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You have it backward... QE does not inflate the USD, it deflates the USD, in turn causing inflation of goods/services.Originally Posted by roberth
Think about this way, they're printing more money, injecting more dollars into circulation, reducing the "buying power" of each USD.... Having less "buying power" in each dollar, means the cost of products and services go higher.
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This is what Anderw Maguire says caused the squash, taken from here: http://kingworldnews.com/kingworldne...26_Silver.html
“First thing this morning, after the Bank of Japan decision, things got a bit roiled. But what I did see was a fully-timed algorithm kick off at exactly 7 AM U.K. time. There is only one seller that can come up with 50 tons of paper gold in a matter of 3 or 4 minutes and that is the Bank for International Settlements....
“We saw this come through and it attacked the entire (massive) bid stack (defending the previous low of $1,180) in a matter of seconds. Obviously there were visible stops. They (the Bank for International Settlements) knew exactly what they were attacking there. It was purely paper gold. We are talking about 50 tons, Eric. That’s an awful big position for somebody to put on (as) a risk position in a single shot.
People ask, ‘How do you know?’ We know that it has to be an official (entity). It cannot possibly be somebody with a compliance department with a risk position they have to look at. And the other thing is this (trade) was enacted in the foreign exchange markets, as opposed to the Comex.
In other words, the short seller suddenly sold gold against the dollar in the foreign exchange market, and that had a huge effect and was able to trip off (an additional) 50 tons of Comex supply in a matter of minutes.”
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Thank you - I should have said "inflates the number of USD in circulation which reduces the value of each USD in circulation". I gotta be more precise with my words, clarity is my friend.
My point still stands, it should take more USD to buy an ounce of silver, not less like we're experiencing now.
Last edited by roberth; 10-31-2014 at 15:43.
Forgive me if I am not getting this right. I am kinda just getting to learn about this stuff.
But, isn't stock indexes act like a fake indicator? In much the same way as the value of the USD goes down, stocks become more expensive. So in the long run "The DJIA hit 17K, etc." would be bad news right? It takes more USD to buy a share of stock.
No sweat, I'm learning new things every day and I've only been watching for a couple of years. There are other people on this board who know WAY more than I do, I just post alot in here because I'm interested in all the things that drive the topic. A good place to start is Investopedia - http://www.investopedia.com/ Glad you've taken an interest in this topic and hopefully economics as well.
I cannot speak to your question about the indices being fake or not, I just don't know enough to make that call. I can only say that the stock price used to be a very good indicator of the financial health of a company, I'm not so sure about that anymore due to FedRes/FedGov intervention and regulation.
Your are correct that due to QE the one dollar bill you hold in your hand right now has less value than it did 7 years ago, so yes, the dollar itself, having less value would be contributing factor to why stocks keep going up because it takes more lower value dollars to buy the same share of stock than it did in 2007 assuming of course that the company stock you're talking about is a company that is producing new and wonderful things we want and need.
I recently ranted about finance companies being part of the Dow Jones 30 Industrials index, finance companies don't belong there because they don't produce anything, they are services not manufacturers. I'm just old-fashioned that way.
Last edited by roberth; 10-31-2014 at 16:23.
No, it is not fake indicator. Dow Jones Industrial Average (^DJI) consists 30 different industries. However, since random sample is small, and they substitute companies, it is not the best way to measure the performance of overall securities market.
Here are the list of 30companies. http://finance.yahoo.com/q/cp?s=%5EDJI+Components
I mean, if DJIA is at 8,000 from 10,000 and kick an under performing companies in the past like AOL-Time and substituted with good performing stock, going back to 10k would be different than before.
This is why if you want to see overall stock market, you gotta look at Wilshire 5000 Total Market Index. S&P500 for top ~500 biggest companies, and Russell2000.
DJIA is calculated by pts, not the %, so their pt gain/loss are little different.
"value of the USD goes down, stocks become more expensive. So in the long run "The DJIA hit 17K, etc." would be bad news right? It takes more USD to buy a share of stock."
Depends on the situation/intl fi/macro/elasticity/consumer conf/ppi/cpi/etc etcetc. If excessive change (in this case, increase) in Money Supply into the economy, there are people who can hedge against commodities or precious metals. There are some people who wants to invest in the market as well. IF you see the housing past 5-6 years, there were not too much activities in commercial or residential real estate relative to 2000-2006. Bond yields are low. Consumption went up a little (can be due to inflation, or just actual change in demand depends on elasticity and type(s) of good(s)). Some investors thought the most logical investment was securities.
I don't know it is a bad news. Hypothetical situation. If Macy had a P/E of 14 THEN AND NOW; EPS of 1.10/share around 2008, and $4.03 earning per share now, it will have basically same price per earning. They made more money, so price of Macy's is higher. Of course EPS is just one fundamental measurement of share price out of 10,000+ ways. (this was just an example).
Eric Sprott has this to say: http://kingworldnews.com/kingworldne..._Not_Gold.html
Eric King: ‘Eric, we are in the midst of this smash in gold and silver, and we have the stock market and the dollar doing what they are doing. What do you expect for the rest of this year, once the dust settles?”
Sprott: “Well, God knows when the dust settles, but what I’ve expected for a long time now is that the basic fundamentals for gold and silver will win the day. That hasn’t happened yet. It hasn’t happened because entities have financial weapons that they can use on these commodity exchanges and the physical buying hasn’t gotten to a point where we have the failure (of an exchange to deliver)....
“But I think it’s reasonably predictable that we are going to have a failure. All of the demand data and the reasons for owning gold have improved. We all know that zero interest rates and printing money has not provided the answer and won’t provide the answer.
The only thing it does is it allows people to speculate on buying securities, but it’s not helping the economies. In fact, there are elements of the economy that are doing worse. The savers are way worse off today than they were before. They are forced to speculate in order to get returns. By speculating they are taking on greater risk.
But there is no recovery. You just have to take the comments of the various people at companies and they keep saying, ‘The consumer is tapped out here and it’s not likely that we are going to experience much growth.’ So how can you have stocks keep going up when there is no commensurate economic recovery?
But the framework for gold and silver and other precious metals to do well is more incredible today than it’s ever been. And you can have (crazy) readings in these (stock) markets -- I’ve experienced it. Going into 1999 - 2000, everyone was buying Nasdaq stocks like crazy. Ultimately the day came when the whole index crashed by 75 percent, and that’s what I think is going to happen here. The stock market is going to crack.
There is no growth and we don’t need to build more plants and equipment because things are cooling down on a worldwide basis, whether it’s China, Japan, Russia or Europe. The U.S. is flatlining at best. In fact I don’t even believe it’s flatlining, it’s probably negative. So there is not much to cheer about in terms of future earnings growth for companies.
Again, I just think that owning paper assets is the worst thing that anyone can do, and they should continue to buy and own physical metals.”
http://disciplejourney.com
“Make men large and strong and tyranny will bankrupt itself in making shackles for them.” – Rev. Henry Ward Beecher (1813-1887) US Abolitionist Preacher
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World Spot has silver in the 15s, oil is around $80.50.
When it hits $15-18 per ASE OTC, could someone add me to your purchase. My CC is in the shitter.
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"when you're happy you enjoy the melody but, when you're broken you understand the lyrics".
Think I'll wait till it hits $7. Do any of you believe it will drop back to or near that level again?
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