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Old 01-22-2014, 12:59 PM   #21
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IMHO- There's little risk of global debt crisis so long as all the major countries/regions remain in mutual debt to similar degrees. I view it as roughly analogous to the Cold War's ethos of 'mutual assured destruction". No one has a reason to tip the applecart of debt if it means destroying their own economy.
Heh, heh, now I feel a whole lot better. Sort of like when they taught us to hide under our desks back in 4th grade.
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Old 01-22-2014, 01:24 PM   #22
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Regardless of the circumstances in China... considering the history of Japan's markets and its economy... Isn't the US in a very similar situation?

What are the chances the Fed's QE policy takes us down the same path?
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Old 01-22-2014, 01:51 PM   #23
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Everyone always understands why things are ok, not to worry , God is in Heaven and all is well.

Until all hell breaks loose. Of course this guy is selling something, and of course he is not going to try to present a very nuanced "on the one hand,..."story. He is a business person and salesman, not an aid worker.

To my fairly open mind, the data he presents cannot be honestly rejected. The only way I see that it can is to say, "well, things appear near extremes, but they have been more extreme (1929, 1999), and anyway, mean reversion is an historical observation, not a physical law, and this is a new era. Anyhow, if the market goes down, the Fed will raise it up again, just like Jesus raised up Lazarus, so no harm done." Or alternatively, "I always ignore events and interpretations, my AA is in place and it will protect me."

To this I think--, ya shure, you betcha!"

Ha
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Old 01-22-2014, 02:35 PM   #24
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China has a lot of problems that are often overlooked by the Western press which is eager to be taken in by its flashy new wealth.

Among them: Many, many dirt poor people; a surplus of young men and not enough women to marry them (one reason to keep a big Army is to mop up part of this surplus); many people upset that their property and livelihoods have been taken away by corrupt officials (another reason to keep a big Army); oppressed minorities (another reason to keep a big Army); and absolutely awful pollution.

Remember, Elon Musk migrated to the USA. Who left the USA for China and then Russia - Edward Snowden.
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Old 01-22-2014, 03:00 PM   #25
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Anyhow, if the market goes down, the Fed will raise it up again,
But isn't that what the Fed has already done with QE?

Are we destined for "QE Eternity" similar to Japan?
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Old 01-22-2014, 03:02 PM   #26
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Are we destined for "QE Eternity" similar to Japan?
Are we? Or will the asteroid get us first?
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Old 01-22-2014, 03:16 PM   #27
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Are we? Or will the asteroid get us first?
I'm betting on an asteroid strike first, followed by the Sun going supernova to finish us off competely. It seems like a cleaner and less painful way to go than suffering through an endless parade of self-proclaimed experts promoting their own version of financial Armageddon.
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Old 01-22-2014, 03:20 PM   #28
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I just looked out the window. Good news. China is still here.

We have a ridiculous amount of our networth tied up in real estate here. I'm not terribly worried about the doom and gloom macro predictions. China has endured a lot of turmoil in the last 200 years and will come through its current issues. Even the pollution thing is getting some serious government attention/investment and one benefit of living in a totalitarian country is that when the government wants to do something they can do it quickly. If you compare the Chinese rollout of universal health insurance with the ACA debacle, it is stunning.

I'm actually most worried about the news that they will likely be putting an elevated commuter railway in near our house. That is probably more likely to affect our property values than macro factors.
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Old 01-22-2014, 03:42 PM   #29
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Perhaps if you read Bernstein's The Four Pillars of Investing", particularly the chapters on the history of investing and the business of investing, you might stop listening to noise. This is not worth the time it would take to read it.
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Old 01-22-2014, 03:51 PM   #30
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Are we destined for "QE Eternity" similar to Japan?
You tell us. Seems telling to me that the FOMC chose to begin tapering QE and did so even before Uncle Ben left the building.
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Old 01-22-2014, 03:57 PM   #31
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Are we? Or will the asteroid get us first?
Each one of us has an asteroid headed our way... some sooner than others.

I'm only asking questions based on the title of the thread... out of curiosity of what your thoughts might be regarding a potential future crisis. Not how it might effect invest philosophies.

There will be another financial crisis at some point in the future and there will be a recovery. But for some... if it takes as long for the recovery to occur as it is in Japan it might feel like being hit by an asteroid.
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Old 01-22-2014, 04:43 PM   #32
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Each one of us has an asteroid headed our way... some sooner than others.



I'm only asking questions based on the title of the thread... out of curiosity of what your thoughts might be regarding a potential future crisis. Not how it might effect invest philosophies.



There will be another financial crisis at some point in the future and there will be a recovery. But for some... if it takes as long for the recovery to occur as it is in Japan it might feel like being hit by an asteroid.

Oh, there will be a crisis. It may be something out of the blue; seems we're always fighting the last war...

Re: Japan, our country (and economy) is much more flexible and open than Japan's, so likely more able to adapt and continue growing and evolving.
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Old 01-22-2014, 04:47 PM   #33
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Oh, there will be a crisis. It may be something out of the blue
Unless it happens at night, then it'll be out of the black.
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Old 01-22-2014, 05:07 PM   #34
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Oh, there will be a crisis. It may be something out of the blue; seems we're always fighting the last war...

Re: Japan, our country (and economy) is much more flexible and open than Japan's, so likely more able to adapt and continue growing and evolving.
Thanks for your comments.

I was beginning to believe it was taboo to discuss any possible threat of... dare I say it again... financial crisis.
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Old 01-22-2014, 05:17 PM   #35
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There will be another financial crisis at some point in the future and there will be a recovery. But for some... if it takes as long for the recovery to occur as it is in Japan it might feel like being hit by an asteroid.
I would never completely rule out a multi-decade stagnation in the U.S. such as Japan has just been through. If it happens, I expect to survive and even thrive, seeing as how I'm only about 40% invested in stocks right now.

But to me, the whole point of why Dan Taylor's blog entry is so intellectually dishonest is precisely because he juxtaposes unrelated crises in what seems to be a blatant scare tactic to get unsophisticated investors to sign on to his investment advisory services for a fee.

PEs in the U.S. are elevated right now, true. But prices in Japan prior to the bubble bursting in 1990 were astronomically higher. Since it didn't affect U.S. investors as much as 2008, it's easy to overlook just how much more overvalued Japanese assets were compared to anything that's ever happened in the U.S. Dan Taylor, as a professional investment advisor, should know this, but if he does he certainly isn't letting prospective clients in on the secret.

Here is Burton Malkiel's description of the Japanese land and stock bubbles. It dwarfs anything that's happening in any major economy right now:

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By 1990, the total value of all Japanese property was estimated at nearly $20 trillion - equal to more than 20 percent of the entire world's wealth and about double the total value of the world's stock markets. America is twenty-five times bigger than Japan in terms of physical acreage, and yet Japan's property in 1990 was appraised to be worth five times as much as all American property. Theoretically, the Japanese could have bought all the property in America by selling off metropolitan Tokyo. Just selling the Imperial Palace and its grounds at their appraised value would have raised enough cash to buy all of California.

The stock market countered by rising like a helium balloon on a windless day. Stock prices increased 100 fold from 1955 to 1990. At their peak in December 1989, Japanese stocks had a total market value of about $4 trillion, almost 1.5 times the value of all U.S. equities and close to 45 percent of the world's equity market capitalization. Firm-foundation investors were aghast at such figures. They read with dismay that Japanese stocks sold at more than 60 times earnings, almost 5 times book value, and more than 200 times dividends.
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Old 01-22-2014, 05:27 PM   #36
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Unless it happens at night, then it'll be out of the black.

It's better to burn out than it is to rust...
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Old 01-22-2014, 05:32 PM   #37
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Thank you karluk.

I appreciate you taking the time to address my questions.
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Old 01-23-2014, 12:28 AM   #38
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Great example Karluk that all bubbles are not created equal.

Even the 2008 market, wasn't nearly as over valued as as the 1999 market for anything related to tech.. I won't say it is easy to spot a bubble but it isn't impossible either. You just have to be willing to spend some time making comparison like Malkiel did.

Back in 1999, in Silicon Valley. A friend of mine was the VP of Engineering for 40 person startup focusing on Business two Business commerce (B2B). Now realize that Ebay and Amazon were only a fraction of their size today and business selling to each other over the net was in their infancy.

His company was going public, he nicely gave all of his poker buddies (mostly former work colleagues) a the opportunity to buy 100 shares at the IPO price. The company went public at $14 and promptly shot up to $50+. In trying to decide if I should sell or wait for a $100. I did some comparisons. I was selling my house at the time so I grabbed the Real Estate section of the paper. I looked at the average selling price of homes in Silicon Valley (about $150K) and multiplied by the total number sold almost 3,000 and determined that value of every house sold in the value in the last year was $400 million. I then looked at the total value of my friends 40 person company, with no revenues, much less profits in a crowded field and realized is was almost twice as much as all the Silicon Valley Real Estate. It was pretty easy to figure out immediately which was going to be worth more in the future 3,000 houses or a 40 person company. Anyway I sold (sadly my friend the VP had to wait a year before selling at which point his company stock was between $1 and $2)

Now there are plenty of metric which show the market is overvalued, and certainly there are some tech companies, and Tesla which are quite expense, but nothing like the excessive of 99/2000 with zero revenues and billion dollar market capitalization, or like the Japanese bubble.


Now I am not saying the market couldn't drop 30% tomorrow, it could and it may stay there for several year. What is very unlikely today is it for it to go down 75% like the NASDAQ did from 2000 to 2002 or the Japanese bear market..

So I complete agree with Karluk, if you going to compare today's market to past bubble, you need to present a somewhat fair comparison.
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Old 01-23-2014, 12:50 AM   #39
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There has always been uncertainty in the markets. Just stick to your stock / bond allocation ratio.
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Old 01-23-2014, 05:27 AM   #40
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More reasonable than than the typical 1%/yr, but still way expensive, and how do returns compare to a low cost passive/index lazy portfolio after expenses?
Indeed. You'll never see his clients' returns plotted against index. The only way to find out is to hand over your A so that he can work his UM.
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