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Thread: More Asset Bubbles Ready to Pop ?:

  1. #1
    Banned Eric Stoner's Avatar
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    Default More Asset Bubbles Ready to Pop ?:

    More and more in the financial press and on Kudlow I am reading and hearing that Fed policy is feeding asset bubbles in stocks, gold and oil. Banks are borrowing money from the Fed at effectively zero interest. Less than zero if you allow for inflation. BUT the banks are NOT lending it out. Not enough of it anyway. Instead they are buying stocks; bonds; gold and oil. Remember that Glass - Steagall has niot been revived and that Goldman Sachs and Morgan Stanley are now "bank holding companies" that can borrow from the Fed. BOA now owns Merrill Lynch. J.P. Morgan Chase owns what's left of Bear Stearns.

    Considering the anemic economic growth and lousy employment picture, stocks are overvalued. Oil is selling for around $20 a barrel more than the laws of supply and demand would justify. Supply is strong with lots of tankers filled to the brim and just sitting around. Demand is weak. Gold is selling far beyond what realistic inflation fears would justify.

    Sooner or later the Fed is going to take away the punch bowl and then what ?

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    God/dess Deogol's Avatar
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    Default Re: More Asset Bubbles Ready to Pop ?:

    Stocks get corrected.

    This is really quite the problem we have. These guys know they can get money for free from the fed, then buy stocks. They also know their "competitors" can get free money from the fed, and buy their stocks. What a fucking mess.

    Without the firewall, these banks are not banks, they are stock brokers with access to free money.

    Then, when stocks go down, the US government will be looking for more debt. So they will borrow from the fed at zero and buy treasuries.

    What a wonderful place it must be to be in their shoes.

    There is definitely something broke in the system. These guys are getting money at 0% which is meant to be fed into the economy and all they are doing is trading stocks between themselves and trading money with the treasury.

    Meanwhile the rest of us starve and are kicked out of our homes.

    Heck, I read Melonie's stuff simply because it is less depressing LOL!!!

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    Banned Melonie's Avatar
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    Default Re: More Asset Bubbles Ready to Pop ?:

    Then what indeed ? The Austrian theory on this topic centers around all of those billions in TARP money or their own capital which the US banks are 'sitting on'. In effect, if the Fed shovels out freshly printed dollars, but those dollars wind up being 'sequestered' in interest bearing proprietary investments made by the banks receiving those dollars, then the impact of those freshly printed dollars re total currency in circulation is muted. But if those freshly printed dollars were to actually be loaned out by those banks , at 10:1 or 20:1 multiplier, we're instantly off to the 'inflation' races. Thus those that are encouraging banks to start making loans should be careful what they wish for !!!

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    Banned Eric Stoner's Avatar
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    Default Re: More Asset Bubbles Ready to Pop ?:

    ^^^ Correct BUT the TARP money was SUPPOSED to let the banks shore up their balance sheets; increase their capital base; ease their overleveraging AND enable them to make loans.
    What little lending they are doing is NOT going to small business which creates most of the new jobs and now with CIT in bankruptcy where are they supposed to get credit ?
    Part of the justification for letting Goldman and Morgan become "bank holding companies" was to INCREASE lending. They were so permitted getting the quid without any obligation to provide the quo.

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    Banned Melonie's Avatar
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    Default Re: More Asset Bubbles Ready to Pop ?:

    ^^^ nice theory ... or propaganda as the case may be. In the end it boils down to privatizing profits and socializing losses ... and the big banks simply aren't going to take risks writing new loans under current economic and socio-economic conditions. Frankly, I have been told that the small business loan sector is going to stay 'red-lined' until it becomes clear what kind of new costs US small businesses are going to be hit with that could swing profitability into bankruptcy. This includes such things as the employer fallout of national health insurance costs, increased energy / utility costs due to 'cap and tax', future US dollar / input commodity price inflation potential, higher personal = business tax rates for LLC's and Subchapter S etc.

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    Banned Eric Stoner's Avatar
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    Default Re: More Asset Bubbles Ready to Pop ?:

    Quote Originally Posted by Melonie View Post
    ^^^ nice theory ... or propaganda as the case may be. In the end it boils down to privatizing profits and socializing losses ... and the big banks simply aren't going to take risks writing new loans under current economic and socio-economic conditions. Frankly, I have been told that the small business loan sector is going to stay 'red-lined' until it becomes clear what kind of new costs US small businesses are going to be hit with that could swing profitability into bankruptcy. This includes such things as the employer fallout of national health insurance costs, increased energy / utility costs due to 'cap and tax', future US dollar / input commodity price inflation potential, higher personal = business tax rates for LLC's and Subchapter S etc.
    Lol. We're listening to the same people. And thank you for exposing the other side of the coin from the bank's pov. As you know, I don't have a dog in the fight from an investment pov.I'm OUT of the stock market, for the most part. What stocks I do have are foreign and/or commodity based . Nonetheless, I still have to live here although I'm trying to get set so as to avoid the coming 45% tax rate.

    Afaic this is just another illustration of how clueless Obama is regarding the economy. In hindsight, it 's going to look a LOT wiser for him to have gotten the economy back on its feet and THEN worried about health care and carbon emissions. More and more it's looking like he and his crew got the whole thing bassackwards.

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    Default Re: More Asset Bubbles Ready to Pop ?:

    What stocks I do have are foreign and/or commodity based
    ^^^ LOL same here ... except mine are all 'foreign' AND commodity based !

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