Welcome to DU! The truly grassroots left-of-center political community where regular people, not algorithms, drive the discussions and set the standards. Join the community: Create a free account Support DU (and get rid of ads!): Become a Star Member Latest Breaking News Editorials & Other Articles General Discussion The DU Lounge All Forums Issue Forums Culture Forums Alliance Forums Region Forums Support Forums Help & Search

marmar

(77,424 posts)
Fri Feb 12, 2016, 11:26 AM Feb 2016

Here Come the Money Helicopters!


Here Come the Money Helicopters!
by Bill Bonner • February 10, 2016


[font color="blue"]The Negative Wealth Effect[/font]
By Bill Bonner, Chairman, Bonner & Partners:


Since the start of the year, the Dow is down about 7%. But certain stock market sectors have undergone a much harder pruning. First, energy… then the tech… and now banks. Shares in too-big-to-fail bank Citigroup are down almost 28% so far this year. And shares in Europe’s biggest bank, Deutsche Bank, are down by more than 36%.

As always, we don’t know where this leads.

But as we warned at the start of the year, it could be the beginning of a serious bear market. And more! As Nobel Prize-winning economist Paul Samuelson put it, the stock market has famously predicted nine out of the last five recessions. Further study shows that a stock market plunge of 10% has about a 50% probability of presaging a recession… 100% of the time!

Hope that’s clear.

But a stock market plunge not only predicts trouble in the economy; it also causes it. The Fed’s treasured “wealth effect” – in which investors, seeing the value of their portfolios rise, feel richer and rush out and spend – works in both directions. When stock prices fall, investors pull back on spending, and the economy goes into a cold funk.

The further stocks fall… the more the likelihood that the economy will follow. This has the central planners worried. .........(more)

http://wolfstreet.com/2016/02/10/here-come-the-money-helicopters/





1 replies = new reply since forum marked as read
Highlight: NoneDon't highlight anything 5 newestHighlight 5 most recent replies
Here Come the Money Helicopters! (Original Post) marmar Feb 2016 OP
Energy stocks have also been slipping Warpy Feb 2016 #1

Warpy

(112,166 posts)
1. Energy stocks have also been slipping
Fri Feb 12, 2016, 10:09 PM
Feb 2016

since everybody thinks they're losing money on low oil prices. The dividends, however, have gone up. The per share stock price is only half of the story.

However, everybody knows that financial institutions that successfully fought regulation are still playing fast and loose with other people's money. Everybody knows they will crash again, it's inevitable, but there is no way to predict when this will happen.

This time, let's hope they're nationalized and re regulated, the corrupt management in prison.

Latest Discussions»Issue Forums»Economy»Here Come the Money Helic...