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So what's the fed going to do if the...
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You are currently reading a thread in /biz/ - Business & Finance

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So what's the fed going to do if the markets drop 50% again? Haven't they already used all their ammo?
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They could turn the .25 rate into 0. all hail our lord and savior Janet Yellen
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>>1050671
A decline is already expected and planned. It's necessary for the market to have a correction. Equities were supported by QE and there was tremendous asset inflation.

I think the fed is aiming for a steady "soft" decline. I expect the correction will take at least a year.
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Hello, /biz/

I came from /g/ because an anon posted a similar thread, calling this a happening.

Can you guys explain this whole situation to a dumb shit like me? I don't do any trading.
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>>1050760
It's a complicated situation. The US problem is probably the easiest to grasp.

The Fed has been printing money (quantitative easing) since the mortgage crisis of 2008. It was necessary but harmful.

The Fed is in the process of raising interest rates and they are putting a hold on their policy of QE. We are starting to experience the consequences of our QE policy. As equities correct, Americans will lose their life savings and retirement.
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>>1050671

they don't need to do anything - they didn't step in last time because the markets dropped, they stepped in because there was a big credit crisis and a massive unknown number of credit default swaps linking various different banks and threatening to cause serious damage to the financial system
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>>1050780
Oh fuck. I guess there's no way to prevent any major damages to myself/family?
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>>1050671
The market objectively belongs much lower than it currently is: "fixing" the bear market would make the financialization bubble worse and hurt the US economy even more (the actual US economy where we make things and do business, not this stock market bullshit).

The Dow belongs around 6000 according to its inflation-adjusted 100 year growth trend.
>inb4 someone shows up with a chart with a log scale
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>>1050793

Your best option now is to sell any equity holdings you may have, wait a few years for the market to finish correcting, then buy back your portfolio to let it grow naturally post-correction.
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>>1050802
Thanks, anon. I don't have any but I'll spread the word.
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>>1050793

Stay/get out of the stock market until the correction is over. To be honest, if you have any kind of shares or market traker then you're in pretty deap already as the market has dropped 20% off its peak. If you sell everything now you run the risk of locking in a loss just before it rebounds. That said, I think everybody is expecting a bear run, and that kind of thing can be a self-fulfilling prophecy, so you're better off out. If you're keen to capitalise on it you could short the market or even buy gold, but both of those come with risks.
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>>1050793
I would argue against this advice >>1050802

Very few individuals can time the market. Someone that is new to investing, wouldn't even know where to start.

>>1050793
There's not much that you can do. The smart money has already exited the market. I recommend that you establish a type of emergency cash fund for you and your family. Do everything possible to limit your expenses.

Read up on investing, there will be a lot of money to be made in the following years. However, there will also be a lot of suffering first.
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>>1050799
You are retarded man, with globalization profits growed faster then ever before. And don't forget emerging countries.
This graph makes absolutely no sense.
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>>1050823
>Dow 20000 by December 2015 :^)
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>>1050692
Why not go negative?
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>>1050692
>>1050825
Have either if you considered that perhaps the market actually is overvalued and this isn't just some spontaneous crash?

Unnaturally low interest rates were what created this financial bubble in the first place.
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>>1050833
the fed isn't ready to admit that
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>>1050833
Yes, I completely agree the market is overvalued and fundamentally weak, but the fed does whatever it takes to keep it going up. It's never going to admit that all this money printing only exacerbated the problem.
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>>1050780
>they are putting a hold on their policy of QE
QE ended in 2014 dumbfuck. Leave /biz/.
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>>1051105
That anon's terminology is shit, but in general he's right. This is the natural result of the Fed's monetary policy.
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>>1051113
Shut up, idiot. Bear markets, especially secular bear markets, are complex. People like you who dispense "hurr derr" advice tend to be only one's truly harmed in a bear market because you're too stupid to know its part of the normal business cycle.
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>>1051124
Oh, yes enlightened one. The Fed in no way inflated the securities markets. They found a way to create value out of thin air without ever having to pay for it.

Face it, moron. Monetary policy is a zero-sum game. They don't sell a good or service, creating value. Any positive effect the Fed creates causes a negative one somewhere else. At the bare minimum, it's amplifying the business cycle, so expect to see a bear market of a similar magnitude of the bull market.
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>>1050671
fed will raise rates in march again and market will go up after this correction once again. this is just big money once again shaking the weaker leaves off
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>>1050844

Yep. printing money just kicks the can down the road. It does help smooth the ride but doesn't make the problems go away. It does allow things to correct though without actually crashing. That would be worse.
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>>1051153
Nobody has been printing money. They have been handing money to banks and abroad. So everywhere but the domestic market.

BANKS ARE FUCKING LOADED.
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>>1050671
Trillion dollar coin, that will destroy deflation in a heartbeat.
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>>1051168
>Government mints 20 coins
>"And they said the national debt would be hard to fix"
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>>1050802
>"My best piece of advice is to time the market by selling right after a 14% drop, waiting for the situation to correct itself, then buying when everybody is jumping in the stock market agian."

So, like that dumb golden retriever, you suggest buying high and selling low?
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>>1051142
Moron, the purpose of the Fed isn't to "sell a good or service" or to "create value." It's purpose is to stabilize the monetary system and provide conditions conducive to high employment, increasing GDP, liquidity and efficiency in credit markets, and low (but not zero) inflation.

The Fed has done all of the above, and NO movement of the stock market has any effect on any of that. Companies don't fire people because the Dow Jones index falls a bit. Banks don't call in loans because oil is in a slump. Prices don't skyrocket just because the S&P took a dip.

You're being stupid. You're reading headlines and parroting bullshit someone else told you about the situation. You're being manipulated for political purposes.

Last I checked, the economy was doing fine, inflation was appropriately low, and employment is stable. Sure, bear markets aren't fun, but they're historically short, small, and meaningless in the long-term.

Stop being a pussy.
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>>1050825
Nobody has suggested going negative. When they talk about negative interest rates, they're talking about negative real interest rates. We had negative real interest rates during the 80s, when you could get 10% interest from your savings account but the inflation rate was near 20% at times.

When the average blogger/4chan nut talks about negative interest rates, they do not understand this distinction. Remember:

real interest rate = nominal (listed) interest rate - inflation
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Let it crash, raise interest rates, and don't bail out anyone but what is covered by FDIC.
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>>1051163

Oh yeah I forgot. It's called quantitative easing. Sorry about that guys. The name change makes it ok again.
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>>1051178
>You're being manipulated for political purposes
This is what's really going on. The banking interests have the most to gain from having a pro-business republican in power. So, right before an important election, they will create doom and gloom so that the republican candidate can say, "Look at what 8 years of a Deomcrat president has wrought!"
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>>1050823
I mean, I think thats what a "financialization bubble" would entail--stocks growing faster than profits and growth can sustain
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>>1051178
You're missing the point. It's not just "providing market conditions". It's engaged in active market manipulation. When the Fed pushes equity prices up with easy money, who pays for that? Monetary policy is zero-sum. The money has to come from somewhere. And it could be many places. Savers receive lower interest rates and make less money on their bank accounts. The CPI increases, which lowers demand. The upturn is followed by an equally large downturn. The Fed can only stimulate at the cost of something else.
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>>1051223
>When the Fed pushes equity prices
The Fed doesn't manipulate the equity markets. The Fed doesn't really care about stock prices, in general, though it will occasionally comment in unusual cases (e.g., "irrational exuberance").

The Fed cares about money supply, liquidity, credit markets, and inflation. Yes, policies that affect these things inevitably affect equity prices as well, as happened when bond prices fell.

Not to mention, where is this fucking "price" you keep talking about? I made 250% gains from 2009-2015. 250%. 2. 5. 0. %. If I have to give back 20-30% back in the short term as part of the natural business cycle, who the fuck cares?
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>>1051244
>The Fed doesn't really care about stock prices
Completely false.

>Not to mention, where is this fucking "price" you keep talking about? I made 250% gains from 2009-2015. 250%. 2. 5. 0. %. If I have to give back 20-30% back in the short term as part of the natural business cycle, who the fuck cares?
You must be fucking dense. Somebody is paying for that money that went into the stock market. We all came out ahead but that money didn't come out of nowhere. There are costs to economic intervention that are being paid or going to be paid. You just don't care because "well I got muh money."
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>>1051320
Listen kid, the market's aren't a zero-sum game. Thinking they are is why you're foreverpoor. Time to grow up.

And no, the Fed doesn't care about stock prices. Stock prices are a symptom, not a condition. The Fed treats root problems, not symptoms.

And you're damn right I don't care because I got muh money. None of us should. Long-term investors shouldn't give a flying fuck about some short-term downturn, no matter how many "happening" threads you and your /pol/ and /r9k/ buddies post. Because we're making mad bank.
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>>1051320
>stock market is a zero sum game
Stopped reading right there
Thread replies: 39
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