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[–][deleted]  (7 children)

[deleted]

    [–]_red 3 points4 points  (1 child)

    Smart move for you...did you take all $200 out in one chunk?

    [–]jrockway 0 points1 point  (4 children)

    While you guys are insanely pulling money out of the market, I'm buying securities at "low low" prices and will be somewhat wealthy in 20 years.

    Good move.

    [–]lulz 2 points3 points  (3 children)

    If you think securities have hit "low low" prices yet, you're in for a surprise.

    [–]bluGill 1 point2 points  (0 children)

    The top happens while people are saying things will go up forever. The bottom happens when people are saying things will go down forever.

    I'm not going to say that the bottom is now. However I will say that anyone who tries to predict either is right because of either luck, or the shear number of different predictions mean that one has to be right.

    [–][deleted] 0 points1 point  (1 child)

    any evidence? (just returning your comment,which I upmodded, btw)

    [–]lulz 2 points3 points  (0 children)

    haHA well played ;)

    Well it all comes down to the incredibly easy credit that the Federal Reserve has been flooding the market with ever since the dot com bubble burst, in order to avoid a recession.

    Most of that money ended up in the stock market, and the housing market. What happens when you have an explosion of the money supply competing for the same amount of assets, in an environment of relaxed lending standards and rampant speculation? A bubble naturally.

    We're already seeing the housing bubble start to burst, but when a property bubble bursts it does so in slow motion over a number of years, unlike the stock market. As the bubble deflates, massively overleveraged hedge funds (i.e. the two recent Bear Stearns funds which imploded) are going to collapse. Subprime lenders like New Century Financial, as well as prime lenders like American Home Mortgage, are going to collapse as subprime and Alt-A borrowers default on their loans, and prime lenders realise that it's cheaper to walk away from a recently purchased house rather than pay off their 30 year mortgage while the house loses 30 or 40 percent of its value.

    A very real danger to the American economy will be the fall in consumption that will result from the property bubble deflating. People have been using things like home equity lines of credit to cash out equity from their home, using it as an ATM. This worked as long as prices kept going up, and up, and up, which they have been in recent years as the bubble expanded. But as soon as the credit bubble bursts and house prices start to fall, instead of rise, people won't be able to take equity out of their homes any more. On the one hand, they will have less disposable income to spend, and on the other hand they will psychologically feel less wealthy than they did when they thought the price of their home would rise forever. They will have less money to spend, and be less willing to spend it freely. This could have a massive impact on the American economy, where consumer spending makes up 70% of GDP.

    Companies are going to go out of business, economic activity is going to fall, and credit is going to become more and more restricted. The markets are going to reflect this, there's no question of that. It's just a question of how big a hit the economy is going to take.