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Old 01-23-2014, 12:58 PM   #41
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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.
I agree that we are not likely to duplicate the 1990 Japan, 2000 tech, or 2008 credit bubbles. Rarely are economic and financial conditions identical. There are too many variables.

But this does not mean we are not currently in a bubble, perhaps even the "mother of all bubbles." If we are, it likely is unique to 2014. There could be other variables (debt, interest rates, downward employment trends, etc) that will combine with the lofty but admittedly unabsurd market valuations to create the "collapse of 2014." It could be that 15 years from now we will be wondering why people were too short-sighted to predict this pending doom. It was so obvious, we will say, just like it was with Japan, tech, and real estate. And in 2029, 15 years from now, there will be a different set of financial stresses on the economy. But people will argue, "It's not like it was in 1990 Japan, or 2000, or 2008 - or 2014 - so there is no need to worry. The specific conditions are different today. We are much wiser in 2029 than people were decades ago."

Of course, this does not mean we are facing disaster, or that the words of any given financial analyst should be followed. There always will be people predicting imminent doom. Even smart people with impressive credentials. And they are usually wrong. In fact, even their correct predictions may be due more to random chance than uncanny financial foresight. And yes, it could be that equities will rise 30% again in 2014, much to everyone's surprise.

As for me, I have no intention of hiding under a rock, at least at this time. However, I also do not wish to ignore or make excuses for economic and financial conditions that do not appear favorable. I said this in 1981, just before a two-decade market boom. I said this in 1999, just before a relatively long period of cumulatively stagnant, although variable, investment returns.
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Old 01-23-2014, 01:09 PM   #42
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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.
Actually, what is "taboo", as it were, is the latest doomer-gloomer writing an article claiming things are gawd-awful, and will crash any minute. As the saying goes, they've predicted 15 out of the last 10 recessions.

Some indicators look iffy, some look good, plus there are the black-swan events we can't really predict. Many here have tired of the attention grabbing headlines, and choose to set an AA that they hope will provide some defense in case the SHTF. May or may not protect them/us, but short of buying a compound, and stocking up on MREs and ammo...
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Old 01-23-2014, 01:15 PM   #43
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As for me, I have no intention of hiding under a rock, at least at this time.
I am interested in your choice of color words here. You describe a situation that could very well be(or possibly is not be) one of a negative outlook It certainly would be hard to say that today has many of the characteristics of an important market bottom. Then you refer to hiding under a rock, thus attaching a pejorative interpretation to taking (possibly unnecessary, possibly portfolio saving) steps to minimize exposure. Certainly there are reasons to do nothing, as there are reasons to act. Why attach the pejorative to the action path?

If we do get a large down move, believe that there will be plenty of much less well timed and much less effective acting!

Ha
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Old 01-23-2014, 01:29 PM   #44
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If we do get a large down move, believe that there will be plenty of much less well timed and much less effective acting!

Ha
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Old 01-23-2014, 02:28 PM   #45
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A Powerful Force Poised to Propel Stocks Even Higher: The great rotation out of bonds and into stocks. A growing number of investors, both large and small, will be making this asset-allocation move in their portfolios, which collectively adds up to an enormous amount of buying power for the stock market. In 1981, the benchmark 10-year U.S. Treasury yielded a mind-boggling 14 percent. But the next 30 years witnessed steadily falling inflation expectations and with it a sharp decline of interest rates — to a low of just 1.4 percent in July 2012.
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Old 01-23-2014, 04:03 PM   #46
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I am interested in your choice of color words here. You describe a situation that could very well be(or possibly is not be) one of a negative outlook It certainly would be hard to say that today has many of the characteristics of an important market bottom. Then you refer to hiding under a rock, thus attaching a pejorative interpretation to taking (possibly unnecessary, possibly portfolio saving) steps to minimize exposure. Certainly there are reasons to do nothing, as there are reasons to act. Why attach the pejorative to the action path?
Good question. I do not have a good answer.

Like many people here, I consider myself to be a stay-the-course boglehead investor. Right or wrong, many people of our ilk have been "socialized" into making casual statements like, "since I cannot predict the future, I am not taking any action other than rebalance into my long-term asset allocation." And it is true. Such statements have a lot of justification. It is difficult, perhaps impossible, to time the market. On the other hand, there is ample evidence for prior bubbles. Yet people, including me, do not tend to act on these bubbles. In fact, many people tend to reenforce bubbles until it is too late. Few things are absolute.

So my pejorative is not meant as a pejorative. It is really an acknowledgement that I am conflicted. I am pondering what to do. So far I have not altered my moderately aggressive 70/30 asset allocation. As a good buy-and-hold investor I proudly - even smugly - claim that I have no intention of doing so. And so far this philosophy has paid off, at least in the last 5 years. It is good that I did not go all cash in January 2013.

But there is still a significant nagging feeling of financial unease. Admittedly, I felt the same way in 1980 and was wrong. Although there was a sharp recession, we did not fall off a cliff (I had no money to invest at that time). I felt this way in the late 1990's and was right, but prematurely right. I took no action. I did not feel this way in 2008 and was wrong. I did not take any action even in the middle of the crisis, except to rebalance and tax-loss harvest. I did not alter my asset allocation, nor did I buy ammo and MRE's even though the world was about to end. My inaction turned out to be a good thing.

However, I look at all of the problems out there today and think that maybe it is different this time. At a minimum, I feel it would be naive for me to discount these problems or simply wish them away. And if we are setting ourselves up for a big fall, I clearly acknowledge that I have no foresight to "get out just in the nick of time." So maybe I should rethink my entire approach. Perhaps it is better to be safe than sorry. I have not yet climbed under a rock, and probably never will. But maybe I should.

So my pejorative terminology is really an expression of ponder.
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Old 01-23-2014, 04:19 PM   #47
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Thanks for taking my question seriously and giving a thoughtful answer.

For my own part, I remember reading these discussion on ER.org near the 2008 blowup and feeling very uneasy, but doing little. (My own investments are solid, etc.) By managing during the crisis, I cam out OK, but I vowed to never walk into something like this again. I respect your thoughtful and non-sarcastic observations on a lot of topics here, so I was interested in your metaphor. Although you used it consciously, many people are not even aware that they are thinking metaphorically, and that metaphors do not map perfectly onto experience.

For myself, I have used relatively short-dated puts to create sort of a stop loss around a 25 -30% loss. This will cost me something, and thus be a drag if they do not turn out to be necessary or if necessary, effective. But basically I do not care, relative to the magnitude of other issues here.

Ha
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Old 01-28-2014, 02:32 PM   #48
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Are we? Or will the asteroid get us first?
Worse than the asteroid, the Andromeda Galaxy is hurtling towards us at 250,000 miles per hour! When Galaxies Collide! showing soon in a theater near you.
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Old 01-28-2014, 03:12 PM   #49
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When Galaxies Collide!
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Old 03-10-2014, 11:19 AM   #50
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The "financial crisis" came early to "JCP", just loaded the wheelbarrow this morning!
Christmas came early this year!
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Old 03-12-2014, 02:55 AM   #51
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I believe the next financial crisis will be currency-based. With all the money printing that has been going on, my bet is that the US $ will crash.
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Old 03-12-2014, 04:08 AM   #52
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I have lived in china for the past 7 years and I currently live here. Never believe these BS artists on the internet who have never set foot in China and are trying to sell you investment advice, books, etc. ...Seriously. This guy is a doofus...

I believe china will have her share of "crises" but I believe China's unique style of "state sponsored capitalism" as well as the willingness of the communist party to remain firmly in power and in control will be a tool used to navigate the property bubble waters, the shadow banking debt levels, the air pollution crisis, and troubles in the south china sea with her neighbors.

I would personally not buy property at these levels as the run up has been a classic bubble run...and there are far better property investment levels presuming you have access to other markets aside china....but popping of the property bubble will yield other financial advancements such as fully convertible RMB currency and other benefits that, in total, will be far better for the long term for the China economy.

As the property bubble goes poof...if it goes poof (and demographics make that not highly likely given the 800 odd million rural residence who wish to move to cities and become urban residents) then money flows will land in gold, equities, and for the lucky few who can move money cross-borders..into overseas investments.

An interesting aspect of the china economy today is that her borders are relatively closed and investment for her citizens is inward facing -- only 4 ways to invest..... Property (housing), Equities (Shanghia A shares), Gold (physical metal and paper gold) or keeping cash in your mattress.

At a solid 7.5% growth rate, there is plenty going on here and it makes even the best Euro or US growth rates look like walking dead zombie economy by comparison.

So...with the market being down about 9% in the past 5 years, I am a buyer and currently long China equities at these levels. (around 1980-2000 on the SSE).

You can play at home via ETF's such as FXI or YINN as a couple examples (or YANG if you are a bear)... or not. Mileage may vary.
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Old 03-12-2014, 09:50 AM   #53
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I believe the next financial crisis will be currency-based. With all the money printing that has been going on, my bet is that the US $ will crash.
If that is the case, where are you currently moving all of your financial assets to?
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Old 03-12-2014, 12:35 PM   #54
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I believe the next financial crisis will be currency-based. With all the money printing that has been going on, my bet is that the US $ will crash.
IMHO, what will presage this is fast and severe deflation to be rapidly followed by a bout of Hyperinflation. You have to be pretty nimble to get out of financials/commodities/RE and into Dollars and then only have a short time to get into gold. other options are to just stay the course or have your assets watch from afar in a country that you feel will be LEAST affected.
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Old 03-12-2014, 01:50 PM   #55
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I believe the next financial crisis will be currency-based. With all the money printing that has been going on, my bet is that the US $ will crash.
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IMHO, what will presage this is fast and severe deflation to be rapidly followed by a bout of Hyperinflation. You have to be pretty nimble to get out of financials/commodities/RE and into Dollars and then only have a short time to get into gold. other options are to just stay the course or have your assets watch from afar in a country that you feel will be LEAST affected.
Wow! What a roller coaster! So many predictions.

The problem with predictions is that whatever causes the next collapse will be something unexpected. If we expected it we would already be there.

And the odds of getting the guess and the timing right are not good if the results of those who have tried this in the past are any indication.

So I don't try. (But if I really did know... I wouldn't tell YOU!)
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Old 03-12-2014, 06:05 PM   #56
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I am not moving anything just in case my predictions are wrong :-) . I worked in Europe for a few years, already have a nice nest egg there.

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If that is the case, where are you currently moving all of your financial assets to?
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Old 03-12-2014, 06:30 PM   #57
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There will always be a next financial crisis as well as a next financial boom. The wise person plans for both knowing that he or she cannot never know the time they will hit or how long they will last.
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Old 03-12-2014, 06:53 PM   #58
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Yep....I predict I won't have as much money as I would like.....
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