Stay calm when the Stock Markets crash.

Stay calm when the Stock Markets crash.

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.20x).

DISCLAIMERS: The opinions expressed in this blog ARE NOT ANY FINANCIAL ADVICE. This author takes absolutely NO RESPONSIBILITY for any action of the readers.

#bankrupt, #stock market, #crash, #lowering interest, #bank rescue,

1. The crashing of share price of any company is just a rude awakening.

The value on the stock market of any (stock market) listed company is just a speculation on how much is the “future value” of that company. The “future value” of the company is just the discounted value of all its earning plus the redistribution of company capitals at its dissolution. So there are a lot of “ifs” in the valuation of the “future value” of a company.

When the “future value” originates from the advocates of the company, it would be astronomically high as all “if’s” have been assumed to be already facts. On the other hand if the “future value” originate from the skeptical observers (the “bears” of the shares markets) it may be dismally low. The traded values of shares at a shares market obviously depends a lot on which side has a bigger propaganda machine.

On the day a company is floated, existing shareholders would want to make quick profits on listing days and they may employ the service of “promoters” and “underwriters” to get outsiders to buy their shares at much more than their real worth.

After all shares had been sold to outsiders, the promotion activities would stop and the skeptic would have their chance to criticize all the “if’s” and the make a more realistic projection of the future earning of the company. From that time, new share holders from the outside would slowly realize the truth:

“If a company is making fantastic profits, its existing owners would not want to sell it, only companies in bad shape are being desperately unloaded by their owners”

Then new shareholders only see the traded values of the company falling. Some get too upset and decide to sell out at all cost (called “sell at market prices”). Others are then so fearful, they compete among themselves to be the first to get out. So the shares price of the company falls down steeply (“shares price crashing”). [1]

2. The crashing of all share prices of any share market is just a market wide rude awakening.

crystalcrash2c70.jpg

The crashing of the shares price of one company on the market may make shareholders of other company worry. They too start worrying whether they had also been taken for a (rough?) ride. Some of them will try to get out of shares to be on the cautious side. This amplified selling action may cause the prices of all shares on a share market to crash.

3. People wrongly blames share market crashes for their financial losses.

The CRASH OF ANY SHARE-MARKETS DESTROYS NEITHER WEALTH, NOR EARNING GROWTH of companies traded on that market. The crash only means that people no longer blindly believe in the rosy pictures painted by the promoters of those companies. New buyers of company shares would only believe in highly probable earnings of the companies, not in their fantastic earning which may or may not eventuate in the future. Some new buyers also want to buy at big discount from panicky existing shareholders.

The periodic loss (earning deficit) of share-market listed companies caused by unreasonable assumptions, uncontrolled spending, loss of income sources, the extravagant payments to directors and managers have slowly and certainly devoured and eroded the growth and sustainability of those company. A share market crash is only a rude call to shareholders to return to reality.

A share market crash is just similar to the medical assessment of an illness in a patient, the detection has not caused the illness, the latter has been caused by other causes which may include his genetic condition, his environment, his living style, etc …

4. Tax money should not be spent rescuing imprudent investors.

a/- Sometimes, the government of the country may feel compelled to rescue those gullible, imprudent people who had put their hard earned money in the share markets. The government of a country often lowers the reserve-bank interest rate to prop up the values of shares.

Such rescue is unfair to other prudent tax payers as they had stayed clear of the unsustainable companies and had not enjoyed the good time provided in their boom time. Governments should better spend money making laws enforcing disclosure compliance by companies, banning the listing of “strangled companies” [4a, 4b] on share markets and educate share-holders on how to force compliance and transparency on companies .

The term “strangled companies” denotes those paying astronomical salaries to their directors, chief executive officers and promoters. When the directors and chief executive officers of the companies are paid astronomically high salaries and bonuses there will be no cash left for basic operations of the companies. The latter are destined to fail.

“Strangled companies” in the stock exchanges of leading countries operate in much the same way as the illegal groups of “kidnappers organized-beggar-operators” operating in third world countries (with weak laws enforcement): Kidnappers stole children from others and force them to beg in public areas. The children are kept always miserable. No matter how much passerby people give to the begging children, their handlers (kidnappers) will extract almost all the money leaving them with only just enough to sustain their miserable lives.

Lowering of the reserve-bank interest rate only makes people spend more on the present and spend less to prepare for there future. Only incapacitated people like old or disadvantaged people pour their excess capacity into strangled companies to prop up the share markets. Most people would borrow money at zero interest to enjoy life while they can still. Some small percentage of careful people may borrow (when approved by their lenders) to build their own income generating devices such as small business under their own control, spare housing capacity for possible future rental purpose and only fools borrow to invest in “strangled companies” on the share markets.

Lowering interest rates strangles pension recipients who earlier invested their money in pension funds.

b/- Sometimes, the government of the country may feel compelled to rescue big banks listed on the shares market.

However, rescuing an insolvent bank is still the propping up of a “strangled company” called a “bank”. That bank has had periodic loss (earning deficit, caused by unreasonable assumptions), uncontrolled spending, loss of income sources, extravagant payments to directors and managers. All those mistakes have slowly and certainly devoured and eroded the growth and sustainability of the bank. It should be let going bankrupt. [5,6]

c/- It is easily seen that a government may pass laws such as those regarding franking credits in Australia with the indirect aim of pumping up share markets [7].

5. Staying calm when share-markets crash.

You can remain calm when the share markets crash if you strictly follow the following rules:

a/- Be self-reliant both in your thinking and in your financial conduct.

b/- Operate only inside your familiar area of financial knowledge. Don’t engage into any financial because of buzzwords. Avoid all financial salesmen with buzzwords. Buzzwords are only only used to confuse new comers like you and are more likely parts of some new traps.

Examples of buzz words are “new economy”, “clicks per day”, “securitized loan”, “negative interest”, “security” (meaning its exact opposite: a loan without any ordinary sense of security), “quantitative easing”, etc…

c/- Don’t have blind spots on the sustainability of the operation of “strangled companies” around you (which include your banks and your pension funds).

d/- Don’t deal with, don’t rely on any financial adviser, promoter who had been bankrupt. Don’t buy into any “zombie companies” which had been bought by Private Equity, Private Investment Group and re-floated on the stock markets.

e/- Don’t leave your hard earned money in any kind of banks without the “guarantee by government of the nation”. Building societies, merchant banks, investment banks, hedge funds are mostly without such guarantee.

A responsible government should also educate customers of its “saving banks” that they would only get back a set percentage of their deposits in the event that their relevant “saving bank” goes bankrupt. This action would hurt the short term interests of “saving banks” but would make a knowledgeable base of depositors, who are also tax payers, which are resilient to economic disasters.

Building societies have a lot of real estates mortgaged to them, but they are not allowed to take those real estates unless the borrowers are in default in repayments.

f/- Deal only with companies that are risk proof against any bankruptcy any of their counter-parties.

g/- Do NOT leave your pension money in the share markets at time of volatility.

h/- Pay also attention on the sustainability of the economy of the nation. The nation may also go bankrupt and some nations had actually lose some of its territories or utilities (communication companies, power companies, water companies) to its creditors. Be prepared for that eventuality when you have your politicians spending national treasures to prop up share markets and rescue failed banks. If your nation go bankrupt after some shares markets crash, blame only yourself and your countrymen for not having been active enough politically and for not having thrown out those politicians.

References:

[1]. Stay calm when they go bankrupt, https://survivaltricks.wordpress.com/2019/07/20/stay-calm-when-they-go-bankrupt/

[2]. Signs pointing to an impending crash for small investors, posted on December 16, 2016

[3]. A satirical guide to signs of an impending crash for small investors posted on January 25, 2017

[4a]. Bankers given outrageous incomes by their boards, posted on December 22, 2016

[4b]. Avoid-buying-zombie-floats-on-the-stock-exchanges posted on October 20, 2017

[5]. https://www.investopedia.com/articles/economics/08/government-financial-bailout.asp

[6]. https://www.abc.net.au/news/2014-11-10/verrender-bank-bailouts-its-now-taxpayers-who-need-protection/5878418

[7]. Government may be behind bubble markets posted on February 12, 2018

[8]. https://rielpolitik.com/2019/09/11/corpro-fascism-911-was-the-coming-out-party-for-the-american-fascists-by-jim-willie/

RELATED Money Blogs ,

crystalball2c70.jpg

Avoid-buying-zombie-floats-on-the-stock-exchanges posted on October 20, 2017

The Futures and Derivatives Markets (Part 1).

crystalball2c70.jpg

The Futures and Derivatives Markets, Part 2: Rigging the indices to win

crystalball2c70.jpg

Government may be behind bubble markets posted on February 12, 2018

ShareInvestments

PREVIOUS MONEY Blogs

Your fiat money (Part 2), Your fiat money, Bankers given outrageous incomes by their boards, Signs pointing to an impending crash for small investors, Bankers earn more than interest margin on secured loans.

Click here for my other blogs.

divider43.jpg

polymeraust100dollars

Click here go to Divider63D400 Home Page (Navigation-Survival-How To-Money).

SUBSCRIPTION: [RSS – Posts], [RSS – Comments]

MENU: [Contents][Blog Image of Contents ][Archives ] [About]

Stay calm when they go bankrupt.

Stay calm when they go bankrupt.

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.20x).

#bankrupt,

1. Bankruptcy is just a rude awakening:

The bankruptcy of a person or an economic entity is declared when after he or that entity cannot meet his or its commercial or financial obligations. After a bankruptcy has been declared, all moneys owing to all creditors will be paid with priorities determined by bankruptcy rules.

The declaration of BANKRUPTCY DESTROYS NEITHER WEALTH, NOR EARNING GROWTH of that person or economic entity. The declaration only means that the person or the economic entity can no longer control the flow of money as he or the entity is not able to meet the obligations imposed on him or the entity. The control is now legally placed in someone’s else hands.

The periodic loss (earning deficit) caused by unreasonable assumptions, uncontrolled spending, loss of income sources, the extravagant payments to directors and managers have slowly and certainly devoured and eroded the growth and sustainability of the economic entity. A declaration of bankruptcy is only a legal report that the madness within that economic entity must be halted.

A bankruptcy declaration is just similar to the medical detection of an illness in a patient, the detection has not caused the illness, the latter has been caused by other causes which may include his genetic condition, his environment, his living style, etc …

2. People often blame their hard time on the bankruptcy of someone else.

Gullible people always rely on the statements of boasting con-men that they can engage in unreasonable, unsustainable dealing with the con-men: Lending money to con-men for a high earning, trading with con-men for some astronomical profits.

Once a con-man has been declared bankrupt, all those gullible people dealing with him will lose on money on loan to him or on in-executable commercial contracts. The gullible often blame the bankruptcy declaration as the cause of their loss, they never blame themselves for having their blind spot on the extravagant claims by the con-men.

3. Tax money should not be spent rescuing imprudent businesses.

Sometimes, the government of the country may feel compelled to rescue those gullible, imprudent people who had given their hard earned money to sophisticated con-men.

Such rescue is unfair to other prudent tax payers as they had stayed clear of the con-men and had not enjoyed the good time provided by the con-men.

Governments should better spend money making laws forcing widespread practice of escrow accounts [1] in commercial contracts to prevent the forcing of imprudent, one-sided contracts on contract partners in weaker position. This method of using escrow accounts would be quite effective in confining the contagion of bankruptcy.

When any local government goes bankrupt, the next higher level (state and federal) of governments should not rescue it. Any such rescue would be unfair to other local governments and would only encourage future irresponsible behaviors. The constituents of that failed government should bear the consequences and learn their hard lesson of not spending beyond their revenues.

4. Staying calm when acquaintance go bankrupt.

You can remain calm when your acquaintance go bankrupt if you strictly follow the following rules:

a/- Be self-reliant both in your lifestyle and financially.

b/- Know how to live within your means: Acquire not what you want but only what you really need. Spend your money on your prioritized necessities: Buying your mean of transportation to widen your area of earning, buying household essentials to lower your cost of living, buying your residence to reduce your cost of accommodation.

c/- Don’t have blind spots on the sustainability of the lifestyles of people and the operation of companies around you (which include banks and pension funds).

d/- Don’t deal with, don’t rely on any individual who had been bankrupt.

e/- Don’t leave your hard earned money in any kind of banks without the “guarantee by government of the nation”. Building societies, merchant banks, investment banks, hedge funds are mostly without such guarantee.

A responsible government should also educate customers of its “saving banks” that they would only get back a set percentage of their deposits in the event that their relevant “saving bank” goes bankrupt. This action would hurt the short term interests of “saving banks” but would make a knowledgeable base of depositors, who are also tax payers, which are resilient to economic disasters.

Building societies have a lot of real estates mortgaged to them, but they are not allowed to take those real estates unless the borrowers are in default in repayments.

f/- All your commercial and financial contracts with all individuals, economic entities must be risk proof against any of them going bankrupt. Many good but imprudent businesses had been destroyed for not taking this precaution (Large amounts of payments in contracts must be kept ready in escrow accounts [1] waiting to be released upon delivery of goods or satisfactory completion of work).

f/- Pay also attention on the sustainability of the economy of the nation. The nation may also go bankrupt and some nations had actually lose some of its territories or utilities (communication companies, power companies, water companies) to its creditors. Be prepared for that eventuality when you have your politicians spending national treasures like drunken sailors. If your nation go bankrupt, blame only yourself and your countrymen for not having been active enough politically and for not having thrown out those politicians.

References:

[1]. https://www.escrow.com/what-is-escrow

RELATED Money Blogs ,

crystalball2c70.jpg

Avoid-buying-zombie-floats-on-the-stock-exchanges posted on October 20, 2017

The Futures and Derivatives Markets (Part 1).

crystalball2c70.jpg

The Futures and Derivatives Markets, Part 2: Rigging the indices to win

crystalball2c70.jpg

Government may be behind bubble markets posted on February 12, 2018

ShareInvestments

PREVIOUS MONEY Blogs

Your fiat money (Part 2), Your fiat money, Bankers given outrageous incomes by their boards, Signs pointing to an impending crash for small investors, Bankers earn more than interest margin on secured loans.

Click here for my other blogs.

divider43.jpg

polymeraust100dollars

Click here go to Divider63D400 Home Page (Navigation-Survival-How To-Money).

SUBSCRIPTION: [RSS – Posts], [RSS – Comments]

MENU: [Contents][Blog Image of Contents ][Archives ] [About]

Living with a probable bubble market.

Living with a probable bubble market

by tonytran2015 (Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No.73).

#bubble, #market, #speculate, #bankrupt,

Living with a probable bubble market.

Please note that this blog is only a sharing of life experience. This blog does NOT give any FINANCIAL ADVICES.
Whether it is a house for living in or a government bond with positive (and hopefully inflation compensated, if you can still find them) interest for incomes, or some shares of a listed company on your local share markets for gambling thrill plus income for few years, you don’t want to buy that when it is priced in a bubble market.
The following shows how to spot the signs of a bubble market.

1. A bubble market can badly burn your business plan.

A bubble market is one where the prices are too high for any long term plan and those prices are predicted to fall down to level afforded by buyers.

If you buy too high in a bubble market you will not be able to pay bank interests on your business loans and suffer an asset loss when the bubble bursts. You yourself may go bankrupt.

Even for a speculator planning to sell to a greater fool, there is still a real chance that he will be the last one holding the speculated stock !

2. Common excuses from sellers/marketers in a bubble market.

2a. “The economy is different this time”:
The dotcom’s excuse that clicks are more important than incomes in its “New Economy” has been an expensive lesson to many speculators.
The FUNDAMENTAL PRINCIPLE of economiccs is forever UNCHANGED: Money earned minus money spent is the left over in the cash box.
2b. The whole nation is asleep with only your seller and you staying awake to do the half baked financial analysis:
This childish reasoning is not for reasonable investors.
2c. The seller is sharing privileged information with you:
If the information turns out to be false you will have no financial recourse to recover your money.
2d. A different plan is coming from the government this time and it will alter all financial planning !
However all government plans do follow the same method and the government has to uphold accountability. History should be a guide to those plans.
All companies also want to avoid their plans revealed causing their unjustified expenses. Is your seller a good anticipator of their moves?

3. Characteristic of a bubble market.

1. Price increases in a bubble market are not in line with historical records. The effects of any excuses given by sellers are still too small for the jump in prices.
2. The supplies and demands are one sided in a bubble market: The manipulators of the market have bought most available stocks before starting the game.
They then increase the current purchase prices on the market to send up the value of their existing stocks to obtain even more loans from the banks. They then would off-load all their stocks at high price and realize their profits before any crash.
3. There are not a variety of sellers. This makes it easier for someone to manipulate the market.
4. The register of current owners has no increase in long term investors/businesses: Only speculators own the stocks and their prices are not justified by the benefit of ownership. All respectable investors have sold out their holdings when the prices have been high enough.
However, accessing the register may not be easy for ordinary investors.
5. If you can still comfortably operate your long term business in the market, facing all anticipated ups and downs, then that market definitely has NO BUBBLE to you and you may only just missed its cheapper period. On the other hand, if you cannot operate your long term business in the market then that market IS A BUBBLE MARKET

4. Any bubble market still has its own long term buyers.

Those people who just sold something into a bubble market can still immediately buy something else from it with that same amount of money.
There are also investors who have to realize their capital gains every year and they will sell shares from one account while simultaneously buying back on another account. They do it to smooth out their yearly income taxes.
For someone who has not sold anything into that bubble market he would be wise to GO FOR ANOTHER TYPE of investment and to come back to buy from that market only after the bubble has bursted. It may take a few year or even a very long while for the bubble to burst but by that time he would have made much more profit on the other type of investment.

5. Conclusion.

If there is any suspicion that a market has become a bubble and you have not been involved in that market for a long while then you should GO FOR ANOTHER TYPE of investment while researching on it.
If the benefit of ownership is MUCH MORE than the payment of the purchase then the market is definitely not a bubble market for you, you just missed its cheaper period: You can still execute your purchase despite all talks about the any bubble bursting.

References:

[1]. Greg Jericho, http://www.theguardian.com, April 06, 2017.

[2]. Michael Janda, http://www.abc.net.au, May 29, 2017.

[3]. Jackson Stiles, thenewdaily.com.au, June 02, 2017.

[4]. Lana Clements, thenewdaily.com.au, June 02, 2017.

[5]. Shane Hickey, http://www.theguardian.com, June 17, 2017.

[5]. Shane Hickey, http://www.theguardian.com, June 17, 2017.

Added after 2018 May 04:

[6]. http://us-issues.com/2018/05/04/the-crisis-next-time/

[7]. https://usawatchdog.com/global-debt-a-parabolic-ponzi-scheme-craig-hemke/

[8]. http://www.goldtelegraph.com/the-dark-cloud-of-global-debt-the-perfect-storm-looms/

[9]. https://www.zerohedge.com/news/2018-07-10/global-debt-hits-record-247-trillion-iif-issues-warning

[10]. https://www.mauldineconomics.com/frontlinethoughts/the-debt-train-will-crash

[11]. https://hat4uk.wordpress.com/2018/07/23/gold-why-rationing-and-price-destruction-foretell-crash2/

[12]. https://mikeyy.org/2018/07/29/anthony-migchels-how-money-rules/

[13]. https://johnib.wordpress.com/2018/07/30/regional-lenders-chinas-most-dangerous-banks/

[14]. https://us-issues.com/2018/08/13/bankruptcy-soars-as-the-country-grapples-with-an-unprecedented-debt-problem/

Added after 2018 Nov 10:

REAL COMPANIES VERSUS HEDGE FUNDS

Understanding the disconnect between an actual company on the stock market, and the bets for and against that company stock, helps to understand what can happen when fiscal policy is geared toward the underlying company (Main Street MAGAnomics), and not toward the bets therein (Investment Class).

[15]. https://theconservativetreehouse.com/2018/11/10/peter-navarro-warns-wall-street-globalists-stand-down-or-else/

PREVIOUS MONEY Blogs

fiatmoneyc60.jpg

A satirical guide to signs of an impending crash for small investors

crystal ball
Gold for storing wealth, posted on 28 April 2017
, , , , , Cashless bartering for survival, Federal Reserve Bank charges undeserved fees to Americans., A satirical guide to signs of an impending crash for small investors, Your fiat money (Part 2), Your fiat money, Bankers given outrageous incomes by their boards, Signs pointing to an impending crash for small investors,Bankers earn more than interest margin on secured loans, Can most pension funds last?, … all

Click here for my other blogs on SURVIVAL

Click here to go toHome Page (Navigation-Survival-How To-Money).

SUBSCRIPTION: [RSS – Posts], [RSS – Comments]

MENU: [Contents][Blog Image of Contents ][Archives ] [About]