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What to Worry About in This Surreal Bull Market

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Re: What to Worry About in This Surreal Bull Market

#51

Post by mjburgess »

benevol wrote: post #44
aedron wrote: post #12

A bubble in slow motion, someone called the present economic environment. I think it's an apt description. Extreme "quantitative easing" (I refuse to take fed speak seriously) has only taken effect very, very slowly. Why? Because all it really was was recapitalizing banks which had enormous gaping holes on their balance sheets after 2008. They have been able to fill the tanks now, getting money hot off the presses fo…

> "growth" (i.e. inflation) before the inevitable crash What you need to know is this: Financial crashes are an eternal cycle, they will never go away. Unless there is fundamental societal change. Here's why: Financial crashes are business to a couple of extremely powerful/rich people. After every crash, assets are undervalued. Rich people have the financial cushion to not be impacted in the slightest way by such cra…

Ah yes, the Flimflam-Fo Equation with its key parameters, "rich person a" and "rich person b".

Conspiracy theories might well be defined just by the application of the fallacy, "if someone benefits, then they intended it".

And here we see this fallacy being applied. Sound like a textbook conspiracy to me. The extremely weathly are not interested in increasing their net wealth, only in specific purchases to further their goals -- which are very easy to undermine with crashes.

People who are merely wealthy might possibly wish to increase their general wealth and therefore believe a crash will help them do that. That is an incredibly outsized risk for a wealthy person to needlessly take however.

Re: What to Worry About in This Surreal Bull Market

#52

Post by eru »

benevol wrote: post #44
aedron wrote: post #12

A bubble in slow motion, someone called the present economic environment. I think it's an apt description. Extreme "quantitative easing" (I refuse to take fed speak seriously) has only taken effect very, very slowly. Why? Because all it really was was recapitalizing banks which had enormous gaping holes on their balance sheets after 2008. They have been able to fill the tanks now, getting money hot off the presses fo…

> "growth" (i.e. inflation) before the inevitable crash What you need to know is this: Financial crashes are an eternal cycle, they will never go away. Unless there is fundamental societal change. Here's why: Financial crashes are business to a couple of extremely powerful/rich people. After every crash, assets are undervalued. Rich people have the financial cushion to not be impacted in the slightest way by such cra…

Financial crashes don't have to be bad. The last one wasn't so bad at first, before the central banks in some countries let nominal GDP dip and caused a mild recession to become the Great Recession.

See eg http://econlog.econlib.org/archives/2017/11/old_classical_m....

Some countries like Israel, Australia (or to a lesser extent the UK) had more competent central banks. See https://marketmonetarist.com/2014/04/24/how-stan-fischer-pre... for a piece about the example of Israel.

Re: What to Worry About in This Surreal Bull Market

#53

Post by yosito »

ronnypostsstuff wrote: post #32

What is the best thing to do with my savings? I am thinking about investing, and read up on it. One thing I don't understand is where to put money to minimize the impact of a recession. Government bonds? But then Graham says, I think, bonds prices also rise in a bull market, and fall afterwards.

I'm not an expert, but I think the safest strategy in an uncertain circumstance is to not put all your eggs in one basket: diversify!

Re: What to Worry About in This Surreal Bull Market

#54

Post by matwood »

KozmoNau7 wrote: post #5
AndrewDucker wrote: post #2

I'd love to know how far away from the next crash people think we are. And where they think is a safe place to put money when that happens.

It will happen before 2020, the question is when exactly it will hit. My money is on late 2018 or early 2019. What to do before then? Don't have any money in US stocks. Diversify both geographically and sector-wise, cash out, be ready to invest when stocks crash through the floor, to ride the wave when they inevitably rise again. The real trick is spotting who's going to rise again and who's going to be left behind.…

> It will happen before 2020, the question is when exactly it will hit.

What will be the catalyst? Just because we haven't had a recession in awhile is not enough. Corporate profits are up, consumer spending is up, and even though everyone on here thinks the numbers are lies, wages are starting to go up.

> My money is on late 2018 or early 2019.

So you have already either shorted the market or bought put options out in 2019?

Re: What to Worry About in This Surreal Bull Market

#55

Post by dsacco »

benevol wrote: post #44
aedron wrote: post #12

A bubble in slow motion, someone called the present economic environment. I think it's an apt description. Extreme "quantitative easing" (I refuse to take fed speak seriously) has only taken effect very, very slowly. Why? Because all it really was was recapitalizing banks which had enormous gaping holes on their balance sheets after 2008. They have been able to fill the tanks now, getting money hot off the presses fo…

> "growth" (i.e. inflation) before the inevitable crash What you need to know is this: Financial crashes are an eternal cycle, they will never go away. Unless there is fundamental societal change. Here's why: Financial crashes are business to a couple of extremely powerful/rich people. After every crash, assets are undervalued. Rich people have the financial cushion to not be impacted in the slightest way by such cra…

> And no, this is not conspiracy, it's pure economics.

If everything you’re postulating here is “pure economics”, would you mind placing it in the context of an economic framework for the sake of precision? Something rudimentary like the macro credit-debt cycle is fine.

As it stands, your exposition appears fairly politically loaded, and your specific claim that crashes are “manufactured” rather than an emergent side effect of market dynamics is, to me, an extraordinary claim that requires commensurately extraordinary evidence.

It’s not at all clear to me how you’re getting from (“there exist people who benefit from systemic market corrections”) to (“market corrections are manufactured by a subset of people who benefit by them”). As another question illustrating this point, would you say that people purchasing homes with overextended mortgages during the housing market bubble were contributing to that crash? If so, did they have a part in “manufacturing” it even though they didn’t benefit? How do you reconcile the ideas of market participants with agency, systemic volatility, and irrational exuberance with the idea of a conspiratorial group capable of systematically driving a market crash?

Re: What to Worry About in This Surreal Bull Market

#56

Post by cmrdporcupine »

benevol wrote: post #44
aedron wrote: post #12

A bubble in slow motion, someone called the present economic environment. I think it's an apt description. Extreme "quantitative easing" (I refuse to take fed speak seriously) has only taken effect very, very slowly. Why? Because all it really was was recapitalizing banks which had enormous gaping holes on their balance sheets after 2008. They have been able to fill the tanks now, getting money hot off the presses fo…

> "growth" (i.e. inflation) before the inevitable crash What you need to know is this: Financial crashes are an eternal cycle, they will never go away. Unless there is fundamental societal change. Here's why: Financial crashes are business to a couple of extremely powerful/rich people. After every crash, assets are undervalued. Rich people have the financial cushion to not be impacted in the slightest way by such cra…

This is the really terrible problem of the push to dismantle state and company pension systems and aggressively replace them with private retirement schemes and the addition of new investment systems under the guise of "retirement" plans -- it has led to the extreme growth of the quasi-snake-oil mutual fund sales industry ("financial planners" whose only job is to sell high commission funds) and has unfortunately also led to the middle working classes being very emotionally and ideologically invested in the fortunes of the stock market. They become easy victims for the process you describe, and also will push politically for anything which "makes the stock market happy" and so the bailouts of 2008, a kind of mass corporatization -- reverse socialism -- of the state not seen in the entire 20th or 19th centuries, was politically tenable in a way it wouldn't have been before.

Re: What to Worry About in This Surreal Bull Market

#57

Post by wz1000 »

jatsign wrote: post #26
truffle_pig wrote: post #22

Shameless plug (but related): https://isthestockmarketgoingtocrash.com/ Posted this here a while ago and people seemed to like it.

Of those indicators, which is most concerning to you? I think I'd lean towards public debt...

"Public Debt" is not an issue. It is probably one of the biggest economic advantages the US has. US dollars(which all US debt is denominated in) are issued by the US government. This means that it is impossible to "default", unless the government willingly chooses to default. The US doesn't owe anyone "real" resources. On the other hand, the US has acquired huge amounts of real resources(cars, services, electronics, clothing...) from (foreign) holders of US debt like China, Japan etc.

Yes, these dollars are capable of purchasing any resources available for sale in the US, but again, as a sovereign nation, the US is capable of imposing customs and taxes to regulate this flow as they see fit.

Debt issued by a sovereign nation which controls its own currency is completely unlike household debt. The US government is not revenue constrained. This means that it does not need to collect taxes in order to spend. Indeed, since all US dollars come from the government, the US government must spend first in order that there be any money to tax away.

Re: What to Worry About in This Surreal Bull Market

#58

Post by koolba »

tehwalrus wrote: post #24
aedron wrote: post #12

A bubble in slow motion, someone called the present economic environment. I think it's an apt description. Extreme "quantitative easing" (I refuse to take fed speak seriously) has only taken effect very, very slowly. Why? Because all it really was was recapitalizing banks which had enormous gaping holes on their balance sheets after 2008. They have been able to fill the tanks now, getting money hot off the presses fo…

That ketchup bottle analogy is wonderful, thank you :)

The classic analogy from economics is filling water in a bathtub.

Say you've got separate hot and cold faucets and there's a delay between turning the valve and the respective water flowing. By the time you get to just the right mix, the ratio of hot water is still increasing and it'll get messed up again, which leads to increasing the cold water, which makes it too cold, which ... You get the idea.

Re: What to Worry About in This Surreal Bull Market

#59

Post by yequalsx »

ronnypostsstuff wrote: post #32

What is the best thing to do with my savings? I am thinking about investing, and read up on it. One thing I don't understand is where to put money to minimize the impact of a recession. Government bonds? But then Graham says, I think, bonds prices also rise in a bull market, and fall afterwards.

If you truly, deep down in your heart, believe there is a crash coming soon then the best thing you can do with your money is to keep it in cash. Invest after the crash. If, like most people, you aren't absolutely certain there will be a crash then you invest for the long haul. You have a diversified set of investments. You put in a little bit each month. After 30 years, barring a civilization destroying event, you'll be fine.

Re: What to Worry About in This Surreal Bull Market

#60

Post by dannyw »

schrodinger wrote: post #50
mattmanser wrote: post #47

Earlier quoted context omitted.

It explains each of the indicators on the page. Click the "Market Overvaluation" button (albeit with a pretty poor UI and terrible URL support so I can't link it). It's basically the value of US companies on the stock market divided by the GDP, $27 trillion / $20 trillion = 135%. Although it makes you wonder about if all that stashed money overseas is having a significant impact on that.

Wouldn’t companies with a strong international presence (e.g. Apple) contribute to that? It seems like increased globalization could explain that high ratio rather than “overvaluation.”

That would be counted in America's GDP.

The metric as designed is more flawed, because not all companies are public.

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