Will the stock market crash (June 24 2016 Update)?

[rocket surgeon]

The policy of the Fed keeping interest rates artificially low hardly is Obama's doing.  That's been going on since the Greenspan years.  Increasing interest rates would be harmful in the short run, but in the long run would be good.

personally, i absolutely agree, increasing the interest rates would be harmful almost anytime, except, eventually we are going to have to face the music.  whoever is paid the big bucks is going to have to do it...gently.  obviously, timing is the biggest factor?

[Jay Bee]

Did chicos ever share one of his 3 long plays, or is he worried we'd destroy the stock(s)?

[Dr. Blackheart]

So you're saying that lower and middle class wages in the US will increase? Really?

*Admittedly, I'm not great with economics/finance as I've repeatedly stated before.

JFK, Reagan and Bush II extended tax cuts that led to middle and lower class income gap closure.  Figure it out as this all led to more than 3-4 years of extended economic growth.  Throw in Clinton with the entitlement pull back and we have four for four.  Two Dems and  tao Republicans.  FDR, Bush I and Obama bailed the economy out with Keynesian.

[jesmu84]

JFK, Reagan and Bush II extended tax cuts that led to middle and lower class income gap closure.  Figure it out as this all led to more than 3-4 years of extended economic growth.  Throw in Clinton with the entitlement pull back and we have four for four.  Two Dems and  tao Republicans.  FDR, Bush I and Obama bailed the economy out with Keynesian.

As I'm trying to learn more about economics and principles, would you mind explaining this a little more? I watched some economic theory on Keynesian over at Khan Academy, but a little harder to put the pieces together here.

[Dr. Blackheart]

As I'm trying to learn more about economics and principles, would you mind explaining this a little more? I watched some economic theory on Keynesian over at Khan Academy, but a little harder to put the pieces together here.

When the public sector steps in to save the private sector.  The Great Depression, the Federal Savings & Loan Bail Out and the Great Recession.  This was needed to create mid to low level jobs in government via public works.  In 2008-12, DC was a boom town...I saw today the Millenials held 12% of government jobs then,  and 8% now as those jobs have switched to the private sector.  One might argue that Reaganomics was also in this group with the splurge is defense spending and automobile subsidies (blue collar jobs) fit this bucket in the midst of hyper inflation. 

In 2008, other banks went under, but there was no way the Fed was going to let CitiBank go under due to their massive debt, especially foreign.  It would have been the 1920's collapse all over again, but worse.  At some point, the Federal government needs to step in and literally own the private sector. 

http://wallstreetonparade.com/2012/08/the-untold-story-of-the-bailout-of-citigroup/

[jesmu84]

When the public sector steps in to save the private sector.  The Great Depression, the Federal Savings & Loan Bail Out and the Great Recession.  This was needed to create mid to low level jobs in government via public works.  In 2008-12, DC was a boom town...I saw today the Millenials held 12% of government jobs then,  and 8% now as those jobs have switched to the private sector.  One might argue that Reaganomics was also in this group with the splurge is defense spending and automobile subsidies (blue collar jobs) fit this bucket in the midst of hyper inflation. 

In 2008, other banks went under, but there was no way the Fed was going to let CitiBank go under due to their massive debt, especially foreign.  It would have been the 1920's collapse all over again, but worse.  At some point, the Federal government needs to step in and literally own the private sector. 

http://wallstreetonparade.com/2012/08/the-untold-story-of-the-bailout-of-citigroup/

I see. Makes sense. So do you believe that eventually private sector middle/lower wage increases will occur? My feelings are that since the private sector has realized what people are willing to do for their current wages, they have no incentive to raise them.

[MU82]

The policy of the Fed keeping interest rates artificially low hardly is Obama's doing.  That's been going on since the Greenspan years.  Increasing interest rates would be harmful in the short run, but in the long run would be good.

Come on, it's all Obama's -- sorry, obummer's -- fault!!

Ipso fatso, it stands to reason that the S&P 500's run-up from Jan. 20, 2009, to now -- which turned every $1,000 invested into $2,656, an annual gain of about 16% -- is all to obummer's credit.

All of the 401k accounts that created wealth for the average worker, not to mention all of the rich who became richer ... it was 100% obummer. Who knew he was such a master of the markets?

Because it does stand to reason that if the last week was obummer's fault, all the market gains from the first 2,200 weeks or so of his presidency -- one of the longest bull runs ever -- was entirely to obummer's credit, right?

If only presidents had that much power.

[GGGG]

personally, i absolutely agree, increasing the interest rates would be harmful almost anytime, except, eventually we are going to have to face the music.  whoever is paid the big bucks is going to have to do it...gently.  obviously, timing is the biggest factor?

It would be harmful in the short term.  In the long run, some interest rate hikes (along with inflation) has some positives.  It would increase savings.  It would decrease the value of borrowing compared to income. 

Really it is ridiculous that 30 year mortgage interest rates are just over 3 percent.  In the good old days of the 90s it was around 7-8%.  In the mid to late 80s it was usually over 10%.  You want to know why lower and middle class wages aren't growing?  That's it right there.

[GGGG]

I see. Makes sense. So do you believe that eventually private sector middle/lower wage increases will occur? My feelings are that since the private sector has realized what people are willing to do for their current wages, they have no incentive to raise them.

When you have little inflation in the economy, and interest rates kept artificially low, wages aren't going to increase.  The core inflation rate (minus energy and food) has been less than 2% for awhile now.  If people can't sell their goods for more than a modest increase over time, how can they give people more wages?  And why would they need higher wages?

[jficke13]

Because it does stand to reason that if the last week was obummer's fault, all the market gains from the first 2,200 weeks or so of his presidency -- one of the longest bull runs ever -- was entirely to obummer's credit, right?

If only presidents had that much power.

He's been president for longer than I thought...

[ChicosBailBonds]

Did chicos ever share one of his 3 long plays, or is he worried we'd destroy the stock(s)?

My long is someone else's short, and vice versa.  You are a savvy investor, you know it depends on one's goals, time horizon, risk tolerance, etc. 

For me, I try to get into things that I believe people will want or need for decades to come.  People need energy.  People want to be entertained.  People need to eat.  So on and so forth.  I tend to lean more on the NEED, than the WANT because in desperate times WANT can be cut. 

I added more energy to my portfolio on Monday.  I feel that is a long term play.  Others will disagree, as stated in this thread.

[Badgerhater]

Invested some money today.  Nothing fancy.  Simply added to current positions based upon current dividend yield.  I'll collect 6 percent on a solid company while waiting for the market to rebound in whatever year it choses to do that.   

[jesmu84]

When you have little inflation in the economy, and interest rates kept artificially low, wages aren't going to increase.  The core inflation rate (minus energy and food) has been less than 2% for awhile now.  If people can't sell their goods for more than a modest increase over time, how can they give people more wages?  And why would they need higher wages?

Fair points. Then why has there been such a disparity between growth of executive pay and worker pay? Maybe we're talking about 2 different timelines?

[GGGG]

Fair points. Then why has there been such a disparity between growth of executive pay and worker pay? Maybe we're talking about 2 different timelines?

I guess I need to know what you mean by "executive."  If you are talking about those at the highest levels, and whose compensation includes stock, well yes.  Total compensation has increased mostly due to stock.  (But you need to know those are a very small percentage of the workforce.)

But if you are talking basic, salaried professionals making high-5 or low-6 figures, I don't think their compensation has increased much at all as a group. 

[Tugg Speedman]

I guess I need to know what you mean by "executive."  If you are talking about those at the highest levels, and whose compensation includes stock, well yes.  Total compensation has increased mostly due to stock.  (But you need to know those are a very small percentage of the workforce.)

But if you are talking basic, salaried professionals making high-5 or low-6 figures, I don't think their compensation has increased much at all as a group.

+1

Most of the astronomical CEO pay is due to them be award tons of stock and the bull market taking it higher.  It is not the company shelling out tens of millions in cash to them.

[jesmu84]

I guess I need to know what you mean by "executive."  If you are talking about those at the highest levels, and whose compensation includes stock, well yes.  Total compensation has increased mostly due to stock.  (But you need to know those are a very small percentage of the workforce.)

But if you are talking basic, salaried professionals making high-5 or low-6 figures, I don't think their compensation has increased much at all as a group.

Appreciate the response.

[Badgerhater]

+1

Most of the astronomical CEO pay is due to them be award tons of stock and the bull market taking it higher.  It is not the company shelling out tens of millions in cash to them.

Tax changes in the 1990s encouraged stock options and other non-traditional sources of pay to CEOs. 

http://www.washingtonpost.com/news/wonkblog/wp/2012/08/16/bill-clinton-tried-to-limit-executive-pay-heres-why-it-didnt-work/

The legislation also limits taxes collected:  From the article "While section 162(m) hasn't cut down on executive pay at all, it has reduced tax revenue by pushing corporations to reduce profits to pay their executives, which in turn reduces the amount of profits subject to the corporate income tax. He estimates that the rule lost at least $7 billion in 2010 alone and that more than half of that figure is due to the exemption of performance-based pay."

Heckuva job Bill.

[GooooMarquette]

I guess I need to know what you mean by "executive."  If you are talking about those at the highest levels, and whose compensation includes stock, well yes.  Total compensation has increased mostly due to stock.  (But you need to know those are a very small percentage of the workforce.)

But if you are talking basic, salaried professionals making high-5 or low-6 figures, I don't think their compensation has increased much at all as a group.

I think that's a good assessment - the compensation growth I've seen in that professional segment has been real, but quite gradual.  Certainly nowhere near the meteoric rise I've seen in charts showing compensation of the one percenters.

[brandx]

Reagan and Bush II extended tax cuts that led to middle and lower class income gap closure.

Did they do this before or after they raised taxes?

(Not a snarky comment. Just wonderin'.)

[GGGG]

Tax changes in the 1990s encouraged stock options and other non-traditional sources of pay to CEOs. 

http://www.washingtonpost.com/news/wonkblog/wp/2012/08/16/bill-clinton-tried-to-limit-executive-pay-heres-why-it-didnt-work/

The legislation also limits taxes collected:  From the article "While section 162(m) hasn't cut down on executive pay at all, it has reduced tax revenue by pushing corporations to reduce profits to pay their executives, which in turn reduces the amount of profits subject to the corporate income tax. He estimates that the rule lost at least $7 billion in 2010 alone and that more than half of that figure is due to the exemption of performance-based pay."

Heckuva job Bill.

And see the reason that was signed is because people were complaining about high salaries back then, and that they weren't tied to company performance.  So they created legislation that encouraged more compensation with closer relationship between compensation and performance (stock options), and this happens.

Look, executive compensation isn't going to change much no matter what limits you put on it.  Trying to craft a perfect system is going to have all sorts of unintended consequences. 

[Pakuni]

+1

Most of the astronomical CEO pay is due to them be award tons of stock and the bull market taking it higher.  It is not the company shelling out tens of millions in cash to them.

And therein lies the problem.
The existing compensation structure incentivizes executives to maximize stock value and little else, much to the benefit of themselves and perhaps short-term investors, but often to the detriment of long-term/institutional investors, as well as the company (and economy) as a whole.
See: Enron
See: WorldCom
See: HealthSouth
See: AIG

[warriorchick]

+1

Most of the astronomical CEO pay is due to them be award tons of stock and the bull market taking it higher.  It is not the company shelling out tens of millions in cash to them.

Well, I guess there is a silver lining to the stock market meltdown, then.  It helped with the income disparity issue.

[MU82]

He's been president for longer than I thought...

Crap. Math!

I hate when math ruins perfectly bad snark on my part.

More like 330-something weeks, right? Dang.

[jficke13]

Crap. Math!

I hate when math ruins perfectly bad snark on my part.

More like 330-something weeks, right? Dang.

Arithmetic... it'll get ya.

[Tugg Speedman]

Well, I guess there is a silver lining to the stock market meltdown, then.  It helped with the income disparity issue.

Cancel the meltdown, the maniac depressive market is now up on the week!

This is one of the craziest weeks ever in the market.