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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

#131

Post by EGreg »

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…

But if this was only the US policy how come there is such a bubble in bitcoin?

Is this a sign of a bubble or people trying to hedge against a crash?

Re: What to Worry About in This Surreal Bull Market

#132

Post by xutopia »

artur_makly wrote: post #29

Would BTC prices rise or fall after this hypothetical crash?

I'm of the opinion that BTC will actually increase relative to all other currencies if a market crash occurs. I expect people to see a huge influx of people purchasing BTC when they see the market start its tumble and then we'll see a dip until it stabilizes.

Re: What to Worry About in This Surreal Bull Market

#133

Post by rm999 »

truffle_pig wrote: post #22

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

Instead of market cap/GDP, wouldn't market cap/earnings (p/e ratio) more directly capture "market overvaluation" and "how much the stock market costs vs how much it is providing"?

If so, it seems like we're at a fairly average place for the last 30 years:

http://www.multpl.com/

https://seekingalpha.com/article/4056553-25-p-e-s-and-p-500-...

Re: What to Worry About in This Surreal Bull Market

#134

Post by dharma1 »

EGreg wrote: post #131
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…

But if this was only the US policy how come there is such a bubble in bitcoin? Is this a sign of a bubble or people trying to hedge against a crash?

Expansive monetary policy has happened in many places around the world, Europe, UK, Japan - not just the US. https://en.wikipedia.org/wiki/Quantitative_easing

It's curious that something that was done as a measure to alleviate the effects of a previous crash is creating another bubble and (probably) another eventual crash.

My guess is the explosion in money going into cryptocurrencies is partly because of that - more loose capital chasing gains - but there are other reasons behind it too. It's a combination of things. Genuine excitement of something new and potentially transformational, desire to move assets away from places they are at risk of being seized (China), FOMO, promise of Lambos, disappointment in the traditional financial system by young people, many reasons.

People get excited when something goes up quickly, and it's been very easy to jump on that speculative train in the case of cryptocurrencies.

Re: What to Worry About in This Surreal Bull Market

#135

Post by Raz2 »

SteveCoast wrote: post #110
dominotw wrote: post #101

Earlier quoted context omitted.

>diversify your investments Diversify into what though? Once market crashes, it takes everything down with it.

Not cash.

Could you explain why? In 08/09 everything became cheaper -> cash became more expensive. Isn't it?

Re: What to Worry About in This Surreal Bull Market

#136

Post by ThrustVectoring »

Al-Khwarizmi wrote: post #106

Honest question: is there any unavoidable reason why there cannot be a permanent bull market? I mean, apart from empirical/historical observation reasons (I don't find those very compelling, as some stuff in economics seems to never happen until it happens). Given the low interest rates, people are growingly investing in diversified stocks to obtain profits in the long term. Index funds are growing, which don't even…

>Taking that into account, could a slow and steady rise not just become a system equilibrium and go on an on?

There's positive feedback inherent in the system under control. Specifically, lower volatility makes it safer and more profitable to use leverage. This leverage will force people to overreact to negative market movement.

Re: What to Worry About in This Surreal Bull Market

#137

Post by dharma1 »

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…

Oscillation happens in many complex systems - population sizes etc.

I think the reasons for why cycles happen in economies are many. It's probably desirable to reduce the amplitude of the cycles, but I'm not convinced humans are capable of that. Due to biological reasons, reward functions are almost always short term. Humans, as individuals and societies, are not very good at optimisations at longer time scales.

I'd like to think that we are capable of more, but it may be that we are not. AI (at some stage) might be able to help us there, if it turns out to have better predictive power than humans - and doesn't lead to more ruin rather than improvement in the human condition.

Re: What to Worry About in This Surreal Bull Market

#138

Post by heurist »

worldsayshi wrote: post #42
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.…

> invest in renewable energy and related sectors Isn't the problem in investing in that that there's really no way to know which particular business will come out on top here since there really isn't any large barriers of entry?

If you don't follow the industry there are indexes and funds available for this stock. All you need to do is find the right ones and you'll be mostly insured from any individual company failure.

There's a lot of money in oil that will be captured by the 'free' energy of renewables. Renewables are just now becoming more cost effective than oil. Oil will be around for a long time but renewables are poised to overtake it in consumer and commercial energy. Might take a few decades but it's inevitable that a vastly more efficient energy source becomes the market leader.

Also, governments across the world are putting in place regulations to build and retrofit buildings to reduce emissions. That's not just energy, it's the actual building materials and techniques. That's a lot of government mandated money about to be put into green infrastructure. Again, this is over decades so the ramp time will seem slow to us humans but now is the time to get in IMO. However, I am an amateur investor and I've definitely been wrong before...

Re: What to Worry About in This Surreal Bull Market

#140

Post by [deleted] »

kgwgk wrote: post #128
wildmusings wrote: post #126

Earlier quoted context omitted.

Markets price in expectations of future events. Yes, there was indeed a panicked frenzy in the futures market. But by the next morning, the consensus clearly emerged that the result was a positive thing for the stock market.

I agree, but people forecast the stock market to go up again in the next year due to the tax reform but that was alredy the reason for most of the gains in the last year... And it's not yet a sure thing.

[deleted]
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