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The Hazards of Asset Allocation in a Late-Stage Major Bubble

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Re: The Hazards of Asset Allocation in a Late-Stage Major Bubble

#31

Post by lumost »

nabla9 wrote: post #25

>Robert Shiller – who correctly and bravely called the 2000 and 2007 bubbles and who is one of the very few economists I respect – is hedging his bets this time, recently making the point that his legendary CAPE asset-pricing indicator (which suggests stocks are nearly as overpriced as at the 2000 bubble peak) shows less impressive overvaluation when compared to bonds. Bonds, however, are even more spectacularly expe…

Wouldn't this force the fed to become the lender to these zombie firms or let the institutions take a bath?

I can't imagine corporate bankruptcies resulting in corrective change if the fed is the principal lender.

Re: The Hazards of Asset Allocation in a Late-Stage Major Bubble

#32

Post by curiousllama »

Greenspan said in '97 that the market reflected a state of "irrational exuberance." If, on that day, you said "oh, cool , I'm exuberant too!" and dumped all your money into random stocks, then you'd still have made money at the bottom of the .com bubble crash.

I totally agree with this guy, but my only reaction is "of course... so what?"

I think any educated observer is wowed by the stock market right now. Anything other than "wow!" is voodoo

Re: The Hazards of Asset Allocation in a Late-Stage Major Bubble

#33

Post by icelancer »

nabla9 wrote: post #25

>Robert Shiller – who correctly and bravely called the 2000 and 2007 bubbles and who is one of the very few economists I respect – is hedging his bets this time, recently making the point that his legendary CAPE asset-pricing indicator (which suggests stocks are nearly as overpriced as at the 2000 bubble peak) shows less impressive overvaluation when compared to bonds. Bonds, however, are even more spectacularly expe…

Yeah, this has been my impression for quite some time now. Future projection for company equity seems fine enough, though quite obviously overvalued (but good luck betting against uncapped QE).

Corporate debt on the other hand has been scary for a few years and is getting ridiculous. Your point lowest possible bond ratings is a solid one, I think, and one I hadn't considered.

The chaining effect of some failures will be significant given how much leverage is inherent in the system. I think bond market spreads will become quite large as liquidity dries up.

Re: The Hazards of Asset Allocation in a Late-Stage Major Bubble

#34

Post by koolba »

Negitivefrags wrote: post #23
joncrane wrote: post #4

This is a great article. Note it's from January 5th, and it's extremely speculative. But certainly at least worth adding to the overall amount of signals that stock investors are thinking. I think I remember someone saying that in 1929 when the shoeshine boys were giving stock advice that that's how someone knew the bubble was about to burst. Lately I've been discussing investment strategies with the people that work…

The 2021 signal is all the high school students telling you what altcoins to buy. And just wait till you see what is going on with Decentralised Finance. https://coinmarketcap.com/yield-farming/ Sort that by Highest APYs. It fluctuates all the time but the numbers are getting as high as 1,000,000% APY. There is no world in which that can be anything but a Ponzi scheme. People are actually buying into these things.

Wtf is a pancake swap?

Re: The Hazards of Asset Allocation in a Late-Stage Major Bubble

#35

Post by yellowstuff »

> I expect once again for my bubble call to meet my modest definition of success: at some future date, whenever that may be, it will have paid for you to have ducked from midsummer of 2020.

Two can play at this game. I predict that at some future date the stock market will be higher than it is today.

Re: The Hazards of Asset Allocation in a Late-Stage Major Bubble

#36

Post by exabrial »

I'm sorta skeptical. With 12% of the usa vaccinated and things on the verge of opening, I really don't see things going into a recession unless the powers at be do something stupid.

I think this is fundamentally different than other bubbles because there's a guaranteed light at the end of the tunnel.

Re: The Hazards of Asset Allocation in a Late-Stage Major Bubble

#38

Post by aaronbrethorst »

joncrane wrote: post #4

This is a great article. Note it's from January 5th, and it's extremely speculative. But certainly at least worth adding to the overall amount of signals that stock investors are thinking. I think I remember someone saying that in 1929 when the shoeshine boys were giving stock advice that that's how someone knew the bubble was about to burst. Lately I've been discussing investment strategies with the people that work…

If I'd taken the advice of one of the guys I hired to move my home back in 2017 and bought Bitcoin like he had, I'd be up 25x today. I thought he was nuts, and still do, but if he's still holding on to his Bitcoin then the joke's on me. Shrug.

Re: The Hazards of Asset Allocation in a Late-Stage Major Bubble

#39

Post by freeone3000 »

viburnum wrote: post #30
slt2021 wrote: post #15

it is not equity that is overpriced. it is that printed dollar that is overpriced (cash is trash). any bond guarantees long-term loss. In 1990, 2k, 2008 investors could escape from equities to bonds with 6% yield, but now they have nowhere to go. That concludes that this bubble will continue as long as interest rate remains near zero. Federal Reserve basically cornered the entire market into equities, investors have…

Why were bond interest rates ever that high in the first place?

The overnight lending rate in 2007 was 5.5%. If that was the cheapest possible you could ever borrow money for even the shortest term, 6% for a long-term bond is downright cheap.

Re: The Hazards of Asset Allocation in a Late-Stage Major Bubble

#40

Post by icelancer »

slt2021 wrote: post #15

it is not equity that is overpriced. it is that printed dollar that is overpriced (cash is trash). any bond guarantees long-term loss. In 1990, 2k, 2008 investors could escape from equities to bonds with 6% yield, but now they have nowhere to go. That concludes that this bubble will continue as long as interest rate remains near zero. Federal Reserve basically cornered the entire market into equities, investors have…

>> That concludes that this bubble will continue as long as interest rate remains near zero.

Yeah, I think that is the generally accepted understanding of what's happening right now especially with additional stimulus / QE methods.

Think you are already seeing equity escape into other asset classes in commodities and cryptocurrency, too.

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