The problem is that economics in general is taught from the viewpoint of the top. Innovation and entrepreneurship are neither top down nor particularly bottom up phenomena, most are done by people somewhere in the middle, who have enough disposable income to do something but live at bare subsistence. Bill Gates? Upper middle class kid who went to Harvard, found a guy with a primitive operating system for a computer that ran on a disc instead of magnetic tape and had the money to buy it. Sam Walton? Able to borrow $20,000 from family to buy a five and dime store. The Wright brothers? Had a bicycle shop. And it goes on from there.

Destroying the middle class in the US is what has stifled innovation and entrepreneurship and those are what have attracted direct business investment. The top is risk-averse. The bottom is broke. So's the whole system.

Both parties are going to have to get serious about rebuilding the middle class unless they want this country to settle into being a post industrial backwater. Neither party is going to like some of the ways this needs to be accomplished.

This country is broken beyond repair.

Maybe the whole human race is.

and on into the early 30s when the bottom dropped out completely. After all, the 1920s were a big party when young women smoked, drank, and misbehaved, when the rich just kept getting richer and a lot of people were borrowing against paper profits on stocks they'd borrowed to buy. Then the bottom dropped out of the stock market and the banks failed and everybody said money just went away practically overnight. It took that much of a disaster to get reforms passed over the howls of old and new money alike.

I don't know what the catastrophe will be for us, I've been watching Russian propaganda today and I've lost too many brain cells to speculate.

I've been watching for it, too. Not so much the stock market mini-collapse of the 1980s, or even the dot-com bubble, but the housing market mess of the early 2000s grabbed my attention because I had worked in jobs tangentially connected. I saw how the money people manipulated things, and manipulated people as if they were markers on a board game.

The reforms of the 1930s are anathema to the money people today; they're actively trying to destroy those reforms while at the same time making sure their wealth -- and power -- are protected. They learned those two lessons from the '29 crash. We the people haven't learned ours.

The stock market in 1929 had been growing increadingly unstable for months before the crash came. The movers and shakers just neglected to inform anyone outside their tight little circle what that might mean. A couple got out just in time and the rest, while considerably poorer than they'd been at the beginning of the year, never missed a meal, unlike the rest of the suckers.

By the time the crash came and the Depression hit, housing prices had fallen for nearly a decade, farms had failed as wholesale food prices had dropped below what it cost farmers to plant, and the Dust Bowl finished them off. The signs of a sick economy were all there before Wall Street crashed and I think a lot of people thought the country was broken beyond repair then, too.

Something big is coming, don't know when, but it will affect all of us. And that's about all I need to say.

. . . . it will precipitate a great ugliness.

There is too much anger, too much fear, too much desperation, too much ignorance at the top as well as at the bottom, and it's all just waiting for a spark.

I rarely venture beyond the confines of this daily thread because I consider even the rest of DU too dangerous.

When things are like they are now (lots of $ being lost), it brings out the worst in some people!

Take care and I appreciate your daily thread.

. . . . the money that's being lost. It's lives and opportunities and "rights" and dignity and hope.

My profile says I've been here on DU since 9 June 2002; I was here for a while before that under another account/name that I closed for reasons no longer important. I watch and read a lot, but this is my safe haven. I have no power to affect the markets, and I rarely even comment on them per se. But I have no faith in them at all and consider them as much a gamble as a Vegas slot machine. It's all rigged in the house's favor. Will I cheer if/when the whole house of cards collapses? No, because I know it will be painful for a lot of people. But I may sneak in a tiny "I told you so."

Last edited Sun Mar 12, 2023, 11:23 AM - Edit history (3)

Yes, the market periodically goes down, some times very steeply. To take the 3 steepest pullbacks since WWII: In '73-'74 we had a 48% drop from peak-to-trough, and it took 7.5 years to recover from that and reach a new high. In the Dotcom bust we had a 49% drop and a 7.2 year recovery time. In the Housing Bubble bust it fell 57% and took 5.5 year to recover.

I guarantee plunges of this depth will happen again. Crashes happen and will continue to happen. I too will join you in telling anyone who doesn't think a crash will ever happen again, "I told you so".

I don't think predicting a crash is any more insightful than predicting that some day there will be a solar eclipse. I don't know anyone who thinks a crash will never happen. Everyone knows it will happen. Personally I think stock valuations are way high and we're plenty ripe for one.

But even after a 50% or 60% plunge, I will still have a bigger nest egg as a long-time buy and hold equity investor. Why? Because after 2 or 3 doublings (meaning a 4 fold or 8 fold increase), a 50% plunge still leaves me with a 2 fold or 4 fold increase.

Nothing holds up as well in the face of withdrawals and inflation than does equities, except perhaps real estate. In other words, it's an even bigger gamble to not have a sizable proportion in equities.



Over the past 20 years, it has grown 6.37 fold, an average annual increase of 9.7%/year
(had the market crashed 60% in 2022 -- a worst crash than any of the post WWII crashes -- then it would have still grown 3.11 fold, an increase of 5.8%/year)

Over the past 50 years, it has grown 131 fold, an average annual increase of 10.2%/year
(had the market crashed 60% in 2022, then it would have still grown 64 fold, an increase of 8.7%/year)

and so on. I'd go to Vegas a lot if I could average these kinds of returns.

This is from the below link, which also has similar for bonds, Treasury bills, and gold. These don't come close to matching the increase in equities.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

And I'm not just cherry-picking the boom periods. The above is inclusive of all periods, down, up, flat.

And when the market recovers and goes on to set yet more new all time highs, I will say "I told you so" to anyone who thinks it will never recover.

The market periodically sets new all time highs. It has never set an all-time low.

Yes it goes up and down and up and down and ... but the pattern is that new lows are higher than the previous lows and new highs are higher than the previous highs.

What really matters as far as risk is the risk of running out of money in retirement, and that risk is much higher for people who don't have any equities and only rely on "safe" fixed income investments, which don't even keep up with inflation. Innumerable historical simulations in innumerable studies have shown that. IOW its a bigger gamble not to be in the market. I don't wish to take that gamble.

I hate to see my fellow progressives misled by anti-equity JackPineRadicals-style "progressive" malarkey and end up having to live a very financially constrained old age, not to mention having very little or nothing to give to Democratic candidates or progressive causes. And by default having to accept the minuscule interest that the banks usually dole out in savings and CDs and so on.



Only a fool gambles with their retirement security -- And it makes DU investors out to be fools because only a fool would wager their retirement security on a Vegas slot machine. We are not fools. In the face of inflation and withdrawals, it's an even bigger gamble to NOT have a sizable proportion in equities.



Yes, a lot of people. 58% of American adults own stock according to a Gallup Survey, 3/5/23 https://www.msn.com/en-us/money/savingandinvesting/only-15-of-american-families-directly-own-stock-and-that-s-okay/ar-AA188NL7
pointing to the detailed report at https://www.fool.com/research/how-many-americans-own-stock/

And if the big crash happens on President Biden's watch, it will be super-painful for everyone to the left of Attila The Hun come the next election and the 4 years after.

Edited to add 1205pm ET: I wish someone could tell me which "Indian casino" gives its clients on average a 223% cumulative return over 10 years, a 537% cumulative return over 20 years, a 1,444% cumulative return over 30 years, a 6,759% cumulative return over 40 years, a 13,016% cumulative return over 50 years, a 33,400% cumulative return over 60 years, and a 120,090% cumulative return over 70 years, because I sure would like to "gamble" there. The equity market is AN INVESTMENT.

What drives the market is earnings (not "luck" or the pull of a slot machine handle ). This from Peter Lynch in 2001:

I've been around longer than my profile indicates as well. It was so many years ago I cannot remember what occurred or why but I've been around a long time too.

You are right, it is nothing more than a huge casino.

If I want to gamble, I can go to the local Indian casino!

I certainly respect your perspectives and I cannot say I disagree with them one bit.

Take care Tansy_Gold and know I think as you do and I will continue to follow your daily thread. Thanks again!