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Thank you for your reply. This bull market is getting to be an old one. I only raised the State of the union address because it might be the 'buy the rumor; sell the event' type of occurrence.
Would you recommend raising cash now in anticipation of picking up some bargains in the future? I think the period around the State of the Union will be a telling time. I also think that Trump's State of the Union speech will be one of the most watched in a long time ... no one can guess what he will say.
@MaryKay,
- First, stick to your long term plan whatever it is. Market timing is very tough to pull off.
- Second, if your plan allows for overweighting or underweighting equities, than I believe this is an appropriate time to be underweight (meaning a higher than usual cash level).
- I'd never try to base an investment decision on an anticipated speech, Federal Reserve meeting, Act of Congress, Supreme Court ruling or the like. Whenever I've anticipated one such outcome from such - the opposite usually occurred.
- Yes - I watch the political scene unfold with alarm. But this is not a political forum and there's little I can do to change the course of history anyway.
Like you, I suppose, I read a lot of financial press, consume David's monthly commentaries and listen to/watch a lot of Bloomberg. The warnings about valuations have been there for several years. But for every one like me, there's at least one other who will will tell you not to worry. That in the long run markets always go up. And the less attention you pay to the financial media the better off you are.(Ignorance is bliss.) Then there are a "select" few who acknowledge that markets can fall precipitously - but who will claim they always know exactly when to bail (at the top of course).
So - Pick your poison. :)
@MaryKay,
Would you recommend raising cash now in anticipation of picking up some bargains in the future? I think the period around the State of the Union will be a telling time. I also think that Trump's State of the Union speech will be one of the most watched in a long time ... no one can guess what he will say.
I think we have to consider that there were 4 recessions during the bank's charter that it did not prevent. And while there were Jackson's contributing factors there were other domestic and international factors e.g. Bank of England raising interest rates. My point being is that the Bank of US/Jackson/Panic of 1837 and Trump economics/Trump/Future economics analogy is a poor one.Hi, Sandra.
The panic of 1837 was one of the major financial events of the 19th century, at least as far as the emerging U.S. economy was concerned; about a hundred actors were moving simultaneously and independently, and we have terrible documentation concerning most of them. (It's the sort of story that I love playing out when I'm teaching the research course on Historiography.)
The 2nd Bank of the U.S., indeed, had a 20 year charter. It served, literally, as the bank of the United State. The federal government deposited its cash into, and paid its bills out of, the bank. As a result, the bank had substantial (huge, for the day) cash reserves that it could lend out to other banks. By controlling that lending, the Bank of the U.S. served to discipline the rest; "get crazy and we cut you off." Jackson was pissed, in part, because the Bank of the U.S. discriminated, in his judgment, against frontier financial institutions. When he became president he took two sets of actions against the bank. He refused to renew its charter (effectively breaking its monopoly power) and he withdrew the federal reserves from the Bank of the U.S. and deposited them in other banks that he thought would be more pro-growth. (Or, his critics charged, would lend to speculators.) In particular, that moved hard currency away from the more established banks in New York City, our emerging financial center, and into the hands of folks in ... say, Louisville or St. Louis.
The net effect was to remove one brake on the system and add fuel to it.
Then other stuff happened. Reduced liquidity in the central banks. Minor British banking crisis which led them to demand specie for US banks. Land and financial speculation. Jackson's demand that bills owed to the federal government be paid in gold or silver (technically, "specie") as a way to check land speculation.
One of the dullest, but most careful, bits of economic historical scholarship is Peter Rousseau's essay for the National Bureau of Economic Research, entitled "Jacksonian Monetary Policy, Specie Flows, and the Panic Of 1837" (2011). After 40 numbingly careful pages of financial flow analyses, he concludes:So, not the refusal to recharter the Bank per se but the effects of defunding it?The Panic of 1837 was the culmination of a series of policy shifts and unanticipated disturbances that shook the young U.S. economy at the core of its financial structure -- the banks of New York City. Over the nine months leading up to the crisis, the specie reserves of these banks came under increasing strain as they reacted to legislation designed to achieve a “political” distribution of the surplus balances among the states and an executive order allegedly aimed at ending speculation in the public lands. With much of the nation’s specie diverted from its commercial center, the prospect of shifts in specie demand both domestically and from abroad combined with a break in land prices to render the panic inevitable.
And I certainly agree that the test for Mr. Trump, as for Mr. Carter before him, is the sticking power of his initiatives. That, in part, might be driven by whether he can drive the election of a lot of like-minded persons in the Congressional elections of 2018.
For what that's worth,
David
So, not the refusal to recharter the Bank per se but the effects of defunding it?The Panic of 1837 was the culmination of a series of policy shifts and unanticipated disturbances that shook the young U.S. economy at the core of its financial structure -- the banks of New York City. Over the nine months leading up to the crisis, the specie reserves of these banks came under increasing strain as they reacted to legislation designed to achieve a “political” distribution of the surplus balances among the states and an executive order allegedly aimed at ending speculation in the public lands. With much of the nation’s specie diverted from its commercial center, the prospect of shifts in specie demand both domestically and from abroad combined with a break in land prices to render the panic inevitable.
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