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OT- Who/What's to blame?


@DCGoldPants

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Originally posted by Funkyalligator

the cyclical nature of the economy. It happens....the economy was growing too fast and the rest of society couldn't keep up.

It's not the economy that grew too fast. It was the stock market, based on wildly inflated valuations of Internet and technology companies, which were in turn based on a nonsense idea of a "new economy" in which profit was not relevant to market valuation.

There are various reasons why Internet companies are almost all not profitable. While some companies have been based on dumb ideas, that's not the whole explanation. One underlying problem is that the Internet as a medium has not been able to sustain a revenue model, whether based on advertising or paid subscriptions.

All the money poured down the stock market toilet after technology companies is pulling down the rest of economy. I don't see any reason for a strong recovery anytime soon.

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The market slowdown is an incredible combination of factors from the recession to the bubble bursting on the Internet bubble. The problem is still that analysts still are predicting far too bullish a revenue growth for tech companies and therefore it's impossible to really meet those expectations despite being impressive. Nokia still is expected to grow at 20 percent even when the company continues to miss and lower expectations. A 10 percent growth rate would be incredible, but, after years of 30 percent a year, it seems troublesome and the psyche of the market still views 10 percent growth as a slowdown rather than good business for any company of size.

At some point the bottom will be seen and we'll start to witness a slow recovery. But, we're already at 1998 levels so much of the inflated valuations in the market have been priced out. Not all of it though. I wouldn't be surprised by the Dow hitting 8500 and the NASDAQ hitting 1200 before we really see things turn.

And, at that point, when you are buying stocks at levels seen six years ago, you'll start wondering how it happened, because things will be good for a few years after :).

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In no particular order:

- Natural fluctuations in the market created a downturn in the economy that began two full years ago.

- Inflated stock prices, especially in the high-tech/internet sectors led to overexpansion by companies, who then overextended their credit and hiring. They're now paying the price by downsizing, going BK, or dissolving. This too began 2 to 2.5 years ago, and has continued.

- Fraudulent accounting practices that have frankly covered up theft on a massive scale have not only, of course, ended up destroying the companies involved, but have also led to uncertainty in the stock market about the legitimacy of stock prices as people no longer fully trust the company performance numbers from accountants that those prices are based on. Enron brought this to light last fall/winter, and the breadth of the scope of the problem continues to be revealed.

- September 11 and the greater attention to conflict in the world have led to greater conservatism on the part of our country and its citizens to invest and do business overseas. It's also led to greater domestic security, especially in travel, that has slowed down business travel and increased the cost of doing business.

- The concern and uncertainty of all of the above has led companies to take a very conservative approach to hiring, expanding and investing, which has further slowed down the economy.

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I agree redman especially about the corruption part.

News 7 here in DC 3 months ago did a series about to black systems tech who found backdoors in one of the classified computers used in the stock market and gathered papers showing how upset the higher ups were at th N****s sticking their noses into the matter

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Originally posted by NavyDave

I agree redman especially about the corruption part.

News 7 here in DC 3 months ago did a series about to black systems tech who found backdoors in one of the classified computers used in the stock market and gathered papers showing how upset the higher ups were at th N****s sticking their noses into the matter

This is one of coming nightmares of the 21st century. Everyone raves about the advantages of computers, but no one thinks about how easy it is to design or insert backdoors to computer systems. The design can be done at the time of original coding, and once the executable code is spit out, no one will find it.

This affects almost everything. Anything of value run by a computer or transmitted by a computer is vulnerable. Even state lottery systems can be rigged, among countless targets.

I'm in the computer industry, so don't assume I'm some kind of Luddite. I know how easy this is, and how hard to detect.

The problem is not hackers, or hackers alone. It's fraud by design.

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Who/what's to blame? Are you serious? You're asking THIS board that question??? Must be rhetorical, right? Surely you know it's the "liberals" who are responsible for everything from the economy to 9/11 to these asteroids that keep whizzing by us unseen.

You knew that, right? :laugh:

(by the way ... and let me make this perfectly clear ... I'm not a liberal) :)

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the stock market bubble and subsequent crash (esp. on the tech side) were caused by the following:

1. Movement of workers away from traditional pension plans and toward self-directed accounts, where brokers/advisors counseled a high risk/high growth strategy as the only way to ensure retirement income.

2. A new technology, ie the Internet, which caused both investors and brokers to conclude that established gauges of the worth of a business were obsolete and that measuring standards other than the bottom line profit/loss were more important in valuing the companies of the future.

3. The expectation that a 25-30% return on stock investments could become the norm of the future and turn the 1930-1992 average of 11% on its head.

4. The idea that any individual with only a few hours worth of knowledge gained from online investment services and websites could learn to successfully invest and manage and trade a portfolio of stocks.

It took me a lot longer than a few hours to learn how to manage my own portfolio and while I ain't the brightest light in the night sky, I ain't the dimmest either :cheers:

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Along with all of the reasons listed above, one that has gone unmentioned is the ridiculous increase in the size of government spending over the last four years. Despite what Keynesian b.s. academics love to preach despite loads of evidence to the contrary, government spending is bad for the economy, because it takes funds out of the private sector where wealth is created, and moves it into the public sector, where more often than not wealth is squandered.

According to the London Economist, last year Non-Defense Discretionary (meaning not counting Social Security, Medicare, or Medicaid or Defense) grew 17%. This year so far, it is up 9%. This is not some post 9/11 trend; these levels go back to when Hastert became speaker of the house. With Congress divided nearly evenly between the 2 parties, everybody is making deals for pork to protect their incumbency. Unfortunately, neither Clinton nor Bush has shown any fortitude in trying to rein in the porkfest. Bush hasn't vetoed even one single spending bill. This has become far worse than the sickening spending sprees of the 80s. For all the talk about liberals and conservatives, the only things separating the Dems and the GOP anymore these days are a handful of social issues like abortion or affirmative action.

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The market crashed because it was a classic bubble, overpriced and built entirely on inflated expectations.

The economy slumped because companies were over inventoried, the loss of consumer confidence following the market downturn and 9/11 depressed spending, and softness in energy and manufacturing, along with over-exposure in banking and insurance. Inventories are still up too much, but nobody's buying.

The one thing that seems to be keeping things going is the remarkable productivity of American workers (somehow we all became alpha types in the 90's :) ), which is still showing signs of increasing.

There's no money supply problem, credit is cheap, and the government dipping back into deficits hasn't started biting into the supply yet, so businesses can afford to expand when the time is right.

My guess is that it will take the rest of the summer for inventories to clear to the point where manufacturing picks back up again.

If we can time Art's 8500 Dow for around then then then the economy and the market might find itself synching up sometime in the fall and taking off next spring.

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you knew something was up when CNBC guests were talking up the market as having bottomed out with a PE of 25 across the board six or seven months ago.

the only stocks that have traditionally held that high a price to earnings were drug companies and others such as IBM when it rolled out the 360 computer in 1964, etc.........or Microsoft with Windows applications in the early 1990's..................

the rest of these stocks are going to settle down at some point to the teens and some to the single digits as they have historically.

perhaps the use of the 401K and SEP vehicles will keep demand for issues at a brisker and more sustained pace and thus a higher multiple, but not enough to warrant those kinds of numbers.

Oracle and Cisco are still way overvalued at their current numbers, a fact which some still find hard to believe. :)

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Lets get real Clinton took office when the economy was rebounding from the hick up that was called the worst economy in 50 years and was kept in check by the GOP congress as well as forced to move to the center if he wanted to get re elected.

Now someone tell me how an increase in taxes would create an incentive to invest

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