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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: THE WATSONYOUTH who wrote (777523)	3/31/2014 1:08:33 AM
From: Bilow	Respond to of 1574343

Hi THE WATSONYOUTH; Re: "The nation's wealthy are getting wealthier because stocks are high. Stocks are high because interest rates are high. -- ....Bilow....you don't know what you are talking about"; You're right, that's a typo, a slip, an error. What I should have written was "The nation's wealthy are getting wealthier because stocks are high. Stocks are high because interest rates are LOW." Sorry. What can I say. And I thought the stuff I write here wasn't read by anyone! Low interest rates mean that bond prices are high and I probably started writing one and changed to the other without fixing it. Same error in the next sentence: And it will end the same way it always has before. When interest rates go UP, the value of stocks and bonds will go down and the wealth of the wealthy will decrease. I mean for Christ's sake, I've been arguing for months with mindmeld about low interest rates, of course I know that interest rates are low! Obviously I'm going to have to fire the team of proof readers I pay to read my posts. -- Carl P.S. The real idiots here won't admit it when they write something that's wrong. I do and just did. And you can go back and read my previous posts that give the (obvious) relationship between stocks and interest rates correctly. Try this one which explains the details of why stocks drop when interest rates rise (and vice versa): AMZN, for instance, is promising earnings far into the future. The earnings in 2001-2004, for instance, are quite small compared to the stock price. It can only be the earnings much farther out that are attracting fundamental investors to this stock. (This assumes that not all AMZN longs are simply figuring on selling to greater fools. For those who do intend to sell to such, I suggest peddling shares to TMF.) When 30 year interest rates changed over the last 8 months from 5.0% to 6.0%, the net present value of $1 in earnings 30 years from now changed from $0.2314 to $0.1741 , a 25% decrease. If 30-year interest rates reach 8.0%, which is the highest they've been in the past two years, the value of that dollar drops to only $0.0994, a 57% drop. Message 10966741 As far as understanding what the Fed is doing, I am under no illusions. Here's a post from 1997 where I talk about the low interest rates you can expect in the event of a depression (and here they are): Waiting For the Big Kahuna (Bilow, September 1997) We can keep the US dollar as the default reserve currency for foreign nations only by defending it with high interest rates. Are we willing to suffer those rates in the face of an economic slowdown at home? Not if that slowdown reaches depressionary levels. Foreigners don't vote, and neither do the citizens who will later have to suffer inflation (at least they don't vote yet.) So my bet is that they defend the dollar with high interest rates until unemployment starts to get nasty. Then they lower rates, the dollar crashes, and inflation begins. Message 2166471 As far as the dollar crashing, it hasn't seriously happened yet -- we still have that inflation coming for us in the future. But there's no question that the Fed buying bonds makes interest rates low, interest rates low makes stocks go high and inflation eventually causes interest rates to rise (but only when the Fed stops its bond purchases!), and this drops stocks. And there's no question, and never has been any, of what the Fed would do in the event of a serious depression. The behavior of the Fed is not a surprise. Quantitative easing, or its equivalent, was in the cards from the beginning of the Fed a hundred years ago. The authorities did the same thing (or its equivalent) in most depressions for the last 400 years before the Fed in most countries. They do it because it helps their economies. Always has and always will. And I when gold was cheap I was buying it for long term buy and hold: Hecla Mining (HL) Message Board, Bilow, November 1997 I did buy FSCNY [a high dividend paying South African gold stock], could of had it cheaper if I'd waited till Friday, but this is a long term buy; I want some insurance. I also bought some BMG, I've done well with both them and HL over the years. I'm also picking up old, foreign, bullion-priced, uncirculated gold coins and stuffing them in my safety deposit box. They probably think I'm a nut over at the bank by now. But I have always collected coins, and I think this is a once in a lifetime buying chance. I think that their low premium indicates that the speculative buyers have been completely shaken out of that market. Everybody who was afraid of inflation now has their stash, and their aren't (yet) anymore buyers. When equities lose their luster, gold will have its returned. Economically, the current problem looks like deflation with associated currency devaluations. There is no question that the inhabitants of SE asia have seen the price of gold zoom in their own currencies. It hasn't happened here, but if we start to have a downturn I think it could, what with the Fed printing green. Message 2550255