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Market prognostication isn't generally good for your sanity or financial wellbeing, and MarketWatch is kind of a trash site, given to talking about technical in
by ericd 9y ago
Market prognostication isn't generally good for your sanity or financial wellbeing, and MarketWatch is kind of a trash site, given to talking about technical indicators and support levels and other BS like that.
That said, there are a number of aspects to the current economy that I find deeply worrying - incredibly high housing/healthcare prices that are seemingly disconnected from reported inflation metrics and median wages, the US at record debt levels relative to GDP (if you count household+government debt), worldwide cash printing, with only assets growing in price to match, and a ferocious property bubble in China. If the last one pops, it seems likely that the money flowing out of China into US property markets will drop out, which would take out the upward pricing pressure, and probably ding US property values quite rapidly, since most people here can't reasonably support the cost of houses here on median wages with anything over rock bottom interest rates. This would seem to make existing secured loans a whole lot less secured than they were before. Also worryingly, banks are compensating for unaffordability by requiring less money down, and covering the difference with PMI (insurance). I think the US populace might simultaneously be nearing the breaking point in terms of the debt it can support due to years of easy money discouraging frugality. If spending dropped off due to an inability to spend more, that would ding the corporate earnings supported by credit, which would spike PE ratios, unless P dropped a lot.
In short, if these things come to a head in proximity to each other, it seems like we might really be in for a shitstorm, which may include a large dose of inflation and bond yields rising if central banks need to redeem a chunk of that US debt they've been gobbling up for its historical safety, in order to compensate for flagging economies to meet their spending obligations.
I really hope I'm wrong (and please tell me why, if I am), but our fundamentals don't seem to support the prices, unless the market is saying the dollar is worth a whole lot less than we think it is.
- elicash 9y agoI wonder (genuinely) if somebody couldn't just as easily create a list of positive signs. Consumer confidence, steady job growth, whatever... For example, you mention growing healthcare costs (true!). But isn't it ALSO true that far fewer people (50%) are filing for bankruptcy since before the ACA? Shouldn't that be a stabilizing force? (Assuming it remains.) To be clear, I'm not arguing you're wrong. Just that it's hard to predict anything, which I think you'd agree with.
- ouid 9y agoIt seems like the economy is largely debt driven. The amount of personal debt that people can accumulate before declaring bankruptcy is finite, and when their credit drops, the economy contracts.
- ellius 9y ago"Debts that can't be repaid won't be repaid."
- ericd 9y agoYeah, I'd love to see it, and I definitely agree that it's impossible to predict the future with any degree of certainty. One of the big reasons for medical bankruptcy is the loss of income without the loss of expenses despite having medical insurance, but I'm sure it's better now that we don't have lifetime max coverage limits and that sort of thing.