Political & Elections

"Nobody has ever stated you should invest in the RE or stock market if you can't afford to lose, but you are so rigid in your opinion, you illustrate your youth."

Since you're 46 and started to invest in 1990, I'm not sure you understand how it works.  I've been investing since the 70's and I'll explain to you what has happened to many people nearing retirement.  Most people were not making big bucks in the 70's.  My first job paid 14000 per year and I'm highly educated in a high demand field.  Therefore not much money went into the market.  Most people hitting retirement age, accumulated the bulk of their "wealth" in the 90's.  Many lost significant sums of money in 2000 - 2001.  Many have not gone back into the market.  A large number of people lost significant sums of money in 2008 to the present.  Many of those people will never again invest in the market.  Its one thing to lose 50% of your money when you have many years to recoup it, its another matter when you have a few years left to work, have > 1,000,000 in retirement funds and lose half of it. 

Don't give me the nonsense about diversification.  In 2008 - today, everything is highly correlated and that includes whether or not it is negatively or positively correlated, its still correlated.  Many people sold near the bottom of the market and have not gotten back in.  Don't give me that nonsense that the average investor is not a speculator, they are.  Most people are not Warren Buffett who buys low and sells high, the typical retail investor buys high and sells low (my definition of a speculator albeit an unsuccessful one).  Our brains are wired to flee danger (saber tooth tigers) and not make wise financial decisions as was also the case in buying overpriced real estate.  This is why the typical "investor" is not in the market, is waiting for Greece, Europe, the deficit or whatever reason to get back into the market.  This is also one of the reasons that the market volumes are so low.

As far as Romney is concerned or any of the Republican candidates, show me any time in US history where government spending was not used to pull the country out of a recession.  Show me any time when deficit cutting worked to pull the country out of a recession.  You see how well that's working in Europe.

I'm sure you've done extensive world traveling and can compare the rate of economic growth of our country vs others.  Countries like China, which I'm sure you've visited, have used government spending to improve their infrastructure.  Our infrastructure is a disgrace.  Instead of giving Mitt a tax break so he can create so many jobs, perhaps we should spend more on infrastructure - our electric grid, education as opposed to cutting teachers and falling further behind the rest of the world.

By the way, your candidates are losing ground against Obama and if the economy continues to improve, your presumed one dimensional candidate - Mitt will lose.

John,

I chose to address certain points in a separate post on purpose.

While you're at it, explain to me how that Romney fellow is going to cut taxes and reduce the deficit - oh ya - I forgot - the job creators will create more jobs so that people will have more money to spend.

No Obama is not government. Perhaps they didn't teach civics classes when you went to school - we have three branches of government and one of them has been holding up progress in this economy. After November, they won't. Instead of worrying about evolution and that Obama shouldn't be president because "he's a muslim and has been illegally elected", they should do their job

Whether its real estate or the stock market, you should never buy what you cannot afford to lose.

1. Romney will be able to reduce the deficit because yes, job creators will create more jobs, and when someone is not under-employed or living paycheck to paycheck they spend money, that means tax revenues will increase.

I highly suspect he will do a 2 prong approach.

~ Payroll taxes will no longer be a short term conversation, it will be approached from a long term perspective. This means, as I have stated before, employers will not worry.

~ Studies on cow methane, i.e. pork barrel will become obsolete, and we will go back to a line item veto.

2. Obama is not govt.

So your defense is semantics. Even in your premise, there are 3 branches, and my civics classes taught me EXECUTIVE was 1 of them. What did your civics class teach you as the 3? Isn't the President the head of the Executive? Doesn't he have the power to VETO the Legislative? The branch that you say after November won't be an issue?

If he is the head of the Executive branch of govt how is he not govt? Are you implying he is like the Queen of England?

3. Investing

Nobody has ever stated you should invest in the RE or stock market if you can't afford to lose, but you are so rigid in your opinion, you illustrate your youth.

The avg investor is not a speculator. The avg home owner doesn't flip homes, contrary to shows like Flip this house. They came with full faith that they were buying to place roots down in the community. It is an American dream to own a home. The avg investor are not day traders with Schwab or E trade. Many people pay month after month to invest in their companies 401K or an IRA. They are in for the long haul.

Good luck on your retirement, hope that the CD return of 2% per yr will do you well when the COL is about the same. Hope when your kids go to college it is not like now with 10% annual tuition increase every yr for the 4 yrs they are in college? Come back than and tell me how it worked out for you if this is your economy. 30% loss of home equity within 5 yrs...no money there. Unemployment at @9% and you were let go, because at 50 you are a financial debt to the bottom line. Under-employed and working 2 jobs to live paycheck to paycheck.

OH Yeah, that's right none of that will ever happen to you because you are too smart and will be indispensable. If I had a dime for everyone who believed that I would be living in Portofino.

-- Edited by pima on Thursday 9th of February 2012 08:28:20 AM

The "elderly dig" was in response to my supposed youthful naivete.  I should point out that I take as a complement being called youthful.  By the way it would also take someone with a walking stick to call me youthful.

As far as Mitt Romney is concerned, he isn't going to do anything more than Obama or any of the posters here on housing or anything else.  In the words of Gary Shilling: "we're in the age of deleveraging" and there is nothing anybody is going to do to change that.  But apparently a lot of people are like cattle and easily led.

Elderly.  

Ha ha.  That's funny.  

Well - let's just see.  Since you're a sophisticated elderly realtor, I'm sure you understand mean reversion in markets - all markets, greater fool theory, following the herd etc.  So I expect that you understand that those who paid a high price for real estate, bought an overpriced asset.  I also expect that you understand that your house was not really worth what you thought it was because sooner or later, markets return to their trendline.  Because there are fools who push up prices and herds that follow them, doesn't mean your house was worth the price except at that instant.

I would also like you to tell me who is buying all those iphones, ipads, droids and big screen tv's.  I guess either people are paying with their credit cards, racking up debt and paying the minimum each month or they have the money and the economy is going gangbusters.

You can also explain to me how the stock market is the same as it was years ago.   Since you traded in the 70's and 80's you dealt with a broker who could not execute a trade in microseconds like today and where there weren't hft algorithms that put out buy orders with the objective of only testing the market or algorithms that scan the online news to pick out key words to trade on. 

While you're at it, explain to  me how that Romney fellow is going to cut taxes and reduce the deficit - oh ya - I forgot - the job creators will create more jobs so that people will have more money to spend.

No Obama is not government.  Perhaps they didn't teach civics classes when you went to school - we have three branches of government and one of them has been holding up progress in this economy.  After November, they won't.  Instead of worrying about evolution and that Obama shouldn't be president because "he's a muslim and has been illegally elected", they should do their job.

Whether its real estate or the stock market, you should never buy what you cannot afford to lose.

For someone who lives in a neighborhood of 800 k homes, you sure like to complain a lot.

Do not underestimate the LDS.

They practice survivalist tactics and have cash for donations to every MR fund raiser. $5, $10, $20 donations on every cornor outside of their temple property will raise a lot of moola. There are four cornors where their temple stands. 

The first thing I would do if I didn't have savings is certainly not to put money in the market.  If I lost my house and/or my job, I would stuff my money under the front seat of the car I was living in.  Don't laugh at that statement, I have a close relative who spent much of last winter living in his car.

And some people buy a bigger house, because they couldn't afford the size house they needed when they were newly married before kids.  Or those who have to relocate for a job.  Or even those that downsize after the kids move away to establish their own lives.  Or those that need to move grandma in because she can't live by herself anymore, and can't get around in the house because of how it's laid out.

Or you have those in the military that rarely are going to be in one place more than 2 or 3 years, who still try to purchase property and then rent/sell when they leave.  It worked for some, not so much for others.  

I can count on one hand how many people I know who moved just to "trade up".  If they had a job and some stability and could stay in one location, they tend to remodel and stay in the same house.  

Then again I live in one of those communities where people set down roots and tend to stay a long time, so those that I know may not be typical.  

Did those that remodel overbuild/overspend for their property?  Yep, almost all of them that I know did.  They also thought their house was an investment.  Of course, that is what they had been told their whole lives! 

Cry me a river!

1.  most people do not move every 7 years because they're changing jobs, they're moving to trade up - completely unnecessary.

2.  I don't need to be on Obama's committee, he's doing well enough:

(CNN) - President Barack Obama tops the Republican presidential frontrunners in hypothetical head-to-head matchups, according to a new survey.

The ABC/Washington Post Poll indicated Obama is ahead of Mitt Romney, 51% to 45%, among registered voters. The new figure is the first time Obama cracked 50% against the former Massachusetts governor in the survey. He received 46% to Romney's 47% in mid-January.

It appears Obama was also aided by an increase in support among independent voters, who were split 48% for Obama and 47% for Romney. The former Massachusetts governor held a 12-point edge in January.

The new figures showed Romney's business background, which he often touts on the campaign trail, is a positive element of his candidacy. He held a narrow edge over Obama on who is best to handle the economy.

The president also bested Gingrich, 54% to 43%, among registered votes, although it was a smaller margin than the 15% by which Obama led the former House speaker in January.

In an interview on Sunday the president said he deserves a second term. The poll found 49% of registered voters agreed, while 49% said he does not deserve a second term.

But the president did not fare as well among independent voters, who will likely play a significant role in the 2012 elections.

Obama received a 47% approval rate among the key voting bloc and a 50% disapproval figure.

The poll questioned 1,000 adults between Wednesday and Saturday with a sampling error of plus or minus four percentage points.

3.  NO - the market is not the same as it was in the past:

 

Welcome to the Machine: High-Frequency Trading Domination

Liz Ann Sonders
Senior Vice President, Chief Investment Strategist, Charles Schwab & Co., Inc.
October 17, 2011

Key points

• Market volatility has spiked, starting with 2010's flash crash and culminating in this year's wild August, bringing asset-class correlations up with it.
• High-frequency trading and the use of leveraged exchange-traded funds (ETFs) are the primary culprits, but the impact isn't all bad.
• What are regulators doing and saying about the phenomenon?

The Flash Crash of 2010. The wild week in August when Standard & Poor's downgrade of US debt hit. Triple-digit last-hour moves becoming the norm. Turbocharged high-frequency trading firms are in the crosshairs of investors and the Securities and Exchange Commission (SEC). But are they really to blame? Over the past couple of months, it's become apparent that this new type of institutional trading is a big concern of individual investors—and it's a hot topic at client events at which I've spoken, so here's my take:

HFT defined
High-frequency trading (HFT) is a program-trading platform that uses high-speed and ultra-powerful computers to transact a large number of trades at very fast speeds. HFT uses complex algorithms to analyze multiple markets and execute orders based on market conditions.

Trading speeds are measured in milliseconds (thousandths of a second), and even more recently in microseconds (millionths of a second) and nanoseconds (billionths of a second). The twinkle in technologists' eyes is picoseconds (trillionths of a second) in a "race to zero." The goal, of course, is to make a (typically) small profit on each trade.

HFT firms are usually trading their own capital and rarely hold positions overnight. Some try to add "alpha" (outperformance relative to a benchmark) by using unique trading strategies, while others are more passive—often just trading the spread between a bid and an offer price.

Dominating trading volume…
According to several sources, including TABB Group, Aite Group and Thomson Reuters, HFT now accounts for between 55-75% of trading volume on average, with some days even higher. You probably remember the second week in August when the market had one of its wildest rides in history. I certainly remember, as I was on a vacation that turned into a non-vacation.

…and elevating volatility
On August 8, the Monday after S&P downgraded US debt, the Dow Jones Industrial Average fell by 635 points. Volume on the New York Stock Exchange was the fourth highest on record. TABB estimates record profits of $60 million that day for HFT firms. The bottom line is that any time trading firms are making millions while the majority of investors are either getting killed or simply watching market action with horror, it's going to generate attention.

Pros and cons
The proponents for HFT claim that it brings more liquidity to the market while keeping transaction costs low via narrowing bid-ask spreads, and a recent study by the Capital Markets Cooperative Research Centre of Australia supports that view. But there are plenty of studies that refute the aforementioned benign characterization of HFT.

One such study was completed last November by Yale Professor X. Frank Zhang, who found that "HFT is positively correlated with stock price volatility" and that it's "especially strong for the top 3,000 stocks in market capitalization and stocks with high institutional holdings." Zhang's most condemning find is that "the positive correlation between HFT and volatility is also stronger during periods of high market uncertainty."

You can see the latest increase in volatility in the chart below.

Volatility Elevated

Source: FactSet, as of October 14, 2011.

You can also see the unprecedented increase in asset class correlations, for which there's a longer history than volatility, in the chart below.

Correlation Elevated

Source: The Leuthold Group, as of September 30, 2011. Average 60-month correlation of monthly changes in S&P 500 with monthly changes in: Morgan Stanley EAFE, Gold, CRB (Commodity Research Bureau) Raw Industrials, 10-Year Treasury, one-Year Treasury-Bill Rate, Broad Foreign Currency Index.

Volatility and correlation are related
In times of high market volatility, stock movements tend to be more correlated and the link has grown increasingly strong since the mid-2000s. That was when regulatory reform encouraged financial exchanges to switch from floor-based trading to electronic trading.

Two things have happened since then that are coincident with the emergence of trading-platform fragmentation and HFT. First, as noted, volatility and correlations have both been higher. Second, the slope of the volatility/correlation curve is steeper, meaning that a rise in volatility today has a more pronounced impact on correlations than in the past.

HFT seems to have reduced bid-ask spreads (and thus transaction costs) in less-volatile times, making markets work more smoothly. But it appears to have done the opposite in more-volatile times, adding to market stress and amplifying volatility.

Diversification is dead …
This increase in correlations is throwing for a loop the notion of diversification in investors' portfolios as a way to minimize risk in volatile markets. If all asset classes are moving in tandem, the power of diversification is lost. This is the reason for the now-popular characterization of market action over the past several years as "risk-on/risk-off" trading, and HFT has undoubtedly been a factor in this phenomenon.

…long live diversification!
I'm often asked about this relatively new highly correlated market and whether it's a fixture of the future or a fluke of the unique environment we've been in since the financial crisis erupted three years ago. I lean toward the latter view and still believe that investing based on longer-term fundamentals will still be rewarded, and that diversification is not dead.

One of the things that high correlations do bring is the opportunity to find mispricings amid coordinated movements. It's simply the case that the fundamentals are very different among the riskier asset classes, and within asset classes among individual securities. When everything's moving in tandem, investors can look for securities, industries, sectors or asset classes whose movements aren't justified by underlying fundamentals. It may not be a strategy with an immediate reward, but should serve investors well in the longer term.

HFT and ETFs
The other facet of HFT dominance is its use of certain vehicles, notably ETFs. I'm a regular reader of TheStreet.com articles written about or by Doug Kass, founder and president of Seabreeze Partners Management. He opined recently on HFT firms' use of "leveraged" ETFs in particular, and it caught the attention of my friend Andrew Ross Sorkin, who penned an article on the subject in The New York Times.

Leveraged ETFs give investors the opportunity to bet on a basket of stocks, commodities or an overall index and have become very popular vehicles for traders generally and HFT firms in particular. It's estimated there's about $1 trillion invested in leveraged ETFs. Their attractiveness to HFT users comes from the fact that investors can bet long or short and leverage the bet, while also moving in and out during the trading day to lock in gains (or limit losses, which can be substantial). There are also "inverse leveraged" ETFs that go up when the price of the basket of goods goes down and vice versa.

Doug Kass calls these leveraged ETFs the "new weapons of mass destruction" as they've "turned the market into a casino on steroids." Leveraged ETFs have to rebalance their holdings each day to remain properly weighted, and they do so by buying and selling millions of shares within minutes. If a leveraged ETF made money that day, it has to reinvest the proceeds and leverage them again to remain balanced. This helps to explain many of the very wild, very large late-day swings we've seen in the market.

The view that HFT firms and their use of leveraged ETFs have wreaked havoc on markets has not gone unchallenged, though. William Trainor, a professor at East Tennessee State University, studied market volatility at the beginning and end of market days and concluded that ETF rebalancing had little to do with it. But Andrew Ross-Sorkin did his own (informal) poll of fund managers and virtually all agreed with the Kass view about both leveraged ETFs and the magnification of their impact from the use by HFT firms.

SEC et al. taking a look
In the meantime, I'm often asked whether there's any official scrutiny of the practices of HFT firms. In fact, US and European Union (EU) securities regulators are looking into whether ETFs and their use by HFT firms amplified August's wild swings in the market.

SEC officials are honing in on leveraged and inverse ETFs specifically, part of a broader look by regulators into exotic trading vehicles and HFT. In early September, prompted by August's market action, the SEC voted to open up a public dialogue about the use of derivatives by mutual funds and ETFs, among other things. The Dow Jones Industrial Average swung by at least 400 points on four consecutive days that month for the first time in its 115-year history. And as previously noted, many HFT firms posted huge profits during that volatile time. Expect to hear much more in the coming months from the SEC.

Across the pond, the EU is considering listing "specific examples of strategies using algorithmic trading and high-frequency trading" that should be banned outright and punished by regulators as market manipulation.

Layering, stuffing and spoofing
The Brussels-based commission is targeting "layering," in which traders place large orders they have no intention of putting through, and "quote stuffing," in which investors seek an advantage by delaying data feeds. "Spoofing," in which market participants try to trick other computers into making decisions that can be exploited for profit, would also be banned.

Steps are already being taken to stem abuses. Regulators in the United States and the EU have recently fined traders for using computers to gain advantage over slower investors/traders by illegally manipulating prices. They're also weighing new rules for HFT, with an international regulatory body to make recommendations to global leaders over the next few weeks. Even the HFT industry itself is cooperating, believing that although the majority of HFT is legitimate and lowers costs, it's in favor of policing the market to quell manipulation and support market stability.

The hoped-for benefit of this increased scrutiny and action is confidence among traditional investors in markets and the belief that we can all again play on a relatively level playing field.



Save money...where?  In investments?  CDs? Money Market?  Roth IRA?  Under the mattress?  

If I saved money in a mattress, I don't increase my wealth.  

If I saved money in a Roth IRA, I could potentially expand my wealth.  Even with the market underperforming, it's still better than putting it in a mattress.

It's unrealistic for most folks to pay off a mortgage before their kids go to school. Perhaps this is possible in undervalued markets where housing is cheap.  In my area, I will be lucky to have it paid off in 30 years.  

College tuition has outpaced inflation.  Most of us could work our way through college in my generation - now, it's a bigger challenge.  

The market has been a casino for decades... Black Monday 1987 is an example. DJIA dropped 500+ pts to 1738. 25 yrs later we are at 12K.

Take 100 place in it a CD with 3% return, and the dow tell me who wins. The problem is many invested late and that is a problem. Those that did long term investment had to sell more shares at a lower price and pay capital gains, yr after yr, after yr. They got hit with capital gains, and loss of shares.

Save money, don't spend what you don't have, make certain that you have put yourself in the position of not paying for an outrageous mortgage (or better yet have it paid off before kids go to school).

Jersey Girl talking now.... F You and the horse you rode in on!

Ban me!

Save money, don't spend what you don't have. I don't spend money I don't have. Everything I purchase is on my debit card. Credit cards are the G forbid.

Mtg issue or paying off before kids go to college. Do you realize that it is rare for kids to live in the same home as the home they were born in? OMG, that is the most inane thing I ever have read...pay off the house. Majority of homeowners move every 7 yrs. Mtg is 30 yrs.

Outrageous mtg. I will go with you on this. People bought homes that were not in their fiscal realm.

All of that being stated, do you think Obama would say things like that..you should have not put yourself in the position, or don't spend money?

Of course not. Your position did nothing more than to prove how in 07 life was better than 12. Obama would never say to the voter anything you posted.

If he stated your post...Save money, don't spend what you don't have, make certain that you have put yourself in the position of not paying for an outrageous mortgage (or better yet have it paid off before kids go to school); he would lose hands down! Good thing you are not on his committee.

I was unaware that the Holiday season was a failure for retailers but maybe numbers were updated since this press release.

http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=1288

Latest Gallup poll = Obama and Romney in a statistical dead heat (Romney up one point).

Our family is making 1/3rd less today than in 2009.

Don't get me wrong.  Happy to have jobs.  Financially, we aren't as secure as we were before - which we all know was probably just an illusion based on ridiculous housing market values.  

Our debt is higher than it was as a family.  It keeps me up at night, wondering how we will make a dent in it, even though we did better than most while recovering from long bouts of un or underemployment. We kept our house and the kids still went to college, but also spent money we didn't have, using our credit cards more than I like, often just to pay things like health insurance premiums.  

It doesn't half bother me as much as how much money is owed on our national debt, however.  We will NEVER get a handle on it, if we don't start now.  

To me, that's the most critical issue of the upcoming election.  

John,

I am not sure I would say it would significantly improve his numbers when many now are under-employed. Yes, a job is a job, but that resentment living paycheck to paycheck will still be there. The fact that the housing market is still underwater with no real sign of improvement and consumer confidence still being low does not make Obama a sure thing.

His odds are stronger because he is the incumbent, but he won last time because he got many young voters to the polls, and I am not sure they will go now. I can't tell you of how many college graduates right now are saddled with debt and have yet to start their career due to unemployment.

We are also going to see a small, but important new group that will hit the unemployment rolls...military members being separated. These people usually are in certain geographic bases and can make a dent on the unemployment in that area, which can ripple up to the state level, making even a purple state change colors very quickly.

As we all know it is not the popular vote that makes a person become President it is the electorate.

Finally, I would bet when they start doing the attack ads against Obama, 2 things will be pounded in everyone's mind. Dow Jones is still at the same place it was back in June 08. Granted up a lot from Dec 08, but run it in July against summer 08 Dow and it will make people think they are no better off today than 4 yrs ago. Run that with homes today are even further under water than 08, which will make them think they are worse off today than 4 yrs ago.  Add that with ads of how the next great bubble is the college loans defaulting because kids can't get jobs out of college while costs are rising, making them believe if they can't change it now they will be even worse off in 4 yrs.  I highly doubt people will see the economy as NOT a negative impact on him.

That is before they even discuss how he like Bush imploded deficit by Trillions.

Seriously I can see the ads...flying to Chicago for Valentine's Day with them showing everything I just pointed out, or maybe the pics from their night to NYC that he promised Michelle or even counting the rounds of golf. I am not trying to place judgement on whether he should or should not have, I am just illustrating that when people are hurting this will anger them.

Now I have to be honest if I was the RNC I would place all of those ads on MSNBC. The reason why most people hate political ads to begin with and if it really ticks them off they will change the channel. That would increase the likelihood of their slant not getting out there as effectively as Matthews, Maddow, Schultz or O'Donnell would like. Less ratings, cheaper ads. For an R that is killing 2 birds with 1 stone.

And that would be because of what?

That the Enquirer's soon to break the news Newt's divorcing yet another wife, or that the number who've given up looking for work is going to be ignored until November?