LouieK

Market Cycles: A Look at the Historical Evidence

The author David Van Knapp asks for a definition of a bull and bear market. Good question, and one I too have seen no one adequately define. Here is my take: There is some level of economic value to the economy and some trajectory it is following toward the future value. This is objective to the markets subjective assessment of that value and trajectory now. When markets subjectively underassess this objective value, then we are in a bull market and when markets subjectively overassess this objective value, then we are in a bear market. Concurrently, there is an interplay between the subjective assessments and the objective values and trajectory, so each of them affects the other and complicates the actual future outcome of the economy. Equity markets do not simply follow economics, they also have an impact on the economy (and its trajectory).

Cash for Clunkers May Cost Up to $45,354 Per Vehicle

What we are talking about is the marginal boost in the economy due to a government program: the marginal boost is 22,000 vehicles and the cost of that boost is $20K to $45K per vehicle to the government. AND, those 22,000 vehicles would have been replaced over a period of time anyway. I have a 1999 Windstar that is past its prime because we are out of our soccer mom phase, so the program just subsidizes what I would have done soon anyway. And when they destroy the Windstar, those going into that phase will be faced with a higher price for used mini-vans, forcing more people to pay more precious, personal resources for their family needs on a mini-van. Even if they buy a new van, the increasing price of the old ones will dampen their ability as consumers to negotiate with the auto dealerships for lower prices on the new ones. So the program helps me and hurts the new families. Those incoming families probably voted for Obama, the saps.

The Bubble of Uncertainty Is About to Burst

g.pincheot writes about,

"the rise of "Ineptomania" personified by Rush Limbaugh - the pied piper of the uninformed."

I listen to Rush Limbaugh from time to time. Do you? My guess is you don't listen to him very often, if at all.

In any case, I would rather have my brain than your brain any day, even it is older.

The Bubble of Uncertainty Is About to Burst

The markets are reacting to the uncertainty surrounding Obama (which remains an uncertainty---just how ideologically motivated is this guy), to the policy prescriptions so far (why did they spend approx 900 billion for fiscal stimulus on a plan which seems overtly not meant to be stimulating and will hamper the economy in the long term--doesn't this make one suspicious of the ideological agenda; and what economic theory supports this spending?), and to the changes in the investment climate. And yes, markets can go lower because they are assessing day by day the new evidence for and the risks to earnings.

Wall Street Breakfast: Must-Know News

Eddie64: greed is a problem only to the extent the financial structure and the productive structure allow government largesse instead of markets to make all economic decisions. When politicians see how they can provide constituencies (such as subprime markets) as promises to get elected, then we always have moral hazard. The problem is not primarily greed, but socialism. Think GSEs like Fannie and Freddie and government policy to support and encourage sub-prime lending.