8 ms·
Asset prices are high across the board
- cm2187 9y agoThere is almost not a week without an article in the Economist or/and the FT about us reaching the peak of the market. I can't help thinking that it starts to look like 2006 again.
- hellofunk 9y agoBut there is also not a week that goes by without an "expert" in the financial media claiming we are due for a crash. Until there are fewer of these "warnings", the market could very well just keep on truckin.
- rdtsc 9y agoPeople who write these articles I think learned from the last crash that those who "predicted" it became famous ("Did you hear, so and so called it, smack on the nose, they must be a good economist. Let's have them write a book"). So now nobody wants to be left out, and so they predict crashes every week. Eventually when a crash will happen they'll say "see I predicted it, where is my book deal".
- baxtr 9y agoUnfortunately I cannot access the article... could anyone summarize the content? Thanks
- goldenkey 9y agoBitter experience has shown that debt-funded assets can magnify losses, causing financial crises. For this reason banks must be able to withstand any reversal of today’s high asset prices and low defaults. That means raising bank capital in places where it is too low, especially the euro zone, and not backsliding on strenuous “stress tests” as America’s Treasury proposes. In the end, however, there may be no escape for investors from the low future returns and even losses that high asset prices imply. They and regulators should take a leaf out of “The intelligent Investor”, and make sure that they have a margin of safety.
- dredmorbius 9y agohttp://archive.is/bNRMM http://archive.is/bNRMM
- bendoernberg 9y agoLooks like you're shadowbanned Goldenkey
- chvid 9y agoUse a private browser
- Bucephalus355 9y agoJoe Kennedy supposedly said he avoided the stock crash of 1929 by getting out of the market when his shoeshiner started giving him stock tips. Multiple times recently I’ve been at restaurants recently overhearing people talk about how much money they’re going to make in Bitcoin. It’s hard to convey here, but the make-money-who-cares-how-it’s-magic came across every time in such a wow-this-is-definitely-a-bubble way. But as they say, markets can remain irrational longer than you cane remain solvent.
- hellofunk 9y agoAs far as the stock market goes, sentiment has not yet reached a peak. There are still a lot of what I call the "wise naysayer" on CNBC and elsewhere, claiming that we are due for a big decline, or even a crash. Until there are no naysayers left, the chances of further climbs is supported by sentiment analysis.
- deleted 9y ago[deleted]
- lend000 9y agoI love that this comment was down-voted because it so ironically conveys how accurate sentiment analysis is -- i.e. the masses reject it.
- hellofunk 9y agoExactly.
- danmaz74 9y agoIn every single crash I know of there were lots of naysayers up until the actual crash. As a matter of fact, right after each crash I personally remember, there were some of those naysayers who got elevated to oracle-status by the press for a time, "the one who had foreseen this all". But they always failed to predict the timing of the next crash, so oracle-status didn't last. Bottom line: still having naysayers isn't a relevant signal. Predicting that there will be a crash is easy (you are almost guaranteed to be eventually right). Predicting WHEN the crash will be is (almost?) impossible.
- tfha 9y agoMy projection is that this is resulting from a lot of circular investing. Fund A gives money to company B, who has more money than they can spend so it goes to fund C, and then that goes to company D, etc. We've learned that you are not supposed to have idle capital. And yet we keep so much of our wealth as money, the only way to deploy it is to send it in a circle. Valuations go up, prices and costs don't. Unfortunately it's a house of cards. When someone finally cashes out, they'll pull money from the whole system to the tune of the amount it's been amplified by circular investing. There will be an ugly correction.
- pishpash 9y agoThat end is called raising the interest rate. When the rate hits some magic phase transition number where enough people believe you can invest in safe liquid accounts for more than the return on risky assets then the whole thing collapses. But then it'll get propped up again afterwards and everybody believes that now.
- eighthnate 9y agoNot sure why you are being downvoted. That's essentially how things work. That's what FED and interest rates exist to do. Create and pop bubbles. As the FED raises interest rates, money will start trickling out of "riskier" assets. The quicker the FED raises interest rates, the more quickly money will leave. Then we get a recession and when the FED feels they've sopped up enough money from the economy, then they will lower interest rates to get more money into the system, get more economic activity and re-inflate asset prices.
- hodder 9y agoIt is a spectrum not an absolute magic rate. As rates rise, different individual investments will be foregone.
- zaroth 9y agoInteresting to note that dollar adjusted the market has actually been going down for months. http://ei.marketwatch.com/Multimedia/2017/10/04/Photos/NS/MW-FV586_image0_20171004091402_NS.jpg?uuid=e3e92926-a905-11e7-98d3-9c8e992d421e http://ei.marketwatch.com/Multimedia/2017/10/04/Photos/NS/MW...
- saimiam 9y agoCan you explain this a little more? I don't quite know what dollar adjusted means.
- hkmurakami 9y agoPerhaps easier to conceptualize in Europe indices. Imagine European stocks go up but so does the strength of the euro vs the dollar. You, as a US resident (ok presumably) wouldn't be realizing those stock gains on the top line numbers because when you sell the position and convert back to dollars, the worse FX rate erodes your returns. When OP talks about dollar adjusted returns of S&P, an analogous mechanism is at work.
- danmaz74 9y agoI think you meant that European stocks go up, but the euro goes down.
- hkmurakami 9y agooops you are correct!
- golangnews 9y agoIt means adjusted for the changing value of the dollar (the currency the assets are priced in).
- jonlarson 9y agoIf I understand right, this is basically merging s&p 500 [1] and dollar value index [2]. The value of the dollar has been dropping all year, at a higher rate than the value of the s&p 500 has been going up. Basically, the market's dollar denominated value is going up, but dollars are becoming less valuable. This combines to mean that market value has actually down this year, not up. Perhaps op can correct me on anything I got wrong. [1] http://www.marketwatch.com/investing/index/spx http://www.marketwatch.com/investing/index/spx [2] http://www.marketwatch.com/investing/index/dxy http://www.marketwatch.com/investing/index/dxy
- qwtel 9y ago"In investing, it is better to sell a year too early, than a day too late".
- jacobkg 9y agoAfter you sell how do you know when to buy back in again?
- cocacola1 9y agoYou'd have to do your research. When everything's gone to hell and people are cursing the markets is probably a good time, though. But when others are selling, as Buffett and probably a good number of other investors say.
- qwtel 9y agopeople with suits looking even more depressed than usual
- csa 9y agoI think Buffet said something to the effect of "be fearful when others are greedy, but be greedy when others are fearful". Having lots of dry powder in a downturn is a very good place to be for a professional investor. That said, most folks are not professional investors, so buy and hold is relatively simple strategy that performs fairly well for non-professionals.
- swandog46 9y agoNo it isn't! It's better to buy and hold and ride it out. Otherwise you tend to miss the gains on the other side. Decades of research by now has shown that buy-and-hold beats timing the market every time.
- pg314 9y ago...beats trying to time the market... If you can time the market correctly, that is obviously the optimal strategy.
- dredmorbius 9y agoRecommended reading. 1929. Galbraith. http://www.worldcat.org/title/great-crash-1929/oclc/933390176&referer=brief_results http://www.worldcat.org/title/great-crash-1929/oclc/93339017...
- quickben 9y agoI doubt it would help. So far I've seen four posts that are spot on, downvoted. The general sentiment is towards hype and bubble, and it's just another echo chamber reinforcing the spiral. Not just here, and a lot more pronounced lately.
- dredmorbius 9y agoThere's a tremendous amount of motivation to keep speculative bubbles running as long as possible. I'm not certain that expresses itself as self-delusion or attempts to manipulate others, though I suspect bits of both. Oh, and Galbraith covers that in his short, very readable, book.
- josephagoss 9y agoI think that anyone in markets such as Bitcoin or Ethereum should be getting out now. It's obvious that we're at the peak and the bubble is soon to pop.
- panarky 9y agoThis has been "obvious" many times over the last 9 years. What's different this time?
- daniel-cussen 9y agoTranslation: wages are comparatively very low.