h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

I'm very pleased that you're reasonably OK, if somewhat damaged, JEllen. Really pleased.

Jab

Captialism needs to be grounded in common sense, and tempered by compassion. When the govt continually gives tax cuts to the richest of the rich, and then expects that money to "trickle down", and of course it doesn't, then you have a problem. I would like to see more programs helping the poor and the middle class -- even if my taxes go up a little as a result. That's why I'm supporting Obama.

Awww, thank you Jab, that's sweet! I'm sure I'm not the only stockholder crying in my cuppa coffee.

The social model of capitalism, JEllen, went out with Thatcher and Reagan, I'm afraid. It's a pity they're both actually ga-ga at the moment (R actually has Alzheimer's and T probably has) to realise what they've done.

<Jab

it would seem like democracy is the answer, would it not?

i am afraid the competition gene is a bit stronger in humans than the solidarity gene. aldous "brave new world" huxley thought something similar and he was not stupid imho

capitalism should be held in a short leash

But heaven forbid that we totally do away with capitalisation!

Stock declines are like roaches: you never see just one.

What is happening is a stampede to the door. We have seen this kind of thing before. How high was the Dow Jones Industrial average earlier this year? 12,000? 13,000? It may go below 8,000 today or next week. That's more than a third. However, in the period 1929-1932, it declined more than 90%. Only a few of us have any memory of what *that* was like. I think the lowest Dow number ever was 42. or maybe it was 41. We are *not* going back to that. As far as I know, not even the Elliott Wave people are predicting that much carnage. But 1,200 is not impossible.

One big factor that worsened that period's decline was the opacity of the closed-end mutual funds that dominated the financial scene. A lot of them kept their holdings a secret, and leveraged to the hilt. Many people who owned shares in them lost *everything.* The open-end mutual funds, which started to exist in the mid-twenties, generally survived the thirties, and some still exist. The Investment Act of 1941 required twice-yearly reports to investors, listing the investment holdings, and severely limiting the funds' ability to borrow money. Hedge Funds were not included in those restrictions.

Maybe this is just me, but I think that any company that allows hedge funds as an option in employee retirement plans should be punished. Even apart from that, I have heard of companies doing all sorts of things with employee retirement plans that were clearly illegal.

If any good comes from these tumultuous events, maybe it will be to shine a spotlight on the inherent weakness of the idea of making large numbers of workers dependent on stocks for living expenses in their retirement years (I would exempt only those companies that pay high dividends, assuming that a highly diversified portfolio was being used). I presume that the Republicans' plans for putting part of Social Security into the stock market is now dead.

When a market goes into freefall like this, the reason is far more sellers than buyers. The sellers are the ones who don't have enough cash. The buyers are the ones who have cash. Cash is king right now. People in the financial sector who have lost their jobs may have trouble making mortgage payments. If a lot of them live in the same towns, those towns will likely slash payrolls, curtailing hours at libraries and munbicipal pools and parks, and so forth. With these amenities in decline, the towns will look less desirable to prospective buyers, so property values will decline. Even the people who have not lost their jobs may cut back on restaurant meals and vacation trips.

The thing is, those people who have cash may be overwhelmed by the number of different ways to use it. In any event, until buyers and sellers come into some kind of equilibrium, the stiock market(s) will be unstable.

I'm afraid the macabre fatalism of Huxley's "Brave New World" is coming much too strongly to the fore at the moment, stimulating a Draconian impulse on the Conservative side and an equally histrionic excess in the direction of social services supports on the Liberal side.

Historically, increases in social services are matched by increases in prices on the capital side that negate them to a considerable extent, net, producing an inflation which puts people and institutions with fixed incomes in increasingly disadvantaged situations.

Draconian measures, on the other hand generate an increase in desperation and crime with the all the costs attached to that.

On market issues, 'momentum' oriented investors who play the stock market as though it were a 'numbers' game, a coin placed in the slot of a slot machine at Las Vegas, have long been conceded to be a destabilizing force in the market, forcing an inflation of stock issues rising and 'harvesting' deflated stocks after a crash. Many of the more questionable 'investment' schemes or programs are designed to exploit the effect, taking advantage of the effective agnosia of the momentum oriented investors on the point that the purpose of the stock market is to support profit making enterprises in consideration of a share of those profits.

"On market issues, 'momentum' oriented investors who play the stock market as though it were a 'numbers' game, a coin placed in the slot of a slot machine at Las Vegas, have long been conceded to be a destabilizing force in the market, forcing an inflation of stock issues rising and 'harvesting' deflated stocks after a crash. Many of the more questionable 'investment' schemes or programs are designed to exploit the effect, taking advantage of the effective agnosia of the momentum oriented investors on the point that the purpose of the stock market is to support profit making enterprises in consideration of a share of those profits" [ITIWBS]

I totally agree. A share of the profits usually materialises as a dividend payout, hence my previous advocacy of using dividends from a well-diversified portfolio of stocks as income. There are many who would scoff at this strategy, but to each his own. In any event, there are two cardinal rules: only invest in things that you understand, and remember that you are not rewarded for taking risks that could have been neutralized by diversification.

It was over issues like this that captital gains taxes were invented... then they were promptly misapplied by people who had never understood that purpose, considered them merely a device for reaping tax revenues, rather than a device for discouraging irresponsible investment.

I think I understand what you mean, but I don't know how many others will get your meaning...... In any event, tax-managed accounts have become more numerous in recent years. It's probably a hopeful sign, though I would think that making some profits should probably take priority over denying the taxman some of his money. This becomes even more of issue when you consider that the ultimate (meaning last) way of denying the IRS a portion of your stock profits is to still own the stocks when you day. The cost basis (price per share that you paid when you bought them) changes to the price in effect on the day of your death. This benefits your heir(s), but you get no enjoyment from the arrangement because you're dead.

Hello Everyone! Let's just face it. the world is in a bit of a mess in
all sorts of ways these days. GREED- Which has got us into this financial chaos,- wide screen T.V.s and 4 wheel drives.- brief merriments, that don't make anyone happy for more than 5 mins, and will be paid off sometime in the distant future, when they're out of date, rather grubby and no longer worth anything. Good for nothing but future land fill.

Then there're morals,- as in treating others as you would yourself. Lots of people seem to have forgotten that concept, and the rest are too busy to notice that they're being deprived of their dosh, via rather dubious, but semi-legal methods. If they're not too busy to notice, then they're too busy to do anything about it.

Then there's all this security rubbish, as a result of the W Trade Centre. Now we have to spend, what little spare time we have,filling in forms, to make sure everything's safe and legal. We're all so busy filling in these Vogon documents, that we don't have time to notice that someone's sneaking off with what little we have. Apart from that, form filling is like throwing the baby out with the bath water. It spoils life's true enjoyments. I'd much prefer to risk security (security is a falacy anyway) and just get on with it.

My next big bug-a-boo is political correctness. Political Correctness strikes me as being very politically incorrect. Now we aren't even allowed to think for ourselves. It used to be we couldn't do whatever we wanted, which was fair enough, but now we mustn't think for ourselves either. Well, why should we? There are others who are so much more capable, and these hipocrites obviously know better than we, or they think they do, and who am I to say they're wrong?

Sorry for this rant! These things , just really get up my nose!
Sorry I haven't been in touch lately Jab

Wouldn't like to get on the wrong side of you violet!

Jab

yes

Greed, check.
Morals, check.
Security, check.
Political correctness, check.

retiringviolet, you've said everything I was going to say, so I'm going to have to think hard of something else to say, and my head is going to soon.

But it's okay. There are four wheel drive vehicles that can get 40 miles per gallon. I know, because I used to own one (Subaru Justy). I'd still own one if they hadn't discontinued the model.

The Golden Rule is fantastic, and so is the principle of the kindness of strangers. Without these two precepts, the world would be a smoldering chunk of scorched earth. Strangely enough, you don't get a true estimate of people's innate character until hard times hit.

There actually is an explanation for the gradual building of the financial bubble that finally popped last week, but I'm trying not to put people to sleep. Let me just say that in the early 18th century a lot of otherwise sensible English people got caught up in a mania that consisted of bidding shares of the South Seas Company up to ridiculous levels. In a different century, the otherwise very sensible Dutch people became so enamoured of tulips that they eventually found themselves paying as much for a tulip bulb as they did for a house. There have been more recent financial bubbles. In the 1880s, railroads were all the rage. People bid railroad stocks up so high, that the eventual collapse resulted in a depression that rivalled the depression of the 1930s.

See what I mean about putting people to sleep? Bubbles keep recurring. No time or place is immune. People tend to assume that the trends that have been in place for awhile will just continue. Then they wake up one morning, and 40% of their 401k retirement money is gone. No stole it. In retrospect, they might have realized that they were poorly diversified. Or, they had a vague idea that the companies they worked for had shafted them by making them take on *all* the risk of investing for retirement. In an earlier era, when there were company retirement plans, it was the company that took the risks on behalf of their employees.

So, yes, greed is definitely a big part of it. But ignorance and (often) complacency on the part of the workers are also factors. It's hard to learn how to invest. A lot of people don't have time. The legislation that created 401k plans originally failed to require a reasonable degree of diversification in corporate plans, and it discouraged companies from providing guidance in investing. So, some employees put everything in low-yield money market funds, and some others tried to market time the hottest stock funds, selling at every market bottom, and buying at every market top. Then there were some who put the stock of their own company into their 401k, and not much else. Granted, when a company provides a match, you're afool not to take it; however, it's prudent to then diversify away from that stock in all of your other accounts. But there was usually no one around to point these things out. Unless you're counting media darlings like Jim Cramer or Motley Fool. Right now, Jim Cramer is telling everyone to sell all their stocks, from what I hear. If the market has bottomed, and is going up again, then selling is exactly what you should *not* be doing. Get some perspective.