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| The S&P Is OverValued By 50% -- Or More in forum [Market-Ticker]
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Pika-steph
Posts: 54732
Incept: 2007-09-11
Live Free Or Die; US Army Est. 1775
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When you first did the Ticker about the debt expansion vs. GDP I started wondering about the direct effects on the stock market. I came the conclusion I didn't really want to do the math on that. Thanks for wrecking my avoidance. 
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Stop the Looting; Start Prosecuting - http://www.FedUpUSA.org/ "The only regulation that really works is failure."--Rick Santelli
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Mayorquimby
Posts: 13909
Incept: 2008-09-18
The Archaic Past
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They who wish to hurt you, work within the law.
- Morrissey
Gold is theft.
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Pika-steph
Posts: 54732
Incept: 2007-09-11
Live Free Or Die; US Army Est. 1775
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Oh yes, that was what was missing, a chart.  Thanks Mayor. 
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Stop the Looting; Start Prosecuting - http://www.FedUpUSA.org/"The only regulation that really works is failure."--Rick Santelli
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Docj
Posts: 1000
Incept: 2009-09-10
Duck & Cover
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KD - apologies in advance if I'm misreading you, but I don't see how any of this disproves the Laffer Curve, which I've always thought was more a logical theory rather than a strict mathematical or economic argument.
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The preservation of liberty depends upon the intellectual and moral character of the people. As long as knowledge and virtue are diffused generally among the body of a nation it is impossible they should be enslaved. - John Adams
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Genesis
Posts: 130793
Incept: 2007-06-26
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Yeah, ok.
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I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
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Pika-steph
Posts: 54732
Incept: 2007-09-11
Live Free Or Die; US Army Est. 1775
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Doc - does the phrase 'garbage in/garbage out' mean anything to you?
The metric is only as good as the data that goes into it. If the data isn't based upon mathematics, then how is there a uniform metric? If I change the metric of inches to be something like spaghetti noodles, how does one ever obtain the accurate measurement of a foot? A yard?
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Stop the Looting; Start Prosecuting - http://www.FedUpUSA.org/"The only regulation that really works is failure."--Rick Santelli
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Genesis
Posts: 130793
Incept: 2007-06-26
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No, it doesn't, for true believers.
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I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
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Randy123
Posts: 5788
Incept: 2008-09-24
Earth
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Everything is overvalued. Including metals that the ZH crowd jizzes over everyday. No place to hide.
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China is the Enemy. Wake Up.
New Normal. Same As The Old Awful.
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Fraudster
Posts: 4175
Incept: 2011-05-10
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Quote:From 2010 onward GDP advanced by 3.93% annually. Debt advanced by 0.93% annually. Debt saturation. What puzzles me is how the debt coverage picture is improving. I would think that once you hit debt saturation, nominal GDP should be declining as you shove more debt into the system.
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"Let China sleep, for when she wakes, she will shake the world." - Napoleon Bonaparte
"Circulation ceases first at the outer edges [Europe and Japan]. It will take a while yet for the decay to reach the heart [America]." - Foundation & Empire by Isaac Asimov
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Docj
Posts: 1000
Incept: 2009-09-10
Duck & Cover
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Steph - maybe I'm just being dense, but I don't understand how any of what KD has correctly pointed out above relates to the notion that, above a certain point, increasing tax rates does not produce net additional tax revenue - which, unless I'm wrong, is the basis of Laffer's argument.
I can easily buy the argument that what we saw during the 80's had little to nothing to do with Laffer but rather was entirely driven by debt creation - which is why we didn't really see any change when Poppy and Bubba increased the tax rates in the 90's (because the debt kept on flowing). Or is THAT the point?
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The preservation of liberty depends upon the intellectual and moral character of the people. As long as knowledge and virtue are diffused generally among the body of a nation it is impossible they should be enslaved. - John Adams
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Mayorquimby
Posts: 13909
Incept: 2008-09-18
The Archaic Past
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Karl shining light on this is how I found Tickerforum. I am amazed there are virtually NO OTHER people, bloggers, reporters, economists etc. who truly 'get it'.
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They who wish to hurt you, work within the law.
- Morrissey
Gold is theft.
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Lowbeyond
Posts: 16937
Incept: 2008-02-11
CO aka West NJ/East CA
Online
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i donno tax rate at zero collects zero, tax rate at 100% collects zero.
in the middle there is x rev vs y marginal rate, does it look like the laffer curve? maybe, maybe - not
but one would think there is a equilibrium in there somewhere. else are you not just assuming that higher and higher marginal rates (above zero) give you higher and higher collections until 100% where it just goes strait to zero all at once?
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Maybe it was a birdy bread-bomber from the future?!
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Pika-steph
Posts: 54732
Incept: 2007-09-11
Live Free Or Die; US Army Est. 1775
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I just added to my explanation...I realized I was being a bit too cryptic. My apologies, Doc, but your inability to see something really, really obvious is not just frustrating, it's unfortunately illustrative of much of the population.
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Stop the Looting; Start Prosecuting - http://www.FedUpUSA.org/"The only regulation that really works is failure."--Rick Santelli
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Mrbill
Posts: 7857
Incept: 2008-10-19
North Carolina
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That's the point, Docj :)
Everyone talking about tax rates and "growth" is talking nonsense.
Which means, just about everybody talking about the economy in any way.
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Docj
Posts: 1000
Incept: 2009-09-10
Duck & Cover
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Steph - Sure, and that's why I don't view the Laffer Curve as an economic analysis or a mathematical proof. It cannot be validated, or invalidated, at this point because the entire data set has been poisoned since, well, at least the 70's and probably much earlier.
Sorry if I wasn't clear.
If only we could be so fortunate to, in our lives, be able to test Laffer's thesis with pure data. Won't likely happen, though.
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The preservation of liberty depends upon the intellectual and moral character of the people. As long as knowledge and virtue are diffused generally among the body of a nation it is impossible they should be enslaved. - John Adams
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Joshua_d
Posts: 163
Incept: 2010-08-26
Lenoir, NC
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I fully expect house and land values to revalue down by a whole lot. I don't know when or by how much, but a 50% drop would be nice for me and my family. I'd consider buying a home and land then.
But, I'm curious what will prompt or force land/home owners to accept the drop, not to mention local governments whose budgets require that property valuations continue to rise ... forever.
No one I know is ready to even consider the possibility that land/home values must crash, and crash hard. Right now I'm torn between simply taking on a loan to get some land vs. waiting to be able to possibly truly afford some land. I hate debt, and I don't want it.
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Pika-steph
Posts: 54732
Incept: 2007-09-11
Live Free Or Die; US Army Est. 1775
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Fraudster wrote..Debt saturation. What puzzles me is how the debt coverage picture is improving. I would think that once you hit debt saturation, nominal GDP should be declining as you shove more debt into the system. An over-simplified analogy, but think of it as the Titanic. It's got a lot of momentum and it's enormous. It can't turn on a dime. Reaction time is also slowed by the amount of leverage continuing to be put into the system. The wall has already been hit, but the realization hasn't happened.
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Stop the Looting; Start Prosecuting - http://www.FedUpUSA.org/"The only regulation that really works is failure."--Rick Santelli
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Mayorquimby
Posts: 13909
Incept: 2008-09-18
The Archaic Past
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The problem is that debt without gdp is a ponzi and once you run out of suckers, the chain letter collapses in on itself.
They can hand everyone a chunk of debt but that ends since it requires more people paying off debt tomorrow than are getting into debt today in order to function. So excess leverage, once it permeates the entire economy, is always going to be self-defeating!
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They who wish to hurt you, work within the law.
- Morrissey
Gold is theft.
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Flyanddive
Posts: 578
Incept: 2008-10-10
Detroit
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Quote:Everything is overvalued. Including metals that the ZH crowd jizzes over everyday. No place to hide. Looking at history, the price of Gold seems to be tied to the level of economic panic. I can find no other correlation that even comes close to that, and certainly not dollar devaluation.
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"I've seen people go into real poverty trying to pretend to be rich."
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Bertdilbert
Posts: 2666
Incept: 2008-12-22
CA
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And that is the problem with forced low interest rates on treasuries. Everything is priced on a basis against them. Lower the treasury rate and the higher stock price becomes "justified" verses treasury return. Only an idiot would make home loans at these rates whoops that is the government ha ha. It can't be unwound without everything crashing down.
At best the, Fed and US government has created a mirage on your investments, your retirement and your tax rate. QE lowers your interest income, while lowering the government cost of borrowing, a stealth tax on your savings. Operation twist was just another scheme to lower the government cost of borrowing.
It appears we have reached the brink of stall speed and unfortunately we are not sitting in a glider.
I guess the best way to describe this is government sponsored falsification of asset prices. When it corrects, it will place an amazing hole in the pension funds of all those union workers and Obama is going to want to bail them out. It is gonna be big.
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Dear Euroland: Relax, Germany has a plan for your money!
Political Capital Defined: We are out of money but will tax our citizens for whatever it takes to "SAVE" the Euro.
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Wcvarones
Posts: 91
Incept: 2007-07-13
San Diego, CA
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Yes, but. What happens when the S&P and housing drop 50%? Pension funds are all instantly bankrupt, municipalities are all toast, households are all insolvent, banks are all insolvent, federal government revenues plummet and the deficit blows out, and the feds can't service their debt with out Fed monetization. Which is why they are going to keep printing money. Devaluation is the only way out. http://www.wcvarones.com/2010/07/devalua....
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Don't lend no hand to raise no flag atop no ship of fools.
wcvarones.com
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Mayorquimby
Posts: 13909
Incept: 2008-09-18
The Archaic Past
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I see the next big recession as bigger and more destructive than people imagine and I think TPTB know this. If we get a recession I see home delinquencies spiking once again, banks insolvent again and 2008 repeating again. Savings rates are down to nearly nothing once again and we are at what is likely the peak of this business cycle right now.
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They who wish to hurt you, work within the law.
- Morrissey
Gold is theft.
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Genesis
Posts: 130793
Incept: 2007-06-26
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Quote:Which is why they are going to keep printing money. Devaluation is the only way out.
Devaluation is not a way out. Devaluation is exactly identical economically to a tax increase!That garbage is stupid-talk that is either the product of self-delusion or a refusal to perform basic algebra.
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I don't care if it makes sense -- only if it makes money. -- Me
Bank (n): See scam, fraud and theft. Eat a bankster -- they're low-carb.
What part of "shall not be infringed" was unclear?
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Nelstomlinson
Posts: 124
Incept: 2011-12-21
Juneau Alaska
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Wcvarones, devaluation also bankrupts pension funds, munis, households and so on. Only way out or not, it doesn't change that. Any way you slice it, none of them are going to be able to meet their obligations in the future.
Changing the unit of account, by devaluing, can make real changes. It can destroy capital, prevent capital formation and reduce growth. It really doesn't matter what the price level is, so long as everyone can buy the necessities. Preventing capital formation and destroying capital soon brings us to the point that many of us can't buy those necessities. Devaluation is the easy way out for the politicians, and the worst way out for the rest of us.
Devaluation is the worst way out, and it seems probable that's what the bat-eared blunder in the white house and his minions are going to do. Anything else means owning up to their mistakes, and that won't happen with this current crew.
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