There will always be recessions, Gilbert, that is the fact of capitalism. You can’t have free enterprise without recessions.
However, the trend is towards increasing prosperity, increasing standard of living. Free enterprise, capitalism works.
Signs of recovery appearing, but not in Canada
- Thread starter VanIsle
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There will always be recessions, Gilbert, that is the fact of capitalism. You can’t have free enterprise without recessions.
However, the trend is towards increasing prosperity, increasing standard of living. Free enterprise, capitalism works.
OK, you know what you're doing then, I wouldn't want to find out you felt you had to jump like those unfortunate investors in the thirties. As long as you're doing the scrapeing it'll be sweet.
People jumping off the buildings is nonsense, it rarely happens. Let me give you a lesson in finance.
Let us say I invest, buy shares in Royal Bank, or IBM. Now, assume I have assets totaling 2 or 3 million $, out of which I have invested 100,000 $ in Royal Bank. Royal Bank stock of course, will go up or down. However, is Royal Bank ever going to go belly up? I seriously doubt it. I can see it going belly up only if Canada’s whole economy collapses. Then we will all have bigger problems that Royal Bank going belly up.
So my money is quite safe with Royal Bank. However, suppose the unthinkable happens. Royal Bank goes bankrupt, but the rest of economy is doing fine. That means I have lost 100,000 $, out of assets of 2 or 3 million $ (being a prudent investor, I would have 40 or 50% of my money in cash form, bonds, GICs, Money Market Fund etc.).
So I have lost 100,000 $ out of assets of 2 or 3 million $. Now, why would I jump off the building for that?
So how did this legend of people jumping off the buildings start? No doubt some of them did jump off the buildings after the 1929 stock market crash. But they were few in number. Let me explain how that can happen.
It happens if you borrow to invest. Let us say that my total assets (including my house, cars etc.) are 2 million $. Using that as collateral, I take a loan of 2 million $ and invest that in Royal Bank or other stocks.
Now, why would I do that? Let us say in one year stocks go up 10%. That means I have made 200,000 $. Even after paying bank the interest on the loan, I will have a handsome amount left over. And it didn’t cost me a penny, I used somebody else’s money to make money.
But let us look at the flip side, stock market crashes to 1/10th of its value. Then my stocks become worth 200,000 $, rather than 2 million $. So when time comes to pay back the loan, I don’t have the money, selling the stocks will raise only 200,000 $.
So I will have to sell my cars, my house etc. to pay back the loan, I will have lost everything. In that case I may consider jumping from the top of a building.
But as I said, such instances are rare. If stock market crashes, most investors will lose the money they invested in stocks and that will be it. Their other assets will be untouched.
It happens if you borrow to invest. Let us say that my total assets (including my house, cars etc.) are 2 million $. Using that as collateral, I take a loan of 2 million $ and invest that in Royal Bank or other stocks.
Now, why would I do that? Let us say in one year stocks go up 10%. That means I have made 200,000 $. Even after paying bank the interest on the loan, I will have a handsome amount left over. And it didn’t cost me a penny, I used somebody else’s money to make money.
But let us look at the flip side, stock market crashes to 1/10th of its value. Then my stocks become worth 200,000 $, rather than 2 million $. So when time comes to pay back the loan, I don’t have the money, selling the stocks will raise only 200,000 $.
So I will have to sell my cars, my house etc. to pay back the loan, I will have lost everything. In that case I may consider jumping from the top of a building.
But as I said, such instances are rare. If stock market crashes, most investors will lose the money they invested in stocks and that will be it. Their other assets will be untouched.
Do the 36,000 over shadow those who lost their jobs in Oshawa,today?
Or just strategically timed bullshyte>
Or just strategically timed bullshyte>
2,600 lost their jobs today in Oshawa..
What stategic time bull is the employment number from last month or closing of a plant that was scheduled months ago have in common ?
Sorry I miss the logic.. Even in extremely good times plant closures happen and people get laid off..
And even the money they "lost" in stocks will only be a "paper loss" unless they get really stupid and sell. But like you say, anyone with even a shred of intelligence doesn't have all their money in equities.
That is the assumption.. But history tells us that Canadian economy follows US economy by 6 months.. So usual downtown is 6 months after US one and upturn is 6 months after US one..
How severe it is does not always reflect the US pattern but the trend does..
As for the rest of the world, it is interesting to see who is already pulling out.. China, UK are showing signs..
You are right, JLM, but unfortunately one doesn’t have to be ‘really stupid’ to sell in a panic. I heard one financial expert once comment that human nature is hard wired to buy high and sell low, and I think he makes a lot of sense.
Usually what happens is that when markets are going up, all the stocks are soaring, the average investor gets caught up in the general excitement, general surge. He is helped along by experts who predict bull market as far as the eye can see, for several years to come. Thus, When Nortel was trading at 120$ (the highest it ever traded), experts were confidently predicting that it will soon reach 200$.
Six months or a year later when the stock market tanks (as it inevitably does), there is general doom and gloom, experts predict doomsday scenarios, claim that this time it is different, that the market is not going to recover this time around. Then the average investor panics, he cannot sleep at night because his stocks lost value. To ensure peace of mind and to avoid further losses, he sells low and thus locks in his losses.
Six months or a year later, markets surge again (as they inevitably do), there is general excitement, the average investor gets caught up in it and the whole madness starts over again.
You need a certain type of mentality, a certain outlook to make money in the stock market. You may have read about the flight of money from equity mutual funds and a mad rush towards money market funds when the stock market was tanking. What people were doing is take money out of stock mutual funds and put it in cash form. Totally wrong thing to do.
I think the U.S. economy has taken a beating on more fronts than ours has, financial (banks) and real estate to name a couple.
Yep, I guess playing the stock market is just another form of gambling, with most gambling addicts it's "one more time", with stock market addicts it's "one more day" on the Bull trend.