Dow is currently in a freefall

[_Doctor CamNC4Me]

https://www.marketwatch.com/story/stock ... 2019-11-07

The Dow fell to a new high of 27,751 today.

- Doc

[_Brackite]

https://www.marketwatch.com/story/stock-futures-climb-after-report-china-us-agree-to-cancel-tariffs-in-stages-2019-11-07

The Dow fell to a new high of 27,751 today.

- Doc

It closed at 27,675 today.

Stocks rose to record highs on Thursday after the world’s two largest economies reportedly agreed to remove existing trade tariffs, sparking a huge rotation into equities and out of bonds.

The 10-year Treasury yield had its biggest upward move since the day after President Donald Trump was elected, trading at 1.95% from 1.81% in the previous session. Bond yields move inversely to prices.

https://www.cnbc.com/2019/11/07/stock-m ... hopes.html


Edited to add:
It closed at 27,681 for the end of the week.

[_Doctor CamNC4Me]

https://finance.yahoo.com/news/trump-st ... 02360.html



I wonder how long we can pump cheap currency into the market before the dollar devalues rapidly. Whatever the case may be here we are. I mean I'm glad the American economy isn't tanking, but this has a sort of 'eat fast food to get your calories' feel to it.

- Doc

[_EAllusion]

The Fed being pressured to lower interest rates because of concerns about the economic effects of the trade war only to rescind the trade war right after they do so certainly feels like a slight of hand.

I don't know if anyone knows enough to know whether we are setting ourselves up for a mid 70's situation or not. There's a conventional wisdom that a recession is on the horizon in a couple years at most, but if it were easy to predict the timing of these things, a lot more people would be making money off this knowledge than are.

[_Doctor CamNC4Me]

Dow continues it plunge hitting a new low of 28,000:

https://www.cnbc.com/2019/11/15/dow-fut ... eport.html

Edit: I do think we’re seeing what a weakening dollar, thanks to the fed just creating currency out of thin air coupled with low interest rates is having on the market. After some quick googling it appears our dollar has fallen in real value about 10-15% since 2017 relative to other currencies; US-produced goods are cheaper and more competitive abroad. HOWEVER, I think we’re seeing cheap money and a hot hot hot housing market (to include building a massive amount of high density apartments) as the primary driver domestically.

- Doc

[_subgenius]

Because its unclear as a concept, explain "cheap money domestically ", please.

[_Doctor CamNC4Me]

Because its unclear as a concept, explain "cheap money domestically ", please.

Sure. I'll keep it simple because it's actually not too complex, so no need to overcomplicate it.

1) The Federal Reserve (Fed) is the central bank of the United States. It's probably the most influential economic institution in the world. Within its charter is to manage the total outstanding supply of US dollars, both in hard and digital currency.

2) The Fed no longer creates paper money to pump into the economy (though some real dollar printing still occurs with the help of the Dept. of Treasury), but the vast majority of US money supply is digitally debited and credited to major banks. The banks loan out those new balances to the broader economy.

3) The federal government is also a borrower of this money in addition to banks. However, when I talk about cheap money being created it's because the Fed will create money at x-mount of interest, lend it to banks, who then loan it out to us. 3.25% for a mortgage is a good example of cheap money being created, lent to banks, and then lent to us.

4) There's a committee that basically meets, they discuss how much money they can create based on various factors, understanding that the economy will borrow that money, and legitimately repay it with interest. In the simplest terms, the Fed can literally and digitally print x-amount of dollars at a cheap rate to keep a shaky economy humming along. The better the economy does they increase the cost of the money they create and loan to avoid runaway inflation.

So. Right now the Fed views the economy as a bit shaky because they keep lowering interest rates. They're pumping 'affordable' currency into the market to induce bank-borrowing and subsequently consumer lending. The bubbles that people are concerned about is the availability of credit for high-risk users, but because money is so cheap to make and lend we're seeing households exceed their debt-to-income ratios at over 100%. If I had to guess, because real estate is going bananas, again, thanks to cheap money to lend and then builders build due to easy rates and demand, we're kicking the can down the road 8-10 years before we see another round of massive defaults, at which time we'll have to address 'cheap money' as non-starter, BUT, that's a huge political hot potato so I don't know how it'll all pan out.

Whatever the case may be I suspect the real purchasing value of the dollar to drop pretty quickly over the course of the next 10-15 years because it's cheap, it's being created quickly and lent out cheaply, and consumer debt is growing. I don't know how sustainable that is.

- Doc

[_subgenius]

I never considered that low interest loans was what you meant be "cheap money".
I think your point about over saturation in consumer lending is valid, but that is not always reliant on low interest rates....especially as those rates manifest with consumers.
Nevertheless, i think there are other factors, apart from the usual ones you note, at play. For example, the dollar losing value is beneficial for the US export market and puts pressure on foreign markets to purchase Treasuries in order to increase the Dollar value...thus making their export market competitive.
I don't think the assessment of "cheap money" can be limited to domestic strategies and influences in our modern global market.

[_Doctor CamNC4Me]

The Dow crashes through the floor to 28121.68:

https://www.foxbusiness.com/markets/sto ... eakthrough

- Doc

[_Doctor CamNC4Me]

The Dow hit rock bottom and kept digging today hitting an abysmal 28,337 at one point.

- Doc