Run don't walk from this market

[mexico]

A long but interesting article about Bob Rodriguez's views of current market. This is the same contrarian who predicted tech bubble and 2008 mkt collapse.

Bob Rodriguez: The man who sees another crash - The Term Sheet: Fortune's deals blog Term Sheet

A quick summary is that he is not putting much money into bonds these days and has a large amt of fund invested in cash.
Most of know that Nat'l debt problem is going to have enormous consequences but if it's not bonds, what are safe alternatives? As a 46 getting ready to FIRE next year, choices have to be well thought out.

 

[Gone4Good]

His isn't an economic, or even a financial, argument; it's a political one. It's not a question of whether we can pay our bills, its whether we ultimately want to.

I believe Churchill is still correct:

"Americans can always be counted on to do the right thing...after they have exhausted all other possibilities."

 

[haha]

Hi everyone
A long but interesting article about Bob Rodriguez's views of current market. This is the same contrarian who predicted tech bubble and 2008 mkt collapse.

I have to go out for a bit, then I will read this. I have never known him to be wrong. Some will say it's all luck; I think he knows what he is doing.

Ha

 

[Midpack]

Right twice, or once? Looks like his fund did well through the dot com bubble, but steeper than the S&P slide for the fund in 2008, though it's done nicely from the bottom I guess.

I'm still sleeping at night with the same old AA, but thanks...and you'll be right eventually.

 

[brewer12345]

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.

 

[Independent]

I'll agree that our problems aren't economic, they're political. Rodriguez is saying the same thing:

The situation isn't irreparable; Rodriguez believes the government can keep rates from climbing too high if it starts making cuts of $350 billion to $500 billion per year. But he has little faith in its willingness to do so. If it were up to him, there would be serious tax reform, with all tax deductions (including mortgage interest) on the table. A former Republican, he describes himself as a "fiscal conservative but social moderate" who has grown disgusted with both parties: "I say, 'A pox on both their houses.'"

Will Churchill turn out to be right about Americans in the 1940s, but wrong about Americans in the 21st century?

One practical issue for an investor is finding a country that's doing better than the US (where investor's rights are reasonably safe).

 

[haha]

One practical issue for an investor is finding a country that's doing better than the US (where investor's rights are reasonably safe).

Chad?

 

[Gone4Good]

Will Churchill turn out to be right about Americans in the 1940s, but wrong about Americans in the 21st century?

I don't think so. Largely because the issues that are important to fiscal sustainability are long-term.

BTW, reducing the deficit by an additional $350-$500B annually (as he thinks is necessary or we're going to die) actually gets the near-term shortfall down to between 1%-3% of GDP, which is basically sustainable indefinitely. Entitlement reform will also be necessary, but can be phased in over several decades.

This ain't that hard (for anyone who actually cares to fix the problem).

 

[REWahoo]

This ain't that hard.

Conceptually, no.

Politically it appears to be about as easy as reaching your arm around your head, grabbing your upper lip, and peeling upward until you scalp yourself (with apologies to Carol Burnett...).

 

[FIREd]

I monitor very carefully DW's company stock and I don't like what I see there. The action over the past 3-4 months reminds me of what was going on in early 2007.

This prompted me to liquidate my riskiest investments in May.

 

[Gone4Good]

Conceptually, no.

Politically it appears to be about as easy as reaching your arm around your head, grabbing your upper lip, and peeling upward until you scalp yourself (with apologies to Carol Burnett...).

I added a qualifier that it's not hard "for anyone who cares about fixing the problem."

For what it's worth, I don't believe the folks who are complaining the most loudly about our fiscal imbalance actually care about deficits. They're using it as an issue to push long-standing policy objectives that have nothing to do with deficits. And yes, that makes getting a deal on the deficit very, very hard.

Fortunately, we don't need an agreement. Existing law stabilizes the federal debt for the next 25 years. What politicians are really negotiating over is how much more we're going to increase spending or cut taxes versus what will happen under existing law. Maybe we'll all be better off if they don't come to an agreement.

 

[Purron]

I'll agree that our problems aren't economic, they're political.

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.

 

[MichaelB]

The fear factor seems to be getting some help as the media gleefully gives an open mike to our sfb politicians as they run around blathering about debt, deficit and doom.

 

[DblDoc]

Another buying/rebelancing opportunity.

DD

 

[wolfbay]

Another buying/rebelancing opportunity.

DD

I assume you are not retired with good income.Some of us retired people might be less sanguine about a possible major correction.

 

[brewer12345]

I assume you are not retired with good income.Some of us retired people might be less sanguine about a possible major correction.

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.

 

[steelyman]

Dumb luck made me sell the last amount of funds in my retirement pool a week ago Friday (which was an up day) that are needed to give me three years worth of the cash I will need at that point (2017, first year I am eligible to withdraw from employer plan, and carries through 2019).

While I find it interesting, I am not qualified to hold forth about monetary policy, or market fundamentals, or any of it. Summertime, and the living is easy.

 

[samclem]

For what it's worth, I don't believe the folks who are complaining the most loudly about our fiscal imbalance actually care about deficits. They're using it as an issue to push long-standing policy objectives that have nothing to do with deficits. And yes, that makes getting a deal on the deficit very, very hard.

Clearly folks on both sides of the debate are pushing longstanding policy objectives, and, yes, their conflicting objectives make it hard to reach a deal.
And yet, this is tautological. How could we cut the deficit (through any means) and not have it be the product of a policy choice? That's all it can be. The budget (how much the government takes from citizens and corporations, and how it is spent) is the single hard-numbers encapsulation of all material aspects of our governmental national priorities. The idea that we could somehow "keep politics out of it" is silly.

 

[wolfbay]

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.

I believe there are fundamental reasons to be concerned. Time will tell in a relatively short period of time.

 

[Purron]

The fear factor seems to be getting some help as the media gleefully gives an open mike to our sfb politicians as they run around blathering about debt, deficit and doom.

Another indicator that 24/7 news coverage is not such a good thing. Who watches good news? I miss the nightly news with Conkrite. Does that age me or what

 

[brewer12345]

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.

 

[clifp]

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.

 

[haha]

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.

Ha

 

[MichaelB]

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.

 

[haha]

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