Economic Meltdown (seconda parte)

[Lissa]

Horsepuckey. First, it's not a ponzi scheme. It shares nothing in common with a ponzi scheme. That's just a scary word people use when they want to frighten the horses. Second, that article is from 2009, which in post-crisis US bond terms, is pretty much the stone age. QE1 and QE2 are dead and gone - and yet, bond prices have gone *up*. If the markets were dumping US Bonds, then the instant QE2 ended, they would have crashed. Did they? Not even close. Most of the debt is 90 day? Great! 3 month yields are ... 0.02! Like, free fraking money. The US could go to Vegas on the defense budget, and markets wouldn't so much as blink. Don't take my word for it - these are actual, honest to god, up to date, bond prices.

I await movement in the opposite direction. Record highs do not stick around forever. But this is not the Fed keeping this afloat. That's what QE is, and they aren't doing any more of it right now - yet no crash.

-Jester

Ponzi was the articles take on it since it is unclear who is buying and who gets paid. QE2 ended June 30 2011.

People are fleeing to T-bills as a safe harbor. Even though the yield will be nearly zero, or slightly negative, it's better than riding a crash down. It's probably a signal of an impending stock market meltdown. We'll see tomorrow, when the markets open.

The market has been over inflated for going on a decade. The market needs to drop to be at the historical climb rate. Right now, that drop needs to take the market into the 10,500 range to get to that historical climb rate. If you look at any of the graphs of the DJIA since it's inception back at the turn of the 20th Century, it has doubled roughly every 12 to 15 years. As of 2007, just at it's peak, it was triple where it had been from the prior 12 to 15 year cycle (it was around 5000 in the mid 90s which was the historically proper level). When the market dropped in 2008 and worked back up to 10,000 in early 2009, it was back to it's proper amount. Then it took off again at a pace that was beyond the historical pace. What we're seeing now, is a re-correction that will likely bring the market back to its proper historical pace (which should put it at around 10,500).