Stock market is a "fully-fledged epic bubble" and will burst

[PeteinSQ]

Jeremy Grantham warns that the stock market is going to implode and it could be like 1929 all over again.

https://www.bloomberg.com/news/articles/2021-01-05...

Assuming you agree with his assesment, what can you do to mitigate against this risk?

Edited by PeteinSQ on Thursday 7th January 14:45

[PeteinSQ]

mikeiow said:

What do you believe, Pete?

I've literally no idea. I look at a company like Tesla and think it's massively overvalued but others strongly disagree with me. I also think it is concerning that whilst the pandemic isn't over and we're almost certainly heading for financial problems in many sectors with a big increase in unemployment the stock market has returned to the value it held before this all started. That doesn't seem to sit very well with the fundamentals of how the economy broadly works.

Could we get to a point in the future where major economies like ours suddenly can't service it's debts or people refuse to lend more?

Like just about anyone else with the ability to save I keep ploughing money into my stocks and shares ISA and the amount of money being managed by the passive funds goes ever higher. Will it keep doing that forever?

Sadly I don't have a crystal ball and I don't understand the issues well enough to really make a call.

I thought bitcoin was done two years ago when the price crashed and look where we are now...

[PeteinSQ]

Mr Whippy said:

Herd mentality.

The sheep have woken up to how they’ve been robbed blind for a decade with low interest rates and surging asset inflation.

Now they’re feeding the late stage parabolic rises in asset values.

This is the time not to buy. This is the time to sell had you bought years ago.

God knows what you buy though... almost everything is over valued with potentially zero real yield potential at today’s prices and a drop in consumer demand.

The only thing I can think has real intrinsic value, low supply, and a real yield in always in demand goods, is agri land and its produce... and it’s price hasn’t ‘surged’ yet, so it’s arguably priced ‘right’ vs most stuff right now... ie, time to get in before everyone else does.

There must be companies out there with reasonably sensible P/E ratios that are in sectors that shouldn't go pop. Generic pharmaceutical manufacturers maybe? Of course a major correction would impact them too, but would they be protected vs shares in Tesla or Apple?

[PeteinSQ]

Welshbeef said:

But I was hoping to find actual investment logic / sharing reasons why sector changes/new developments.

Not oh it’s penny stock I’ll put £5k in on it

Might as well go all in on black (or red).

[PeteinSQ]

Stick Legs said:

As said above prediciting is a lottery.

For all we know Covid has actually spared the world from the biggest financial melt down of all time by taking the markets off the boil and re-focusing investor attention to Pharma and Healthcare related stocks away from tech. But who knows.

Diversity would be my plan, spread thin & hold on unless you have a particular insight into one area. Frankly looking at the news I'd be investing in the company that makes Lexan Shields & Rubber Bullets for the US Police!

Well my strategy (as much as I have one) is always to be diversified as much as possible by using the Vanguard life strategy funds. I'm currently 80% equities and 20% bonds, maybe if I thought this was a real risk I'd go towards more bonds?

[PeteinSQ]

millen said:

Well worth reading John Authers' column this morning https://www.bloomberg.com/opinion/articles/2021-01...
Note: you can subscribe to his 7.00 am emails free (for now) without a pricy Bloomberg sub. Always helpful on the big picture, imo!

If you like Bloomberg I can recommend subscribing to the Readly App, it costs something like £7 a month and you get access to loads of magazines including Bloomberg Business Week and Bloomberg Markets. You also get a load of car magazines which as you're on here I assume you'd also like.

[PeteinSQ]

I'm 39 and with regards to my pension funds etc I will most likely do nothing on the basis that there may well be a market correction but I've got another 28 years of saving to do and the market will bounce back eventually. In the event that this doesn't happen something far more fundamental will have occurred and maybe I won't live to 68 as we all start killing each other for the last tin of beans.

[PeteinSQ]

The thing I don't understand about bitcoin is how it can ever be a currency when it's value fluctuates so much? How can anything be reliably priced in bitcoin when the value can shoot up or down the very next moment?

If the price ever gained a level of relative stability as per the USD, Euro, Yen or GBP then I can totally see why it could be attractive. At the moment it just seems a bit like tulip bulbs or any other crazy speculative investment you care to mention.

[PeteinSQ]

xeny said:

Wtf do you propose if they all fail? AIUI, the surviving companies don't want orphan customers as current gas prices are above the price cap, and adding customers will make them exhaust their hedged supplies sooner.

Increase the cap with a view to reviewing again in 3-6 months so that suppliers can pass the cost on to customers. A lot of these smaller suppliers are just badly run and wouldn't really be missed, and if there was a true need for them new ones will eventually take their place.

[PeteinSQ]

At least Octopus ask before they increase your direct debit. We have very seasonal electricity usage (we have an electric aga which we switch off in summer) but I know this, and I know from having lived here for 8 years how much electricity we use across the entire year. So I give them that info (and now we've been with them over a year they can confirm it) and split the cost equally over 12 months. So currently I've got a pretty big amount of credit but that will get gobbled up over the next 6 months when the aga goes back on in October.

The aga uses at least £5 a day in electricity. Probably more like £8 or £9 with this increase.

[PeteinSQ]

Mr Whippy said:

Better on oil for an Aga these days?

I recall old Aga could be converted, ie, coke, coal, oil, but assume leccy ones are stuck on leccy.

My Dad bought a leccy one but paid £15,000 for solar so it roughly offset the cost.

The Aga was in the house when we bought it. I'd never have had it fitted it personally, they cost a fortune to buy and then cost a fortune to run.

I rationalise its continued use in the house on the basis that it provides quite a bit of heat that we don't have to provide via the gas central heating (I've worked out that it's worth about 2 degrees C in heating upstairs, obviously a lot more in the kitchen). It also dries all our clothes and cooks all the food. It's still an absolutely ridiculous thing and having a run of cupboards and a normal oven and hob put in was financially one of the best decisions I've ever made.

[PeteinSQ]

dingg said:

This thread was opened 7th jan after all indices had a bit of a good week.

Indices were :-

Dow 30829 currently 34840
Nasdaq 12740 currently 14855
Spoo 3748 currently 4400
Dax 13950 currently 15200
Ftse 6870 currently 7150

Just as well I ignored the call

Lolol

Ha, well I too stayed fully invested in my tracker fund. What's the alternative really?