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Too Much Savings
Old 07-20-2005, 10:56 PM   #1
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Too Much Savings

Looks like the market that is going to drop is the Stock Market rather than the Housing Market. Business is not investing.


"Greenspan noted that most American homeowners have considerable equity built up in their homes, so that it would take a substantial crash in prices to trigger a significant rise in foreclosures.

The bigger worry for policymakers is the global savings glut and its evil twin, the dearth of investment.

Contrary to supply-side theory, a huge infusion of cash into U.S. corporations in the past few years has not led to a large increase in investment. It appears that it was not high taxes that restrained investment in the future, but executives' uncertainty about the prospects for a decent rate of return.

The same uncertainty holds true globally.

Oil producers are floating on cash, but have not stepped up investments in their domestic industries. China and Japan are saving, but the savings are going into U.S. Treasurys, not factories and schools. Investment in Europe is "tepid," in the chairman's words.

Global savings are being siphoned into U.S. real estate.

Overproduction is the specter haunting the world now. Greenspan doesn't know the answer, but at least he's asking the questions."

Rex Nutting is Washington bureau chief of MarketWatch.
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Re: Too Much Savings
Old 07-20-2005, 11:04 PM   #2
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Re: Too Much Savings

Quote:
Originally Posted by boont
Looks like the market that is going to drop is the Stock Market rather than the Housing Market. Business is not investing.
I don't follow your logic. I assume businesses are not investing because they don't need to. Many of them are still recovering from all of the overcapacity they created a few years ago. Hording cash isn't a bad thing in those circumstances. They seem to have pretty good earnings growth because of it (or in spite of it, depending on your point of view).
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Re: Too Much Savings
Old 07-20-2005, 11:12 PM   #3
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Re: Too Much Savings

Quote:
Originally Posted by wabmester
I don't follow your logic. I assume businesses are not investing because they don't need to. Many of them are still recovering from all of the overcapacity they created a few years ago. Hording cash isn't a bad thing in those circumstances. They seem to have pretty good earnings growth because of it (or in spite of it, depending on your point of view).
Could the hoarding of cash lead to the increase in dividend yields? That would rock.
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Re: Too Much Savings
Old 07-21-2005, 12:14 AM   #4
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Re: Too Much Savings

Quote:
Originally Posted by boont
Looks like the market that is going to drop is the Stock Market rather than the Housing Market. Business is not investing.
I've been reading Nutting's complaints for two years, and today our stock portfolio hit an all-time high...
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Re: Too Much Savings
Old 07-21-2005, 05:16 AM   #5
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Re: Too Much Savings

Quote:
Global savings are being siphoned into U.S. real estate.
So maybe when real estate prices level off, more people will move over to stocks (after an adjustment period). These things move in cycles. In the mean time, stocks are doing quite well despite global savings being siphoned off into US real estate.

The over capacity issue will eventually work itself out in the time tested manner. Inefficient producers will shut down, leaving only the efficient ones standing.
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Re: Too Much Savings
Old 07-21-2005, 06:17 AM   #6
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Re: Too Much Savings

Quote:
Originally Posted by Laurence
Could the hoarding of cash lead to the increase in dividend yields?* That would rock.*
Back when I was still running a MFG. company, General Dynamics was a customer (this was in the early 1990s). I recall the top management came under a lot of criticism (from shareholders) as they were sitting on a mountain of cash. I didn't know all the reasons (or if I did I forgot),
but I admired them for doing this. Hanging onto your cash unless it's
sitting there doing nothing (lazy money) is rarely a bad thing.

JG
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Re: Too Much Savings
Old 07-21-2005, 08:34 AM   #7
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Re: Too Much Savings

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Originally Posted by Michael
So maybe when real estate prices level off, more people will move over to stocks...
Exactly.* The masses move to where the going is good.* For the past 5 years, the going has been good with real estate while the stock market has been generally flat.

When the masses begin to see the stock market moving up in the next year, they will flock in to cause another swelling (or maybe even a bubble) there.* This should last 4 or 5 years.

Then, in reaction to the stock market swelling, the feds will raise interest rates to the point that people will move out of equities and into bonds and CDs causing the market to go down. This should last about 4 or 5 years.

Then there will be a recession, and the feds will start lowering rates again until they are so low, people will sell their bonds (at a profit), get out of CDs, and start looking back at real estate as an investment.
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Re: Too Much Savings
Old 07-21-2005, 12:16 PM   #8
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Re: Too Much Savings

By just about any measure, the past three years have produced one of the biggest cash gushers in the oil industry’s history. Since January of 2002, the price of crude has tripled, leaving oil producers awash in profits. During that period, the top 10 major public oil companies have sold some $1.5 trillion worth of crude, pocketing profits of more than $125 billion.

“This is the mother of all booms,” said Oppenheimer & Co. oil analyst Fadel Gheit. “They have so much profit, it’s almost an embarrassment of riches. They don’t know what to do with it.

By John W. Schoen
Senior Producer
MSNBC
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Re: Too Much Savings
Old 07-21-2005, 12:27 PM   #9
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Re: Too Much Savings

I love reading that people think the market is going to crash. That's a bullish indicator for me.
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Re: Too Much Savings
Old 07-21-2005, 12:30 PM   #10
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Re: Too Much Savings

It would be nice if they gave some to their shareholders in the form of dividends - instead of the supid buying spree a lot of them went on - the last time oil prices shot up.

I have faith in management - stupidity will rule once again - unless of course - this time it's different.

Heh, heh, heh - sigh.









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Re: Too Much Savings
Old 07-21-2005, 03:07 PM   #11
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Re: Too Much Savings

Quote:
Originally Posted by unclemick2
It would be nice if they gave some to their shareholders in the form of dividends - instead of the supid buying spree a lot of them went on - the last time oil prices shot up.

I have faith in management - stupidity will rule once again - unless of course - this time it's different.

Heh, heh, heh - sigh.
But if they paid out their cash hoards in the form of substantial dividends, there wouldn't be any money for executive bonuses. :
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Re: Too Much Savings
Old 07-25-2005, 12:49 AM   #12
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Re: Too Much Savings

Quote:
Originally Posted by retire@40
Exactly.* The masses move to where the going is good.* For the past 5 years, the going has been good with real estate while the stock market has been generally flat.

When the masses begin to see the stock market moving up in the next year, they will flock in to cause another swelling (or maybe even a bubble) there.* This should last 4 or 5 years.

Then, in reaction to the stock market swelling, the feds will raise interest rates to the point that people will move out of equities and into bonds and CDs causing the market to go down.* This should last about 4 or 5 years.

Then there will be a recession, and the feds will start lowering rates again until they are so low, people will sell their bonds (at a profit), get out of CDs, and start looking back at real estate as an investment.
Sounds like a great argument for diversification and an asset allocation strategy. Which is why I like that strategy.
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Re: Too Much Savings
Old 07-25-2005, 10:47 PM   #13
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Re: Too Much Savings

"I love reading that people think the market is going to crash. That's a bullish indicator for me." Azanon

It already did crash in 2000 where have you been? I sold out at near the top and it still hasn't reach where I sold five years ago. So you've made a total of not much since then.

Buffett says he sees no opportunities in the market for the next ten years or so but you do. Good for you go ahead and invest. The world is awash with cash and they aren't investing but you are. Business is not investing but you are.

Every baby boomer who just inherited their parents house and cash are not putting it into the market but you are.

We know from 2000 that the market analysts are crooked and we know that the accounting firms are crooked. But you have faith.

Good luck.
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Re: Too Much Savings
Old 07-26-2005, 08:23 AM   #14
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Re: Too Much Savings

Yawn!

2000 - 2003 was a pimple on an elephant's butt - the usual minor market fluctuation.

Now a 5000 point drop in the DOW would be interesting - in which case I would be tempted to up the stock portion of my balanced index.

In the meantime - it's De Gaul and the Norwegian widow.

Cash held on the side waiting for a drop - is about the same amount I have saved to bet this year on the SAINTS making it to the Superbowl - not much.

Hope springs eternal.

Heh, heh, heh.





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Re: Too Much Savings
Old 07-26-2005, 07:57 PM   #15
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Re: Too Much Savings

"the usual minor market fluctuation"

You sound like a guy that lost quite a bit of money and is making excuses.

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Re: Too Much Savings
Old 07-26-2005, 08:22 PM   #16
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Re: Too Much Savings

Quote:
Originally Posted by boont
You sound like a guy that lost quite a bit of money and is making excuses.
boont, you sound like a guy who wants to argue/pick a fight/troll. Don't think unclemick, Azanon, SG or any other regular poster here is going to go for your bait.

You might want to try some other fishing hole.

REW
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Re: Too Much Savings
Old 07-26-2005, 08:24 PM   #17
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Re: Too Much Savings

Nope

Not spending as much as we're making and the women are starting to bitch about it - "you're not getting are younger - you cheap bastard."

Trying to run up the score is a male hormone thing - even if the heavy lifter is balanced index - with Vanguard's computers rebalancing their little hearts out.

Watching the markets and doing absolutely nothing - just standing there has got us through the first almost 12 years of ER.

I do keep 15% side money in individual stocks - it's an incurable male hormone thing.
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Re: Too Much Savings
Old 07-27-2005, 05:44 PM   #18
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Re: Too Much Savings


I have been reading this site for several years. While it is true that I don't post much I don't see why you need to cast aspersions on me that don't apply. You act like this is your site and no one else should comment without your consent.

I posted a new idea about what has confounded Greenspan and most financial experts. Namely that long term rates are unaccountable low and that the markets have not been doing much for the last several years.

Current thinking is that the globe is awash with liquidity and yet business and individuals are not doing traditional investments with this liquidity. There are obvious implications for such a unique environment in regard to the financial markets. Exactly what these implications are we don't know yet. But I am suggesting to buy and hold stocks in this unusual time is possibly not the right course of action.

I am certainly not the only one to advance these cautions.

b.
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Re: Too Much Savings
Old 07-27-2005, 05:54 PM   #19
 
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Re: Too Much Savings

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But I am suggesting to buy and hold stocks in this unusual time is possibly not the right course of action.
boont,

To me, I thought the most unusual time in my lifetime was in 1966. I met Karla and we had a whopping good time in her parent's basement.

Your above statement is an absolute maybe!* - Hey! - Guess what? - Nobody knows what is going to happen! But whatever happens, I'm sure you will tell us 'That you told us so'.

I'm going to go out on a limb here and predict that "markets will fluctuate"

You can do whatever you want. You probably are not going to influence many here.

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Re: Too Much Savings
Old 07-27-2005, 07:04 PM   #20
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Re: Too Much Savings

Wellllll boont.

At least nobody has called you a bored 13 year girl posting from Missoula yet - but that was winter.

Rock up! Boont! Rock up! Football season is coming.

Anywise - the great benifit of hindsight being what is - dollar cost averaging in the no where market of 1966 - 1982 provided the foundation for our ER - didn't seem like a lot of fun at the time though.

To borrow from Cut - Throat - 'Recency' - gotta watch out for that recency - can lead a person into pole vaulting over rat turds.

Heh, heh, heh. Hang in there. Stick to your guns - if your method works for you.
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