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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

#61

Post by headmelted »

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…

Please don't take offence, but you've misunderstood the mechanics of how wealth is accumulated.

The wealthiest people in the world are wealthy by virtue of the gains made on the assets they already have. So, in a bull market, their assets grow while someone without assets is left behind. The inverse is true, too - they'll proportionally lose to the same degree in a crash - as while a poor person may have no investments, the wealthy person's investments will crash in line with the market. There won't be a financial cushion, at least not a significant one.

Books have been written around timing markets and it's generally accepted that it cannot be done reliably. To get out before a crash then buy cheap would require you to predict three different moments accurately: when to get in, when to get out, and then when to buy on the "cheap". Timing even one reliably requires luck or clairvoyance.

"Rich people have the financial cushion to not be impacted in the slightest way by such crashes". This is clearly false - wealthy people don't keep mountains of cash lying around as they would miss out on the growth in bull markets, and as a result their wealth would decrease relative to their peers.

Investors generally just become relatively poorer during a crash then make it back and more during the next bull market, at least that's how it's worked until now. There's an old quote I can't find the source of right now that sums it up fairly aptly:

"Stocks go down faster than they go up... but they go up further than they go down".

Re: What to Worry About in This Surreal Bull Market

#62

Post by chrisbro »

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…

Minor correction: Sarbanes-Oxley was introduced in 2002 after the Enron/Worldcom crises, not after the 2007/2008 financial crises: https://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act

Re: What to Worry About in This Surreal Bull Market

#63

Post by yequalsx »

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.

There's an economics adage that is appropriate to keep in mind:

Economists have predicted 15 of the last 10 crashes.

Just before a crash the best place to keep your money is in cash. Those who are liquid after a crash can clean up by investing at that time.

Re: What to Worry About in This Surreal Bull Market

#64

Post by aquova »

brndnmtthws wrote: post #34
artur_makly wrote: post #29

Would BTC prices rise or fall after this hypothetical crash?

Nobody knows, but if I were to guess I think they'd rise. If you're someone who loves Bitcoin (and it would make sense to think the people buying Bitcoin love it), then it's likely you think of it as a safe haven. I see Bitcoin (and ETH, and others to a lesser degree) as a safe haven. I personally have been selling off stock and moving into BTC, ETH, and others because I think the traditional stock and bond market is…

> If you're someone who loves Bitcoin (and it would make sense to think the people buying Bitcoin love it), then it's likely you think of it as a safe haven.

The problem with this statement is that many people getting into Bitcoin don't understand the underlying concept behind it, nor do they really care. I've spoken to several people who are treating BTC as a new stock investment, and only care about the steadily increasing value and think they can make a quick buck. If Bitcoin crashes (and I think it'll crash to some degree fairly soon) it won't be the core BTC enthusiasts who will leave, it'll be these opportunists getting frightened and leaving in droves.

Now, this may actually be healthy for the long-term state of BTC, but I still think it'll have to happen.

Re: What to Worry About in This Surreal Bull Market

#65

Post by dsacco »

headmelted wrote: post #61
benevol wrote: post #44

Earlier quoted context omitted.

> "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…

Please don't take offence, but you've misunderstood the mechanics of how wealth is accumulated. The wealthiest people in the world are wealthy by virtue of the gains made on the assets they already have. So, in a bull market, their assets grow while someone without assets is left behind. The inverse is true, too - they'll proportionally lose to the same degree in a crash - as while a poor person may have no investmen…

I agree with the thrust of your comment, but to nitpick:

> Books have been written around timing markets and it's generally accepted that it cannot be done reliably. To get out before a crash then buy cheap would require you to predict three different moments accurately: when to get in, when to get out, and then when to buy on the "cheap". Timing even one reliably requires luck or clairvoyance.

This doesn’t strike me as true, unless you’re describing the subset of academic economists who agree with EMH in some form. In particular, the first sentence on its own appears to be evidently untrue; it’s clear that there are many parties, including economists and financiers, who attempt to time the market and generally forecast macroeconomic shifts.

Re: What to Worry About in This Surreal Bull Market

#66

Post by ataturk »

matwood wrote: post #54
KozmoNau7 wrote: post #5

Earlier quoted context omitted.

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…

The advice you're replying to is awful, do yourself a favor and don't follow it.

Why does everyone think buying puts or shorting stocks is as easy as going long? It's not. It's an even faster way of losing money! Go try it sometime--or even just simulate it. People who say these things are clueless.

Re: What to Worry About in This Surreal Bull Market

#67

Post by sharemywin »

chrisbro wrote: post #62
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…

Minor correction: Sarbanes-Oxley was introduced in 2002 after the Enron/Worldcom crises, not after the 2007/2008 financial crises: https://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act

Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111–203, H.R. 4173, commonly referred to as Dodd–Frank) was signed into federal law by President Barack Obama on July 21, 2010.

Re: What to Worry About in This Surreal Bull Market

#68

Post by wildmusings »

After basically 0% net growth in the market for over a year leading up to the election, there has been a 25% boom beginning exactly on the day after Trump won. That is no coincidence. The markets are anticipating Trump's promised massive deregulatory push (already well underway), tax cuts, a more union-hostile Justice Department and NLRB, and other business-friendly changes.

Re: What to Worry About in This Surreal Bull Market

#69

Post by ataturk »

cmrdporcupine wrote: post #56
benevol wrote: post #44

Earlier quoted context omitted.

> "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 als…

What were the pension funds invested in? You do understand that the reason to move to 401K style plans is because pension obligations were over-promised and under-delivered by the same snake oil salesmen you describe. You understand that, correct? At least with individual plans, when people change jobs they get to keep whatever they contributed versus a pension plan which has varying types of payouts and much longer vesting schedules.

Re: What to Worry About in This Surreal Bull Market

#70

Post by sharemywin »

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…

The problem is a lot of people are momentum investing, hold and forget. kind of a variations on greater fool theory. eventually if I wait long enough someone will come along and buy this for what I paid or maybe more.
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