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"Perhaps it should have been clear that profits in 2004-07 were too high to be sustainable, but it surely was not apparent to the vast majority of participants."

......... It would be interesting to delve into how and where these high profits were obtained. Graphs indicate "our" productivity increasing sharply over the last decade, but are "we" gaining in productivity or just getting the work done overseas at cheaper labor costs?

"Not sustainable?" Why? Is it that our market is becoming saturated as in autos and housing? I can't claim to have seen "it" coming but have lamented stagnant wages and its stifling effect on US demand since the last bubble.


The chart at the bottom tells the story well. Had wages followed the productivity gains upward US consumers really could have "gone shopping". Since we (and most of the world) is operating at well below full capacity the "shopping" would not have resulted in inflation.

Nothing could have helped us avoid the wholesale corruption of Wall Street and the resulting Mess, but once we've shored up that situation there will still be the problem of stagnant wages, exacerbated by unemployment that in the US means little income for those "covered" and no income for the other half who are not covered. Somehow, and well beyond what is possible in any "stimulus" package median wages have to rise enough that "shopping" can resume.

Another "oil shock" and/or continued bleeding from the soaring costs of H/C taking yet more out of a stagnant wage and high unemployment would mean the US would remain in a nasty recession for a long time.

A Speculation

Could it be that we are at the end of an old order? That today we reached a tipping point where productivity increases and out paces our ability to "go shopping?" That the profits are so ensconced in the super-wealthy "owner class" that labor and therefore the consumers that the welfare of the world is dependent upon has lost their power to obtain wage gains?

If so....... and it seems we've been toying with this through EITC and a host of other transfer payments, it may be that there is no choice but to further increase transfer payments. I'd rather not see that as it would create even more distortions than we have now.

Can it be that those behind the scenes of both the Bush and Obama admins KNOW that the thing won't run without massive deficit spending?

In a science fiction world where goods are mostly provided by robots are the consumers to be enslaved by those "owning" the robots or are they to be empowered by receiving dividends from our technology?


Thank you for this discussion of market efficiency. In his MIT lecture last month, Robert covers how fat tails may be partly explained through the decomposition of debt into cash and a put option. A put option ahead of its maturity will have a more extreme slope the closer the asset value gets to zero. As a result, the writers of such puts (lenders) will present returns that are increasingly sensitive to asset values, the closer those asset values get to zero.


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Street Rat

A couple of points. One, it is less difficult to outperform DJI if the index still included AIG and Citi...

Second, as Posner alludes to, the "Black Swan" may have been a regular old white swan subsequently painted black by revisionist history. The bubble was perceived by many back in 2006 and its effects could have and should have at least been considerably softened by Greenspan raising rates.

Related to this second point is TBTF and repeal of Glass-Steagall, and the much-discussed non-regulation of bond market synthetic CDO activities, including shorting activities in the form of CDSs. I would submit that the metrics are simply not geared toward seeing an imminent Black Swan event. In order for that to occur, there must be a regulatory, academic, and financial industry approach that takes TBTF/systemic risk seriously.

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Denis J. Hauptly

What happens if everyone invests their money in index funds or, to pose a somewhat less absurd question, if half the money isn in index funds? As a smaller group of stock pickers extablishes the market does the advantage of index fubds decrease? At what point does it turn negative?



while wages fell, non taxable type compensation (primarily the cost of health insurance, but other types as well) rose dramatically. So compensation did indeed rise and it was spent on medical treatment far in excess of what is consumed in the rest of the world. Americans like upgrading their cars & TVS, big houses and expensive often unnecessary medical treatment.

Or so it seems to me.....


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Hey guys!

Just wanted to give everyone a heads up!

There has been a lot of hype around the Forex Autopilot Turbo, also know as FAPTurbo program.

At first I was a bit skeptical, but after trying it out, it seems quite profitable. It's a robot that will do
trading automatically for you. I tried it on a demo forex account first and then moved to the live account
and haven't looked back since.

Message me for screenshots if you want!

Their official site is:

Martin Pessener


Good Evening

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Lot of review claiming that it works...How many of those reviewers have actually tried it? These people are
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A "rational" stock market bubble would be a situation where stock prices reflect present earnings and the expected future earnings of the large majority of market participants, and where future earnings are expected to rise over time.


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