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The Crash of ’87, from the Wall Street Players Who Lived It

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Re: The Crash of ’87, from the Wall Street Players Who Lived It

#121

Post by PatientTrader »

jonwachob91 wrote: post #117
forapurpose wrote: post #109

Earlier quoted context omitted.

> Crashes are actually great for the middle class In perhaps one narrow sense. The middle class people who lose their jobs and savings, or whose welfare depends on economic activity (i.e., almost everyone) such as others buying, selling and investing in things don't do so well. Perhaps there is some data on how well the middle class did in 1929, 1988, 2008, etc.

It's also ignoring the amount of middle-class savings that are destroyed during the crash... The ONLY middle class individuals that benefit from a crash are those with the cash to buy in at the depreciated prices.

> It's also ignoring the amount of middle-class savings that are destroyed during the crash

Cash savings actually increase in value during crashes. Crashes provide the middle class with opportunities to purchase assets that they otherwise would not be able to afford.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#122

Post by pm90 »

aswanson wrote: post #112
lmm wrote: post #97

Earlier quoted context omitted.

There are more people looking to invest more money today, so supply/demand means you won't get as good a return. In '87 access to capital was more valuable, so you could get paid more for it.

Thats one thing that hasnt been studied enough, I suspect. Huge amounts of capital from 401ks alone may have more effect on the market valuations than actual value creation. There is just so much money chasing a return, increasing constantly.

This might be an unpopular opinion on this forum, but one of the best ways to reduce the money supply seems to be more taxation right? This is why I don't get why Republicans seem so hell bent on tax cuts... we already have so much money going around. Better take it out, fund healthcare and education and reasonable welfare systems.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#123

Post by PatientTrader »

swendoog wrote: post #115
PatientTrader wrote: post #87

Crashes are actually great for the middle class. The value of the dollar increases as prices come down. Homes, land, property, etc all become cheaper during crashes. This "bull market" is the actual "crash." All its doing is depleting the value of your money

I don't see how they're great for the "middle class". A crash is generally bad for anyone who's invested. I could only see it being good for people who have cash on hand after the crash.

> A crash is generally bad for anyone who's invested

You are forgetting that cash in hand or in a bank is an asset/investment. Cash should be 20-30% of any investment portfolio.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#124

Post by RobertoG »

mikeash wrote: post #114
mitsubishi77 wrote: post #111

Earlier quoted context omitted.

Sounds like a strange logic to me... Is that not like wanting to become a MD just so you can "know what to do" if you ever get sick?

I bet a lot of doctors became doctors for exactly that reason.

I bet it's even more common with psychologists.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#125

Post by RobertoG »

pm90 wrote: post #122
aswanson wrote: post #112

Earlier quoted context omitted.

Thats one thing that hasnt been studied enough, I suspect. Huge amounts of capital from 401ks alone may have more effect on the market valuations than actual value creation. There is just so much money chasing a return, increasing constantly.

This might be an unpopular opinion on this forum, but one of the best ways to reduce the money supply seems to be more taxation right? This is why I don't get why Republicans seem so hell bent on tax cuts... we already have so much money going around. Better take it out, fund healthcare and education and reasonable welfare systems.

If you fund healthcare and education you are putting the money out again.

-When you tax and spend, you are redistributing, but the final quantity is the same.

-When you tax but don't spend, you are reducing demand in the economy by making worse the people with money.

-When you don't tax and don't spend in public services (austerity), you are reducing demand in the economy by making worse the people without money.

That should explain the Republican position.

Anyway, there are different "kinds" of money, and only one "kind" is reduced or created that way.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#126

Post by vtange »

AnimalMuppet wrote: post #113
Lost_BiomedE wrote: post #81

Earlier quoted context omitted.

Safe bet: cash. Speculative bet: put options.

It seems to me that holding the stock but buying put options is not speculative; it's merely buying insurance. Why do you regard it as speculative? Or were you referring to selling put options?

Put options lose value over time. You are speculating on the near-term risk of stocks losing value - effectively trying to time the market/predict the weather.

Selling put options is a bet that the put options will expire worthless, which is a bet that stocks will continue to go up/not fall.

I honestly believe the insurance analogy for options is misleading. The value of an option is quite literally the difference in value between selling the stock at market price and at the option strike. As a stockholder you don't save yourself as much from buying put options regularly as you would from say getting a surgery covered with health insurance.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#127

Post by recursive »

mitsubishi77 wrote: post #111
justherefortart wrote: post #75

My fake portfolio as a kid was heavily IBM weighted. I think it was 120 or 126/share before the crash. This is one of the reasons I got a degree in finance (and economics). I wanted to know what to do with my money if I ever had any.

Sounds like a strange logic to me... Is that not like wanting to become a MD just so you can "know what to do" if you ever get sick?

Makes a lot of sense to me. I wish I understood how to deal with money. As it stands, my basic problem is that I don't trust anyone to tell me, since I don't know how to rule out a conflict of interest. So I just set my employer 401k to a high-seeming level and forge ahead.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#128

Post by danans »

pm90 wrote: post #122
aswanson wrote: post #112

Earlier quoted context omitted.

Thats one thing that hasnt been studied enough, I suspect. Huge amounts of capital from 401ks alone may have more effect on the market valuations than actual value creation. There is just so much money chasing a return, increasing constantly.

This might be an unpopular opinion on this forum, but one of the best ways to reduce the money supply seems to be more taxation right? This is why I don't get why Republicans seem so hell bent on tax cuts... we already have so much money going around. Better take it out, fund healthcare and education and reasonable welfare systems.

Wouldn't funding those programs put money right back into the economy, thus preserving the money supply?

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#129

Post by RobertoG »

rwmj wrote: post #93
Meegul wrote: post #92

Earlier quoted context omitted.

This is only partially true. It ignores the job losses that result from the fall in capital available to firms. Additionally, anyone owning equities, which should be most of the middle class although I'm aware this isn't the case, will see their wealth decrease. I'd argue that the only people who benefit from crashes are those with large amounts of cash assets, which is generally not how you should be holding your we…

> Holding cash, after all, is just withholding wealth from being productive. Unless you're literally storing notes under your bed, your bank is lending out your money to someone.

"Unless you're literally storing notes under your bed, your bank is lending out your money to someone."

Banks don't lend deposits. It seems that it's one of those fallacies that never die. Maybe, because it's in the textbooks.

"[..]reserve requirement does not act as a binding constraint on banks’ ability to lend and consequently their ability to create money. The reality is that banks first extend loans and then look for the required reserves later."

From: http://www.investopedia.com/articles/investing/022416/why-ba...

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#130

Post by nerfhammer »

pm90 wrote: post #122
aswanson wrote: post #112

Earlier quoted context omitted.

Thats one thing that hasnt been studied enough, I suspect. Huge amounts of capital from 401ks alone may have more effect on the market valuations than actual value creation. There is just so much money chasing a return, increasing constantly.

This might be an unpopular opinion on this forum, but one of the best ways to reduce the money supply seems to be more taxation right? This is why I don't get why Republicans seem so hell bent on tax cuts... we already have so much money going around. Better take it out, fund healthcare and education and reasonable welfare systems.

that's not how the money supply works.

US Treasury != US Federal Reserve

If you give the Federal Reserve a dollar it ceases to exist. If you give the Treasury a dollar it will go out and spend it on something, the dollar will continue to exist. Taxes go to the Treasury.

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