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Old 06-06-2011, 05:50 PM   #21
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I believe there are fundamental reasons to be concerned.
Like? I am genuinely interested because I don't get the widespread and deeply felt pessimisim.
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Old 06-06-2011, 05:53 PM   #22
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Yes, but it's important to consider the psychological state of investors too. As Brewer pointed out, the financial news seems to be suddenly doom and gloomish. The fear factor.
Well I don't think we are being at all irrational to be fearful.
  • Horrible jobs report
  • Exceeded the debt limit and no progress on reaching an agreement
  • Inflation is picking up except for housing
  • Housing market is dead and despite record low interest rates and affordability shows no signs of life
  • Civil wars breaking out in the oil producing region of the world appear to be getting worse
  • European debt crisis is worsening
Now this wouldn't be so troubling if there were obvious solutions to the problems but there aren't. The Government is completely out of ammo
  • There is no money for another fiscal stimulus
  • Can't cut interest rates
  • The largest state CA is close to bankruptcy and most others are hurting
There is good news corporate balance sheets are in great shape and profits are very good and dividends are being raised at a rapid level.

Now I'd be perfectly happy to be greedy if everybody was fearful. But we aren't the volatility index (the so called fear index) is trading between 15-18 at the same level as the carefree days of 2007. I'd also be happy if the stocks were priced for an upcoming double dip, they aren't. Stocks are only cheap in relationship to the returns of other asset classes like bonds.
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Old 06-06-2011, 05:55 PM   #23
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OK, but aside from a herd flight/technical mumbo-jumbo/dowsing rod indicators, where is said market disaster going to come from on a fundamental basis? A normal correction appears a given at this point, but more than that? The US is not going to default and the Germans will write checks to bail out Greece until doomsday.
Brewer, where did the colossal crash of 1973-74 come from?

IMO these things do not have to "come from" anything, all it takes is extended valuations in some area or areas, and it can happen. Not necessarily will happen, but certainly can.

If we need to look around for possible triggers or accelerants for a fire once it gets going, certainly there are plenty.

But this is as far as I am willing to go, as this topic always arouses derision. (Not that you are being derisive, I just answered you because you did formulate a question.)

I don't think it is possible to say more than risk is high, (and nonspeculative reward likely low) which is different and less useful from saying that the market will crash.

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Old 06-06-2011, 05:55 PM   #24
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OK, but aside from a herd flight/technical mumbo-jumbo/dowsing rod indicators, where is said market disaster going to come from on a fundamental basis? A normal correction appears a given at this point, but more than that? The US is not going to default and the Germans will write checks to bail out Greece until doomsday.
Nor is there any indication the US or anyone else is going to fall into recession.
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Old 06-06-2011, 05:57 PM   #25
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Like? I am genuinely interested because I don't get the widespread and deeply felt pessimisim.
One question I have is how pessimistic can people be if Shiller PE10 is ~23?

Tha does not strike me as pessimistic, not matter what the media might be saying. Rodriguez is bearish, genius James Altucher is extremely bullish, and so it goes.

Ha
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Old 06-06-2011, 06:11 PM   #26
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Like? I am genuinely interested because I don't get the widespread and deeply felt pessimisim.
You and I have a different opinion of the German mood. The Greek situation is not solved.There is going to have to be yet another bailout needed and the Germans aren't going to put up with it IMHO. Also it is not clear this is a self sustaining recovery. The fed prints trillions, treasury borrows trillions and this is the recovery we get? If the Fed starts talking about QE3 or some other never before tried experiment in the next 12 months or so it won't be a good sign. The next year or two should be interesting. Calling someone an IVY LEAGUE economist might wind up being the ultimate insult.
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Old 06-06-2011, 07:01 PM   #27
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One question I have is how pessimistic can people be if Shiller PE10 is ~23?

Tha does not strike me as pessimistic, not matter what the media might be saying. Rodriguez is bearish, genius James Altucher is extremely bullish, and so it goes.

Ha
I personally am not sold on the usefulness of PE 10.

I guess I look at a market where businesses have improving operating fundamentals, solid balance sheets, intelligible business plans, spew gobs of cash, etc. and you cannot give them away. That does not look like exuberant optimism. OTOH, I see signs of foolish valuations in most sectors of the bond market.
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Old 06-06-2011, 07:02 PM   #28
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You and I have a different opinion of the German mood. The Greek situation is not solved.There is going to have to be yet another bailout needed and the Germans aren't going to put up with it IMHO. Also it is not clear this is a self sustaining recovery. The fed prints trillions, treasury borrows trillions and this is the recovery we get? If the Fed starts talking about QE3 or some other never before tried experiment in the next 12 months or so it won't be a good sign. The next year or two should be interesting. Calling someone an IVY LEAGUE economist might wind up being the ultimate insult.
Thanks for the response. We don't agree, but it is helpful to hear your take.
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Old 06-06-2011, 07:06 PM   #29
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Civil wars breaking out in the oil producing region of the world appear to be getting worse
Are they? Egypt has calmed down, Libya is now on the slow boil, the Saudis appear to have bribed/threatened their populace into aquiescence. Yemen is blowing up, but that place was always a basket case, ditto Syria. What am I missing? Bahrain?

I have actually been amazed at how quickly things simmered down.
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Old 06-06-2011, 07:13 PM   #30
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The great thing about these discussions it that it matters not one whit what we think or say, the markets will rule and debate will be over.

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Old 06-06-2011, 07:34 PM   #31
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Well I don't think we are being at all irrational to be fearful.
  • Horrible jobs report
  • Exceeded the debt limit and no progress on reaching an agreement
  • Inflation is picking up except for housing
  • Housing market is dead and despite record low interest rates and affordability shows no signs of life
  • Civil wars breaking out in the oil producing region of the world appear to be getting worse
  • European debt crisis is worsening
While not generally being of a paranoid persuasion, I do have something like a devil theory of the stock market. I think when the big players see a bull on the way, they need to force out the small players. It has to be a persuasive case to get us to sell, but when the case is being made that the market is about to go down, down, down, what it really means is that the market is soon to go up, up, up.
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Old 06-06-2011, 07:39 PM   #32
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Are they? Egypt has calmed down, Libya is now on the slow boil, the Saudis appear to have bribed/threatened their populace into aquiescence. Yemen is blowing up, but that place was always a basket case, ditto Syria. What am I missing? Bahrain?

I have actually been amazed at how quickly things simmered down.

After listening to various talking heads on Charlie Rose, and the Newshour, I think the situation is getting worse not better.
Yeman basket case in the past, slightly worse with the President being wounded.
Bahrain formerly stable government, keeping a tight lid on a highly pissed off population, with additional problems of Shia, Sunni tensions. Modest oil producer
Libya, formerly stable police state, now engaged in a civil war with no signs of ending soon, significant oil producers
Syria formerly very stable police state, standing on the bring of a civil war. No hope of a quick resolution
Egypt formerly stable government moderate with respect to Israel. Now they have accomplished the easy goal getting rid of Mubbark, but have made little traction in forming any type of government.


Compared to the situation say a several months ago. We have replaced a couple of potential civil wars, Tunisia and Egypt, with 3 actual civil wars. And neither Tunisia or Egypt are out of the woods.
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Old 06-06-2011, 07:46 PM   #33
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After listening to various talking heads on Charlie Rose, and the Newshour, I think the situation is getting worse not better.
Yeman basket case in the past, slightly worse with the President being wounded.
Bahrain formerly stable government, keeping a tight lid on a highly pissed off population, with additional problems of Shia, Sunni tensions. Modest oil producer
Libya, formerly stable police state, now engaged in a civil war with no signs of ending soon, significant oil producers
Syria formerly very stable police state, standing on the bring of a civil war. No hope of a quick resolution
Egypt formerly stable government moderate with respect to Israel. Now they have accomplished the easy goal getting rid of Mubbark, but have made little traction in forming any type of government.


Compared to the situation say a several months ago. We have replaced a couple of potential civil wars, Tunisia and Egypt, with 3 actual civil wars. And neither Tunisia or Egypt are out of the woods.
I will have to do some more digging. Egypt matters and although there is a certain amount of confusion it has not gone nearly as badly as I initially feared. Bahrain matters, but things seem to be simmering there, rather than actively boiling over. I have to look more closely at recent events in both countries as I have not been closely following it lately.

Libya is gradually being won by the rebels/NATO and as soon as they box Gaddafi in to a corner he can fester their until he drops dead and it will not matter.

I don't think Tunisia matters all that much. Anyone know?

Syria and Yemen are, have been, and unfortunately probably always will be a mess. Fortunately, that is all anyone expects of them so they will remain a boil on the arse of the world rather than rectal cancer.
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Old 06-06-2011, 07:51 PM   #34
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Like? I am genuinely interested because I don't get the widespread and deeply felt pessimisim.

Perhaps it's because the US jobs market is at its worst levels in decades. If you are unemployed- especially in certain fields- you might feel discouraged.

Next on the list would be the condition of the US housing market. Will it correct eventually? Of course, but recent data is ugly and has a lot of people worried.
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Old 06-06-2011, 08:11 PM   #35
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You and I have a different opinion of the German mood.
To paraphrase an old saying . . . 'When you owe the bank 1MM, the bank owns you. When you owe 325B, you own the bank."

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Old 06-06-2011, 08:21 PM   #36
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Perhaps it's because the US jobs market is at its worst levels in decades. If you are unemployed- especially in certain fields- you might feel discouraged.

Next on the list would be the condition of the US housing market. Will it correct eventually? Of course, but recent data is ugly and has a lot of people worried.
I am in the housing market as both a buyer and a seller, and I am well aware of the mess. That said, we are finding our way toward the bottom as it is now noticeably cheaper to buy rather than rent in both the market where I am buying and the market where I am selling.

Perhaps we just have different expectations on jobs: I expect a long, slow recovery as is typical of what happens after a credit crash. I also expect ocasional blips and stalls along the way. The key to happiness is low expectations...
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Old 06-06-2011, 08:48 PM   #37
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What is amazing to me is how quickly the dominant refrain has switched from positive to negative in just about every media outlet, online discussion, etc. Its like watching someone flip a switch.
Interestingly enough, the Bob Rodriquez article linked by the OP was written at least 2 month ago. A similar article came out in the June issue of Money Magazine, which probably went to press in early May. This means that the article was written in April at the latest. The market was doing pretty well when this "doom and gloom" article was being produced. So this doesn't appear to be a positive to negative flip of the media switch.

I agree with you, though, that sentiment can rapidly change. Time will tell if this past month marks the beginning of the end of us all, or if it is just another one of those never-ending blips on the radar screen.
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Old 06-06-2011, 08:57 PM   #38
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I assume you are not retired with good income.Some of us retired people might be less sanguine about a possible major correction.
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Another buying/rebelancing opportunity.
What DD said.

"Good income" dividend stocks seem to be doing just fine so far.

Part of the FIRECalc assumption is that a portfolio can survive all of these minor blips, as well as a few major stutters for at least 30 years. If you understand that and you're still not happy with negative volatility (nobody complains about positive volatility) then you need a different asset allocation.
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Old 06-06-2011, 09:04 PM   #39
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Clearly folks on both sides of the debate are pushing longstanding policy objectives,
Really?

Because if that were true, I'd expect to see the left using the deficit as a reason to push Cap & Trade because of the massive revenues that could be generated by auctioning off carbon credits. I'd expect them to be pushing single-payer health care to control costs. And, of course, higher marginal rates. If one were really radical, they could call for 100% of deficit reduction to come from increased revenue.

On the other side, I'd expect to see a push to lower marginal rates (even as the goal ostensibly is to reduce deficits), to privatize (our voucherize) medicare, to revoke the affordable care act, to turn medicaid over to the states. If one were really radical, they could call for 100% of deficit reduction to come from spending cuts.
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Old 06-06-2011, 09:29 PM   #40
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The key to happiness is low expectations...
I must be the happiest man in the USA world universe.

I'm about as conservatively invested as I've ever been, partly because I'm getting older, and partly because all this gloom and doom may be correct.

I think we've been living on borrowed money time since the 70s. With deficit spending since forever, we've cut taxes too much, or spent too much, depending on your persective, and primed the pump artificially, in real estate and the financial industry, creating vaporwealth, that vanished in 2008-2009, or was that 2000-2001? We can probably grow our way out of it, but it won't be perty, nor quick. And it could very well go to ****...
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