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

[egomeister]

Lim said:

Are you saying there is no limit? What happens when bonds etc flow to equity looking for returns?

It's already happened hasn't it? Dividend stocks is where you find yield, and bonds for price appreciation.

[MikeKite]

Lim said:

Which begs the question, what could trigger a > 20% crash? In the near term. Anything?

The overall market or tech stocks?

The NASDAQ fell almost 80% when the bubble burst a couple of decades ago.

https://en.wikipedia.org/wiki/Dot-com_bubble

[eps]

Watched The Big Short over the weekend, think we're heading for a fall, if not sizeable correction within the next 6-18 months.

[rdjohn]

An interesting article that puts things in perspective

https://www.seeitmarket.com/comparing-todays-stock...

Everyone thought that the world was coming to and end in the early 1970’s. The world and stockmarkets somehow survived

[Mr Whippy]

rdjohn said:

An interesting article that puts things in perspective

https://www.seeitmarket.com/comparing-todays-stock...

Everyone thought that the world was coming to and end in the early 1970’s. The world and stockmarkets somehow survived

Easy fix.

Debase dollar. Only needs to decouple dollar from gold. 1973 iirc.

Let debasement commence, and real wealth of average USA person drop for the next 50 years.


I’m all for the world carrying on, it will, it always does.
But “get-awayable-with-inflation” has run its course now.
Inflation is creeping in and there are no more corners to cut to keep costs low. Chocolate bars can keep getting smaller, and cars can keep getting their ‘percepted’ values adjusted for inflation... but raw food/kg prices, energy costs, and rents and property prices can’t escape.

Without salary rises then spending will keep dropping as everyone throws all they earn at food and a roof over their head.


The wheat and chaff need to be sorted. Bailing out everyone just rewards the weak, and that’s what we have... a business cycle worth of weak businesses that can’t survive without more free money... rather than an economy of businesses that make money in the prevailing environment.

But right now, even the wheat is over valued... the chaff is worthless.

[Condi]

The US/UK worker has most/all their pension linked to the stock market.

The governments and central banks cannot afford the market to crash as it would destroy the retirement savings of a huge number of people, leading to adverse social consequences.

Hence the repeated QE and printing of helicopter money.

It will not end well, one way or another, but predicting how and when is impossible, so you may as well enjoy the rollercoaster.

One of the biggest problems with QE is that it increases the wealth of those who already own assets, but does nothing for those who do not. The inequality is only getting wider and this will also lead to huge social problems at some point. The people who are 30 and 40 now, as their parents start passing money down and liquidating houses etc, will see a much larger divide open up between those who's parents had money and have benefitted from the asset price inflation and those who didn't. Exactly what government's do about this I am not sure, but you can expect to see more IHT I guess to pay for the social support and "levelling up".

[Oilchange]

BoRED S2upid said:

Bitcoin, gold, silver, property, wine...

But no I don’t agree with the article. Until interest rates increase people have no other option but the stock market.

Doing nothing is always an option.

[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.

[Mr Whippy]

Condi said:

The US/UK worker has most/all their pension linked to the stock market.

The governments and central banks cannot afford the market to crash as it would destroy the retirement savings of a huge number of people, leading to adverse social consequences.

They always have had pensions saved like that, so what changed in recent decades?

If you were invested properly approaching retirement no issues.

If you’re still off retirement, no issue as markets recover.

It’s not about that. It’s about keeping the very rich people very rich.

[anonymous-user]

I'll avoid trying to pick the top.

"The market can stay irrational longer than you can stay solvent."

[Condi]

Mr Whippy said:

They always have had pensions saved like that, so what changed in recent decades?

Previously pensions were defined benefit, and the risk was borne by the company. It is only over the last 20/30 years that workers have had exposure to the stock market as pensions changed to defined contribution.

I don't believe it is about keeping rich people rich, it is about keeping average people solvent.

[Mr Whippy]

Condi said:

Mr Whippy said:

They always have had pensions saved like that, so what changed in recent decades?

Previously pensions were defined benefit, and the risk was borne by the company. It is only over the last 20/30 years that workers have had exposure to the stock market as pensions changed to defined contribution.

I don't believe it is about keeping rich people rich, it is about keeping average people solvent.

DBs have independent funds managed by trustees. So it’s still the same thing.
Yes company has to keep it solvent by varying contributions... but market crashes were always a thing in the past too.

I’d say it’s more about failure of the Western hegemony and MMT is dying efforts to keep it going.
Sadly it’s not stopping it, and it’s only benefitting the wealthy.

The solution is to change and adapt to the new environment, but feeding malinvestment with free easy money is counter to that... we’ve spent 15 years breeding more weakness into the economy.


Needless to say, whatever happens happens.

Good to accept that the world is the way it is and to try play it accordingly to protect your own interests.

The biggest issue is gaining the perspective to understand how the world really is... especially that of finance.

[DonkeyApple]

Condi said:

Previously pensions were defined benefit, and the risk was borne by the company. It is only over the last 20/30 years that workers have had exposure to the stock market as pensions changed to defined contribution.

I don't believe it is about keeping rich people rich, it is about keeping average people solvent.

The insidious nature of asset inflation and why it was politically triggered in the late 90s is that it makes the average person feel wealthier and so they are happier and spend more but ultimately the trick runs out of steam and you end up in the situation where you have to step into a market and underpin asset values because the owners of those assets haven't the actual wealth to handle the rebasing.

The ending of the key drivers behind property inflation by the Govt in 2010 has been about the only sane thing done by a govt in the last 30 years.

The missing ingredient today is wage inflation which subsequently needs to be met with gentle and matching credit restrictions as real income replaces synthetic.

[funinhounslow]

DonkeyApple said:

The insidious nature of asset inflation and why it was politically triggered in the late 90s is that it makes the average person feel wealthier and so they are happier and spend more but ultimately the trick runs out of steam and you end up in the situation where you have to step into a market and underpin asset values because the owners of those assets haven't the actual wealth to handle the rebasing.

The ending of the key drivers behind property inflation by the Govt in 2010 has been about the only sane thing done by a govt in the last 30 years.

The missing ingredient today is wage inflation which subsequently needs to be met with gentle and matching credit restrictions as real income replaces synthetic.

But didn’t the introduction of help to buy fan the flames even more?

[BarryGibb]

funinhounslow said:

DonkeyApple said:

The insidious nature of asset inflation and why it was politically triggered in the late 90s is that it makes the average person feel wealthier and so they are happier and spend more but ultimately the trick runs out of steam and you end up in the situation where you have to step into a market and underpin asset values because the owners of those assets haven't the actual wealth to handle the rebasing.

The ending of the key drivers behind property inflation by the Govt in 2010 has been about the only sane thing done by a govt in the last 30 years.

The missing ingredient today is wage inflation which subsequently needs to be met with gentle and matching credit restrictions as real income replaces synthetic.

But didn’t the introduction of help to buy fan the flames even more?

And rock bottom base rates

[DonkeyApple]

BarryGibb said:

funinhounslow said:

DonkeyApple said:

The insidious nature of asset inflation and why it was politically triggered in the late 90s is that it makes the average person feel wealthier and so they are happier and spend more but ultimately the trick runs out of steam and you end up in the situation where you have to step into a market and underpin asset values because the owners of those assets haven't the actual wealth to handle the rebasing.

The ending of the key drivers behind property inflation by the Govt in 2010 has been about the only sane thing done by a govt in the last 30 years.

The missing ingredient today is wage inflation which subsequently needs to be met with gentle and matching credit restrictions as real income replaces synthetic.

But didn’t the introduction of help to buy fan the flames even more?

And rock bottom base rates

Arguably, both of those were essential emergency actions to prevent the market from collapsing. Rates were slammed to halt defaults that would have been too large to handle and HtB is a fudge to bridge the gap between excessively inflated asset values and depressed incomes. Without which the market would have ground to a halt due to to few new owners coming in at the bottom.

The key is that they deleveraged the market and used changes to BTL to remove the most toxic debt pyramids to stabilise the market without triggering a monumental collapse.

It is very bizarrely just about the only competent political activity in living memory. Whether it was by luck or genius is the big debate.

The most important result that we must achieve is to get the housing market back to a level where it can just be let to burn when it needs to and to not have to step in and artificially support it after deliberately artificially inflating it.

[anonymous-user]

Condi said:

I don't believe it is about keeping rich people rich, it is about keeping average people solvent.

Interesting perspective.

[Condi]

Mr Whippy said:

DBs have independent funds managed by trustees. So it’s still the same thing.
Yes company has to keep it solvent by varying contributions... but market crashes were always a thing in the past too.

A DB pension fund will normally invest in "safe" long term investments like bonds, guilts, property and the like. Most companies have stopped DB schemes because their investments have failed to keep up with the promised return (to the employee) and so the company has had to fund it. The employee didn't care what the investment was in because they had no risk.

The amount of money "average Joe" has in the stock market has never been higher. If that goes to nothing, or drops by a large amount, then their retirement plans are ruined, they fall back onto the state.

[VR99]

PeteinSQ said:

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.

Same age as you but I've taken a slightly different approach. Looked at the default fund my pension was invested in..it wasn't great in terms of performance over the last few years so switched over to a higher cost but higher equity exposure active fund which has outperformed the default over the last 5 years. It's a risk but even if there is a big market correction that should still benefit me long term..assuming I also make it to retirement age!

[anonymous-user]

Condi said:

A DB pension fund will normally invest in "safe" long term investments like bonds, guilts, property and the like. Most companies have stopped DB schemes because their investments have failed to keep up with the promised return (to the employee) and so the company has had to fund it.

The crazy thing is it's the avoidance of risk which has ended up killing DB schemes. If they'd remained "risk on" they'd all have had money coming out of their ears. As usual, a few failures ended up spoiling the party for everyone.