Global financial crisis - what does it mean to you

[mx250]

Strap yourself in for a bumpy ride is my advice . More bad times are more probable rather a 'turn for the better'. How bad? The full spectrum, from an adjustment to world depression, faces all of us. Don't be too alarmed because economic growth is as much about consumer sentiment and economic confidence as it is about the economic settings, the 'fundamentals'. 

That broker is extremely optimistic in my view. (Economist were invented to make weather forecasters look good  ).

In my view the economic model of debt driven consumerism (with debt, in part, being repaid by inflation with never a downturn ) is wrong - be that Greece or China. Given the slightest hiccup and the bastards can't 'steady the ship' and get back to the same economic model fast enough. And to do that they guarantee the 'too big to fail' banks/country/governments - who then use the guarantee to take riskier risks for short term profits and fat pay checks while digging a deeper hole which we 'can't allow to fail'.

And brokers trying to make money by encouraging optimism and trading volume (profit to them) on the upswing and downswing . 

[vmx42]

Too right Graeme. All too true - but it is not what the average punter wants to hear. We are supposed to be the most educated humans ever to walk the face of the planet - but in reality we are as dumb as ever.

It is just like the industry built around 'weight loss scams'. The science of weight loss is just basic physiology, but it involves doing things that a vast number would really prefer not to do. So instead, to make themselves feel better, they read the womens magazine to hear about the latest miracle diet of the stars. And then a short time later the next miracle diet of the stars and so it goes on.

But if you try to tell them the truth… UGGGGGHHH - are you mad I can't do that!!!! Are you insane!!!! Well the financial markets are just the same, we do everything we can to get something for nothing and completely ignore reality. And you wonder why we get the governments we do - if they told us the truth they would be shot.

Gotta love human nature.

And brokers trying to make money by encouraging optimism and trading volume (profit to them) on the upswing and downswing . 

The Brokers story is so true. It is an industry based on participation and speculation with your money, nothing more. So long as the wheels are turning everything is just fine. Until you hit that bump in the road.

There is a simple BS tester that no broker that I have ever met could [or would] answer. "If you GENUINELY knew what was going to happen in any financial market, even just tomorrow… WOULD YOU TELL ME?"

The answer is 'OF COURSE NOT'. If they genuinely knew what was going to happen they would keep it to themselves.

Even if you knew to 80% certainty, you could make a fortune virtually overnight - and if you think they would tell you then you truly are delusional.

So the bottom line is that they peddle middle of the road, average products hoping to meet their budgets to get their bonuses. How it works out for the investor is never even considered.


By the way, that bump in the road up ahead looks like a whopper… better hold on tight!!

[firko]

I think it's a cyclic thing and will get better quicker than the 'glass half empty' cynics think.

[vmx42]

Really not trying to be glass half empty.

But the more 'they' tell me to fill up the glass the more concerned I become, because nobody will come along and offer to bail me out if it goes tits up.

[mx250]

I think it's a cyclic thing and will get better quicker than the 'glass half empty' cynics think.

A bit more than cyclical methinks.....

This is just Europe (but similar if not worst for USA and Japan, and a whole bunch of others); lots of debt and no surplus income to pay back debt - in fact struggling to meet govt commitments and service loan (which is what the Greek Crisis was all about). It wouldn't take much increase in commitment or decrease in income (both likely to Govt during a recession) or the drying up of available credit or an increase in the price of credit, to put them over the edge. And the trick is to reduce spending without deepening the recession and spiraling downward.

Throw in a little political uncertainty (Britain, Italy ) and..........

"One of the main causes of the currency crisis in the eurozone is that virtually all countries involved have breached their own self-imposed rules.

Under the convergence criteria adopted as part of economic and monetary union, government debt must not exceed 60% of GDP at the end of the fiscal year. Likewise, the annual government deficit must not exceed 3% of GDP. However, as the maps show, only two of the 16 eurozone countries - Luxembourg and Finland - have managed to stick to both rules.

Overall, Greece is the worst offender, with debt at 115.1% of GDP and a deficit of 13.6% of GDP. But among the bigger economies, Italy's debt is even higher than Greece's as a percentage of GDP, while Spain's deficit is 11.2% of GDP. If the UK were in the eurozone, it would also fall foul of the criteria, with its debt now standing at 68.1% of GDP and its deficit at 11.5% of GDP."


http://news.bbc.co.uk/2/hi/business/10150007.stm

[vmx42]

hey Graeme,
Not sure I totally understand your 'Fear give intelligence to fools' tagline.

What is your reading of it?
VMX42

[mx250]

hey Graeme,
Not sure I totally understand your 'Fear give intelligence to fools' tagline.

What is your reading of it?
VMX42

It's my motorcycling maxim not my financial maxim  .  (A.K.A. Fear gives wisdom to the foolish). That is, a little fear stops me going too far (making a fool of myself financially or hurting myself physically )

It has a corollary; fear is the theft of dreams. Also true.

Good judgment has you treading a careful path between these two maxims/truisms

[vmx42]

Good judgment has you treading a careful path between these two maxims/truisms

You wouldn't have a map of that path would you? Or a GPS file for the newbies? 

[mx250]

Good judgment has you treading a careful path between these two maxims/truisms

You wouldn't have a map of that path would you? Or a GPS file for the newbies? 

Sorry, I can't give you a map or GPS references but I recommend one of these.



(I'm the bastard on your left if you're wondering )

[mx250]

Too right Graeme. All too true - but it is not what the average punter wants to hear. We are supposed to be the most educated humans ever to walk the face of the planet - but in reality we are as dumb as ever.

It is just like the industry built around 'weight loss scams'. The science of weight loss is just basic physiology, but it involves doing things that a vast number would really prefer not to do. So instead, to make themselves feel better, they read the womens magazine to hear about the latest miracle diet of the stars. And then a short time later the next miracle diet of the stars and so it goes on.

But if you try to tell them the truth… UGGGGGHHH - are you mad I can't do that!!!! Are you insane!!!! Well the financial markets are just the same, we do everything we can to get something for nothing and completely ignore reality. And you wonder why we get the governments we do - if they told us the truth they would be shot.

Gotta love human nature.

And brokers trying to make money by encouraging optimism and trading volume (profit to them) on the upswing and downswing . 

The Brokers story is so true. It is an industry based on participation and speculation with your money, nothing more. So long as the wheels are turning everything is just fine. Until you hit that bump in the road.

There is a simple BS tester that no broker that I have ever met could [or would] answer. "If you GENUINELY knew what was going to happen in any financial market, even just tomorrow… WOULD YOU TELL ME?"

The answer is 'OF COURSE NOT'. If they genuinely knew what was going to happen they would keep it to themselves.

Even if you knew to 80% certainty, you could make a fortune virtually overnight - and if you think they would tell you then you truly are delusional.

So the bottom line is that they peddle middle of the road, average products hoping to meet their budgets to get their bonuses. How it works out for the investor is never even considered.


By the way, that bump in the road up ahead looks like a whopper… better hold on tight!!

Some good healthy skepticism there 42 .

The stock exchanges provide two services to the community, one is to the economic benefit of society the other isn't. Stock exchanges are very important to the efficient assembling and allocation of capital in the economic process. The stock exchange is also a form a gambling which is not an economic benefit but rather an economic danger. Some stock exchange transaction simply concentrate wealth (when someone 'wins' someone also 'loses' the equivalent amount (less broker fees for buying and selling , of course )).

Unfortunately everyone uses the same expression to describe the windfall; 'I made money' on the sale.

Unfortunately there is more gambling than investing at the moment. 50 years ago the primary investors were private individuals (90%) and institutions (10%). These days its the other way around. Private investor buy and hold stock long term. The institutions, and some private (traders but more correctly speculators/gamblers) are not only buy short term but even bet on the upward and downward fluctuations of the market which can exacerbate or even be self serving.

Unfortunately, as you describe, the individual, and collectively as nations, general worldview has changed so they now have the right and expectation to 'make money', and spend, without creating wealth. This is the attitude that has fired the economic model of debt driven consumerism which can be seen in nations and individuals.

[vmx42]

The guy on the right looks a bit like the 'farting guy' from Blazing Saddles…

[vmx42]

Some good healthy skepticism there 42 .

I really do try not to be a skeptic [my close friends will laugh at that statement  ], but it is so difficult when you are constantly bombarded with biased, one eyed, misleading bulls$@t.

If it is not Gerry Harvey telling me I don't have to pay for 4 years, it is an economist telling me that now is a great time to invest, to a real estate agent telling me now is a great time to invest, to the financial adviser telling me now is a great time to invest… etc, etc…

I just feel that the harder they push their CRAP at me, the harder I have to RESIST. I almost feel it is my responsibility to show my ambivalence to their distorted, biased messages.

I know they don't really care about me or my welfare.

I am really happy [and somewhat proud] that both my kids have finely attuned BS meters and enthusiastically bag out the latest 'Current Affair' or Today Tonight' crap fest for what it is. I don't want them to allow that cycnacism to influence other parts of their lives, but a healthy level of distrust of the media/politicians/money makers will serve them well as they grow into adulthood.

It is sad that you have to, but if you couldn't laugh at them you would go mad and/or broke.

[EML]

If you've ever wonder what it's like to passenger a sidecar cross outfit, get into the stock market.
You are just the ballast, they can't go on without you and when they hit a bump it all goes up in the air and where you land is out of your control for the most part.
The best you can do is try to steer it from afar (no throttle, brakes or even handle bars) or jump ship-which by the way I've seen a few do.....
Sounds like life really.....

[vmx42]

If you've ever wonder what it's like to passenger a sidecar cross outfit, get into the stock market.

Walter, that is the funniest thing you have ever said…

Perhaps all Bankers and Stockbrokers should go for a ride in a sidecar to understand helplessness!!

[mx250]

Some good healthy skepticism there 42 .

I really do try not to be a skeptic [my close friends will laugh at that statement  ], but it is so difficult when you are constantly bombarded with biased, one eyed, misleading bulls$@t.

If it is not Gerry Harvey telling me I don't have to pay for 4 years, it is an economist telling me that now is a great time to invest, to a real estate agent telling me now is a great time to invest, to the financial adviser telling me now is a great time to invest… etc, etc…

I just feel that the harder they push their CRAP at me, the harder I have to RESIST. I almost feel it is my responsibility to show my ambivalence to their distorted, biased messages.

I know they don't really care about me or my welfare.

I am really happy [and somewhat proud] that both my kids have finely attuned BS meters and enthusiastically bag out the latest 'Current Affair' or Today Tonight' crap fest for what it is. I don't want them to allow that cycnacism to influence other parts of their lives, but a healthy level of distrust of the media/politicians/money makers will serve them well as they grow into adulthood.

It is sad that you have to, but if you couldn't laugh at them you would go mad and/or broke.

I don't think your kids will go far wrong with guidance like that  .

I think I can say the same thing for my kids - so far so good  .