
- stock market boom continues over 20,000 Dow

- are we seeing something that is historic?

- will rising stocks drive the economy forward? - economic boom?



Historic?

Potentially.

Will rising stocks drive the economy into a boom? Doubt it.

For one, I don't see the path that channels rising stock prices into increased investment. Usually that occurs the otherway around- increased investment and growth leads to higher stock prices.

We have the cart before the horse. And the cart is not going to pull itself!

Also with rising rates, we will probably see stocks cool off by the end of this year, or perhaps sometime next year.
  

"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." J M Keynes

"In the first place, the dichotomy between "theoretical" and "practical" is a false one. In economics, all arguments are theoretical. And, since economics discusses the real world, these theoretical arguments are by their nature "practical" ones as well." M Rothbard
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Re: - stock market boom continues over 20,000 Dow
Reply #4 - Feb 14th, 2017 at 2:58pm
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TowardLiberty wrote on Feb 14th, 2017 at 2:53pm:
Historic?

Potentially.

Will rising stocks drive the economy into a boom? Doubt it.

For one, I don't see the path that channels rising stock prices into increased investment. Usually that occurs the otherway around- increased investment and growth leads to higher stock prices.

We have the cart before the horse. And the cart is not going to pull itself!

Also with rising rates, we will probably see stocks cool off by the end of this year, or perhaps sometime next year.


Exactly!  In that way, stocks are a trailing indicator, not a leading indicator.  And more to the point, there is no shortage of investment dollars floating around.  The banks are doing swell, lending is great, and lots of businesses are walking around with record amounts of cash.

If demand isn't there to buy more widgets, then no amount of investment in widget factories will earn reward.  And demand gets depressed when hiring is flat, wages are flat, prices are rising, and inelastic prices (like rent and healthcare) are booming.  And even if the investor class is making out like bandits, they simply don't consume enough, relative to the rest of the population.
  

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Re: - stock market boom continues over 20,000 Dow
Reply #5 - Feb 14th, 2017 at 3:10pm
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forgotten centrist wrote on Feb 14th, 2017 at 2:58pm:
Exactly!  In that way, stocks are a trailing indicator, not a leading indicator.  And more to the point, there is no shortage of investment dollars floating around.  The banks are doing swell, lending is great, and lots of businesses are walking around with record amounts of cash.

If demand isn't there to buy more widgets, then no amount of investment in widget factories will earn reward.  And demand gets depressed when hiring is flat, wages are flat, prices are rising, and inelastic prices (like rent and healthcare) are booming.  And even if the investor class is making out like bandits, they simply don't consume enough, relative to the rest of the population.


Yeah there is a demand story there. We pulled so much demand forward from the future that we are going to suffer with tepid demand for a bit. And we became so indebted that we do not have room to take on new debts, which is what is necessary for growth to occur.

But I think there is also a sectoral imbalance story as well- discoordination on the supply side driven by years of false signals and distorted prices.

And the result is a misallocation of scarce resources that would be more productively utilized elsewhere, which would also involve hiring complementary factors like labor, which would raise wages.

And then there is the technology story which is replacing human labor and growing output, which leads to lower wages and diminished demand.
  

"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." J M Keynes

"In the first place, the dichotomy between "theoretical" and "practical" is a false one. In economics, all arguments are theoretical. And, since economics discusses the real world, these theoretical arguments are by their nature "practical" ones as well." M Rothbard
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Re: - stock market boom continues over 20,000 Dow
Reply #6 - Feb 14th, 2017 at 3:23pm
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TowardLiberty wrote on Feb 14th, 2017 at 3:10pm:
And then there is the technology story which is replacing human labor and growing output, which leads to lower wages and diminished demand.


I read a piece on this over the weekend saying that our accounting/tax systems actively encourage automation.  If you buy robots/software/etc to get work done, you can deduct the costs, amortize them, etc.  But if you invest in training employees there's no sweet deal like that. 

And a large amount of our productivity gains have come from improved management techniques, rather than automation, but investment in such techniques is equally un-deductible.  Stuff like just-in-time delivery, small inventories, rapid customization, etc.

These are investments that preserve the labor component, and that add generously to the bottom line, but get smashed by distorted tax policies.
  

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Re: - stock market boom continues over 20,000 Dow
Reply #7 - Feb 14th, 2017 at 3:34pm
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forgotten centrist wrote on Feb 14th, 2017 at 3:23pm:
I read a piece on this over the weekend saying that our accounting/tax systems actively encourage automation.  If you buy robots/software/etc to get work done, you can deduct the costs, amortize them, etc.  But if you invest in training employees there's no sweet deal like that. 

And a large amount of our productivity gains have come from improved management techniques, rather than automation, but investment in such techniques is equally un-deductible.  Stuff like just-in-time delivery, small inventories, rapid customization, etc.

These are investments that preserve the labor component, and that add generously to the bottom line, but get smashed by distorted tax policies.

Yeah that sounds right.

I bet higher health insurance costs are also depressing hiring.

And the old story about the skills mismatch. I hear that heavy equipment operator jobs go empty for a year or more.

Yet we are churning out PhDs who won't be able to find work.

  

"Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." J M Keynes

"In the first place, the dichotomy between "theoretical" and "practical" is a false one. In economics, all arguments are theoretical. And, since economics discusses the real world, these theoretical arguments are by their nature "practical" ones as well." M Rothbard
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Re: - stock market boom continues over 20,000 Dow
Reply #8 - Feb 14th, 2017 at 3:37pm
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forgotten centrist wrote on Feb 14th, 2017 at 2:41pm:
When the DJ went up over 120% during Obama's 8 years, weren't you guys saying that stock prices are meaningless?  Or that it was a bubble?

I'm happy to see stock prices rise, but I'd really like to see economic growth rise and disparity-of-wealth fall.

- didn't it go up over those 8 years because of falling interest rates? - was that a bubble and not because of economic growth?

- will the rising market with rising rates mean economic growth?
  

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Re: - stock market boom continues over 20,000 Dow
Reply #9 - Feb 14th, 2017 at 3:42pm
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- rising stocks dont lead to new stock issues? - ipo's? - raise capital for new or expanding businesses?
  

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