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View Diary: The Stock Market is Not Crazy and the Republicans are Toast (210 comments)

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  •  Right, they're just "injecting money" (3+ / 0-)
    Recommended by:
    chuckvw, JesseCW, banjolele

    into the economy. But they aren't giving it out. It just gets magically put into the economy. And then it magically doesn't cause inflation. You're kidding me right?

    If debt were a moral issue then, lacking morals, corporations could never be in debt.

    by AoT on Tue Apr 30, 2013 at 04:04:08 PM PDT

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    •  By buying 100% guaranteed US debt like (8+ / 0-)

      Treasuries/MBS the Fed frees other monies to go into private investments.

      So the Fed does not "inject" QE willy-nilly.  It is safely stored in US bonds and

      1- lowers interest rates
      2- increases the money supply responsibly
      3- chases other money into projects and investment

      It does so with such little risk that the only downside (inflation) is now a mere mirage among goldbugs.

      "The way to see by faith is to shut the eye of reason." - Thomas Paine

      by shrike on Tue Apr 30, 2013 at 04:10:32 PM PDT

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      •  If interest rates are at .25 (10+ / 0-)

        then it lowers them below zero and effectively funnels money to various banks. You live in a magical world where giving money to banks somehow makes them invest it, even though we did that for years and it didn't work. We live in a consumer economy, this is more trickle down bullshit.

        If debt were a moral issue then, lacking morals, corporations could never be in debt.

        by AoT on Tue Apr 30, 2013 at 04:17:08 PM PDT

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        •  People AVOID banks when rates are low. (6+ / 0-)

          And no one is GIVING money to banks!

          How do you get everything backward?

          "The way to see by faith is to shut the eye of reason." - Thomas Paine

          by shrike on Tue Apr 30, 2013 at 04:21:43 PM PDT

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          •  Um, yeah, people don't *save* (5+ / 0-)

            But if you think that banks don't have money then you really are living in a different world. They're investment banks. They invest their money in financial instruments and other nonsense, along with some other things. The fact that you're trying to convince me that this has nothing to do with banks is absurd. I mean, seriously?

            If debt were a moral issue then, lacking morals, corporations could never be in debt.

            by AoT on Tue Apr 30, 2013 at 04:24:23 PM PDT

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        •  Your comment is on Point (9+ / 0-)

          The Fed bond/mortgage buying program forces investors to "reach for yield".  After all, CALPERS promises an 8.0% return on investments, a return they can no longer get by allocating resources to safe investments.

          So Calpers, and many others, "reach for yield", buying stocks and bonds.  The high yield index is as strong as it's ever been, even stronger then during Drexel's heyday.

          http://marketrealist.com/...

          Against all odds, the high yield bond yields ended last week setting a new record low.

          The average yield for the BAML High Yield Index was at 5.5%, after having started the year at record lows around 6%. To put it in perspective, the high yield bond market is supposed to be composed of the riskiest debt securities, and they’re yielding almost what the 10 year Treasury was yielding back in 2007. The market had never dipped below 7%, but the returns on the week ended lower.

          And frankly, I can't blame pension fund managers for reaching for yield.

          When it blows up, it's going to blow up on all their colleagues, so no one gets fired.

          If they opt for "safer" investments, and Bernanke doesn't pull the punchbowl in the short-term, their returns will trail those who did "reach for yield".  And if that happens, you get fired.

          Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project. www.hamiltonproject.org

          by PatriciaVa on Tue Apr 30, 2013 at 05:03:24 PM PDT

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      •  Except it isn't (6+ / 0-)
        Recommended by:
        AoT, Palafox, chuckvw, JesseCW, banjolele, srkp23

        Currently, monies are being "freed" into stock dividends, not investment.  In fact, corporations are making use of low interest rates to buy debt in order to pay for these dividends.  Apple's mega-sale of bonds is just the most recent example of this.  By contrast, private investment is at an all-time low.

        •  Not true. Capital expenditures are at all time (4+ / 0-)

          highs too.

          "Core Cap-ex" - private only - was up 6% y/o/y in Q1.

          Apple's huge bond auction was to pay investors without repatriating its huge off shore cash.

          "The way to see by faith is to shut the eye of reason." - Thomas Paine

          by shrike on Tue Apr 30, 2013 at 04:25:45 PM PDT

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        •  Come on (0+ / 0-)
          In fact, corporations are making use of low interest rates to buy debt in order to pay for these dividends.  Apple's mega-sale of bonds is just the most recent example of this.
          You do understand, right, that what Apple is doing is borrowing $17b against its assets of $145b so as not to take a significant tax loss for sending out those dividends, right?

          I'm not quite sure how this is a bad thing, except in the generic 'no goddamn American companies pay taxes' kind of way. And honestly, it's also not terribly common. In fact, I suspect that (no google-cheating, now!) you can't name another company that has done it in the last year. And that the first three that you find via google will be doing it for the same reason: good cash flow and good profits, but for one reason or another they don't want to commit their cash right at the moment.

          •  Seriously? (5+ / 0-)

            First, yes is obviously is a bad thing that American corporations are shuttling revenues overseas to avoid taxes.  Yes it is a bad thing that they can take advantage of ridiculously low interest rates to raise money to then funnel it to their wealthy investors.  And that amidst all this continues the austerity agenda and the suffering of the American people.  The effective tax rate paid by corporations as a whole is at the lowest level on record and it's doing no favors to our social safety net.

            Second, that "they don't want to commit their cash" was precisely my point.  They aren't investing into the American economy, they are sitting on cash rather than make capital investments that would generate economic growth broadly felt by the American people.  Instead, they convert their cash into dividends felt by their stockholders.  QE isn't doing jack s*** for the economy despite its nominal purpose to "create jobs."

      •  not all MBS's are 'guaranteed' (0+ / 0-)

        "We can't solve problems by using the same kind of thinking we used when we created them." - Albert Einstein

        by pickandshovel on Tue Apr 30, 2013 at 06:03:19 PM PDT

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