Bubble of the Century?
(see chart below) How long will this continue for? I personally believe low interest rates have propped up the markets since it began. The ECB, BOC, and BOJ are meeting this week to make their decision for interest rates.
Yields have also been moving up while equities market is still climbing (even after that small correction). Something can't be right here?
This sure will be a busy week in the FX market, I'm sure institutions have already exited/re-positions by now.
Stocks have been extended for a while but trying to predict the exact timing of a "crash" is very tough...what if it isn't a "crash", but more of a "gradual" ~20% slide over 6 months as signs of inflation pick up and the FED gets more hawkish?
Personally, I have no clue but if I had to guess I'd think that we'll get a nice stagflationary ~1-2 years in 2019-2021 time period which will take the wind out of a lot of these stocks.
Tech will underperform in the short run and continue to outperform in the long run.
I'd expected this in 2016-8 as interest rates were confirmed to begin to rise. Two things now seem to require some sort of crash: last year's 30% irrational run up and recent volatility. Had either of these existed on their own I'd be content to shrug, but the drop down to rational levels is likely to be steeper and faster than most people are comfortable with, leading to a negative feedback loop of self fulfilling crash. Potential catalysts include Chinese real estate market crash, war, trade war, BTC crash (my favorite guess), among others.
I pulled out 100% and am now waiting for a reversion to the mean:
yeah, you're probably right, but why pull out 100%? what about repositioning instead?
You could have made the exact same argument 3 or even 4 years ago and missed out on some spectacular years...why not just keep the capital in the market and reposition it to become more defensive?
I never understand the extremes...what if we run up 40% from here and THEN have the "big crash"...well then it won't be that big, in real terms. I don't see how it can be worse than 2008 unless it's a complete economic collapse?
Unless you have a way to invest passively in something that can give you an avg return of ~6-7% per year, why would you pull out of stocks? Why didn't you pull out 2 or 3 years ago? Are you just sitting in cash?
You very well could be right, so I’ll be thinking this through over the next few days. I’m not too attached to my point of view...just the goal of early retirement.
For now, yes, I’m all cash and money market (or equivalent), although I play around with a few bucks day trading just for fun.
See, if this was last year I’d completely agree with you. I though for sure that rising rates would soften the markets starting at the end of 2015 and it would decline a bit and run sideways for a few years until nominal GDP caught up to asset prices. It was always clear that asset prices were on the high side, but there was a general climate of stability. There was good news, there was bad news, but overall the Fed and White House were trying to keep things stable
Not so anymore and this is a direct influence of the current president’s management style. Or mismanagement style, if you will. We just saw a 35% run up at a time when it should have been taking a breather, so it’s like being tired and then drinking yet more coffee...now you’re really going to crash later. What I didn’t foresee was trump winning and then hyping up market enthusiasm. If anything, he had a chance to come in and blame a recession on Obama. But a correction off the high now? That’s all him. I’m going to love making fun of anyone trying to rationalize it.
All fine and well and who cares about politics, but we were already expecting 15-30% softening before he encouraged everyone to bid it up another 35%, so the dip at this point is highly likely to freak people out. I like the S&P500 better as an indicator, so for the sake of conversation: i expected a slide from around 2000 down to 1400-1700 in 2016. Fast forward a year and while the S&P500 is at 2800......it’s still got to head towards that 1400-1700 range. That’s a potential 50% drop just on fundamentals. What happens when it picks up speed and the news is going nuts with it? People, markets generally overreact. It won’t stop at a 50% decline, it will stop when people stop panicking.
The story of the last few decades is that asset bubbles are getting bigger, faster, and the resulting correction has to be more painful. Asset prices were already on an accelerating growth curve for almost a decade...then went parabolic. There’s no way we can’t have a blowout.
I may go back in if a steady uptrend presents, but at a time when we are clearly due for a downturn and the entire market swings full percentage points in a day...I’m good sitting in my hands for a while. I’d like to keep all the money I made over the last decade. If I’m wrong, I miss out on a few points. If I’m right, I have lots of dry powder when the market bottoms out.
The next year or so will be interesting for sure :)
Let's just make this qualification: nobody knows anything about the near-term or long-term direction the market will go. We could just as easily be in a secular, 30 year bull market, as we could be facing another deep recession. If I was a betting man, I'd bet on the former. The world is changing in so many ways that I see immense opportunity in general over the next few decades. Developed western countries will continue to further their advantages over the rest of the world, I think that in turn these advantages will continue to fuel the capital markets.
There was a story on Reuters concerning fraudulent statements made by the chinese youth; they want homes (now) not tomorrow, but yesterday, and now. They're going to private banks, smaller banks, and fraudulently filling out documents for luxury condominiums in Hong Kong.
This is the bubble: Chinese consumer credit. The Chinese housing market is the next bubble, but of course, since it is a communist dictatorship, it will not burst. There is no more bubbles, unless of course you're talking about Cannabis. Cannabis has so many dangers associated with it: Cannabis is a clinical trial in the Americas, and when enough research is conducted on it (official research) and that is published: Cannabis stocks which are extremely overvalued (at the moment) will diminish.
The next bubble after that is pharmaceuticals. Since the world is taking a holistic approach to health, even after sophisticated medicine using Cannabis derivatives is conducted, most medicine if not all will be moot.