Why is The American Stock Market going to crash?

[iNow]

I've seen Frontlines episode, The Warning, a few times, actually. I still have no idea what you're on about, nor how any of your posts relate to those quoted within.

[amanda more]

I've seen Frontlines episode, The Warning, a few times, actually. I still have no idea what you're on about, nor how any of your posts relate to those quoted within.

 

I think your posts are excellent and you have provided several answers to the question.

 

This is tiring I know but this works as tree,forest,ecosystem.

 

With dozens of answers to this question there is also which one occurred at what level of this hierachy.

 

Say one answer is that the bad economy tanks stock markets. Yet, as you have pointed out,it is so much more.

 

Certainly, if I was on here doing something really useful, I would have bought on margin. The Nikkei is down right now.

 

 

 

 

 

 

 

 

 

 

 

 

 

[amanda more]

Anyone who's panicking right now and selling is selling after a big drop. That's selling low, and it's a bad strategy. I haven't seen any analysis from Amanda, just an insistence that the market is going to crash. If I had seen an analysis it would include many companies with increasing profits and low P/E ratios; a temporary drop in prices is a buying opportunity, not a cause to jump out of the market.

 

The profits and P/E ratios are only as valid as CPAs and the rules makes them. What happened with Enron was hocus-pocus with numbers. Lying is currently legal on the numbers. Disclaimers are found in the English of the financial statement which was the only requirement resulting from Enron.

 

I am thinking the current drops. ups etc. are independent of the above, though. Look to the end of the current year long delay to open up off balance sheet numbers to cause real intensity. Overseas they talk percent. Selling after say a 2% drop is a stop/loss strategy. Selling after the crash is as you say.

[jackson33]

The profits and P/E ratios are only as valid as CPAs and the rules makes them. What happened with Enron was hocus-pocus with numbers. Lying is currently legal on the numbers. Disclaimers are found in the English of the financial statement which was the only requirement resulting from Enron.[/Quote]

 

amanda; Profits and earnings are reported quarterly by each publicly traded company and they are required to send each stock holder these reports. I understand what your saying, in that maybe up to 30 people (larger companies) that work on these reports daily, could in some way falsify them or more to real point, maneuver sales/cost/obligations, to their advantage, but it's highly unlikely. No regulation conceived could unearth all the ways, figures can be distorted. During times when growth is expected P/E ratios generally average 18 times earnings and currently are around 8-9 times earnings and it's highly unlikely their all conspiring.

 

You earlier mentioned the possibility, a portfolio of stocks, might never recover from losses during one down turn in the markets and correct, but also correct in any years of your mentioned historical 6% gains, then I believe that's figure comes from the DOW and S&P's. Companies in these indexes have changed, sometimes on a yearly basis and many companies that have been in them have failed or near failed. If you or your adviser/broker had consistently made poor or bad investments, then during any point during those 6% gains you could have lost 6% and invested only in the 530 most traded stocks. Along this line of thought, if you got involved with Tech Stocks at the wrong time, you might not ever recover and many actually did during the early years.

 

 

http://stockcharts.com/freecharts/historical/nasdaq1986.html

 

What and how any portfolio is managed, is determined by experienced advisers, based on many things, especially age, risk management, can you stay the course, not needed the cash and so on. Said another way if you expect high returns and long term 6% is high, more risk is involved...

[amanda more]

amanda; Profits and earnings are reported quarterly by each publicly traded company and they are required to send each stock holder these reports. I understand what your saying, in that maybe up to 30 people (larger companies) that work on these reports daily, could in some way falsify them or more to real point, maneuver sales/cost/obligations, to their advantage, but it's highly unlikely. No regulation conceived could unearth all the ways, figures can be distorted. During times when growth is expected P/E ratios generally average 18 times earnings and currently are around 8-9 times earnings and it's highly unlikely their all conspiring.

 

You earlier mentioned the possibility, a portfolio of stocks, might never recover from losses during one down turn in the markets and correct, but also correct in any years of your mentioned historical 6% gains, then I believe that's figure comes from the DOW and S&P's. Companies in these indexes have changed, sometimes on a yearly basis and many companies that have been in them have failed or near failed. If you or your adviser/broker had consistently made poor or bad investments, then during any point during those 6% gains you could have lost 6% and invested only in the 530 most traded stocks. Along this line of thought, if you got involved with Tech Stocks at the wrong time, you might not ever recover and many actually did during the early years.

 

 

http://stockcharts.c...nasdaq1986.html

 

What and how any portfolio is managed, is determined by experienced advisers, based on many things, especially age, risk management, can you stay the course, not needed the cash and so on. Said another way if you expect high returns and long term 6% is high, more risk is involved...

 

This is a hard concept.

 

If off balance sheet transactions are allowed then it doesn't take any collusion to keep them off. SAP, standard accounting practice. The derivative market is a dark market. This means they don't have to report how much they owe. This means liabilities are distorted that are shown in the report. Like any Ponzi scheme, it works until it doesn't.

 

Beating the market seems like a doable goal. Yet crashes take down everyone.

 

There are ten year runs where a portfolio of blue chips never recover their price. You can lose much of your principle. Using horse racing analogies, logical difficulties are apparent. All of the sales-speak Americans have become accustomed to is dangerous.

 

I just thought of another reason for a stock market crash.

 

Next reason:

This is more a question than a reason. Because they are lean and mean do companies actually make goods and services or are they relying on contractors? That may mean they are vulnerable to the contractors increasing business without them. I do realize Goodwill is huge but is it truly "bankable"?

 

 

 

The market went down about 1000 pts in the last several days, based largely on hysteria and the unsurprising idiotic behavior of Congress. The value of my stocks dropped a small fortune. I can either sell, cementing the loss, and put the money in cash accounts yielding about 0 and holding dollars of questionable long-term value, or leave it invested in corporations that have strong balance sheets,produce useful products, pay dividends and invest in growing their business.

 

I think I can figure this out.

 

So some math. 1000 dollars. remove 200 dollars You will have realized a loss of $20 from where it was.

 

The market tanks 50%> Now you have $1000 - $200= $800 . That $800 is now $400 + $200 = $600

 

If you haven't removed it then

 

$400 + 1/2 $200 = $500

 

So,a scenario believing all is hunky dory with no underlying rotten fundamentals and you would have lost the $20 as the market "corrects itself."

 

But for proposed scenario you will have $100 more than you would have had if it does tank. The concern in scenario 2 is this is bad news. Odds are that $500 is going to be needed more as more of the economy tanks.

 

This means the paper losses are more likely to become real losses as that money is needed to say, eat. Historically there have been ten year periods of no recovery.

 

The flight to treasuries will keep interest rates down. But when they are at 5% and even if the current market is 14% the average run is 6%. That means the stock market player is risking his principal for a mere difference of 5% to 6%. That is truly a suckers bet.

 

So in keeping with the topic. People ignore the math until they can't.

[jackson33]

If off balance sheet transactions are allowed then it doesn't take any collusion to keep them off. SAP, standard accounting practice. The derivative market is a dark market. This means they don't have to report how much they owe. This means liabilities are distorted that are shown in the report. Like any Ponzi scheme, it works until it doesn't.[/Quote]

 

amanda, it still boils down to the same thing, in that if a Company or those charged to file quarterly reports, make a decision and if those assets or liabilities are incorrectly ignored to enhance a profit/loss, their board of directors and the CEO/CFO sign off on the report, they can be challenged. Additionally most all Companies have their own independent auditors and activist stock holders with large investments with them...I understand what the Bernie Madoff's in the World have caused, but IMO 99.9% of all business/investors, hold a tight line with the law, Here's a little more on OBS's;

 

Some companies may have significant amounts of off-balance sheet assets and liabilities. For example, financial institutions often offer asset management or brokerage services to their clients. The assets in question (often securities) usually belong to the individual clients directly or in trust, while the company may provide management, depository or other services to the client. The company itself has no direct claim to the assets, and usually has some basic fiduciary duties with respect to the client. Financial institutions may report off-balance sheet items in their accounting statements formally, and may also refer to "assets under management," a figure that may include on and off-balance sheet items.[/Quote]

 

http://en.wikipedia.org/wiki/Off-balance-sheet

 

Beating the market seems like a doable goal. Yet crashes take down everyone.[/Quote]

 

Well beating the markets and investing are two different things, but believe me, many people make fortunes during every major market drop, selling short, betting a market will drop. George Soros, the best known....

 

This is more a question than a reason. Because they are lean and mean do companies actually make goods and services or are they relying on contractors? That may mean they are vulnerable to the contractors increasing business without them. I do realize Goodwill is huge but is it truly "bankable"?[/Quote]

 

I'm not sure what your asking but as asked, if contractors are used (as with Amazon and many online retailers, drop shipping) those contractors could enhance their own business when shipping a product, with advertising of some kind. Depending on their agreement, possibly breaking a contract, they won't be supplying very long.

[swansont]

So some math. 1000 dollars. remove 200 dollars You will have realized a loss of $20 from where it was.

 

The market tanks 50%> Now you have $1000 - $200= $800 . That $800 is now $400 + $200 = $600

 

If you haven't removed it then

 

$400 + 1/2 $200 = $500

 

So,a scenario believing all is hunky dory with no underlying rotten fundamentals and you would have lost the $20 as the market "corrects itself."

 

But for proposed scenario you will have $100 more than you would have had if it does tank. The concern in scenario 2 is this is bad news. Odds are that $500 is going to be needed more as more of the economy tanks.

 

This means the paper losses are more likely to become real losses as that money is needed to say, eat. Historically there have been ten year periods of no recovery.

 

The flight to treasuries will keep interest rates down. But when they are at 5% and even if the current market is 14% the average run is 6%. That means the stock market player is risking his principal for a mere difference of 5% to 6%. That is truly a suckers bet.

 

So in keeping with the topic. People ignore the math until they can't.

 

You only realize a loss when you sell the stock for less than what you paid for it.

 

Your argument is predicated on there being a crash. It's not a given. Dr Rocket was speaking of what's actually happening in the market, not your manufactured scenario. Are you discussing hypothetical scenarios or actual ones? Pick.

[amanda more]

In any kind of troubleshooting it is very helpful to do this:

 

A-

B-

 

In fact safety analysis involves a kind of simulation. Assume A happens what is the result? But if B happens what is the result?

Further on topic then:

 

"The problem is, it’s completely backwards. The “disagreeable medicine” Cooper suggests is budget cuts, including cuts in entitlement programs like Social Security. But that has nothing to do with the problem she presents at the beginning: slow economic growth. Anyone who is reading this blog already knows that budget cuts are contractionary in the short term. The “medicine” the economy needs now is more government spending, not less, and there’s nothing disagreeable with putting more people to work and building more stuff that people want.*"

This is from James Kwak http://www.economonitor.com/blog/2011/08/barack-obama-and-harry-potter/

 

So, contractionary means a decrease in the economy- recession. The classic lesson or science from The Great Depression means that having government spend less makes a depression worse. Simple. Eighth grade economics.

 

There is this odd thing in science where as great as it is to define the past and present to be really useful one wants to know effects and consequences. You will get no argument from me that it is a crystal ball having inherent difficulties. Yet, science has this history showing it has been effective.

Why is the stock market going to crash? Idiots tank the economy over wild unproven rhetoric versus studied history and science. Economy tanks, stock market tanks.

[swansont]

Just for reference, closing levels for this past Friday

DJIA 11,444.61

NASDAQ 2,532.41

S&P 500 1,199.38

 

Friday the 12th

DJIA 11,269.02

NASDAQ 2,507.98

S&P 500 1,178.81

[jackson33]

"The problem is, it’s completely backwards. The “disagreeable medicine” Cooper suggests is budget cuts, including cuts in entitlement programs like Social Security. But that has nothing to do with the problem she presents at the beginning: slow economic growth. Anyone who is reading this blog already knows that budget cuts are contractionary in the short term. The “medicine” the economy needs now is more government spending, not less, and there’s nothing disagreeable with putting more people to work and building more stuff that people want.*" [/Quote]

 

Helene Cooper of the New York Times wrote a “news analysis” story saying that the challenge for President Obama is this: “Is he willing to try to administer the disagreeable medicine that could help the economy mend over the long term, even if that means damaging his chances for re-election?”[/Quote]

 

amanda; From your article Cooper or from others some actual economist Paul Krugman are advocating "Keynesian Economics". Briefly that in a Capitalist Economical System, Government can step in replacing the Corporate Structure to stimulate an economy, the end all for a stable economy. What I would suggest, where Government CAN change each two years (has happened each two years, since 2006), along with 50 Sovereign States, and that rather important Document, the Constitution, this is an impossible scenario.

 

No there is nothing wrong with trying to establish an environment, where business will voluntarily hire people or more to the point where new business, start ups or expansion is the desired choice of those that are involved. However, Obamacare, continued over spending, the threat of new taxes and REGULATION, are simply not working. Finally, if he were to try for another Stimulus, he might satisfy his so called "base", but not the independent or swing voters. Also remember, if SCOTUS does not rule Obamacare unconstitutional first, probably every republican running, with a chance to win, WILL work to repeal the entire program, he has to win to protect his only self professed accomplishment, IMO.

[iNow]

Finally, if he were to try for another Stimulus, he might satisfy his so called "base", but not the independent or swing voters. Also remember, if SCOTUS does not rule Obamacare unconstitutional first, probably every republican running, with a chance to win, WILL work to repeal the entire program, he has to win to protect his only self professed accomplishment, IMO.

I disagree. He might also satisfy people who are looking at this situation without wearing ideological blinders... People who want to see something reasonable actually done... Something based on evidence and history... Something incredibly likely to address the root cause of the problems we're facing and result in strong improvement overall. They might be satisfied, too.

 

If that group should overlap with his base, or even independent or swing voters, then that's just icing on the cake. It's not about government being an "end all be all," it's about helping increase jobs immediately and to stimulate growth where the private sector has failed, thus increasing demand across all economic domains, thus raising revenues overall and having a self-reinforcing effect on growth.

 

Stagnation and contraction and austerity will result in just what the names imply... A stagnant and contracted economy, and while the Patient Protection and Affordable Care Act might have some peripheral effect on business, it's hardly the core issue with which businesses are struggling as your post directly implies. That is more accurately explained by low demand and unavailable cash in the hands of consumers. Put people back to work, and those people have cash to spend, which increases revenues in businesses where those people spend their cash... Lather, rinse, repeat.

[swansont]

I disagree. He might also satisfy people who are looking at this situation without wearing ideological blinders...

That reminds of the (possibly apocryphal) Adlai Stevenson quote:

 

"That's not enough, madam, we need a majority!"

[Hal.]

Should the people here declare whether they are Democrat or Republican ? Would you like to have 17 political parties and use coalitions ?

Edited August 15, 2011 by Hal.

[amanda more]

 

Stagnation and contraction and austerity will result in just what the names imply... A stagnant and contracted economy, and while the Patient Protection and Affordable Care Act might have some peripheral effect on business, it's hardly the core issue with which businesses are struggling as your post directly implies. That is more accurately explained by low demand and unavailable cash in the hands of consumers. Put people back to work, and those people have cash to spend, which increases revenues in businesses where those people spend their cash... Lather, rinse, repeat.

 

This is so very basic. Where were these people raised that they missed this? Or are they just so blinded with some skewed self-interest that such basics are too disturbing?

 

Perhaps history will point to a simple little rule change by an organization we think of as dealing with entertainment. The repeal of the FCC guidelines on equal time opened the floodgates. We own the airwaves but now have such distortion that many have been raised with this. This has taken modern thought a huge step back from rational thinking and discourse.

 

It isn't like people's characters are much different from Roman times. I'm sure the Coliseums were packed as christians lost to lions. So the argument that it sells is pretty lame. It is after all, our coliseum.

 

My money is now though on the elite- that upper 2%. It has certainly been fun for over a generation. My Great Depression experienced 85 year old friend said several years ago that economic collapse means riots in the streets. I listened but didn't believe. I knew things can get wild in Europe. But England?

 

Even the rich follow fads. The tide may turn and a realization hits that for those who have found it less fun to hang in Barcelona or Paris they may want to enjoy the USA. Riots here would be disconcerting even to them. The penthouses can still view the streets.

 

Someone I know who hates the liability of an ER may get health insurance today. Young adults will have the grandparent who managed to get to 65 but the babyboomer parents are currently being done in in their fifties. Who wants to insure them? Why as a culture must the 80 year old watch grandchildren left without parents? One 62 year old worked weeks on it, got opportunity to spend 650 a month for health insurance and had short hospital stay. She knows she would have died with only ER care.

 

The rich- the ones I know are already out of the market so this downturn effected 401ks but not them. The rich just got richer-again. Which brings power.

 

I think the future belongs to them as it probably always has. So, even if personally not suffering will the rich allow policies to prevent tanking the economy and prevent the stock market from continuing a risk of crashing? If not, by standing idly by when it is in their power to be ethical will the wealthy have caused the crash?

 

Better phrased- Oligarchy causes stock market crashes.

 

 

 

 

 

[jackson33]

Hal; That's one thing about a two party system I like, in that the coalition can be formed by the people, through the Primary System, before the National Election.

 

 

 

I disagree. He might also satisfy people who are looking at this situation without wearing ideological blinders... People who want to see something reasonable actually done... Something based on evidence and history... Something incredibly likely to address the root cause of the problems we're facing and result in strong improvement overall. They might be satisfied, too.[/Quote]

 

iNow; The 2010 Elections, based on over spending, over regulating, returning to a Constitutional Government and Obamacare, were pretty much the issues and a reversal of the 2008 sentiments. If correct and I think I am, Obama is trying to build his base, attract moderates, with more spending, more debt, larger Union or organizational control, knowing none of this can be achieved while the House remains Republican. Strategically this is a good move, but it will not get anything done or will it work. He NOW has a record.

 

As for evidence, no doubt accepted by Keynesian Advocates as empirical, is in my mind is not even a possible solution today, with a very different society. You simply can't add to depression era programs, that are to me that "root cause" and you know the any suggested results of Keynesian Principles during the 1930's are arguable. Not even spending on WWII will work, as the US after the War was the Worlds supplier of products around the World.

 

If that group should overlap with his base, or even independent or swing voters, then that's just icing on the cake. It's not about government being an "end all be all," it's about helping increase jobs immediately and to stimulate growth where the private sector has failed, thus increasing demand across all economic domains, thus raising revenues overall and having a self-reinforcing effect on growth. [/Quote]

 

Of all entities, the US Federal Government is incapable of "immediately" adding jobs, but as a for instance, could relax regulation, control and rhetoric on Natural Resource development in about a year unleashing the entrepreneurial spirit of the American Capitalist.

 

Stagnation and contraction and austerity will result in just what the names imply... A stagnant and contracted economy, and while the Patient Protection and Affordable Care Act might have some peripheral effect on business, it's hardly the core issue with which businesses are struggling as your post directly implies. That is more accurately explained by low demand and unavailable cash in the hands of consumers. Put people back to work, and those people have cash to spend, which increases revenues in businesses where those people spend their cash... Lather, rinse, repeat. [/Quote]

 

American Business is no longer dependent on a specific consumer or is the consumer dependent on them. While profits are down from the hay day's of the last decade, they are up over the depths of the current recession and American Business is holding more CASH, on their balance sheets, here and overseas, probably more so than ever before, counting inflation. Drop the Corporate Tax Rates to 15% (consumers/investors, pay anyway) and all the said trillions being held overseas, would flow like a tidal wave back into the US....

[swansont]

Should the people here declare whether they are Democrat or Republican ? Would you like to have 17 political parties and use coalitions ?

How would that affect the stock market?

[Hal.]

Swansont , I'm assuming you're an expert at not plain and simply answering the questions you've been asked and asking instead a question to them . Did you learn that in grade school ?

[amanda more]

Swansont , I'm assuming you're an expert at not plain and simply answering the questions you've been asked and asking instead a question to them . Did you learn that in grade school ?

 

And yet you state a question.

 

Perhaps you could mention something which is on topic. You may actually want to mention some idea,concept reason which effects the American stock market.

 

 

 

[iNow]

While profits are down from the hay day's of the last decade, they are up over the depths of the current recession and American Business is holding more CASH, on their balance sheets, here and overseas, probably more so than ever before, counting inflation. Drop the Corporate Tax Rates to 15% (consumers/investors, pay anyway) and all the said trillions being held overseas, would flow like a tidal wave back into the US....

This doesn't make sense. If businesses are already holding their cash and not spending it (which I agree is very much happening right now), how does reducing their taxes further (consequently giving them EVEN MORE cash) help matters? You argue they have a lot of cash and that the situation will be made better by giving them even more? That's silly.

 

There is no need for these companies to invest in capital equipment or employees right now given that the demand for their products is so low. Demand is so low that the current infrastructure and reduced headcount at companies can adequately support that demand. Increase the demand for their products and they'll increase the number of staff they pay to make them. Increase the demand for their products and they will increase their investments into facilities and capital equipment to adequately supply that demand.

 

This is an oversimplification, but the central point is true. Demand gets increased when more people have money to spend, or... said another way... when more people have jobs. The government can, in fact, create jobs. We did it in WWII, and we can do it now. There are plenty of highway projects, high speed rail projects, high speed internet projects, clean energy projects, etc. that we could dump money into to QUICKLY stimulate growth (sorry for saying immediately earlier... it was intended to be rhetorical).

Edited August 15, 2011 by iNow

[Hal.]

 

And yet you state a question.

 

 

Yes Amanda , I think like that reading Swansont , he affects my thinking , forgive me .

 

 

Perhaps you could mention something which is on topic. You may actually want to mention some idea,concept reason which effects the American stock market.

 

 

Amanda , what's wrong with having a 50 % corporate tax rate ?

[mississippichem]

There is no need for these companies to invest in capital equipment or employees right now given that the demand for their products is so low. Demand is so low that the current infrastructure and reduced headcount at companies can adequately support that demand. Increase the demand for their products and they'll increase the number of staff they pay to make them. Increase the demand for their products and they will increase their investments into facilities and capital equipment to adequately supply that demand.

 

I'm not one to take tax increases likely but I've thought for some time now that there should be a fairly hefty tax on corporate retained earnings. This could incentivize the big blue chip companies to not keep as much on the books in these down economic times perhaps leading to employment expansion and a greater desire to acquire physical capital (trucks, buildings, land, etc.). This gets into touchy political territory though as the Republicans would most likely frame this as a tax on savings. I couldn't disagree with them here but i think it would be a justified tax on savings. Right now it is to a company's advantage to hold their money in these volatile economic and political times.

 

This idea is in contrast to the current situation were hiring more employees is a non-trivial expense. You've got state and federal unemployment taxes, payroll taxes, healthcare (yeah I know the new healthcare law...got watered down a lot though, employers will still bear some costs I assume), and retirement matching just to name some employment related expenses. There are also regulations that only kick in once a business employs over a certain number of people. The incentivization structure for employment in our country is totally backwards of how it should be IMO.

 

I might even go as far as to say we could afford to give corporations a tax break on their profit as long as we tax the hell out of retained earnings. That way expansion and hiring would become a very favorable thing to do as far as accounting is concerned.

[jackson33]

This doesn't make sense. If businesses are already holding their cash and not spending it (which I agree is very much happening right now), how does reducing their taxes further (consequently giving them EVEN MORE cash) help matters? You argue they have a lot of cash and that the situation will be made better by giving them even more? That's silly.[/Quote]

 

iNow Corporations don't pay taxes, they collect them. Whatever they expect profits to be, are based on expenses and whatever that expected tax is, is an expense. If they aren't forced to include the 20% difference would make a difference to the consumer, in turn creating an additional demand.

 

More to the point however, balance sheet cash being held back by not increasing dividends, expansion, R & D or payroll (new or current), today is primarily connected to not having a long term understanding of what's ahead in many areas, cost of hiring or maintaining employees one factor. This has nothing to do with Income Tax Brackets for those not Incorporated, which is a different issue.

 

There is no need for these companies to invest in capital equipment or employees right now given that the demand for their products is so low. Demand is so low that the current infrastructure and reduced headcount at companies can adequately support that demand. Increase the demand for their products and they'll increase the number of staff they pay to make them. Increase the demand for their products and they will increase their investments into facilities and capital equipment to adequately supply that demand.[/Quote]

 

Not really; The largest reported quarterly report comes from Apple Computer, shows about 78B$, the largest amount held by any Corporation, yet they can't supply there own market. IMO, because of the uncertainty in the US, they are building new plants, as is GE and several major's in China, India and South America. Although it's not the only factor, dropping the Corporate Tax's, would encourage US expansion..

 

There are plenty of highway projects, high speed rail projects, high speed Internet projects, clean energy projects, etc. that we could dump money into to QUICKLY stimulate growth (sorry for saying immediately earlier... it was intended to be rhetorical). [/Quote]

 

Not the Federal Government. The process simply takes too long, then going through the States it takes even longer. States don't all set the money aside from the various grants, appropriations or the Highway Bills to start with and use the money where needed on the assumption the money will be available from other sources later, which just never happens.

 

Here's comes the dichotomy; When Government is choosing the segments needing stimulation, it generally comes the fact business is not or there would be no need to start with. HS Internet and Road Construction, to my knowledge hasn't exactly stopped, in fact over here in the boonies, both are going strong, yet my little town of 35K, doesn't even have a cab company. As for High Speed Rail, where wanted, needed and States can later assume total responsibility for cost, that would seem a good idea, but that's not the scenario I'm hearing.

 

I might even go as far as to say we could afford to give corporations a tax break on their profit as long as we tax the hell out of retained earnings. That way expansion and hiring would become a very favorable thing to do as far as accounting is concerned. [/Quote]

 

mississippi; Under your scenario what business would do, many are doing today, is to buy back their own stock, which they could later reissue. Also keep in mind, any interest paid, dividends paid from other stocks being held or profit from any sold assets, are paid the year taken. Said another way, this would be the simplest of all regulation to avoid.

[swansont]

Just for reference, closing levels for this past Friday

DJIA 11,444.61

NASDAQ 2,532.41

S&P 500 1,199.38

Monday the 15th

DJIA 11,482.90

NASDAQ 2,555.20

S&P 500 1,204.49

 

Back up above the "we're going to crash, get out of the market" levels.

[iNow]

I'm not one to take tax increases likely but I've thought for some time now that there should be a fairly hefty tax on corporate retained earnings. This could incentivize the big blue chip companies to not keep as much on the books in these down economic times perhaps leading to employment expansion and a greater desire to acquire physical capital (trucks, buildings, land, etc.).

I'm not so sure how I feel about this because I think that cash goes a long way (often) toward R&D, and also allows for mergers and acquisitions to grow the company in the long-term. I'm not immediately inclined to do this as I think it addresses symptoms instead of root causes. Having that cash on hand isn't really the problem so much as not spending it is, and I am not sure the proposal you shared is really the best way to encourage spending. I think increasing demand is, as that will require more spending on goods, materials, and staff. I haven't thought it all the way through, though.

 

 

 

 

 

iNow Corporations don't pay taxes, they collect them.

Sorry, what? Yes, they do pay taxes. What you've said here is simply wrong.

 

 

More to the point however, balance sheet cash being held back by not increasing dividends, expansion, R & D or payroll (new or current), today is primarily connected to not having a long term understanding of what's ahead in many areas, cost of hiring or maintaining employees one factor.

I won't argue with you that these things play a small role, but I think you're blind if you think that's the primary reason. If there is no demand for their products then it doesn't really matter how certain or anxious they are about the future. It's their present business which is where they're struggling most.

 

Also, one example does not a trend make. Apple is the exception, not the rule.

 

 

 

Not the Federal Government. The process simply takes too long, then going through the States it takes even longer.

I didn't set a time table when speaking about the above investments. I only stated that it would encourage growth quickly. In response, you're arguing to do nothing because it might take a few months to a year. My point was that these steps are the single surest way to get growth accelerated. Your reply does nothing whatsoever to refute what I said. I'm not as defeatist about this issue as you are. I know there are challenges to overcome, but I also think there exist solutions and ways to mitigate those challenges, and I'm not willing to leave things as they are when history shows that we can do things to improve the situation.

 

 

Here's comes the dichotomy; When Government is choosing the segments needing stimulation, it generally comes the fact business is not or there would be no need to start with.

You're oversimplifying. This is true sometimes, but it's hardly the infallible axiom you suggest. Clean energy is a clear example. Simply transfer the subsidies from oil to solar and wind and that would go a VERY long way to stimulating job growth in these sectors and across worker type... in manufacturing, installation, and service... and it would help the environment. High speed internet, too. You can't seriously be here suggesting to all of us that people in rural areas enjoy having slow internet and an inability to watch simple videos or perform online transactions? Come on, Jackson. You're really straining credulity here in an attempt to stick to your ideological guns.

 

 

As for High Speed Rail, where wanted, needed and States can later assume total responsibility for cost, that would seem a good idea, but that's not the scenario I'm hearing.

Incredulity is not a valid counter argument. The fact that you personally don't interact with a culture that wants cheap, fast, community transportation does not mandate that this desire is nonexistent.

[amanda more]

I'm not so sure how I feel about this because I think that cash goes a long way (often) toward R&D, and also allows for mergers and acquisitions to grow the company in the long-term. I'm not immediately inclined to do this as I think it addresses symptoms instead of root causes. Having that cash on hand isn't really the problem so much as not spending it is, and I am not sure the proposal you shared is really the best way to encourage spending. I think increasing demand is, as that will require more spending on goods, materials, and staff. I haven't thought it all the way through, though.

 

 

.

You're oversimplifying. This is true sometimes, but it's hardly the infallible axiom you suggest. Clean energy is a clear example. Simply transfer the subsidies from oil to solar and wind and that would go a VERY long way to stimulating job growth in these sectors and across worker type... in manufacturing, installation, and service... and it would help the environment. High speed internet, too. You can't seriously be here suggesting to all of us that people in rural areas enjoy having slow internet and an inability to watch simple videos or perform online transactions? Come on, Jackson. You're really straining credulity here in an attempt to stick to your ideological guns.

 

 

First paragraph is in response to:

mississippichem, on 15 August 2011 - 05:51 PM, said:

 

"I'm not one to take tax increases likely but I've thought for some time now that there should be a fairly hefty tax on corporate retained earnings. This could incentivize the big blue chip companies to not keep as much on the books in these down economic times perhaps leading to employment expansion and a greater desire to acquire physical capital (trucks, buildings, land, etc.)."

For the second paragraph, I see you are from oil country. Do you find that those in the oil industry understand the need for alternatives better? (that would be rather ironic)

 

So, we could be having lean times and a volatile stock market due to lack of incentives to move retained earnings into better areas. Does R and D still have big tax advantages? If retained earnings are taxed it may further push into R and D to not pay the tax.

Edited August 16, 2011 by amanda more