<p>No, they also hurt the economy, but not as bad as the other reasons for tax increases. They found that a shock of tax increases reduces GDP no matter what, but this particular shock is not as bad as the others.</p>
<p>They suggested this reason: “This is consistent with the idea that deficit driven
tax increases may have important expansionary effects through expectations and long-term interest rates, or through confidence.”</p>
<p>People get that the government is doing something about the deficts, so they have an optimistic view about the future.</p>
<p>“So Doct, what do you think of the market?”</p>
<p>I’m struggling to control my emotions. I feel that these days are much trickier to invest, even though I’m sure I’ve felt this way pretty much all the time over the years. Typically one has to worry about the economy, jobs etc however now we have the actions of the Bernank or the central banks that seem to be random and have huge consequences. I’ve pulled back on some positions and figure even if I miss a 100 pts in the S&P, I’m at an age that capital preservation is more important than capital appreciation. It also gives me some dry powder in case things turn around. In general from a macroeconomic view, I’m having a hard time being positive over the long term. Maybe Rick Santelli is correct when he said that now is the time for an economic enema.</p>
<p>I am so underinvested in equities now…i don’t like the QE programs. It adds an artificial element to the markets. I don’t like the economy. And I am just risk averse. I am also surprised how much my portfolio has cratered with small positions. </p>
<p>I think watching CNBC makes long term investing very difficult. There is so much noise coming out of there. </p>
<p>I think the mute button comes in very handy when Rick Santelli comes on. Actually there are very few people on that I respect on that network.
I like the economist. I am sorry that Mark died and Erin left. CNBC runs all day in the office but I rarely pay attention.</p>
<p>I like the real estate reporter. She is pretty.</p>
<p>A while back I read a quote by a well-known female investment advisor (can’t remember her name) but she basically said there are two type of loss risks. The risk that you will lose out on capital appreciation and a risk you will lose capital. She pointed out that you might lose out on some capital appreciation by not being in a market that is volatile as ours is now but if you lose your capital, then you will never get an opportunity to participate in an up market again. She was obviously very bearish on the market (as are many people) but I thought she had a good point. The global economy is in such great distress right now that maybe trying to hang onto what you have instead of hoping it will keep going up is the right approach, especially for people in our age bracket. Of course, you want diversification in your portfolio but most people I know simply sock money into equity-laden mutual funds and hope for the best.</p>
<p>I love listening to Fast and Mad Money. They’re very entertaining - particularly Fast Money - they seem to be having more fun than I am. Generally I don’t listen to their advice but from time to time - I learn of a company that I hadn’t thought of and I take a look. I filter everything I hear from Bloomberg and CNBC to get some feel of what investors and traders are looking at. I even talk to people at work about how they feel about the market. My experience has shown me that I don’t need to talk to very many people to get a feel for how the general public feels about things - we are herd animals and behave pretty much the same way.</p>
<p>Momlive, most people…if you ask them what would make you feel worse…missing out on a $20,000 Gain or losing $10,000… Would say losing $10,000.</p>
<p>And happiness from making money is not as happy as sadness from losing money…people don’t get as much happiness from actually making $10,000 as the sadness they have when they lose $10,000…and I think the difference increases as we age.</p>
<p>Doct…yeah we have CNBC on because the guys in the office hope to get ideas. For me, there is so much misinformation on the network, I would rather have it turned off…</p>
<p>People are not buying it because they dont see congress as serious. Only politicians can claim that a bill that increases spending is actually a deficit reduction bill. </p>
<p>For months now, he has said that we and the rest of world is an business cycle slowdown that would peak in the summer - not a soft patch due to Japan etc. He was one of the few who adamantly stressed this. The indicators were turning down before the tsunami. He expects this to continue through at least the rest of the year but doesn’t think we’ll have a recession. He generally doesn’t make market predictions. I’m not sure if his recession call is based on the assumption that we will get QE3 however. Last summer, I followed what he said and cleaned up. Unfortunately, I was less careful this summer even though he warned.</p>
<p>Tega, I hope we never get the world you want…it will be really ugly. Unless you are talking about cutting projected deficits in the far off future.</p>
<p>We did this game in the 30’s…the balancing budget game…</p>
<p>Ok Doct…i found a link with the economist you mentioned.</p>
<p>The reactions around the world this weekend have been interesting. There’s been criticism of S&P (similar to what’s been said here though even more pointedly so), we told you so from some countries (like the UK that took the austerity route), get your house in order (China, like they are a shining example).</p>
<p>Lots of speculation about what will happen on Monday morning - lots of guessing with most thinking that not much will happen. I think that’s wishful thinking at this time.</p>
<p>The criticism of Standard & Poor seems to revolve around the fact that they were lax with mortgage backed securities and lax with Lehman. So we’re not supposed to like being lax, yet apparently Krugman and his followers are now demanding of Standard & Poor what they didn’t like Standard & Poor doing in the past…being lax.</p>
<p>^My husband is bracing himself for a slew of calls from clients Monday morning. He got a lot on Friday after the market dropped 500 points. People are very nervous.</p>
<p>The criticism of S&P also includes the fact that they have the arithmetic wrong. Also that the deficit isn’t really a problem now but may be over a decade from now…</p>
<p>“The criticism of Standard & Poor seems to revolve around the fact that they were lax with mortgage backed securities and lax with Lehman. So we’re not supposed to like being lax…”</p>