A Quote by Irving Fisher
There may be a recession in stock prices, but not anything in the nature of a crash.
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A major boom in real stock prices in the US after Black Tuesday brought them halfway back to 1929 levels by 1930. This was followed by a second crash, another boom from 1932 to 1937, and a third crash. Speculative bubbles do not end like a short story, novel, or play. There is no final denouement that brings all the strands of a narrative into an impressive final conclusion. In the real world, we never know when the story is over.
Fundamental analysis seeks to establish how underlying values are reflected in stock prices, whereas the theory of reflexivity shows how stock prices can influence underlying values
It's like simulating earthquakes: we can over and over study a bubble, crash, bubble, crash. Then we can see mathematically if there's some regular pattern and what's going on in people's brains when prices are going up and before the crash is happening.
The underlying strategy of the Fed is to tell people, "Do you want your money to lose value in the bank, or do you want to put it in the stock market?" They're trying to push money into the stock market, into hedge funds, to temporarily bid up prices. Then, all of a sudden, the Fed can raise interest rates, let the stock market prices collapse and the people will lose even more in the stock market than they would have by the negative interest rates in the bank. So it's a pro-Wall Street financial engineering gimmick.
I've lived through periods of illiquidity before. Asset prices come down. The economy slows or even goes into recession. Then the cycle re-starts. We buy at lower prices with less leverage.
Stock prices are likely to be among the prices that are relatively vulnerable to purely social movements because there is no accepted theory by which to understand the worth of stocks....investors have no model or at best a very incomplete model of behavior of prices, dividend, or earnings, of speculative assets.
The economic repercussions of a stock market crash depend less on the severity of the crash itself than on the response of economic policymakers, particularly central bankers.
Stocks always go down much faster than they go up. That's why it's called a crash. People who put their money into the stocks will find, all of a sudden, that stock prices are no longer being supported by the debt leveraging that's been holding them up.
Stock prices turn people's heads. When prices are high, we treat a company like gods, and if they drop, we treat them as fools.
The bull market, rising prices, earning lots of money, make it seem as if the good days will never end. When prices are falling and there is a recession, that also feels as though it will last for ever. Politics is the same. People simply can't imagine changing circumstances.
I think the stock market is a very dangerous place to be at the present time. In fact, the stock market today is almost identical to where it was in October 2007 and then there was a $7 trillion crash and before that in March 2000.
There are times when a market such as housing, transportation or the stock or mortgage market keep rising and people with capital want to join in this growth. Soon the markets become overheated, partly because of the abundance of investment money and speculation. This is when the government should raise interest rates and increase the cost of borrowed money. Governments are shy about doing this because it could cause the very recession. Yet this is the best time to do this so that the inevitable recession never reaches the magnitude of the recent Great Recession.
You can't tell me you can make any system or country work with low wages and high prices, and high wages with high prices don't mean anything when the prices eat up the wages and don't leave anything over.
In my view, the biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital. Not only is the mere drop in stock prices not risk, but it is an opportunity. Where else do you look for cheap stocks?
Although there are good and bad companies, there is no such thing as a good stock; there are only good stock prices, which come and go.
The Adversity Index was created by msnbc.com and Moody's Analytics to track the economic fortunes of states and metro areas. Each month, the Adversity Index uses government data on employment, industrial production, housing starts and home prices to label each area as expanding, at risk of recession, in recession or recovering.
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