Stock market is a "fully-fledged epic bubble" and will burst
Discussion
fesuvious said:
'everything bubble'
= Everything is balanced ?
Or
= Everything is nuts ?
Everything is in a bubble. = Everything is balanced ?
Or
= Everything is nuts ?
House prices in a bubble
Equities in a bubble
Bonds in a bubble
What else is there?
Whatever there is then it is also in a bubble.
Massive amounts of printed money are chasing gains everywhere. This has created these bubbles.
No one wants to sit on cash. Everyone wants to deploy their capital chasing risk to make gains.
We even have readers and contributors to this thread saying they will continue investing at these prices because we will always go up from here.
Does this make sense?
Were people saying the same thing just before the GFC and just after?
I choose to not believe people who say you can't time the market.
mikeiow said:
fesuvious said:
'everything bubble'
= Everything is balanced ?
Or
= Everything is nuts ?
From ATMs quote "All assets are over valued now. There is no safe haven", I assume the latter = Everything is balanced ?
Or
= Everything is nuts ?
It probably is nuts, and I am sure parts of the economy will get reset....but equally, coming out of Covid, the world could do very, very well, I would suggest. There is a stifled demand for goods/holidays/etc.....
Buffett always says that you should be fearful when others are greedy ,and be greedy when others are fearful......I suspect more people are fearful right now than greedy. Notwithstanding that he has a large cash pile right now!
People are not fearful now. Not many people in this thread which is about bubbles and busts are willing to liquidate their positions. That's not fearful that's greed. Everyone continuing to hold now is greedy not fearful. If they were fearful they would be liquidating.
Phooey said:
Cash is getting a lot of negative attention, but we forget the moment assets take a hit, that (unloved) cash will be back to top of the leaderboard.
Which will be the moment to go long equities. Will I have the bottle to do it? I hope so, but while I held my nerve through March 2020 it was but a short lived tickle compared to what a bear market could be like.mikeiow said:
I suspect more people are fearful right now than greedy. Notwithstanding that he has a large cash pile right now!
I don’t think equity valuations support the notion that people are fearful right now.As for Buffett, he’s had a very large cash pile of the last decade and these articles run quite regularly.
Cash has certainly devalued. Inflation.
Many people have 1/ Potentially had more cash to spend this past 12-18 months. 2/ Felt they are richer due to house price inflation (and to an extent stocks/pensions/cars) so therefore feel they have more cash to spend. 3/ FOMO possibly.
This time next year I wonder how inflation will really affect disposable income. Interest rate rises. Fuel/energy costs. Food costs. Council tax increases. All paid for out of taxed income. Probably going a bit o/t here but I think theres a lot of people living above their means and a year or two of constant price rises might bring things back into sync.
Many people have 1/ Potentially had more cash to spend this past 12-18 months. 2/ Felt they are richer due to house price inflation (and to an extent stocks/pensions/cars) so therefore feel they have more cash to spend. 3/ FOMO possibly.
This time next year I wonder how inflation will really affect disposable income. Interest rate rises. Fuel/energy costs. Food costs. Council tax increases. All paid for out of taxed income. Probably going a bit o/t here but I think theres a lot of people living above their means and a year or two of constant price rises might bring things back into sync.
Edited by Phooey on Sunday 10th October 19:55
I'm very much an amateur in this world, so: how useful is this page?
https://money.cnn.com/data/fear-and-greed/
I occasionally remember it exists and try to make sense of the various inputs they use!
https://money.cnn.com/data/fear-and-greed/
I occasionally remember it exists and try to make sense of the various inputs they use!
Hard to argue against the idea that we are nearing the end of the reign of the western empire.
Still think cash has devalued way more than we give credit (phnar) for. My house has nearly doubled in price since i bought it in the GFnC of 2009 ish. Has it though? Or has purchasing power of cash halved. Truth is perhaps somewhere in the middle. A pint in my local is more expensive than 2009 too, not quite double.
Still think cash has devalued way more than we give credit (phnar) for. My house has nearly doubled in price since i bought it in the GFnC of 2009 ish. Has it though? Or has purchasing power of cash halved. Truth is perhaps somewhere in the middle. A pint in my local is more expensive than 2009 too, not quite double.
If you believe in Templeton's views on Bull markets:
"Bull markets are born on PESSIMISM, grow on SKEPTICISM, mature on OPTIMISM and die on EUPHORIA.”
then there is not much sign of the euphoria & people buying indiscriminately that blows markets up. Recent advice was that there is some healthy scepticism about & that suggests it has legs yet...
"Bull markets are born on PESSIMISM, grow on SKEPTICISM, mature on OPTIMISM and die on EUPHORIA.”
then there is not much sign of the euphoria & people buying indiscriminately that blows markets up. Recent advice was that there is some healthy scepticism about & that suggests it has legs yet...
bmwmike said:
Hard to argue against the idea that we are nearing the end of the reign of the western empire.
Still think cash has devalued way more than we give credit (phnar) for. My house has nearly doubled in price since i bought it in the GFnC of 2009 ish. Has it though? Or has purchasing power of cash halved. Truth is perhaps somewhere in the middle. A pint in my local is more expensive than 2009 too, not quite double.
Agreed. There has also been lots of inflation in stuff like houses etc for decades now, likely partly driven by printing. The more "normal" measures of inflation have shown little change, and many have wondered why it has not shown much despite the amount of money printed. One option I have seen mentioned is the global economy is far more interconnected, so it's much harder to inflate a massive global economy, rather than the much smaller national economies we had back in say the 1970's.Still think cash has devalued way more than we give credit (phnar) for. My house has nearly doubled in price since i bought it in the GFnC of 2009 ish. Has it though? Or has purchasing power of cash halved. Truth is perhaps somewhere in the middle. A pint in my local is more expensive than 2009 too, not quite double.
ATM might suggest you can time the markets, but I've seen similar arguments for the last decade and more than basically everything is about to collapse. I even know one or two people who have done stuff like sold their house during covid as we were about to see a massive crash. Instead like assets for the last decade the party hasn't ended, and even a crash now is very unlikely to wipe out all the growth since these predictions have been around.
Also the UK is being hit a bit worse than some other places, due to Brexit, but in general I'd hazard a lot of people might not have the biggest UK exposure anyway. As Derek says, if you bail now you have to get the timing right twice - and many have been left behind in the past guessing wrong. If I remember right ATM was out early on in Covid, so has missed out on the big bounce back already?
xeny said:
Everything feels highly valued and hence risky. Cash feels as if inflation is a threat. You can make a good argument for all the options being terrible, so maybe the right answer is diversify as much as possible and keep your fingers crossed?
My suspicion is there's a good chance that in a couple of years many people will either feel worse off (inflation impact) or be worse off (asset valuation falling).
Being cash risk is the right approach for one scenario, being asset rich is right for the other.
If of course we get inflation in day to day goods and services and various market downturns as a package....
Hopefully there won’t be a combination of both of these… My suspicion is there's a good chance that in a couple of years many people will either feel worse off (inflation impact) or be worse off (asset valuation falling).
Being cash risk is the right approach for one scenario, being asset rich is right for the other.
If of course we get inflation in day to day goods and services and various market downturns as a package....
The reality seems to be that we have not been here before, with clear inflationary pressures, at both national and international levels, but a more restricted toolkit (notably inability to move interest rates much). Means calling it is even harder than usual.
It’s affecting all markets, not just stocks. Within the past week or so a dealer offered me a signed Banksy at ~25% discount to very recent auction. That suggests to me that people in that market are also struggling to call it. I don’t know who the fool is, me for passing, or the guy who recently paid +25%... Also some interesting movements in the wine markets over the past couple of years as COVID disrupted traditional business practices combined with financial uncertainty where there seem to be examples of people struggling to call it. Likewise we all know about property prices but views differ about which way they’ll go.
An “all or nothing” position would obviously be huge gamble right now but, given the amount of money injected globally, it’s hard to see how currencies won’t be devalued so I wouldn’t want to be holding too much cash. But if you accept that some assets do feel a bit toppy, how much is too much if you want to retain the ability to be opportunistic? The answer to that is going to depend on personal circumstances etc.
LooneyTunes said:
Hopefully there won’t be a combination of both of these…
The reality seems to be that we have not been here before, with clear inflationary pressures, at both national and international levels, but a more restricted toolkit (notably inability to move interest rates much). Means calling it is even harder than usual.
It’s affecting all markets, not just stocks. Within the past week or so a dealer offered me a signed Banksy at ~25% discount to very recent auction. That suggests to me that people in that market are also struggling to call it. I don’t know who the fool is, me for passing, or the guy who recently paid +25%... Also some interesting movements in the wine markets over the past couple of years as COVID disrupted traditional business practices combined with financial uncertainty where there seem to be examples of people struggling to call it. Likewise we all know about property prices but views differ about which way they’ll go.
An “all or nothing” position would obviously be huge gamble right now but, given the amount of money injected globally, it’s hard to see how currencies won’t be devalued so I wouldn’t want to be holding too much cash. But if you accept that some assets do feel a bit toppy, how much is too much if you want to retain the ability to be opportunistic? The answer to that is going to depend on personal circumstances etc.
Re currency devaluation and govts all printing cash there are very few main currencies which have not done this so in essence it’s parity isn’t it. The reality seems to be that we have not been here before, with clear inflationary pressures, at both national and international levels, but a more restricted toolkit (notably inability to move interest rates much). Means calling it is even harder than usual.
It’s affecting all markets, not just stocks. Within the past week or so a dealer offered me a signed Banksy at ~25% discount to very recent auction. That suggests to me that people in that market are also struggling to call it. I don’t know who the fool is, me for passing, or the guy who recently paid +25%... Also some interesting movements in the wine markets over the past couple of years as COVID disrupted traditional business practices combined with financial uncertainty where there seem to be examples of people struggling to call it. Likewise we all know about property prices but views differ about which way they’ll go.
An “all or nothing” position would obviously be huge gamble right now but, given the amount of money injected globally, it’s hard to see how currencies won’t be devalued so I wouldn’t want to be holding too much cash. But if you accept that some assets do feel a bit toppy, how much is too much if you want to retain the ability to be opportunistic? The answer to that is going to depend on personal circumstances etc.
Welshbeef said:
Re currency devaluation and govts all printing cash there are very few main currencies which have not done this so in essence it’s parity isn’t it.
And this is the merry go round.All assets are over valued now because no one wants to hold cash so everyone is chasing gains elsewhere = risk taking.
There is no safe haven because everyone else has piled their cash in to anything that used to look safe and this caused valuations to rise too - everywhere on everything.
We're in an everything and everywhere bubble.
Bubbles do pop.
So you tell yourself this bubble wont pop, or this time its different, or it could take 10 years for it to pop. Or you dont want to hold cash because you might miss out on some gains = risk taking - and so you go back to the top of this paragraph and repeat.
ATM said:
Welshbeef said:
Re currency devaluation and govts all printing cash there are very few main currencies which have not done this so in essence it’s parity isn’t it.
And this is the merry go round.All assets are over valued now because no one wants to hold cash so everyone is chasing gains elsewhere = risk taking.
There is no safe haven because everyone else has piled their cash in to anything that used to look safe and this caused valuations to rise too - everywhere on everything.
We're in an everything and everywhere bubble.
Bubbles do pop.
So you tell yourself this bubble wont pop, or this time its different, or it could take 10 years for it to pop. Or you dont want to hold cash because you might miss out on some gains = risk taking - and so you go back to the top of this paragraph and repeat.
LooneyTunes said:
Hopefully there won’t be a combination of both of these…
The reality seems to be that we have not been here before, with clear inflationary pressures, at both national and international levels, but a more restricted toolkit (notably inability to move interest rates much). Means calling it is even harder than usual.
It’s affecting all markets, not just stocks. Within the past week or so a dealer offered me a signed Banksy at ~25% discount to very recent auction. That suggests to me that people in that market are also struggling to call it. I don’t know who the fool is, me for passing, or the guy who recently paid +25%... Also some interesting movements in the wine markets over the past couple of years as COVID disrupted traditional business practices combined with financial uncertainty where there seem to be examples of people struggling to call it. Likewise we all know about property prices but views differ about which way they’ll go.
An “all or nothing” position would obviously be huge gamble right now but, given the amount of money injected globally, it’s hard to see how currencies won’t be devalued so I wouldn’t want to be holding too much cash. But if you accept that some assets do feel a bit toppy, how much is too much if you want to retain the ability to be opportunistic? The answer to that is going to depend on personal circumstances etc.
Do we have a reduced toolkit? I'd agree it's perhaps more restricted on interest rates going down, but that's less of an issue with inflation appearing. Of course if they go up those with debt will be worse off, but take the biggest impact for many - a huge chunk of houses are already paid off, and if rates go up it will likely allow new people to enter the market who were priced out earlier by the asset price as lower interest rates impacted the monthly costs. It's just a transfer of wealth between different parts of society in effect - if a crash in house prices does occur it impacts the older and middle aged people who own now, but helps discount prices for new buyers and in general young people. The reality seems to be that we have not been here before, with clear inflationary pressures, at both national and international levels, but a more restricted toolkit (notably inability to move interest rates much). Means calling it is even harder than usual.
It’s affecting all markets, not just stocks. Within the past week or so a dealer offered me a signed Banksy at ~25% discount to very recent auction. That suggests to me that people in that market are also struggling to call it. I don’t know who the fool is, me for passing, or the guy who recently paid +25%... Also some interesting movements in the wine markets over the past couple of years as COVID disrupted traditional business practices combined with financial uncertainty where there seem to be examples of people struggling to call it. Likewise we all know about property prices but views differ about which way they’ll go.
An “all or nothing” position would obviously be huge gamble right now but, given the amount of money injected globally, it’s hard to see how currencies won’t be devalued so I wouldn’t want to be holding too much cash. But if you accept that some assets do feel a bit toppy, how much is too much if you want to retain the ability to be opportunistic? The answer to that is going to depend on personal circumstances etc.
We also have the tool of either increasing or decreasing government interventions too, which is a powerful tool as we see now. It's being used to 'create "growth" (by devaluing money so it looks like there is growth in the west - useful to try and keep people happier), used to devalue the currency (helps exports if you want that), used to buy back government debt and so makes borrowing for the country much cheaper and so on.
One random art deal isn't so useful - I see lots of weird stuff at auction all the time. To balance the wine markets - whisky auction prices have never been better (from an investor perspective). And so on.
I'm absolutely not saying there won't be a crash - but many of these arguments I have seen for years, and in that time even with a 50% crash you'd still be equal or ahead of those who have been talking about this in that time. Maybe you might reduce your exposure a little, but in general it's probably going to be better to get out once stuff starts moving down, rather than just picking a random feeling like now. You'd have the risk that it's another small drop, and you do lose some returns, but look at all those people who stayed out of the markets during Covid - so far they've massively lost out as a result of going by their random feelings of how to time things.
It's all very interesting and most on here at least have assets/money to put somewhere/worry about. Large swathes of the populace don't and for them definitely I'd say life is becoming harder they are being squeezed?
The asset bubbles are interesting because right now if you have 1000 people with an 'x' valued at 'y' they all think they have 'Y' safely tucked away for a rainy day but a switch in sentiment and there suddenly might not be any buyers if it's niche, the cliche "it's worth whatever someone is willing to pay" comes into play. Right now "cash is trash" but if most have no excess then a turn in sentiment or a whiff of crash, even if in one asset class, then where will the buyers come from and that could give a quicker price decline, or a decline from another asset to reinvest, so a sort of contagion, which all crashes are I spose.
I think most in recent times have experienced an inability to act in times of high volume/stress in the market, Hargreaves Lansdown, Robinhood, crypto exchanges etc, so arguably we never actually have all the money our statements say we have? I mean if any of us liquidate our positions today we will, but if we all did we definitely wouldn't? When it comes to selling out in a crash, we definitely aren't all equal in opportunity are we?
But hey just hold on, wait through the blips is the current adage? But then we have recency bias where everything has always recovered reasonably quickly and exceeded old valuations.......there are instances in history of this not happening for years though?
I agree all governments are devaluing their currencies and paying the needy/everyone helicopter money can that work? Hard to argue from a social aspect it hasn't been absolutely the right thing to do for the past few years. I know we probably don't care but doesn't it just make lots of the world slaves to the wealthy west when the wealthy west aren't really working for it as such (as much) they are just creating currency to buy stuff and sustain our lifestyles as much as possible?
The asset bubbles are interesting because right now if you have 1000 people with an 'x' valued at 'y' they all think they have 'Y' safely tucked away for a rainy day but a switch in sentiment and there suddenly might not be any buyers if it's niche, the cliche "it's worth whatever someone is willing to pay" comes into play. Right now "cash is trash" but if most have no excess then a turn in sentiment or a whiff of crash, even if in one asset class, then where will the buyers come from and that could give a quicker price decline, or a decline from another asset to reinvest, so a sort of contagion, which all crashes are I spose.
I think most in recent times have experienced an inability to act in times of high volume/stress in the market, Hargreaves Lansdown, Robinhood, crypto exchanges etc, so arguably we never actually have all the money our statements say we have? I mean if any of us liquidate our positions today we will, but if we all did we definitely wouldn't? When it comes to selling out in a crash, we definitely aren't all equal in opportunity are we?
But hey just hold on, wait through the blips is the current adage? But then we have recency bias where everything has always recovered reasonably quickly and exceeded old valuations.......there are instances in history of this not happening for years though?
I agree all governments are devaluing their currencies and paying the needy/everyone helicopter money can that work? Hard to argue from a social aspect it hasn't been absolutely the right thing to do for the past few years. I know we probably don't care but doesn't it just make lots of the world slaves to the wealthy west when the wealthy west aren't really working for it as such (as much) they are just creating currency to buy stuff and sustain our lifestyles as much as possible?
I generally don't pay too much attention to these bigger picture debates and finger in the air macro voodoo - certainly it has very little bearing on my own equity investing decisions - but I'll have a go at a bull case.
Valuations appear rich, but so far the market has reliably underestimated the pace and scale of post-COVID recovery in corporate earnings in Europe and the US. So while stocks look a touch expensive historically, I think the demand side is there and if earnings surprises continue there is still room for them to grow into those valuations. Ultimately stocks are still the best long-term hedge against inflation and beneficiary of the human will for better; bonds are some way off positive real yield; gold is an unreliable girlfriend so what else are you going to do.
Slightly tongue in cheek at the end there and this stuff really doesn't make much difference to me, but still happy to be overweight equities here.
Valuations appear rich, but so far the market has reliably underestimated the pace and scale of post-COVID recovery in corporate earnings in Europe and the US. So while stocks look a touch expensive historically, I think the demand side is there and if earnings surprises continue there is still room for them to grow into those valuations. Ultimately stocks are still the best long-term hedge against inflation and beneficiary of the human will for better; bonds are some way off positive real yield; gold is an unreliable girlfriend so what else are you going to do.
Slightly tongue in cheek at the end there and this stuff really doesn't make much difference to me, but still happy to be overweight equities here.
Scootersp said:
Right now "cash is trash" but if most have no excess then a turn in sentiment or a whiff of crash, even if in one asset class, then where will the buyers come from and that could give a quicker price decline, or a decline from another asset to reinvest, so a sort of contagion, which all crashes are I spose.
There are plenty of the very wealthy holding cash because they have been exiting at the highs. But the average Joe is all in and the only money they will have available is their rainy day fund and their income from wages. We all know rainy day funds have been dwindling recently so there is not much to play with here. Then add in that everyone is maxed out on Mortgages so their monthly outgoings are high. If we get a little bit of an interest rate hike then that will be very bad for most people with big mortgages and if house prices have been rising rapidly then that means we have lots of buyers so there are probably plenty of people with bigger mortgages than this time last year or 2 years ago etc. The elastic is getting stretched and stretched and the more it stretches then the more it snaps back. The longer a bubble is inflated then the sharper the pop.fesuvious said:
That's the point I was making.
Not supporting, just 'making'.
We're in the end of this craziness. The market and it's cycles will kill this ridiculous experiment at some point.
Problem is that everyone in this thread could be dead by then.
I've written the word 'narnia' on here at lot to describe the world we entered after the GFC.....
(GFC my arse it was only a correction.....if it had been allowed to crash it would have been the healthy way forward)
...but it's true. This is Narnia.
Or is it?
Didn't the Romans try the same trick @1000years ago? Creating more money....they doubled soldiers salaries to start with and tried to effectively inflate their way forward. Just before the collapse of Rome.
Is this really so odd though? We seem to have entered a phase of human development where the denial of the obvious and denial of facts is considered the norm.
We have entered an age where nothing is allowed to be bad. No bad opinions, no bad outcomes. No consequences.
Allied to short term politics.
The next 15-20 years???
f
k that!
My political career may only last four.
We're doing this to ourselves.
For the moment, yes I'm almost out of equities. You simply cannot have a bubble and rapid spending / activity like we've just seen and not have a nsty reaction. Couple that to inflation and ouch.
First UK prediction Q1 2022 growth will be non-existent. By end Feb we'll be really worried
2023 the crash will come IMO and cash will be kingNot supporting, just 'making'.
We're in the end of this craziness. The market and it's cycles will kill this ridiculous experiment at some point.
Problem is that everyone in this thread could be dead by then.
I've written the word 'narnia' on here at lot to describe the world we entered after the GFC.....
(GFC my arse it was only a correction.....if it had been allowed to crash it would have been the healthy way forward)
...but it's true. This is Narnia.
Or is it?
Didn't the Romans try the same trick @1000years ago? Creating more money....they doubled soldiers salaries to start with and tried to effectively inflate their way forward. Just before the collapse of Rome.
Is this really so odd though? We seem to have entered a phase of human development where the denial of the obvious and denial of facts is considered the norm.
We have entered an age where nothing is allowed to be bad. No bad opinions, no bad outcomes. No consequences.
Allied to short term politics.
The next 15-20 years???
f
k that!My political career may only last four.
We're doing this to ourselves.
For the moment, yes I'm almost out of equities. You simply cannot have a bubble and rapid spending / activity like we've just seen and not have a nsty reaction. Couple that to inflation and ouch.
First UK prediction Q1 2022 growth will be non-existent. By end Feb we'll be really worried
ATM said:
Scootersp said:
Right now "cash is trash" but if most have no excess then a turn in sentiment or a whiff of crash, even if in one asset class, then where will the buyers come from and that could give a quicker price decline, or a decline from another asset to reinvest, so a sort of contagion, which all crashes are I spose.
There are plenty of the very wealthy holding cash because they have been exiting at the highs. But the average Joe is all in and the only money they will have available is their rainy day fund and their income from wages. We all know rainy day funds have been dwindling recently so there is not much to play with here. Then add in that everyone is maxed out on Mortgages so their monthly outgoings are high. If we get a little bit of an interest rate hike then that will be very bad for most people with big mortgages and if house prices have been rising rapidly then that means we have lots of buyers so there are probably plenty of people with bigger mortgages than this time last year or 2 years ago etc. The elastic is getting stretched and stretched and the more it stretches then the more it snaps back. The longer a bubble is inflated then the sharper the pop.Gassing Station | Finance | Top of Page | What's New | My Stuff