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Non-Road Boards => Off-Topic => Topic started by: tradephoric on November 19, 2018, 02:40:20 PM

Title: Are we heading for a market crash?
Post by: tradephoric on November 19, 2018, 02:40:20 PM
The recent price action of the DJIA is resembling that of late 2007 to me.  Will the intraday high of 26,951 on October 3, 2018 become a multi-year high in the market similar to the peak that occurred on October 12, 2007?  I created an excel spreadsheet that finds the highest correlation of the current market trend (looking out X number of days out) with previous market trends.  The 2012-2018 DJIA market (blue line) actually has the highest correlation with the 1950-1956 market (red line).  Useful information?  Probably not!

(https://i.imgur.com/ke5VyYR.png)
Title: Re: Are we heading for a market crash?
Post by: Rothman on November 19, 2018, 02:46:48 PM
Erm...historical trends of prices are probably not very indicative of future performance.

The economy collapse back then was due to the housing market bubble from runaway, unregulated banks that were allowed to mingle their normal banking business with investments, which they did, in derivatives sloppily rated by raters sleeping at the wheel. 

Is anything like that happening now?
Title: Re: Are we heading for a market crash?
Post by: hbelkins on November 19, 2018, 03:56:57 PM
Erm...historical trends of prices are probably not very indicative of future performance.

The economy collapse back then was due to the housing market bubble from runaway, unregulated banks that were allowed to mingle their normal banking business with investments, which they did, in derivatives sloppily rated by raters sleeping at the wheel.  banks being required to make bad loans to customers who couldn't repay them due to the Community Reinvestment Act.

FIFY.
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 19, 2018, 03:59:50 PM
In response to the global financial crisis, the federal reserve pegged the fed fund rate at 0% and went through several rounds of quantitative easing.  The same story played out through central banks around the world (some of them even had negative interest rates).  Because of this loose money policy the global economy is drunk on debt right now and the corporate debt levels are higher today than they were before the 2000 and 2008 recessions.  Looking from 1980, whenever the fed has raised rates the next recession soon followed (except during the dot-com bubble which pushed the economy along for a few extra years before the crash).  And after each recession, the fed has been unable to raise rates back to the previous pre-recession levels.  So yes, 2% may not sound like a high rate, but it's infinitely higher than the 0% rate it's been pegged at between 2009-2016.  When the next crash hits, what are they going to do... peg the rate at 0% for 10 or 15 years since 7 years apparently wasn't long enough?  It just seems like the fed is running out of options to address the upcoming crash.

(https://i.imgur.com/HaQBi1v.png)

^2016-2018 is the final heartbeat before the fed flat lines. 
Title: Re: Are we heading for a market crash?
Post by: Chris on November 19, 2018, 04:38:53 PM
I've heard a similar story about the European Central Bank (ECB). They too have kept the interest rate very low, despite several years of strong economic growth in most Eurozone countries. It appears that growth is leveling off, Germany even recorded one quarter of economic contraction. But the ECB doesn't have tools to address downturns now, they can't lower the interest rates since they are already sitting at virtually 0%.

Though situations appear to be much worse in some emerging markets, growth figures from China are considered to be unreliable but some other countries are facing massive debt, inflation and currency problems, particularly in South America. Argentina currently has a president that is seen as a pro-reform figure (the first non-radical / non-peronist in nearly 100 years), but can't seem to get the situation under control.

I've read that many emerging markets have accumulated large debts in U.S. dollars, but are unable to repay those due to worsing currency exchange rates (i.e. their debt becomes more expensive for them). In Europe, Italy is a problem child, it has a very high debt (in the 130% of GDP range) and no government has managed to reduce it. Taxes are very high, but incomes are lagging. They also have many socio-economic problems: in many areas it is almost impossible for young adults to make a living. Many  live with their parents until they're in their 30s and sometimes even into marriage. In addition, Italy has a huge north-south divide, almost reminiscent of eastern and western Germany in terms of the per capita income gap.
Title: Re: Are we heading for a market crash?
Post by: vdeane on November 19, 2018, 09:13:50 PM
I suspect that we're heading for another crash.  At this point, more and more economists are predicting a recession within the next couple of years.  Heck, a friend of mine thinks it will be a complete and total economic collapse.
Title: Re: Are we heading for a market crash?
Post by: wxfree on November 19, 2018, 10:43:54 PM
We're always headed toward the next crash, and the next recovery.  We also always have doomsayers, who see the end of the world just ahead.  The next recession will probably be soon, just because we don't usually go much longer than this without one.  The Fed is also quantitatively de-easing, letting 40 billion dollars worth of bonds mature each month from their holdings while reinvesting whatever matures above that amount.  It probably would have been nice if they'd started that several years ago.  If the next recession isn't severe, they'll have another cycle to bring down the size of the balance sheet and normalize interest rates.

The previous recession was unusual, because it accompanied a financial crisis.  We hadn't had that kind of recession in a long time, but after certain legislative changes were made and certain behaviors that caused the last financial crisis were allowed again, a few years later we had another one.  That recession shouldn't be thought of as a normal occurrence that is likely to happen again soon, and should not be what is envisioned as likely to happen during the next recession.

Also, I don't think the chart above should be taken as a reflection of normal interest rates.  The chart starts right before the inflation problems in the 1970s, and gives an artificially high impression of the "baseline" rate.  I don't know what the average is, but looking at a chart for a longer time period, I get the impression that the idea of an average isn't really useful.  The rate at each time period reflected broader goings on in the economic world, and was probably affected by whatever popular theory was going around at the time.
Title: Re: Are we heading for a market crash?
Post by: Scott5114 on November 20, 2018, 12:14:56 AM
Why do you ask, did you see the market going through a roundabout or something?
Title: Re: Are we heading for a market crash?
Post by: Rothman on November 20, 2018, 12:15:56 AM
Erm...historical trends of prices are probably not very indicative of future performance.

The economy collapse back then was due to the housing market bubble from runaway, unregulated banks that were allowed to mingle their normal banking business with investments, which they did, in derivatives sloppily rated by raters sleeping at the wheel.  banks being required to make bad loans to customers who couldn't repay them due to the Community Reinvestment Act.

FIFY.
Holy cow.  So ensuring banks weren't redlining caused the housing bubble...

That is certainly a new variant of reality.
Title: Re: Are we heading for a market crash?
Post by: Tonytone on November 20, 2018, 12:29:25 AM
There are always new loop holes, have you guys ever seen the movie “The Big Short” which explains, what lead up to our pervious recession. We always find ways of making money flip which helps everyone in the short term, but the long term will be effected worse. Seems that if a big crash happens in the future, that would be a great time to rewrite our GOV too.


iPhone
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 20, 2018, 01:13:01 AM
Considering the country is in the midst of a 10-year recovery, it's concerning that the budget deficit is approaching 1 trillion dollars.  With the increase in federal fund rates it's going to get more expensive to service the national debt over the coming years.  The CBO projects that by 2026 interest on the national debt will be the third largest budget expenditure (just behind social security and medicare).  With the rising mortgage rates there is weakening in the housing market and home refi's just hit an 18 year low.  People are no longer using their houses as ATM machines and pumping that money back into the economy.   

(http://www.msnbc.com/sites/msnbc/files/styles/embedded_image/public/10.16.18.png?itok=XRkv8mqF)

Does anybody remember when Trump said the market was in a big fat ugly bubble during the debates?  He seemed to be making the argument that Janet Yellen was keeping interest rates artificially low to prop up the markets and keep the economy rolling to help the democrats get elected.  Of course now that he's president, he's critical of the fed for raising rates (when before the election he was critical of them for keeping rates artificially low).

Title: Re: Are we heading for a market crash?
Post by: Tonytone on November 20, 2018, 01:16:17 AM
Considering the country is in the midst of a 10-year recovery, it's concerning that the budget deficit is approaching 1 trillion dollars.  With the increase in federal fund rates it's going to get more expensive to service the national debt over the coming years.  The CBO projects that by 2026 interest on the national debt will be the third largest budget expenditure (just behind social security and medicare).  With the rising mortgage rates there is weakening in the housing market and home refi's just hit an 18 year low.  People are no longer using their houses as ATM machines and pumping that money back into the economy.   

(http://www.msnbc.com/sites/msnbc/files/styles/embedded_image/public/10.16.18.png?itok=XRkv8mqF)

Does anybody remember when Trump said the market was in a big fat ugly bubble during the debates?  He seemed to be making the argument that Janet Yellen was keeping interest rates artificially low to prop up the markets and keep the economy rolling to help the democrats get elected.  Of course now that he's president, he's critical of the fed for raising rates (when before the election he was critical of them for keeping rates artificially low).

Wowwwwwwww, America was not in a deficit, until the war, which started because of 9/11. What would america be like today if that didn’t happen. How do we reverse this. Its getting worse. Thats why trump talks of cutting programs & countries funding. So we can get back on the market.


iPhone
Title: Re: Are we heading for a market crash?
Post by: Rothman on November 20, 2018, 07:59:03 AM
Put America on the market?  And sell it to whom? :D

Yeah, when your tax plan explodes the deficit by heavily favoring the rich in the cut, that does make funding needed government programs difficult.  The Republican Administration can't say they need to cut programs now when they caused the lack of funding in the first place.

Tax the rich.
Title: Re: Are we heading for a market crash?
Post by: MNHighwayMan on November 20, 2018, 08:02:00 AM
Put America on the market?  And sell it to whom? :D

Russia, of course.
Title: Re: Are we heading for a market crash?
Post by: roadman65 on November 20, 2018, 09:40:03 AM
This is a political discussion isn't it?  This should get locked before the end of the next week.  We all know that when you talk about Wall Street it ends up in politics due to the fact the average American believes that one of the two parties (or both) are responsible for any bad changes in the Market, and some on here will develop a flame war over it especially when one user forgets that or unawaringly does so.
Title: Re: Are we heading for a market crash?
Post by: 1 on November 20, 2018, 09:49:15 AM
This should get locked before the end of the next week.

Good to know that we still have over a week before this thread gets locked.

one user forgets that or unawaringly does so.

That one user? I think it will be intentional.
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 20, 2018, 10:24:18 AM
At the start of 2008 the DOW dropped roughly 15% over 17 trading days and it was the first major leg down during what would become known as the global financial crisis.  If we continue to track the late 2007/early 2008 market the DOW will be at ~22,000 before Christmas.  If that happens i wouldn't panic sell but wait for a retest of the 200 day MA.  Assuming we see a significant sell off over the next few weeks, i believe the market will retest its 200 day MA (~24,500) around April 2019 and that will be your last best chance to lock in the market gains that we have experienced over the past decade. 

Saying all that, this is just a guess and i agree with hbelkins that historical trends of prices are not indicative of future performance.  But sometimes you do see price action that closely matches a previous crash and it almost spooks the market and becomes a self-fulfilling prophecy.  Maybe from here we break through DOW 27,000 and make new highs... but if we do see a significant drop heading into the end of the year i would be concerned.
Title: Re: Are we heading for a market crash?
Post by: paulthemapguy on November 20, 2018, 10:55:45 AM
one user forgets that or unawaringly does so.

That one user? I think it will be intentional.

QFT.

I don't know if we're headed toward an all-out crash just yet, but the tyrannical act of pardoning the corporate aristocracy from having to contribute their share of taxes really isn't good for our deficit. 

Put America on the market?  And sell it to whom? :D

Yeah, when your tax plan explodes the deficit by heavily favoring the rich in the cut, that does make funding needed government programs difficult.  The Republican Administration can't say they need to cut programs now when they caused the lack of funding in the first place.

Tax the rich.

Totally nailed it IMHO.
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 20, 2018, 11:29:58 AM
Here's a comparison of the 2008 stock market to the current stock market.  The correlation isn't extremely high but it's interesting to keep track of.

(https://i.imgur.com/XVguaeS.png)

Title: Re: Are we heading for a market crash?
Post by: NE2 on November 20, 2018, 11:44:16 AM
(https://i.imgflip.com/2n17nf.jpg)
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 20, 2018, 11:58:18 AM
It is interesting that both correlation charts are pointing to a market bottom in early 2020.  If we continue to track the 1956 market we trade sideways/slightly down in 2019... if we track the 2008 market we crash in 2019.

(https://i.imgur.com/ke5VyYR.png)
(https://i.imgur.com/XVguaeS.png)
Title: Re: Are we heading for a market crash?
Post by: wxfree on November 20, 2018, 12:43:57 PM
Wowwwwwwww, America was not in a deficit, until the war, which started because of 9/11. What would america be like today if that didn’t happen. How do we reverse this. Its getting worse. Thats why trump talks of cutting programs & countries funding. So we can get back on the market.


iPhone

The wars certainly had a lot to do with the deficit, but the surpluses just before were not an ongoing and normal situation.  When the 2001 tax cuts were being debated (ask your parents about it, they probably got a government check that year because the tax cut was made retroactive to the beginning of the year and they sent rebate checks) there was talk of future surpluses as far as the eye can see, which justified the tax cut.  People like to predict that whatever is happening now will keep happening forever.  That prediction is always wrong, but we keep doing it.

In my non-expert but almost-semi-informed view, I see the surpluses of the 90s and the economic expansion that drove them as a result of the growing Internet economy.  There was talk of a "new economy" in which the stock market could only go up.  Less than 10 years later there was a belief that home prices could only go up.  In both cases, there was a belief that what was going on at the moment could never stop, and in both cases that belief was wrong, as it always is.

In some way, the expansion of the Internet economy is related to other discussions here about stores closing.  The "new economy" was based on the idea that we could sell more stuff online while not selling less stuff in stores.  That obviously isn't true.  I view that period of expansion and the following period of physical store contraction, which is ongoing, as a single event.  The expansion and contraction weren't real things, or at least were much smaller things, if we average them out, they just happened at different times.  In my mind, we should see some of that late 90s surplus, maybe more than all of it, as filling in some of the following deficit because part of the cause of both was really the same event.

Edit:  I think I remember Alan Greenspan talking about how we shouldn't pay off all of the national debt and should keep a trillion or two because that's a major part of the bond market.  That's how much the world had changed.  Or at least how much the way they thought of the world had changed.  That's also how you know it's about to change back.  When there's this much certainty of a new reality is when the real reality reminds you of why it's been in place forever.
Title: Re: Are we heading for a market crash?
Post by: sparker on November 20, 2018, 12:49:25 PM
Much of the market losses in recent weeks have been a "correction" of the bubble that accompanied the rise of numerous individual stocks -- principally tech-related -- such as Apple and its associated suppliers.  Add to that a general disillusionment with social-media stocks as a "safe bet" for capital increases, and you have the makings of a general market correction rather than a crash.  Other things that tend to precipitate a more widely distributed correction -- lowered oil prices due to market manipulation by producers, both natural & man-made disasters (one after another in the 2nd half of 2018) -- also point toward a broad correction -- the Dow may well dip below 20K by the end of 2019's first quarter, taking it into decidedly "bear" territory.  But an actual "crash"?  Not likely; there's still too much value on the table and it's going out of the presently troublesome volatile areas (deemed safe a year or so ago) and into safe havens (more staid corporate bonds) for a while until the correction bottoms out; at which time it'll come back gradually;  we'll probably plateau out at or near the levels we're at now (24-25K Dow) by the end of 2019.   
Title: Re: Are we heading for a market crash?
Post by: Rothman on November 20, 2018, 12:51:27 PM
(https://i.imgflip.com/2n17nf.jpg)
Would have been better with roundabouts.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 20, 2018, 01:06:46 PM
(https://i.imgflip.com/2n17nf.jpg)
Would have been better with roundabouts.

Oh, man, I'd forgotten about that thread!  Thanks!

(https://i.imgur.com/7xfMgsU.png)

Also...

(https://i.imgur.com/wohLIQl.png)
Title: Re: Are we heading for a market crash?
Post by: wxfree on November 20, 2018, 01:11:19 PM
CNN's web site has the leading headline "The stock market keeps dropping."  That's true, but it looks really orderly to me.  They're sizeable but not enormous drops.  I wonder if crashes are becoming more likely, or at least easier to get, because of the increase in computerized trading and the increase in access to information and ease of ordering trades.  If more people, and computers, can get in on the selling more easily, that might make it more likely that instead of a nice, orderly retreat we get huge sudden drops.  Because of that, I take the current nice, orderly retreat as a good sign.  It may be that, at some point, panic sets in.  Jim Cramer on CNBC has been hoping for panic selling because he believes that will help to get everyone's tensions out and help stabilize the market.  So far, it looks like a nice and steady pullback, which could lead toward a crash or could be a good thing and set up the next bull run.
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 20, 2018, 01:18:10 PM
The wars certainly had a lot to do with the deficit, but the surpluses just before were not an ongoing and normal situation.  When the 2001 tax cuts were being debated (ask your parents about it, they probably got a government check that year because the tax cut was made retroactive to the beginning of the year and they sent rebate checks) there was talk of future surpluses as far as the eye can see, which justified the tax cut.  People like to predict that whatever is happening now will keep happening forever.  That prediction is always wrong, but we keep doing it.

Great point.  In January 1999 the CBO estimated that there would be a 381 billion dollar surplus by 2009 using baseline assumptions.  They just assumed the trend of government surpluses in the late 90s would continue indefinitely (and in a straight line).  We all know what happened next and instead of a 381 billion dollar surplus in 2009 there was a 1.4 trillion dollar deficit.   

THE ECONOMIC AND BUDGET OUTLOOK: FISCAL YEARS 2000-2009
https://www.cbo.gov/sites/default/files/106th-congress-1999-2000/reports/eb0199.pdf
Title: Re: Are we heading for a market crash?
Post by: hbelkins on November 20, 2018, 01:53:19 PM
I don't know if we're headed toward an all-out crash just yet, but the tyrannical act of pardoning the corporate aristocracy from having to contribute their share of taxes really isn't good for our deficit.

You do realize that there's really no such thing as corporate taxes, right? That those expenses get passed down to the eventual consumer/purchaser?

Put America on the market?  And sell it to whom? :D

Yeah, when your tax plan explodes the deficit by heavily favoring the rich in the cut, that does make funding needed government programs difficult.  The Republican Administration can't say they need to cut programs now when they caused the lack of funding in the first place.

Tax the rich.

Totally nailed it IMHO.

You mean further tax those who are already paying the vast majority of taxes?
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 20, 2018, 01:53:56 PM
Every FAANG stock is officially in bear market territory.  Facebook is leading the decline with a 40% drop from its 52 week high.  Of course after an incredible run up in these stocks over the past few years a correction isn't surprising.  However, if the NASDAQ breaks below 6600 (February's low) then the selling pressure could intensify.  We really aren't that far from seeing a break below those levels.

The five most important tech stocks are getting slaughtered, with each down more than 20% from highs
https://www.cnbc.com/2018/11/19/every-faang-stock-is-now-in-a-bear-market.html

By the way any predictions where the DOW closes today?  Lately we have been getting some significant selloffs in the final hour of trading.  That brings me to another interesting index to consider known as the smart money flow index.  The theory is that "dumb money" trades early in the day while the "smart money" trades at the end of the day.  So if the market constantly rises in the morning and sells off at the end of the day that's a bearish indicator.  TBH there have been a lot of false negatives with this indicator in the past but it is interesting to see that there has been a big drop in this indicator throughout 2018.

(https://bullmarkets.co/wp-content/uploads/2018/04/smart-money-flow-index-1.png)
Title: Re: Are we heading for a market crash?
Post by: 1 on November 20, 2018, 02:05:20 PM
Put America on the market?  And sell it to whom? :D

Yeah, when your tax plan explodes the deficit by heavily favoring the rich in the cut, that does make funding needed government programs difficult.  The Republican Administration can't say they need to cut programs now when they caused the lack of funding in the first place.

Tax the rich.

Totally nailed it IMHO.

You mean further tax those who are already paying the vast majority of taxes?

Yes. Here are some example numbers (these aren't the actual tax rates):
$40,000 - 15% = $34,000
$40,000,000 - 30% = $28,000,000

If the rich are taxed more, while the middle class has the same tax rate:
$40,000 - 15% = $34,000
$40,000,000 - 50% = $20,000,000

It doesn't matter that much whether someone gets $20M or $28M per year; they're still really rich. On the other hand, decreasing $34K even to $32K (an increase from 15% to 20% tax) would make it harder to live, and there are many more of those people.
Title: Re: Are we heading for a market crash?
Post by: paulthemapguy on November 20, 2018, 02:14:29 PM
I don't know if we're headed toward an all-out crash just yet, but the tyrannical act of pardoning the corporate aristocracy from having to contribute their share of taxes really isn't good for our deficit.

You do realize that there's really no such thing as corporate taxes, right? That those expenses get passed down to the eventual consumer/purchaser?

People who run corporations have their own money.  They have their own money paid out by the corporations they run, and they pay themselves exorbitant amounts even if their employees are all making minimum wage?  Tell me I don't have to actually explain that to you.

Put America on the market?  And sell it to whom? :D

Yeah, when your tax plan explodes the deficit by heavily favoring the rich in the cut, that does make funding needed government programs difficult.  The Republican Administration can't say they need to cut programs now when they caused the lack of funding in the first place.

Tax the rich.

Totally nailed it IMHO.

You mean further tax those who are already paying the vast majority of taxes?

The first law of money ought to be the first law of thermodynamics--it isn't created or destroyed, for the most part.  It's transferred through transactions; it's given and taken.  When you've taken billions out of America with no regard for public interest and stored it overseas, that's a huge chunk of change that was taken from the public interest.  That money could be benefiting people like you and me.  When some people have 1 million times the amount of money than others, you have to ask yourself how much (spending/bribing) power is too much for one person to have.  One percent of the people in America own more wealth than the bottom 90 percent.  I personally can't be satisfied with that.  They pay the vast majority of taxes because they have the COLOSSAL majority of the funds to begin with.
Title: Re: Are we heading for a market crash?
Post by: Rothman on November 20, 2018, 02:21:31 PM
Keep in mind the rich usually pay the lower tax percentage on capital gains rather than their salaries as well.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 20, 2018, 02:28:06 PM
Just so everyone understands, there are fewer than 100,000 Americans making more than $30 million a year.  In order to be in the top 1% of earners in America, your annual income only needs to be about $400,000.  There's a decent chance you know at least one person who fits into that category, so it's important to think of them whenever you discuss how to get more money out of the "filthy rich".

Furthermore, the top 1% may own more wealth than the bottom 90%, but the top 1% also already pays more income tax than the other 99% combined.  To say that they're not "paying their share" is a flat-out lie. 
Title: Re: Are we heading for a market crash?
Post by: jemacedo9 on November 20, 2018, 02:40:53 PM
This is the ol' percentage vs dollar comparison.

Do rich people pay more (or the same) in dollars than poorer people.  Most likely.
Do rich people pay more (or the same) in percent of total income than poorer people?  Not as likely as in dollars (depending on which income bracket you are looking at).

Which is more "fair"? This is a conversation that will continue to go in circles until the end of time.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 20, 2018, 02:57:33 PM
This is the ol' percentage vs dollar comparison.

Do rich people pay more (or the same) in dollars than poorer people.  Most likely.
Do rich people pay more (or the same) in percent of total income than poorer people?  Not as likely as in dollars (depending on which income bracket you are looking at).

Which is more "fair"? This is a conversation that will continue to go in circles until the end of time.

The rich pay more in both dollars and percentage.  Our country has a progressive tax code, which means that, the more money you make, the higher your tax bracket—hence you pay a higher percentage of your income in taxes.
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 20, 2018, 03:16:26 PM
Here is the top marginal tax rate in America compared to other major economies.  For a period in the 60s America had a higher tax rate than the UK, France, and Germany until Kennedy dropped it from 90% to 70%.  It wasn't until Reagan when the top tax rate dropped all the way down to 28%.  The idea that anyone would have to pay 70% or 90% in taxes makes me want to throw up in my mouth a little.   

(https://i.redd.it/uexda5402n101.png)
Title: Re: Are we heading for a market crash?
Post by: jemacedo9 on November 20, 2018, 03:33:03 PM
This is the ol' percentage vs dollar comparison.

Do rich people pay more (or the same) in dollars than poorer people.  Most likely.
Do rich people pay more (or the same) in percent of total income than poorer people?  Not as likely as in dollars (depending on which income bracket you are looking at).

Which is more "fair"? This is a conversation that will continue to go in circles until the end of time.

The rich pay more in both dollars and percentage.  Our country has a progressive tax code, which means that, the more money you make, the higher your tax bracket—hence you pay a higher percentage of your income in taxes.

Initial tax liability per the tax tables, yes. However, that's not necessarily true when you include tax deductions, income deductions, etc. The chances of a richer person paying less of a final percentage of tax because of these deductions is greater than someone not as rich, until you let to the much lower income brackets, who also have poverty-related credits and deductions.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 20, 2018, 03:33:49 PM
The idea that anyone would have to pay 70% or 90% in taxes makes me want to throw up in my mouth a little.   

How about the 60% in Sweden for people greedy enough to earn more than $75,000 per year?
Title: Re: Are we heading for a market crash?
Post by: NE2 on November 20, 2018, 03:35:59 PM
This thread has taken a hard right turn. Fuck you people.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 20, 2018, 03:43:04 PM
This is the ol' percentage vs dollar comparison.

Do rich people pay more (or the same) in dollars than poorer people.  Most likely.
Do rich people pay more (or the same) in percent of total income than poorer people?  Not as likely as in dollars (depending on which income bracket you are looking at).

Which is more "fair"? This is a conversation that will continue to go in circles until the end of time.

The rich pay more in both dollars and percentage.  Our country has a progressive tax code, which means that, the more money you make, the higher your tax bracket—hence you pay a higher percentage of your income in taxes.

Initial tax liability per the tax tables, yes. However, that's not necessarily true when you include tax deductions, income deductions, etc. The chances of a richer person paying less of a final percentage of tax because of these deductions is greater than someone not as rich, until you let to the much lower income brackets, who also have poverty-related credits and deductions.

(2015 numbers)
Average tax rate, bottom 50% = 3.59%
Average tax rate, top 1% = 27.10 %

Don't fool yourself into thinking the top 1% is dropping their tax rate by more than 23% just by claiming deductions.
Title: Re: Are we heading for a market crash?
Post by: Mark68 on November 20, 2018, 04:00:05 PM
Here is the top marginal tax rate in America compared to other major economies.  For a period in the 60s America had a higher tax rate than the UK, France, and Germany until Kennedy dropped it from 90% to 70%.  It wasn't until Reagan when the top tax rate dropped all the way down to 28%.  The idea that anyone would have to pay 70% or 90% in taxes makes me want to throw up in my mouth a little.   

(https://i.redd.it/uexda5402n101.png)

Even though the top marginal rate was 90% in the 50s and 70% in the 60s, the economy was still expanding at a high rate, with only a couple of minor setbacks. Nobody actually pays the top marginal rate, anyway, given the proliferation of tax attorneys and certified public accountants. These fields wouldn't exist unless people with money didn't feel the need to find every tax loophole they can.

Besides, with these tax rates, the federal government actually had the wherewithal to fund and build Big Things--you know, things like the space program and the Interstate Highway System. IMHO, the reason why we now have crumbling infrastructure, why we are falling behind in education, and why we haven't taken the necessary steps in new technologies (including green energy) is attributable to the squeezing of government revenue.

Our government (starting with the Reagan Administration) has made the conscious choice to stop doing things well. One of the few things that the US can still do well is kill people--that and make it easy for the non-rich to be fleeced and stigmatized by the rich.

Of course, that's a feature and not a bug. It's essentially the Kochs, Adelsons, and Waltons of the world saying, "We've got ours, screw you!" But that can only work for so long before the economy tanks due to the lack of consumer purchasing power (you can only borrow for so long) and/or the people get completely fed up and demand change.

Call me a cynic, but I'm guessing the former happens before the latter.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 20, 2018, 04:05:19 PM
the proliferation of tax attorneys and certified public accountants. These fields wouldn't exist unless people with money didn't feel the need to find every tax loophole they can want to keep the income they're legally entitled to keep.

That might have been what you meant to say.
Title: Re: Are we heading for a market crash?
Post by: kalvado on November 20, 2018, 04:11:36 PM
Look at it from the other direction:
(https://files.taxfoundation.org/legacy/docs/Chart1_1.jpg)
(https://files.taxfoundation.org/legacy/docs/Chart2_1.jpg)
There is no significant reduction of spending as %% of GDP.
Of course, US spends only 37% of GDP as government spending; Sweden is at 49% and Finland is at 57%.
But those numbers tend to keep growing, and I am not sure what would happen once they exceed 100%...
Title: Re: Are we heading for a market crash?
Post by: Mark68 on November 20, 2018, 04:14:09 PM
the proliferation of tax attorneys and certified public accountants. These fields wouldn't exist unless people with money didn't feel the need to find every tax loophole they can want to keep the income they're legally entitled to keep.

That might have been what you meant to say.

Actually, it is not.

Those who benefit from society should contribute to it. It's part of the social contract.

Ayn Rand be damned.
Title: Re: Are we heading for a market crash?
Post by: bing101 on November 20, 2018, 04:16:53 PM
https://www.cnbc.com/2018/11/20/stock-market-dow-futures-negative-as-tech-stocks-sink.html


The Headlines in this article is pointing in that direction.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 20, 2018, 04:30:26 PM
the proliferation of tax attorneys and certified public accountants. These fields wouldn't exist unless people with money didn't feel the need to find every tax loophole they can want to keep the income they're legally entitled to keep.

That might have been what you meant to say.

Actually, it is not.

Those who benefit from society should contribute to it. It's part of the social contract.

Ayn Rand be damned.

They do, as previously noted—even more by the dollar and by the percentage point than those who earn less.
Title: Re: Are we heading for a market crash?
Post by: NE2 on November 20, 2018, 04:43:35 PM
They do, as previously noted—even more by the dollar and by the percentage point than those who earn less.
Stop trying to justify policies that benefit horrible people. It makes you one of them.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 20, 2018, 04:45:56 PM
They do, as previously noted—even more by the dollar and by the percentage point than those who earn less.
Stop trying to justify policies that benefit horrible people. It makes you one of them.

What policies?  A policy of not making rich people pay even more more of their earned income to the government than the rest of us?  And, for the record, the wealthiest people I personally know right now are some of the nicest and most generous.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 20, 2018, 04:49:01 PM

This should get locked before the end of the next week.

Good to know that we still have over a week before this thread gets locked.

Ain't no WAY this thread will last a week.
I'm one of the most active ones in the conversation right now, and even I think it should be locked by the end of the day.
Title: Re: Are we heading for a market crash?
Post by: Tonytone on November 20, 2018, 05:09:52 PM
They do, as previously noted—even more by the dollar and by the percentage point than those who earn less.
Stop trying to justify policies that benefit horrible people. It makes you one of them.
Its a game NE2. We can only work to change this & the people that approve of this will see their fate.


iPhone
Title: Re: Are we heading for a market crash?
Post by: NE2 on November 20, 2018, 05:13:31 PM
And, for the record, the wealthiest people I personally know right now are some of the nicest and most generous.
Until they vote to fuck over everyone else, unless your friends are some of the few that don't suck. But chances are they're racist assholes who deserve to die. Chances are you are too.
Title: Re: Are we heading for a market crash?
Post by: Mark68 on November 20, 2018, 05:24:06 PM
the proliferation of tax attorneys and certified public accountants. These fields wouldn't exist unless people with money didn't feel the need to find every tax loophole they can want to keep the income they're legally entitled to keep.

That might have been what you meant to say.

Actually, it is not.

Those who benefit from society should contribute to it. It's part of the social contract.

Ayn Rand be damned.

They do, as previously noted—even more by the dollar and by the percentage point than those who earn less.

And as also been noted, not necessarily on an individual basis.

Warren Buffet once said that his secretary paid a higher percentage of her income than did he (based on his position as a hedge fund manager, and that income as well as dividends being taxed at a lesser rate). This should never be the case in a truly progressive tax system.

We all bitch about the cost of such-and-such road or rail or tunnel or other infrastructure, and how none of it ever gets done, or if it does, how long it takes. Did you ever wonder why there are no funds to do these anymore? It ain't rocket science (another area where the US is falling behind).

Title: Re: Are we heading for a market crash?
Post by: bing101 on November 20, 2018, 06:15:39 PM
And, for the record, the wealthiest people I personally know right now are some of the nicest and most generous.
Until they vote to fuck over everyone else, unless your friends are some of the few that don't suck. But chances are they're racist assholes who deserve to die. Chances are you are too.

https://www.independent.co.uk/news/world/middle-east/iran-execution-sultan-of-coins-gold-sanctions-economy-corruption-human-rights-trial-a8636451.html

Well at least Iran has done something whenever they have a financial crisis. It's this one.
Title: Re: Are we heading for a market crash?
Post by: Brandon on November 20, 2018, 06:24:43 PM
Here is the top marginal tax rate in America compared to other major economies.  For a period in the 60s America had a higher tax rate than the UK, France, and Germany until Kennedy dropped it from 90% to 70%.  It wasn't until Reagan when the top tax rate dropped all the way down to 28%.  The idea that anyone would have to pay 70% or 90% in taxes makes me want to throw up in my mouth a little.   

(https://i.redd.it/uexda5402n101.png)

That's why this was made:
"One for you, nineteen for me" - George Harrison.
Title: Re: Are we heading for a market crash?
Post by: Takumi on November 20, 2018, 07:30:48 PM
deserve to die
How tolerant of you.
Title: Re: Are we heading for a market crash?
Post by: MNHighwayMan on November 20, 2018, 08:32:47 PM
the proliferation of tax attorneys and certified public accountants. These fields wouldn't exist unless people with money didn't feel the need to find every tax loophole they can want to keep the income they're legally entitled to keep.
That might have been what you meant to say.

Except that doesn't make any sense. If they were legally entitled to keep it, then it wouldn't be taxed.
Title: Re: Are we heading for a market crash?
Post by: US71 on November 20, 2018, 08:42:19 PM
the proliferation of tax attorneys and certified public accountants. These fields wouldn't exist unless people with money didn't feel the need to find every tax loophole they can want to keep the income they're legally entitled to keep.
That might have been what you meant to say.

Except that doesn't make any sense. If they were legally entitled to keep it, then it wouldn't be taxed.

I see we dropped 551 points today.
Title: Re: Are we heading for a market crash?
Post by: J N Winkler on November 20, 2018, 11:08:47 PM
(2015 numbers)

Average tax rate, bottom 50% = 3.59%
Average tax rate, top 1% = 27.10 %

Don't fool yourself into thinking the top 1% is dropping their tax rate by more than 23% just by claiming deductions.

Where are you getting these numbers?  I see 27.1% (or figures close to it) for the top 1% in Tax Foundation blog pieces, where they are based on adjusted gross income with deductions already rolled in.  (The Tax Foundation is a broadly anti-tax think tank.)

Just so everyone understands, there are fewer than 100,000 Americans making more than $30 million a year.  In order to be in the top 1% of earners in America, your annual income only needs to be about $400,000.  There's a decent chance you know at least one person who fits into that category, so it's important to think of them whenever you discuss how to get more money out of the "filthy rich".

I do know a few one-percenters, and I suspect I may have a few in my extended family.  Nevertheless, I do not think of increased progressivism in the tax code as equivalent to confiscation.  I believe that, like the poor, the rich will always be with us, especially in a country like the US where previous episodes of severe income inequality led to crises of labor unrest, anarchism, propaganda of the deed, etc. as well as the longer-lasting consequences of stringent antitrust enforcement and high marginal tax rates for the very wealthy, but did not fundamentally realign the country away from capitalism.  (The more I learn about the histories of Russia and China, the less convinced I become that the explosive dispossession of the landlord class in both countries with the advent of Communism was historically anomalous.)

In this thread we have already had an indirect quotation from Thomas Piketty's Capital in the 21st Century, which has become a touchstone for those who see that inequality in income and wealth is increasing and believe that this is bad.  But it is also worth reading his Economics of inequality, a much shorter book that looks at the various dimensions of the problem (inequality of labor income, capital income, accumulated wealth, etc.) and the pros and cons of various options for addressing it through redistribution.  His appraisal of the latter is pretty bleak, though he endorses various forms of intertemporal social investment such as education, infrastructure, basic and applied scientific research, as well as a high minimum wage, which he sees not as a mechanism for redistribution but rather as a way to protect low-skilled workers' standards of living from the monopsony power of employers.
Title: Re: Are we heading for a market crash?
Post by: adventurernumber1 on November 20, 2018, 11:59:13 PM
Here is the top marginal tax rate in America compared to other major economies.  For a period in the 60s America had a higher tax rate than the UK, France, and Germany until Kennedy dropped it from 90% to 70%.  It wasn't until Reagan when the top tax rate dropped all the way down to 28%.  The idea that anyone would have to pay 70% or 90% in taxes makes me want to throw up in my mouth a little.   

(https://i.redd.it/uexda5402n101.png)

That's why this was made:
"One for you, nineteen for me" - George Harrison.

Well, at least we have an awesome song to freshen up the mood of an otherwise severely derailed thread.  :coffee:
Title: Re: Are we heading for a market crash?
Post by: Takumi on November 21, 2018, 01:57:15 AM
Psh, this thread was doomed from the start. I'm surprised it's still open.
Title: Re: Are we heading for a market crash?
Post by: abefroman329 on November 21, 2018, 08:08:13 AM
Here is the top marginal tax rate in America compared to other major economies.  For a period in the 60s America had a higher tax rate than the UK, France, and Germany until Kennedy dropped it from 90% to 70%.  It wasn't until Reagan when the top tax rate dropped all the way down to 28%.  The idea that anyone would have to pay 70% or 90% in taxes makes me want to throw up in my mouth a little.   

(https://i.redd.it/uexda5402n101.png)

That's why this was made:
"One for you, nineteen for me" - George Harrison.

Well, at least we have an awesome song to freshen up the mood of an otherwise severely derailed thread.  :coffee:
Eleanor Rigby is better  :bigass:
Title: Re: Are we heading for a market crash?
Post by: Brandon on November 21, 2018, 09:16:21 AM
Psh, this thread was doomed from the start. I'm surprised it's still open.

I'm pleasantly surprised it's still open.  It's been a bit of a learning experience for me as I've little to do with stocks and the market.  There's only been one person trying to derail (unsuccessfully so far) the thread, and as far as I'm concerned, all his posts can be deleted.
Title: Re: Are we heading for a market crash?
Post by: US71 on November 21, 2018, 01:14:20 PM
And, for the record, the wealthiest people I personally know right now are some of the nicest and most generous.
Until they vote to fuck over everyone else, unless your friends are some of the few that don't suck. But chances are they're racist assholes who deserve to die. Chances are you are too.

I know several people who are "wealthy" (a relative term, really) who spend their money helping others.  Some wealthy people are jerks, some are not. Then you have people like my sister who, upon receiving half of my mom's estate, went to work trying to screw me out of my half.
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 21, 2018, 01:26:08 PM
Rise rates, plateau, recession.  The fed is just about to pause their rate hates before the next recession hits.  If the fed gets to 3% before they pause the hikes i would be shocked.

(https://pbs.twimg.com/media/DshySgQXgAE0M8r.jpg)
Title: Re: Are we heading for a market crash?
Post by: 1 on November 21, 2018, 01:30:41 PM
Rise rates, plateau, recession.  The fed is just about to pause their rate hates before the next recession hits.  If the fed gets to 3% before they pause the hikes i would be shocked.

(https://pbs.twimg.com/media/DshySgQXgAE0M8r.jpg)

That purple line does not exist. What would happen in 2030 if that purple line was there?
Title: Re: Are we heading for a market crash?
Post by: Rothman on November 21, 2018, 01:31:06 PM
Those defending not raising taxes on the rich still forget that their income is also more proportioned to be in capital gains.

Giving them a huge tax cut on their salaries and now saying popular programs are unable to be funded is the definition of ingenuous.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 21, 2018, 01:33:30 PM
the proliferation of tax attorneys and certified public accountants. These fields wouldn't exist unless people with money didn't feel the need to find every tax loophole they can want to keep the income they're legally entitled to keep.
That might have been what you meant to say.

Except that doesn't make any sense. If they were legally entitled to keep it, then it wouldn't be taxed.

When you or I claim deductions on our taxes, why does nobody accuse us of "finding every tax loophole we can"?  Or when a small business owner hires a tax preparer at H&R Block to calculate the best way of filing taxes, nobody thinks anything out of the ordinary is afoot?  Doing so is simply considered smart and prudent, and not doing so is viewed as paying more money to the government than necessary.  Yet somehow, when it's a wealthy person *gasp* doing a similar thing through their accountants, suddenly people say it's selfish and vile.

If they were legally entitled to keep it, then it wouldn't be taxed?  I'm sorry, I thought we were talking about the money they don't pay to the government.  When my wife and I file our taxes (and, by the way, she is self-employed), we are legally entitled to keep all of our income that doesn't get payed in taxes.  Most years, that means the government owes us money (a refund), because we're legally entitled to keep some of the money that we had already paid in.  So yes, if there is some "loophole" in the tax code that allows a person to keep a certain portion of his income, then, by the same reasoning, he is legally entitled to keep that portion of his income.  A tax is what the government requires you to pay out of your money.  Everything not required of you is still your money.  How hard you worked to keep every last penny of it is irrelevant to the fact that it's your money.



Where are you getting these numbers?  I see 27.1% (or figures close to it) for the top 1% in Tax Foundation blog pieces, where they are based on adjusted gross income with deductions already rolled in.  (The Tax Foundation is a broadly anti-tax think tank.)

I believe you and I were looking at the same data, just from different years.  But, if those figures have deductions already rolled in—then it doesn't really discount my assertion that the wealthy pay more taxes than the rest of us by percentage point, does it?



Those who benefit from society should contribute to it. It's part of the social contract.
They do, as previously noted—even more by the dollar and by the percentage point than those who earn less.
And as also been noted, not necessarily on an individual basis.

But what does the individual basis have to do with anything?  There are plenty of poor people who try harder than others to avoid paying more than necessary in taxes, plenty of middle-class earners who try harder than others to avoid doing so, and plenty of wealthy folks who try harder too.  I don't think anyone in this discussion is trying to claim that every single person in a certain tax bracket acts in a certain way.  Well, actually, now that I think about it, it does seem like a lost of people on here are basically saying that about the rich.  They're apparently all evil, greedy, heartless people who hire others to figure out how to cheat the system.
Title: Re: Are we heading for a market crash?
Post by: Rothman on November 21, 2018, 01:41:06 PM
the proliferation of tax attorneys and certified public accountants. These fields wouldn't exist unless people with money didn't feel the need to find every tax loophole they can want to keep the income they're legally entitled to keep.
That might have been what you meant to say.

Except that doesn't make any sense. If they were legally entitled to keep it, then it wouldn't be taxed.

When you or I claim deductions on our taxes, why does nobody accuse us of "finding every tax loophole we can"?  Or when a small business owner hires a tax preparer at H&R Block to calculate the best way of filing taxes, nobody thinks anything out of the ordinary is afoot?  Doing so is simply considered smart and prudent, and not doing so is viewed as paying more money to the government than necessary.  Yet somehow, when it's a wealthy person *gasp* doing a similar thing through their accountants, suddenly people say it's selfish and vile.

If they were legally entitled to keep it, then it wouldn't be taxed?  I'm sorry, I thought we were talking about the money they don't pay to the government.  When my wife and I file our taxes (and, by the way, she is self-employed), we are legally entitled to keep all of our income that doesn't get payed in taxes.  Most years, that means the government owes us money (a refund), because we're legally entitled to keep some of the money that we had already paid in.  So yes, if there is some "loophole" in the tax code that allows a person to keep a certain portion of his income, then, by the same reasoning, he is legally entitled to keep that portion of his income.  A tax is what the government requires you to pay out of your money.  Everything not required of you is still your money.  How hard you worked to keep every last penny of it is irrelevant to the fact that it's your money.



Where are you getting these numbers?  I see 27.1% (or figures close to it) for the top 1% in Tax Foundation blog pieces, where they are based on adjusted gross income with deductions already rolled in.  (The Tax Foundation is a broadly anti-tax think tank.)

I believe you and I were looking at the same data, just from different years.  But, if those figures have deductions already rolled in—then it doesn't really discount my assertion that the wealthy pay more taxes than the rest of us by percentage point, does it?



Those who benefit from society should contribute to it. It's part of the social contract.
They do, as previously noted—even more by the dollar and by the percentage point than those who earn less.
And as also been noted, not necessarily on an individual basis.

But what does the individual basis have to do with anything?  There are plenty of poor people who try harder than others to avoid paying more than necessary in taxes, plenty of middle-class earners who try harder than others to avoid doing so, and plenty of wealthy folks who try harder too.  I don't think anyone in this discussion is trying to claim that every single person in a certain tax bracket acts in a certain way.  Well, actually, now that I think about it, it does seem like a lost of people on here are basically saying that about the rich.  They're apparently all evil, greedy, heartless people who hire others to figure out how to cheat the system.
Nah, they're not evil.  They should just be taxed at a higher rate.  Give us little guys a break.
Title: Re: Are we heading for a market crash?
Post by: kalvado on November 21, 2018, 01:57:56 PM
Rise rates, plateau, recession.  The fed is just about to pause their rate hates before the next recession hits.  If the fed gets to 3% before they pause the hikes i would be shocked.

(https://pbs.twimg.com/media/DshySgQXgAE0M8r.jpg)

That purple line does not exist. What would happen in 2030 if that purple line was there?
One may argue that purple line is there since 1980: https://www.macrotrends.net/2015/fed-funds-rate-historical-chart
What would happen?... Well, there are unsustainable economic patterns - and one cannot count on continuation of current trends into indefinite future. 
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 21, 2018, 02:16:05 PM
Nah, they're not evil.  They should just be taxed at a higher rate.  Give us little guys a break.

↓  So, basically, what I said earlier (pertinent phrase highlighted).  ↓

making rich people pay even more more of their earned income to the government than the rest of us

↓  And what hbelkins said before me.  ↓

further tax those who are already paying the vast majority of taxes?



It doesn't matter that much whether someone gets $20M or $28M per year; they're still really rich. On the other hand, decreasing $34K even to $32K (an increase from 15% to 20% tax) would make it harder to live, and there are many more of those people.

This sort of math puzzles me.  Nobody would take $1 from someone who is down to his last $10.  Hardly anyone would suggest taxing an extra $2000 out of someone who earns $20,000 a year.  But, for some reason, taxing an additional $500,000 out of someone who earns $5 million a year is fine and dandy.  Why is the person who works hard to earn $20,000 a year somehow more entitled to what they've earned than the one who built a business empire and earns substantially more?  Why disincentivize people from building their businesses by letting them keep less of what they earn?  Isn't growing business what keeps the economy going?
Title: Re: Are we heading for a market crash?
Post by: Rothman on November 21, 2018, 02:17:28 PM
No.  Trickle-down economics is a myth.
Title: Re: Are we heading for a market crash?
Post by: hbelkins on November 21, 2018, 02:22:00 PM
They do, as previously noted—even more by the dollar and by the percentage point than those who earn less.
Stop trying to justify policies that benefit horrible people. It makes you one of them.

What do you define as a horrible person? Anyone who makes more money than you do?
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 21, 2018, 02:23:51 PM
No.  Trickle-down economics is a myth.

Good.  Now I don't feel bad for keeping all my stimulus check a few years ago.



They do, as previously noted—even more by the dollar and by the percentage point than those who earn less.
Stop trying to justify policies that benefit horrible people. It makes you one of them.

What do you define as a horrible person? Anyone who makes more money than you do?

I'm pretty sure that's true.  Although it's not limited to just them, but likely includes everyone who makes less than he does too.
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 21, 2018, 02:34:24 PM
That purple line does not exist. What would happen in 2030 if that purple line was there?

Here's the long term trend of the fed rate since 1980.  After each recession - and as the country has taken on more and more debt - the fed has been unable to raise rates to the previous recession level.  The fed may raise rates in December but abandon the rate hikes in 2019 (the pause) before the next recession hits.  That seems like the most likely scenario.

(https://fred.stlouisfed.org/graph/fredgraph.png?g=m9dX)

When we experience a market crash over the next few years the fed will inevitably drop the rate back to 0% and hold it there till 2030 and beyond.  Just like the 2008 crash the fed will try to stimulate the economy with multiple rounds of QE and take even more debt on their balance sheets.  But we are currently in a ‘debt bubble’… bailing out that bubble with more debt doesn’t make a whole lot of sense to me.  Even with a modest rise in rates to 2% the housing market appears to be weakening and the monthly supply of houses has started to increase with the higher interest rates kicking in (not to mention home refi's are currently at an 18 year low).

(https://fred.stlouisfed.org/graph/fredgraph.png?g=m9dL)

There are other signs the economy is about to break down.  The yield curve is about to invert which has been a very predictable recession indicator over past recessions...

(https://fred.stlouisfed.org/graph/fredgraph.png?g=m9d4)

In addition, the Wilshire 5000 full cap price index to GDP ratio (the Warren Buffett indicator) is signaling that the markets are more overvalued than they were during the dot-com bubble....

(https://fred.stlouisfed.org/graph/fredgraph.png?g=m9gl)
Title: Re: Are we heading for a market crash?
Post by: Takumi on November 21, 2018, 02:41:29 PM
No.  Trickle-down economics is a myth.

Good.  Now I don't feel bad for keeping all my stimulus check a few years ago.



They do, as previously noted—even more by the dollar and by the percentage point than those who earn less.
Stop trying to justify policies that benefit horrible people. It makes you one of them.

What do you define as a horrible person? Anyone who makes more money than you do?

I'm pretty sure that's true.  Although it's not limited to just them, but likely includes everyone who makes less than he does too.
Less than zero?
Title: Re: Are we heading for a market crash?
Post by: Brandon on November 21, 2018, 02:42:49 PM
Rise rates, plateau, recession.  The fed is just about to pause their rate hates before the next recession hits.  If the fed gets to 3% before they pause the hikes i would be shocked.

(https://pbs.twimg.com/media/DshySgQXgAE0M8r.jpg)

That purple line does not exist. What would happen in 2030 if that purple line was there?
One may argue that purple line is there since 1980: https://www.macrotrends.net/2015/fed-funds-rate-historical-chart
What would happen?... Well, there are unsustainable economic patterns - and one cannot count on continuation of current trends into indefinite future. 

The line, if one looks 1980 to present, appears to be logarithmic, not straight, with a curve that may reach zero or near zero by 2030.
Title: Re: Are we heading for a market crash?
Post by: Rothman on November 21, 2018, 02:50:17 PM
No.  Trickle-down economics is a myth.

Good.  Now I don't feel bad for keeping all my stimulus check a few years ago.


That is exactly why it is a myth.  The rich hold onto new money rather than spend it in ways that would benefit the little people.
Title: Re: Are we heading for a market crash?
Post by: J N Winkler on November 21, 2018, 02:54:43 PM
When you or I claim deductions on our taxes, why does nobody accuse us of "finding every tax loophole we can"?  Or when a small business owner hires a tax preparer at H&R Block to calculate the best way of filing taxes, nobody thinks anything out of the ordinary is afoot?  Doing so is simply considered smart and prudent, and not doing so is viewed as paying more money to the government than necessary.  Yet somehow, when it's a wealthy person *gasp* doing a similar thing through their accountants, suddenly people say it's selfish and vile.

Let us agree at the outset (per a famous 1920's court decision from Judge Learned Hand) that nobody is legally obliged to pay more tax than he or she owes.  Therefore, any argument that a segment of society does not pay enough in taxes is therefore implicitly an argument that those people's tax liability should be legally adjusted to serve an economic or social policy goal.  Such adjustments are inevitably a political choice.

However, while tax liability in theory is fixed in law, in practice there is some discretion in enforcement and the wealthy are better equipped to take advantage of it.  The IRS cannot pursue every instance of tax noncompliance any more than the police can pursue every instance of exceeding the speed limit by so much as a mile an hour.  This is why, for example, the New York Times' story on Trump's inheritance from his father quoted from an IRS agent saying that in the context of an audit, pursuing inconsistent valuations of real property (something the Times reported that Trump's father, and later Trump himself, used to reduce their tax bills) is a last resort.

Similarly, the wealthy have broader opportunities for wealth accumulation compared to you and me simply because many investment vehicles have quite high minimum buy-ins.  For example, I cannot cash in on the (now national) success of Freddy's Frozen Custard because it is structured as a type of limited partnership and very few people have the money to get in.  While legal compulsion could be brought in to open things up for small investors, this would constrain entrepreneurs' economic freedom to choose the business structure that is most appropriate for their commercial activities.  Again, the tradeoff between the two eventually becomes a political choice.

I believe you and I were looking at the same data, just from different years.  But, if those figures have deductions already rolled in—then it doesn't really discount my assertion that the wealthy pay more taxes than the rest of us by percentage point, does it?

I am not so sure, for two reasons.  First, the basis for calculating AGI changes over time as some deductions become available while others go away.  Second, as I understand it (not being a tax expert), deductions work by offsetting income that would otherwise be counted as adjusted gross income (so, e.g., a $10,000 deduction wipes $10,000 off of income).  Since it is probable that most of the rich have more flexibility in structuring their income to maximize deductions, it is conceivable that a high tax burden as a percentage of AGI translates to a much smaller burden as a percentage of gross income without deductions applied.

What I do see in the Tax Foundation data is that year on year, the tax burden of the one-percenters converges very close to the 27.1% AGI value.  This leads me to suspect that most one-percenter filers are stacking up enough deductions that they end up paying the AMT, the brackets for which range from 26% to 35%.

Moreover, as Rothman alludes to, the flip side of the majority of the tax take coming from the one-percenters is that small, incremental changes in their effective marginal tax rates have disproportionate effects on whether the government is able to cover its bills.
Title: Re: Are we heading for a market crash?
Post by: J N Winkler on November 21, 2018, 03:05:28 PM
This sort of math puzzles me.  Nobody would take $1 from someone who is down to his last $10.  Hardly anyone would suggest taxing an extra $2000 out of someone who earns $20,000 a year.  But, for some reason, taxing an additional $500,000 out of someone who earns $5 million a year is fine and dandy.  Why is the person who works hard to earn $20,000 a year somehow more entitled to what they've earned than the one who built a business empire and earns substantially more?  Why disincentivize people from building their businesses by letting them keep less of what they earn?  Isn't growing business what keeps the economy going?

The empirical experience is that income is not the sole motivator for an entrepreneur to build a business empire.  In fact, it may not even be the primary driver.  Our longest sustained periods of business growth were between 1945 and 1980, when top marginal tax rates were quite high, there was no "shareholder value" mantra to serve as an obstacle to companies using their retained earnings to expand, and CEO pay was a small multiple of entry-level worker pay.

There are enormous prestige benefits to being the CEO of a successful company, as well as wide opportunities for on-the-job consumption (access to a corporate jet, company picking up the cost of meals and transportation, etc.--to name just two of probably at least fifty different ways in which life is made sweet in the C-suite).  At a time of high marginal tax rates, these were probably far more important than the money actually paid to the CEO.
Title: Re: Are we heading for a market crash?
Post by: Mark68 on November 21, 2018, 03:37:13 PM
Here is an article by Nick Hanauer, a billionaire venture capitalist, about how trickle-down economics is a scam sold to the American people and how it does not help the vast majority of Americans.

http://prospect.org/article/want-expand-economy-tax-rich

He's been interviewed and has written many other articles about this simple fact: If you raise the minimum wage, you give people at the bottom of the pay scale more money that they will then use to buy more goods and services, and the economy will grow.

OTOH, you give people like him a tax cut, it doesn't grow the economy, other than in niche markets (like private planes and yachts). They will just invest, much of it overseas. That doesn't help the economy, and as we've seen, that's exactly what happened after the 2017 tax cuts.

Trickle-down economics has never actually been based in reality.
Title: Re: Are we heading for a market crash?
Post by: hbelkins on November 21, 2018, 04:10:29 PM
Less than zero?

Had an OK soundtrack. Probably most memorable for Aerosmith's version of "Rockin' Pneumonia and the Boogie Woogie Flu."
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 21, 2018, 04:31:08 PM
If you raise the minimum wage, you give people at the bottom of the pay scale more money that they will then use to buy more goods and services, and the economy will grow.

Then let's set the minimum wage to $300 an hour.  Problem solved.
Title: Re: Are we heading for a market crash?
Post by: MNHighwayMan on November 21, 2018, 04:38:29 PM
If you raise the minimum wage, you give people at the bottom of the pay scale more money that they will then use to buy more goods and services, and the economy will grow.
Then let's set the minimum wage to $300 an hour.  Problem solved.

Don't be ridiculous.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 21, 2018, 04:40:27 PM
If you raise the minimum wage, you give people at the bottom of the pay scale more money that they will then use to buy more goods and services, and the economy will grow.
Then let's set the minimum wage to $300 an hour.  Problem solved.

Don't be ridiculous.

Sorry.  Let's do $50 an hour instead.
Title: Re: Are we heading for a market crash?
Post by: Takumi on November 21, 2018, 05:06:22 PM
Less than zero?

Had an OK soundtrack. Probably most memorable for Aerosmith's version of "Rockin' Pneumonia and the Boogie Woogie Flu."
I was hoping for the Elvis Costello song, but that'll do.
Title: Re: Are we heading for a market crash?
Post by: kevinb1994 on November 21, 2018, 05:12:59 PM
If you raise the minimum wage, you give people at the bottom of the pay scale more money that they will then use to buy more goods and services, and the economy will grow.
Then let's set the minimum wage to $300 an hour.  Problem solved.

Don't be ridiculous.

Sorry.  Let's do $50 an hour instead.

How about $25 an hour which is more than likely to happen in the (near) future.
Title: Re: Are we heading for a market crash?
Post by: abefroman329 on November 21, 2018, 05:13:20 PM
Less than zero?

Had an OK soundtrack. Probably most memorable for Aerosmith's version of "Rockin' Pneumonia and the Boogie Woogie Flu."
I was hoping for the Elvis Costello song, but that'll do.
I think that was a bigger hit than the shitty Bret Easton Ellis adaptation H. Belkins alluded to. And he’s wrong, the most memorable song is the Bangles’ cover of Hazy Shade of Winter.
Title: Re: Are we heading for a market crash?
Post by: abefroman329 on November 21, 2018, 05:14:06 PM
My iPhone auto-corrected “Belkins” to “Bellies,” is THAT ever appropriate.
Title: Re: Are we heading for a market crash?
Post by: kevinb1994 on November 21, 2018, 05:36:01 PM
Less than zero?

Had an OK soundtrack. Probably most memorable for Aerosmith's version of "Rockin' Pneumonia and the Boogie Woogie Flu."
I was hoping for the Elvis Costello song, but that'll do.
I think that was a bigger hit than the shitty Bret Easton Ellis adaptation H. Belkins alluded to. And he’s wrong, the most memorable song is the Bangles’ cover of Hazy Shade of Winter.
I think you meant to refer to him as H.B. Elkins (or H.B. for short).
My iPhone auto-corrected “Belkins” to “Bellies,” is THAT ever appropriate.
LOL it sounds like it wanted you to refer to him as a hillbilly.
Title: Re: Are we heading for a market crash?
Post by: kalvado on November 21, 2018, 05:43:21 PM
If you raise the minimum wage, you give people at the bottom of the pay scale more money that they will then use to buy more goods and services, and the economy will grow.
Then let's set the minimum wage to $300 an hour.  Problem solved.

Don't be ridiculous.

Sorry.  Let's do $50 an hour instead.

How about $25 an hour which is more than likely to happen in the (near) future.
I don't believe dollar would collapse that low.
Title: Re: Are we heading for a market crash?
Post by: abefroman329 on November 21, 2018, 05:48:15 PM
LOL it sounds like it wanted you to refer to him as a hillbilly.
Certainly not. That would be a personal attack, and personal attacks are expressly forbidden.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 21, 2018, 05:52:58 PM
If you raise the minimum wage, you give people at the bottom of the pay scale more money that they will then use to buy more goods and services, and the economy will grow.
Then let's set the minimum wage to $300 an hour.  Problem solved.

Don't be ridiculous.

Sorry.  Let's do $50 an hour instead.

How about $25 an hour which is more than likely to happen in the (near) future.

Ah, OK, right.  $7/hour is too low, $300/hour is ridiculous, $50/hour is still too high, but $25/hour (or $15/hour) is just right.  The key to financial well-being in a society is apparently giving a lot of people more money—just not too much money.  Kind of like Goldilocks.

If doubling the minimum wage would make everything better, than why wouldn't quadrupling it make it even better than that?  What's wrong with demanding a $300/hour minimum wage that isn't also wrong with demanding a $15/hour minimum wage?
Title: Re: Are we heading for a market crash?
Post by: MNHighwayMan on November 21, 2018, 06:01:56 PM
Please tell me you understand that it's not a linear, "more is better" sort of thing.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 21, 2018, 06:05:09 PM
Please tell me you understand that it's not a linear, "more is better" sort of thing.

I'm not the one saying more is better.
Title: Re: Are we heading for a market crash?
Post by: Takumi on November 21, 2018, 06:08:36 PM
My iPhone auto-corrected “Belkins” to “Bellies,” is THAT ever appropriate.
Neither is funny.
Title: Re: Are we heading for a market crash?
Post by: MNHighwayMan on November 21, 2018, 06:10:14 PM
Please tell me you understand that it's not a linear, "more is better" sort of thing.
I'm not the one saying more is better.

But it's not really arguing in good faith to put some ridiculous number out there—one that I assume you're mentally competent enough to understand why it would never work—and then suggest that the whole idea is rubbish.

The whole point of minimum wage is to set a bottom level, a floor, for wages. A level where one is at least able to live from, if frugally and modestly. That hasn't been the case for a number of years now.
Title: Re: Are we heading for a market crash?
Post by: NE2 on November 21, 2018, 06:17:44 PM
Mr. Phoger is just an idiot. Ignore his spew.
Title: Re: Are we heading for a market crash?
Post by: abefroman329 on November 21, 2018, 06:18:02 PM
But it's not really arguing in good faith to put some ridiculous number out there—one that I assume you're mentally competent enough to understand why it would never work—and then suggest that the whole idea is rubbish.
It’s not, it’s a combination of the slippery slope and appeal to ridicule fallacies.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 21, 2018, 06:20:55 PM
Please tell me you understand that it's not a linear, "more is better" sort of thing.
I'm not the one saying more is better.

But it's not really arguing in good faith to put some ridiculous number out there—one that I assume you're mentally competent enough to understand why it would never work—and then suggest that the whole idea is rubbish.

It’s not, it’s a combination of the slippery slope and appeal to ridicule fallacies.

Then tell me what number is unreasonably high and why it's unreasonably high.  I have yet to hear anybody AT ALL explain why minimum wage should be $15/hour but not $40/hour.  Every argument I've heard in favor of the former should work for the latter—and every argument I've heard against the latter should apply to the former.

I work for a small business owned by a wealthy man, and I do not believe it would be beneficial to increase everybody's pay by some amount.  Overhead is already tight as it is, and I've seen many a co-worker let go because we could no longer afford to employ them.  And I've seen several others take a cut in working hours per week in order to stay.  Reducing the owner's take-home pay by increasing his personal income tax and then reducing his company's profitability by requiring him to pay his employees more in wages is not a good way of ensuring people have disposable income to spend into the economy.  Rather, it's a good way of ensuring people lose their jobs and have no disposable income to spend into the economy. 
Title: Re: Are we heading for a market crash?
Post by: Tonytone on November 21, 2018, 06:21:52 PM
So most of the people on the forum are Pro-Conservatives?


iPhone
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 21, 2018, 06:25:02 PM
Pro-Conservatives

What is a pro-Conservative?  Is that different than a Conservative?
No, most people on this forum are on the Left.
But Trump is still a ra.……………………………..
Title: Re: Are we heading for a market crash?
Post by: abefroman329 on November 21, 2018, 06:27:17 PM
Then tell me what number is unreasonably high and why it's unreasonably high.
And that’s the “shifting the burden of proof” fallacy.
Title: Re: Are we heading for a market crash?
Post by: kalvado on November 21, 2018, 06:28:26 PM
Please tell me you understand that it's not a linear, "more is better" sort of thing.
I'm not the one saying more is better.

But it's not really arguing in good faith to put some ridiculous number out there—one that I assume you're mentally competent enough to understand why it would never work—and then suggest that the whole idea is rubbish.

The whole point of minimum wage is to set a bottom level, a floor, for wages. A level where one is at least able to live from, if frugally and modestly. That hasn't been the case for a number of years now.
So what are the good numbers? I can see good reasons for $3-4/hour cuts across the board, but why 25 or 300 is more ridiculous number than 15?
Title: Re: Are we heading for a market crash?
Post by: Tonytone on November 21, 2018, 06:30:42 PM
Pro-Conservatives

What is a pro-Conservative?  Is that different than a Conservative?
No, most people on this forum are on the Left.
But Trump is still a ra.……………………………..
Meaning they are extremely right, im actually happy you said that kp. I was expecting a different answer


iPhone
Title: Re: Are we heading for a market crash?
Post by: abefroman329 on November 21, 2018, 06:31:10 PM
So most of the people on the forum are Pro-Conservatives?


iPhone
I would say so, yes. It IS a roads forum, after all.
Title: Re: Are we heading for a market crash?
Post by: Tonytone on November 21, 2018, 06:35:13 PM
So most of the people on the forum are Pro-Conservatives?


iPhone
I would say so, yes. It IS a roads forum, after all.
Explains why we have so many threads, left unfinished


iPhone
Title: Re: Are we heading for a market crash?
Post by: US71 on November 21, 2018, 06:36:58 PM
The average CEO makes $13.8 Million a year, which is about $37,800 per day which works out to around $1575 an hour.

https://www.glassdoor.com/research/ceo-pay-ratio/
Title: Re: Are we heading for a market crash?
Post by: NE2 on November 21, 2018, 06:55:51 PM
So most of the people on the forum are idiots?
Yep. Robert Moses wannabes too.
Title: Re: Are we heading for a market crash?
Post by: Tonytone on November 21, 2018, 06:57:50 PM
So most of the people on the forum are idiots?
Yep. Robert Moses wannabes too.
Omg, NE2 you don’t have to fire these people up like this. They already deal with it when they eat unseasoned food.


iPhone
Title: Re: Are we heading for a market crash?
Post by: Rothman on November 21, 2018, 08:17:29 PM
Wow.  Thread still ain't locked.

It is sort of like what Mitch Hedberg said about Pepperidge Farm bread:  You lock it and it still ain't locked.
Title: Re: Are we heading for a market crash?
Post by: Duke87 on November 21, 2018, 08:20:39 PM
Then tell me what number is unreasonably high and why it's unreasonably high.  I have yet to hear anybody AT ALL explain why minimum wage should be $15/hour but not $40/hour.  Every argument I've heard in favor of the former should work for the latter—and every argument I've heard against the latter should apply to the former.

Because, as with your prior allusion to Goldilocks, there is a balance to be struck. Increases in the minimum wage increase both the available spending money of anyone working and the burden on employers to pay their staff... but the impact of the former diminishes as the minimum goes higher because once people have enough to make ends meet, they start saving up money instead of spending it, which diminishes its benefit to the present economy. The impact of the latter, meanwhile, increases as the minimum goes higher as employers start to exhaust their options to offset higher labor costs with savings elsewhere or reduced margins.

I can't argue in favor of a specific value as I lack the data to assert where the ideal balance point is. It's not a single answer either - it will be different in different places, varying with the local cost of living, strength of the local labor market, etc.

Recent experiments with raising the minimum locally, however, have not generally resulted in significant negative impacts on employment rates, which suggests that the current federal minimum is likely below the sweet spot in most places.

It doesn't matter that much whether someone gets $20M or $28M per year; they're still really rich. On the other hand, decreasing $34K even to $32K (an increase from 15% to 20% tax) would make it harder to live, and there are many more of those people.

This sort of math puzzles me.  Nobody would take $1 from someone who is down to his last $10.  Hardly anyone would suggest taxing an extra $2000 out of someone who earns $20,000 a year.  But, for some reason, taxing an additional $500,000 out of someone who earns $5 million a year is fine and dandy.  Why is the person who works hard to earn $20,000 a year somehow more entitled to what they've earned than the one who built a business empire and earns substantially more?

For exactly the reason 1 states - because the impact of someone losing X% of their income does not scale linearly with the magnitude of said income. And this is true of the impact both to their own financial health and to society at large.

Look at it this way - someone who earns $20,000 a year after taxes is going to spend every penny of it because they have to just to keep their bills paid... if they can even afford to keep all their bills paid. Someone who earns $5,000,000 a year is extremely unlikely to spend all of it because they have no particular need to. They will be squirreling a substantial chunk of it away in various accounts and investment vehicles, which doesn't provide the same benefit to the economy as money that is actually getting spent. That money would be put to better use supporting projects and programs that benefit the public (or paying down the ever-growing national debt) than it is just sitting in someone's private assets.



As for the original subject at hand, the biggest threat I see to the economy currently is our president's insistence on starting and escalating trade wars. Come January a whole plethora of imports from China will be subject to tariffs of 25%, with numerous American exports to China also becoming subject to tariffs of 25% in retaliation.

The percentage of goods sold in the US that are made in China, or that are assembled in the US but have some of their components or raw materials sourced from China, is quite high. These tariffs are going to be extremely disruptive to the supply chains many manufacturers and retailers rely on, which will cause significant slowdowns in business and the stock and labor markets will reflect this.
Title: Re: Are we heading for a market crash?
Post by: Takumi on November 21, 2018, 08:28:26 PM
Ignore his spew.
I'd ignore yours if the ignore function still worked.
Title: Re: Are we heading for a market crash?
Post by: Takumi on November 21, 2018, 08:33:21 PM
Pro-Conservatives

What is a pro-Conservative?  Is that different than a Conservative?
No, most people on this forum are on the Left.
But Trump is still a ra.……………………………..
Meaning they are extremely right, im actually happy you said that kp. I was expecting a different answer


iPhone
It's about even. I'm a centrist myself.
Title: Re: Are we heading for a market crash?
Post by: Tonytone on November 21, 2018, 08:34:13 PM
Pro-Conservatives

What is a pro-Conservative?  Is that different than a Conservative?
No, most people on this forum are on the Left.
But Trump is still a ra.……………………………..
Meaning they are extremely right, im actually happy you said that kp. I was expecting a different answer


iPhone
It's about even. I'm a centrist myself.
Yes, as I am also a moderate. But sometimes I can get a little Lib.


iPhone
Title: Re: Are we heading for a market crash?
Post by: US 41 on November 21, 2018, 09:22:21 PM
My vote is yes. The assumption right now seems to be that the market is doing really good. IMO it's a bad time to invest because eventually the market is going to go back down again (maybe not crash). Everyone keeps trying to get me to invest, but I don't want to right now because I don't have much confidence that the economy is going to keep improving. The best time to invest is when the economy is doing poor. Then once it gets good again you pull out. At least that's my understanding, which could be completely wrong   :-D.
Title: Re: Are we heading for a market crash?
Post by: J N Winkler on November 21, 2018, 09:29:39 PM
Because, as with your prior allusion to Goldilocks, there is a balance to be struck. Increases in the minimum wage increase both the available spending money of anyone working and the burden on employers to pay their staff... but the impact of the former diminishes as the minimum goes higher because once people have enough to make ends meet, they start saving up money instead of spending it, which diminishes its benefit to the present economy. The impact of the latter, meanwhile, increases as the minimum goes higher as employers start to exhaust their options to offset higher labor costs with savings elsewhere or reduced margins.

I can't argue in favor of a specific value as I lack the data to assert where the ideal balance point is. It's not a single answer either - it will be different in different places, varying with the local cost of living, strength of the local labor market, etc.

Recent experiments with raising the minimum locally, however, have not generally resulted in significant negative impacts on employment rates, which suggests that the current federal minimum is likely below the sweet spot in most places.

A traditional macroeconomic test for too-high minimum wage is whether inflation is also high.  I tend to agree that even in low-cost cities, there is some scope for raising the minimum wage without contributing to inflation.  (Wichita has some special problems Kyle does not mention, such as hemorrhaging young college-educated women.)

Employers can respond to increases in the minimum wage by substituting capital for labor:  in other words, bringing in machines to replace the human employees.  Their ability to do this is constrained both by what is technologically possible and by high up-front costs for automation.  However, since ongoing R&D keeps pushing the frontiers of technological possibility ever further outward, and the initial costs of automation drop as hardware and software becomes commoditized, keeping minimum wages artificially low to maintain high employment is not sustainable in the long term.  I believe it also imposes heavy costs in terms of human dignity.

For exactly the reason 1 states - because the impact of someone losing X% of their income does not scale linearly with the magnitude of said income. And this is true of the impact both to their own financial health and to society at large.

Look at it this way - someone who earns $20,000 a year after taxes is going to spend every penny of it because they have to just to keep their bills paid... if they can even afford to keep all their bills paid. Someone who earns $5,000,000 a year is extremely unlikely to spend all of it because they have no particular need to. They will be squirreling a substantial chunk of it away in various accounts and investment vehicles, which doesn't provide the same benefit to the economy as money that is actually getting spent. That money would be put to better use supporting projects and programs that benefit the public (or paying down the ever-growing national debt) than it is just sitting in someone's private assets.

This is what economists mean when they talk about the diminishing marginal utility of income.

All of this said, however, there is one serious objection to the "eat the rich" strategy.  Sometimes there are scale effects such that large returns are possible only with large initial investments made by an unitary entity with an incentive to seek profit.  This is a good reason to be cautious about dispossessing the wealthy.  On the other hand, an investor class that is oriented toward portfolio capitalism (trading on financial markets) rather than entrepreneurship is a sign that large investments are being foregone.  It is also true that while there are private investors who take a very long view, in many cases the government is better positioned to initiate a string of initial investments that lead to payoffs that are both very large and very late; the Internet is the classic example.

As for the original subject at hand, the biggest threat I see to the economy currently is our president's insistence on starting and escalating trade wars. Come January a whole plethora of imports from China will be subject to tariffs of 25%, with numerous American exports to China also becoming subject to tariffs of 25% in retaliation.

The percentage of goods sold in the US that are made in China, or that are assembled in the US but have some of their components or raw materials sourced from China, is quite high. These tariffs are going to be extremely disruptive to the supply chains many manufacturers and retailers rely on, which will cause significant slowdowns in business and the stock and labor markets will reflect this.

I also tend to think that the prospects of "victory," however defined, are rather dim because the Chinese have the capability to respond to the tariffs by redirecting much of their production to a needed expansion of domestic consumption.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 21, 2018, 09:37:44 PM
( a lot )

Thank you for actually attempting to explain the position.  What you say makes sense to me.  Really, I appreciate you taking the time to type that reply.

I do disagree with your assertion that someone who earns $20,000 a year has to spend every penny of it just to pay the bills.  I have a family of five, and our combined income isn't a whole lot more than that—maybe $30,000 or something like that.  And, by the way, I've never earned $15 an hour (although I think.  I'm not saying we have a bunch of extra money to throw around—no, we have to watch what we spend—but I'd say we're far from what any reasonable person should consider to be the minimum standard of living.  We own a car, we have a house in decent condition in an average neighborhood, we can buy our children birthday and Christmas presents, we give to the church and to charity, we travel……  Now, we don't really have any savings or an emergency fund, but that being true is a far cry from living in poverty.



Wichita has some special problems Kyle does not mention, such as hemorrhaging young college-educated women.

And a local economy largely dependent on building things that wealthy CEOs tend to buy.
Title: Re: Are we heading for a market crash?
Post by: US71 on November 21, 2018, 09:47:01 PM


And a local economy largely dependent on building things that wealthy CEOs tend to buy.

Yachts, aircraft, lawyers, politicians....
Title: Re: Are we heading for a market crash?
Post by: vdeane on November 21, 2018, 09:48:18 PM
Another point is that, back in the era of high taxes, the way businesses would avoid socking their shareholders and/or CEO with a large tax bill was instead giving the money to their employees, in the form of higher wages/benefits and increased hiring.  That effect is now gone - businesses now have no reason to hire anyone unless the amount of money that employee makes for the company is more than the cost to pay them.  That's one of the reasons why well-paying jobs are harder to find these days, and why "do more with less" is the current name of the game.
Title: Re: Are we heading for a market crash?
Post by: kphoger on November 21, 2018, 09:54:39 PM

And a local economy largely dependent on building things that wealthy CEOs tend to buy.

Yachts, aircraft, lawyers, politicians....

Aircraft.  We design and build a lot of private jets in this city.  It would be hard to find someone in Wichita who doesn't personally know multiple people employed in that industry.  Rich CEOs buying private aircraft is what keeps this town going.
Title: Re: Are we heading for a market crash?
Post by: webny99 on November 21, 2018, 10:20:28 PM
Just my opinion, but I believe the minimum wage should be set high enough that you can easily live on it, but low enough that you don't have too much disposable income, i.e. you will spend what you have instead of saving it.

If you're making 20,000 a year and get a raise to 25,000 a year, you will almost certainly spend that extra 5,000 on things you've always wanted, improving your standard of living, and so on. If you are suddenly making 80,000, all of that money will not flow to the economy. You will start thinking in terms of saving - and so will your employer. Meaning less money feeding back into the economy. So there is a balance, but that balance is certainly at a higher point than where it is now. Around $11-12 per hour seems sustainable. Importantly, I think it should be lower for enrty-level workers. The full federal minimum should not take effect until you are at least 21 if not older.

@kphoger, your open-ended parenthetical has me curious now.
Title: Re: Are we heading for a market crash?
Post by: 1 on November 21, 2018, 10:48:08 PM
So most of the people on the forum are Pro-Conservatives?


iPhone

This forum has a liberal majority. However, most don't mention their beliefs unless it's on topic or the beginning of a thread).

ending parenthesis without beginning one is intended
Title: Re: Are we heading for a market crash?
Post by: kalvado on November 21, 2018, 11:00:05 PM
Just my opinion, but I believe the minimum wage should be set high enough that you can easily live on it, but low enough that you don't have too much disposable income, i.e. you will spend what you have instead of saving it.

If you're making 20,000 a year and get a raise to 25,000 a year, you will almost certainly spend that extra 5,000 on things you've always wanted, improving your standard of living, and so on. If you are suddenly making 80,000, all of that money will not flow to the economy. You will start thinking in terms of saving - and so will your employer. Meaning less money feeding back into the economy. So there is a balance, but that balance is certainly at a higher point than where it is now. Around $11-12 per hour seems sustainable. Importantly, I think it should be lower for enrty-level workers. The full federal minimum should not take effect until you are at least 21 if not older.

@kphoger, your open-ended parenthetical has me curious now.
Wages in general should be such that economic output covers purchasing capacity of those funds.
This is not currently the case, as US has huge trade deficit - in other words, population is able to buy more than same population produces. It is partially covered by Wall street sucking money, partially - by debts. In either case, desired consumption level should be no factor here, but productivity should be.
Title: Re: Are we heading for a market crash?
Post by: Duke87 on November 22, 2018, 12:03:31 AM
I do disagree with your assertion that someone who earns $20,000 a year has to spend every penny of it just to pay the bills.  I have a family of five, and our combined income isn't a whole lot more than that—maybe $30,000 or something like that.  And, by the way, I've never earned $15 an hour (although I think.  I'm not saying we have a bunch of extra money to throw around—no, we have to watch what we spend—but I'd say we're far from what any reasonable person should consider to be the minimum standard of living.  We own a car, we have a house in decent condition in an average neighborhood, we can buy our children birthday and Christmas presents, we give to the church and to charity, we travel……  Now, we don't really have any savings or an emergency fund, but that being true is a far cry from living in poverty.

You also live in Wichita. In New York City, $30k a year (which incidentally is just a hair under $15/hr if you work 40 hours every week and never work overtime) would have you living in squalor. Hell, you could double that and you'd still have a lower standard of living than you do in Wichita with a family of five. This is why the ideal minimum wage varies from place to place.

Regardless, general point holds - once people's incomes start to climb high enough that they start saving or investing some of their earnings rather than spending all of them, there are diminishing returns to the economy from increasing their wages - which is why it is bad economic policy to raise a minimum wage past this point, and good economic policy to make people who have earned their way past this point contribute a greater percentage of their income in taxes.

This also means that tax brackets really ought to vary from place to place depending on the local cost of living, but alas I do not see congress ever opening that can of worms.
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 22, 2018, 11:58:41 AM
My vote is yes. The assumption right now seems to be that the market is doing really good. IMO it's a bad time to invest because eventually the market is going to go back down again (maybe not crash). Everyone keeps trying to get me to invest, but I don't want to right now because I don't have much confidence that the economy is going to keep improving. The best time to invest is when the economy is doing poor. Then once it gets good again you pull out. At least that's my understanding, which could be completely wrong   :-D.

If i was 22 years old i would definitely invest some money into the market - even if it's only $500.  Open an account and go through the process of buying and selling equities. If you put some money into the markets and it proceeds to crash 50%, you are going to learn invaluable investing lessons that you can apply the rest of your life.  In 20 years, $500 will mean nothing to you.  Maybe don't invest your entire inheritance, but at least get into the game.

The old adage is that bull markets don't die of old age but rather get killed off by the fed.  With the fed raising interest rates over the past 2 years the bull run may indeed be peaking.  However, while we are currently in one of the longest bull markets in history, this has also been one of the shallowest (suggesting this bull run could continue for another 2 or 3 more years).  Even the rise in interest rates by the fed has been relatively slow compared to the lead up of previous recessions.  It feels like this entire market cycle has been going on in slow-motion.

(https://4.bp.blogspot.com/-lc2oT1t3JAE/WpQFm7zpYEI/AAAAAAAAV0s/yJM5jHt_dYUtnMV9SGhixpOHC8eQkdsvgCLcBGAs/s1600/John%2BBurns%2Bvia%2BMosler%2B22108.png)
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 22, 2018, 12:32:04 PM
To highlight the slow recovery this economy has been experiencing, here is a graph of the percent job losses relative to peak employment.  This recovery just returned to peak employment but it took a long time to get there. 

(https://www.iedconline.org/clientuploads/JobRecoveryChart.JPG)

We also have historically low unemployment rates and high consumer confidence right now... which are more signs that we may have reached the peak of this business cycle.  While these indicators suggest everything looks good right now... these indicators always look good right before a crash.

(https://fred.stlouisfed.org/graph/fredgraph.png?g=m9Sl)

(https://fred.stlouisfed.org/graph/fredgraph.png?g=m9Sk)
Title: Re: Are we heading for a market crash?
Post by: hbelkins on November 22, 2018, 12:37:55 PM
LOL it sounds like it wanted you to refer to him as a hillbilly.
Certainly not. That would be a personal attack, and personal attacks are expressly forbidden.

No, it was meant to be a comment on my weight. I'm quite proud of my rural heritage and wouldn't think of changing it.

When you have nothing else, make personal attacks. (See his personal comment, which is aimed at me because he complained about my anti-Hillary tag line and it got all such personal comments banned.)
Title: Re: Are we heading for a market crash?
Post by: 1 on November 22, 2018, 12:41:04 PM
I have thought for the last few years that there would be a crash in or before 2020. However, it seems like late 2021 to early 2022 is more likely, based on your graphs (especially the ones in earlier pages of this thread). Maybe slow growth means more time between recessions.
Title: Re: Are we heading for a market crash?
Post by: abefroman329 on November 22, 2018, 12:51:59 PM
LOL it sounds like it wanted you to refer to him as a hillbilly.
Certainly not. That would be a personal attack, and personal attacks are expressly forbidden.

No, it was meant to be a comment on my weight. I'm quite proud of my rural heritage and wouldn't think of changing it.

When you have nothing else, make personal attacks. (See his personal comment, which is aimed at me because he complained about my anti-Hillary tag line and it got all such personal comments banned.)
What makes you think it’s aimed at you? That’s a serious charge and you don’t have any evidence to support it.
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 22, 2018, 12:58:29 PM
It can be dangerous to rely entirely on technical analysis.  Since 1990 the 1-year moving average of the DJIA has crossed below the 2-year moving average just 3 times (in 2001, 2008, and 2016).  When this crossover occurred in 2016 you could have made the case that a crash was coming (since in 2001 and 2008 the crossover did foresee a crash).  However, looking back i'd equate the 2016 crossover to the 1998 and 2006 "failed" crossover.  You have a period in the bull run where the market looses steam and wants to retest that 2-year moving average, only to have one more big run up before the actual crash occurs.  Well we had the big run up from 2016-2018, and now it looks like we are primed for another crash.  Today's price action really does reflect the price action from late 2007.. just like in 2007 we just had a failed double top and now it appears the 1-year and 2-year moving averages are getting ready to converge.  And the recession indicators of today are similar to the recession indicators from 2007.

(https://i.imgur.com/HdNmGgf.png)



Title: Re: Are we heading for a market crash?
Post by: abefroman329 on November 22, 2018, 01:02:19 PM
he complained about my anti-Hillary tag line and it got all such personal comments banned
This isn’t true. Mods and admins have told you it isn’t true. Here’s the thread where they tell you it’s not true:

https://www.aaroads.com/forum/index.php?topic=22967.0

Repeating a lie doesn’t make it magically true if you’ve repeated it enough times.
Title: Re: Are we heading for a market crash?
Post by: Roadsguy on November 22, 2018, 05:18:42 PM
Is this supposed to just be an experiment in unmoderated threads or something?
Title: Re: Are we heading for a market crash?
Post by: Takumi on November 22, 2018, 05:26:20 PM
yawn
Title: Re: Are we heading for a market crash?
Post by: abefroman329 on November 22, 2018, 05:27:19 PM
Is this supposed to just be an experiment in unmoderated threads or something?
I hope the mods and admins have better things to do today.
Title: Re: Are we heading for a market crash?
Post by: 1 on November 22, 2018, 05:31:11 PM
The Dow Jones isn't an accurate indicator of the entire economy.
Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 22, 2018, 06:37:22 PM
It's kind of ironic that the September 1988 cover of the economist magazine had Ten 10 2018 on the coin around the Phoenix's neck.  The beginning of this most current downturn really began on October 10, 2018 when the DOW plunged 831 points (considering the market had already recovered from the February selloff earlier in the year).

(https://i.imgur.com/o8eL3or.jpg)

This is what the economist is saying today on how to prepare for the next global recession:

Title: Re: Are we heading for a market crash?
Post by: tradephoric on November 22, 2018, 07:25:36 PM
Hillary plans on running for president in 2020.  These are comments she made during a live taping of Recode Decode at New York City's 92nd Street YMCA. 


Now people will say she doesn't have a shot but the Simpsons already predicted that she would become president after Donald Trump.  IMO, the only way she becomes president is if the country is in the midst of a global financial crisis the likes of 2008.  Somebody better warn Trump not to invest in children.

Title: Re: Are we heading for a market crash?
Post by: SSOWorld on November 22, 2018, 09:16:05 PM
ok, the political thing has gone long enough - this subject got diluted - time to lock