Stock market is a "fully-fledged epic bubble" and will burst
Discussion
Jon39 said:
Your question might be a tease, but I will take it as genuine.
I must be boring you all now, repeating my strategy story.
'Where do you think the markets are going', is one of the reasons for staying invested continually, long-term.
I have mentioned a few times, that nobody knows what will happen this week, next month, next year, next couple of years. So I cannot answer your question. It is all so unpredictable, so not really worth thinking too much about. Diving in and out of markets, because someone thinks something might happen, involves guessing, hopes and fees.
People who like Index funds, should put money in (regularly would probably be usual) and don't sell each time there is a market panic, because that is trying to guess future market movements. It is the sudden upward movements which can be the killers. If you are not in, then any sudden rises are missed. That has happened this year, with oil companies. Huge share price rises for obvious reasons. I still remember the Gulf of Mexico disaster and an oil price at $25, so the oil business is always prone to swings in both directions. Not long ago, difficulties in the oil sector forced Shell cut their dividend, which had never happened since World War 2.
If you like to own individual shares, my experience is to try to find big businesses, which are established and which you think will have prospects of continuing to succeed and grow. When earnings rise significantly, eventually the share price will follow upwards. If businesses can also make progress during recessions, so much the better. An example of a non-cyclical business being Severn Trent, a steady plodder with continuous demand for the product. Has had a strong rise during the last 12 months though (rerating), so their upward share price climb cannot always continue at that rate.
Good luck with your investing.
There's only a few people on this forum that I tend to take note of what they post. I admire your investing strategy hence was just curious to know what you thought of the current economic situation wrt to previous crashes and 'signs'. The above re investing regularly makes perfect sense and is the theme I currently follow... I just like to hear peoples opinions and stories
Cheers
Phooey said:
Derek Chevalier said:
It's a daft question to ask. No one knows.
It's not really a daft question asking for Jon's thoughts is it - it's interesting to get opinions from investors that have more of a clue than we do. I wouldn't dream of holding Jon to it 
We know that over the long term the markest have historically gone up.
Other than that, I'm not sure what else there is to discuss
Jon39 said:
Your question might be a tease, but I will take it as genuine.
I must be boring you all now, repeating my strategy story.
'Where do you think the markets are going', is one of the reasons for staying invested continually, long-term.
I have mentioned a few times, that nobody knows what will happen this week, next month, next year, next couple of years. So I cannot answer your question. It is all so unpredictable, so not really worth thinking too much about. Diving in and out of markets, because someone thinks something might happen, involves guessing, hopes and fees.
People who like Index funds, should put money in (regularly would probably be usual) and don't sell each time there is a market panic, because that is trying to guess future market movements. It is the sudden upward movements which can be the killers. If you are not in, then any sudden rises are missed. That has happened this year, with oil companies. Huge share price rises for obvious reasons. I still remember the Gulf of Mexico disaster and an oil price at $25, so the oil business is always prone to swings in both directions. Not long ago, difficulties in the oil sector forced Shell cut their dividend, which had never happened since World War 2.
If you like to own individual shares, my experience is to try to find big businesses, which are established and which you think will have prospects of continuing to succeed and grow. When earnings rise significantly, eventually the share price will follow upwards. If businesses can also make progress during recessions, so much the better. An example of a non-cyclical business being Severn Trent, a steady plodder with continuous demand for the product. Has had a strong rise during the last 12 months though (rerating), so their upward share price climb cannot always continue at that rate.
Good luck with your investing.
But after almost 14 years of easing from CBs with QE and rate cuts to near zero, we’re seeing a rapid and sudden tightening with QT and rate rises.
It’s triggered the almost always associated run into a technical recession, and ended the decades long bond bull market.
Just check TLT and NFLX as two diverse assets, almost perfectly aligned with the Nov USA Federal Reserve meeting at their tops and subsequent decline.
The Fed knows where it’s going and they gave everyone fair warning.
Mr Whippy said:
No one knows where it will go.
But after almost 14 years of easing from CBs with QE and rate cuts to near zero, we’re seeing a rapid and sudden tightening with QT and rate rises.
It’s triggered the almost always associated run into a technical recession, and ended the decades long bond bull market.
Just check TLT and NFLX as two diverse assets, almost perfectly aligned with the Nov USA Federal Reserve meeting at their tops and subsequent decline.
The Fed knows where it’s going and they gave everyone fair warning.
Where does the fed think it is going? But after almost 14 years of easing from CBs with QE and rate cuts to near zero, we’re seeing a rapid and sudden tightening with QT and rate rises.
It’s triggered the almost always associated run into a technical recession, and ended the decades long bond bull market.
Just check TLT and NFLX as two diverse assets, almost perfectly aligned with the Nov USA Federal Reserve meeting at their tops and subsequent decline.
The Fed knows where it’s going and they gave everyone fair warning.
Phooey said:
.... hence was just curious to know what you thought of the current economic situation wrt to previous crashes and 'signs'.
I suppose one possible ingredient for the next recession, might be the extremely high domestic property values.
A major contributor to that situation has been the prolonged period of (record low) almost zero interest rates, obviously an encouragement to borrow more.
The average property last year cost nine times the income of a full-time worker in England, up from 7.6 times in 2019 and 6.4 times in 2009. Back in 2002, prices were a mere 4.9 times earnings.
Even first time buyers targeting the cheaper end of the market faced a price to income ratio of 4.8 in 2020, according to the Office for National Statistics. At the turn of the century this was 3.1, and it stood at just 2.3 times earnings in 1986.
First-timers typically have to save up a deposit equal to 20pc of their property’s price, often running to many tens of thousands of pounds. This clearly would have been unaffordable in previous decades. The critical difference between the current market and that of the 1980s - or even the early 2000s - is low interest rates.
Now that we are seeing rising interest rates, a proportion of mortgage borrowers might become unable to cope with their repayments.
A mortgage interest rate rise from say, 2% to 4% does appear to be a comfortable 2% increase, but of course the amount of interest payable goes up by 100%.
Jon39 said:
The 2008 crash was foreseeable, but as always, when it would happen was the unknown.
The longer that something amiss goes on, the bigger the fall.
Property market lending started to get out of hand, quite a while before that crash.
Warning Signs / Alarm Bells:-
Northern Rock, one of the smaller property lenders, captured 25% of the whole mortgage lending market.
'Liar Loans' to obtain a bigger mortgage debt - very popular, where you exaggerate your income having been told no one will check.
Commercial property lending became very generous.
What was not widely known though, were the 'Trailer Park Loans' going on the the USA..
Mortgages for people with little or even no income, then all those loans were packaged together and sold on to other financial institutions.
Presumbly once securitised, the mortgagee's weak financial status became hidden.
That’s beside the point though as the real lesson from GFC isn’t actually anything to do with any of those specific factors. Instead it’s one about understanding what you’re investing in, which I remain convinced that many of the buyers of RMBS did not (simply looking at the ratings assigned to each tranche instead of properly understanding composition/rating methodology).
It's not unreasonable to think the S&P could stumble down to 3500 but at some point the FED will step in for no other reason than most Americans have equities in their 401K's. China will probably be forced into some stimulus also but more towards infrastructure like last time.
It would seem as if the easy money of the Bull market is behind us and now it's finding something which might grow over the next 5yrs.
On a macro level, I speak to a lot of US manufacturers and they are desperately trying to unwind themselves from China but easier said than done. Anything EV component related, if we believe that governments will continue the push is a good place especially given the Geo-Political risks of supply, look at Mexico and its position on Lithium. US manufacturers can't and won't rely on China over the longer term as there are too many risks.
It would seem as if the easy money of the Bull market is behind us and now it's finding something which might grow over the next 5yrs.
On a macro level, I speak to a lot of US manufacturers and they are desperately trying to unwind themselves from China but easier said than done. Anything EV component related, if we believe that governments will continue the push is a good place especially given the Geo-Political risks of supply, look at Mexico and its position on Lithium. US manufacturers can't and won't rely on China over the longer term as there are too many risks.
Jon39 said:
I suppose one possible ingredient for the next recession, might be the extremely high domestic property values.
A major contributor to that situation has been the prolonged period of (record low) almost zero interest rates, obviously an encouragement to borrow more.
The average property last year cost nine times the income of a full-time worker in England, up from 7.6 times in 2019 and 6.4 times in 2009. Back in 2002, prices were a mere 4.9 times earnings.
Even first time buyers targeting the cheaper end of the market faced a price to income ratio of 4.8 in 2020, according to the Office for National Statistics. At the turn of the century this was 3.1, and it stood at just 2.3 times earnings in 1986.
First-timers typically have to save up a deposit equal to 20pc of their property’s price, often running to many tens of thousands of pounds. This clearly would have been unaffordable in previous decades. The critical difference between the current market and that of the 1980s - or even the early 2000s - is low interest rates.
Now that we are seeing rising interest rates, a proportion of mortgage borrowers might become unable to cope with their repayments.
A mortgage interest rate rise from say, 2% to 4% does appear to be a comfortable 2% increase, but of course the amount of interest payable goes up by 100%.
bmwmike said:
Mr Whippy said:
No one knows where it will go.
But after almost 14 years of easing from CBs with QE and rate cuts to near zero, we’re seeing a rapid and sudden tightening with QT and rate rises.
It’s triggered the almost always associated run into a technical recession, and ended the decades long bond bull market.
Just check TLT and NFLX as two diverse assets, almost perfectly aligned with the Nov USA Federal Reserve meeting at their tops and subsequent decline.
The Fed knows where it’s going and they gave everyone fair warning.
Where does the fed think it is going? But after almost 14 years of easing from CBs with QE and rate cuts to near zero, we’re seeing a rapid and sudden tightening with QT and rate rises.
It’s triggered the almost always associated run into a technical recession, and ended the decades long bond bull market.
Just check TLT and NFLX as two diverse assets, almost perfectly aligned with the Nov USA Federal Reserve meeting at their tops and subsequent decline.
The Fed knows where it’s going and they gave everyone fair warning.
They set no mandate on anything else do they?
They do the same thing over and over again.
If you believe this will be the one in ten times they run a rate hiking cycle to quell inflation without causing a recession, then that’s a different matter.
In any case, humans don’t change. And the Fed telegraphs what it’ll do well in advance.
So the question is, what do humans do?
You have 100 years of historical data to reference.
Massive increase on company insolvencies, especially on construction and property sector on last quarter.
https://www.gov.uk/government/statistics/company-i...
https://www.gov.uk/government/statistics/company-i...
Phooey said:
bmwmike said:
Where does the fed think it is going?
Well if you listen to Derek and Whippy “no one knows”I can tell you now, these smart guys (Fed etc) know where it’s going. What they choose to tell you is very select
ooid said:
Massive increase on company insolvencies, especially on construction and property sector on last quarter.
https://www.gov.uk/government/statistics/company-i...
Could this just be a load of shoddy companies which took out Bounce Back loans and then folded rather than paying them back?https://www.gov.uk/government/statistics/company-i...
NowWatchThisDrive said:
I'm not quite sure what you're trying to suggest here. Market economies are complex mechanisms filled with competing incentives, externalities and free will. Central bankers don't have some special power of clairvoyance, they're just economists looking at the same world as everybody else and equally capable of being wrong about its future state. If they were right about everything there would be no such thing as policy error, which is demonstrably not the case.
You would assume however, that bankers would be suitably qualified, experienced and (given that it is their job) be able to dedicate most of their waking hours to anticipating the future, and therefore able to have a better stab at it than Joe Public.Jambo85 said:
NowWatchThisDrive said:
I'm not quite sure what you're trying to suggest here. Market economies are complex mechanisms filled with competing incentives, externalities and free will. Central bankers don't have some special power of clairvoyance, they're just economists looking at the same world as everybody else and equally capable of being wrong about its future state. If they were right about everything there would be no such thing as policy error, which is demonstrably not the case.
You would assume however, that bankers would be suitably qualified, experienced and (given that it is their job) be able to dedicate most of their waking hours to anticipating the future, and therefore able to have a better stab at it than Joe Public.breakfan said:
ooid said:
Massive increase on company insolvencies, especially on construction and property sector on last quarter.
https://www.gov.uk/government/statistics/company-i...
Could this just be a load of shoddy companies which took out Bounce Back loans and then folded rather than paying them back?https://www.gov.uk/government/statistics/company-i...
NowWatchThisDrive said:
Relative to the man on the street with little/no interest or practical experience in markets, yes. Relative to all the other people in the world trying to do the same thing...less so. Most of them have been career civil servants and/or academics in economics, a field that at best might be described as well-intentioned pseudoscience, and at worst as mathematical astrology.
Broadbent, Pill, Saunders and Haskell were professionals employed by the finance industry.Jambo85 said:
NowWatchThisDrive said:
I'm not quite sure what you're trying to suggest here. Market economies are complex mechanisms filled with competing incentives, externalities and free will. Central bankers don't have some special power of clairvoyance, they're just economists looking at the same world as everybody else and equally capable of being wrong about its future state. If they were right about everything there would be no such thing as policy error, which is demonstrably not the case.
You would assume however, that bankers would be suitably qualified, experienced and (given that it is their job) be able to dedicate most of their waking hours to anticipating the future, and therefore able to have a better stab at it than Joe Public.Gassing Station | Finance | Top of Page | What's New | My Stuff