Sunday, August 23, 2015

Bye-Bye, Miss American Pie ! Built on the basis of a delusional built stock market...

Bye-Bye, Miss American Pie ! Built on the basis of a delusional built stock market

Alexander Rogers
Continued failure - Monday Oh, what's pleasing to the ear of any liberal economist, the term "market capitalization". 

Perhaps there is no more senseless and detached from the reality of economic concepts. Market capitalization - is not the real value of your assets, plants, machinery, raw materials and finished products (which is realistic and not too difficult to find), and an abstract representation of how much it costs your company including other abstractions like "brand", "image" and so on. It even has nothing to do with the profitability of your company, because it is full of examples of how the company makes a profit, and its shares fall, and vice versa. And on the basis of a delusional built all stock markets. Naturally, this can not but cause crises, because instead of the regulatory function of the system plays a speculative (in their previous publications, I have examined in detail the role of debt margin - ..). 

Speculation generates a pyramid and the pyramid inevitably descends. Http:// .. As you can see from the graph, since 2009 the US stock markets is continuously growing, and this growth was purely speculative, because the real economy of the United States most of that time did not grow, and frankly stagnated. fictitious speculative growth stock markets provides an exceptional continuous operation of "printing press" - continuous infusion of tens of billions of unsecured dollars shyly hid behind vague term «quantitative easing» (Quantitative easing, QE). 

Another feature of a financial system - from blowing up the bubble it starts to demand more and more profits, and real dividends from anyone, even the high-tech production activities are no longer able to meet these needs, the system begins to need all greater financial pumped. And the Fed for objective reasons, the last year trying to reduce the swapping (QE volumes gradually decreased). There is a gap that is filled for some time due to the new influx of speculative capital from outside (the pyramid!). When the gap gets too big - the bubble burst. That is, we may see on the NYSE (New York Stock Exchange, NYSE) -the beginning of the collapse of one of the most ambitious in the history of bubbles.

What happened on Wall Street on Friday? Index Dow Jones (the 30 largest "industrial" companies in the US) per session lost 3.13% of the value (-530.94 points, to the level of 16459.75), the index S & P-500 - 3.19% (-64.84 points, to the level of 1970.89), "high-tech" NASDAQ-100 index - 4.28% (-187.856 points, to the level of 4197.27). Total market losses are estimated at about 582 billion dollars. Russian liberals like to speak maliciously, that the market capitalization of the «Apple» ten times higher than that of "Gazprom". But they are, as always, broken - not ten, because the beginning of the year Apple "thinner" at 158 billion lost in this very capitalization of about 27%. Only this Friday for one day «Apple» has lost 6% of the shares . This is not surprising, since the Corporation, as well as many other American brands, greatly overstated. 

For example, I'm in the last year, wrote that «Facebook» overrated I think six times (this is the most gentle estimates, but really - 10 times or more). Https:// v = khNJu1Pjeo0 leaders of the fall were shares of «Walt Disney Company», whose price fell by 6.43 points (6.04%), ending the session at around 100.02. And shares of such giants as «Boeing Company» fell in price by 5.70 points, ie 3.99% and closed trading at around 137.02. In fact, the further collapse of the market was only saved by the completion of Friday's trading. In boxing there is even a special term «saved by the bell» (saved gong). 

Now the US government has two days (Sunday, when there will be an article - will have one) to implement emergency measures. To save the market need to throw it comparable, and even superior to the sum of the loss - of $ 600 billion or more. And this is almost the amount of the annual cash infusion QE (and almost equal to the annual US military budget), but one day. Again, to infuse the cash needed to urgently Congress passed a law raising the threshold of US government debt. Otherwise, the Treasury will not be able to release a sufficient amount of US Treasuries, the Fed under which emits dollars. 

In general, it is very problematic to the same needs to happen on the eve of how the Treasury was going to raise interest rates on Treasuries. Without this increase social system the United States is on the verge of collapse as pension and other social funds are holders of Treasuries, and the current low rate on them does not allow pension funds to get enough income to fulfill their social obligations. In general, increases - and valish budget does not increase - valish social programs. And you can not raise or increase too, can not. Although, knowing the American establishment, they spat on social programs - are likely to save the financiers, speculators on Wall Street as they did in 2008-09 (pensioners do not have such a powerful lobby in Congress and they do not sponsor election campaigns of US presidential candidates).

The most important thing is that this crisis within the framework of the current system can not be resolved, it can only delay (devaluation of the dollar will be under both scenarios). And many in the leadership of the United States (as the Ministry of Finance and Treasury and the Fed) is well aware of. So, on Monday it will be very interesting ... Alexander Rogers .

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