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The next financial crisis?
Old 01-20-2014, 09:05 PM   #1
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The next financial crisis?

I don't work with this advisor and was provided this link from a friend. Found the article very interesting and a bit concerning. Specifically, I am concerned that a financial downturn in China, caused by a real estate bubble burst, decreased government support, social unrest or what is outlined in the blog, could have significant impact on the world economy and personal investment/retirement accounts.

Taylor Investment Management | Our Blog

Would love to hear some others opinions.
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Old 01-20-2014, 09:15 PM   #2
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There's always a potential crisis somewhere, and no one has a crystal ball. Investing, like life, holds no guarantees.

That said, I tend to agree that US market is "overvalued" by some historic measures so my AA is on low side. But I still hold significant equity positions as "overvalued" markets can still rise for some time before a major decline/correction. Alternatively markets can tread water for years while valuations 'normalize'. Again, no one knows the future. 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.
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Old 01-20-2014, 09:15 PM   #3
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Originally Posted by Pharmmgr View Post
I don't work with this advisor and was provided this link from a friend...

Would love to hear some others opinions.
Hang around with some different friends.
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Old 01-20-2014, 09:17 PM   #4
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Old 01-21-2014, 06:34 AM   #5
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Would love to hear some others opinions.
Stick to your plan.
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Old 01-21-2014, 06:37 AM   #6
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The market goes up, the market goes down. The long-term trend is up. Stay the course.
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Old 01-21-2014, 08:10 AM   #7
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There will always be seemingly convincing good news and convincing bad news - always, always, always. The truth is, the authors who claim they know, don't. If you're a long term investor, downturns come with the territory but the long term trend has always been up so you ride out the inevitable setbacks. If you're a short term investor, best of luck...
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Old 01-21-2014, 10:22 AM   #8
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Dan Taylor is nothing more than the latest financial soothsayer to play the doomsday card in order to attract attention to himself. If he's right, he can brag about how smart he is and how everyone should entrust their money to him. If he's wrong, it's easy enough to delete this failed prediction and replace it with another. In fact, that appears to be what he's done in the past. I may have missed something, but I don't see any articles on his blog except this lastest one. What was he saying to his clients at this time last year? Was he predicting 30% stock returns in 2013, or was he already cautioning everybody about excessively high valuations?

As far as whether he's right this time, who knows? U.S. stock valuations are indeed lofty compared with their historical ranges, and China is having problems. I don't see a clear connection between problems in China and a stock market crash in the U.S., but maybe Mr. Taylor is right and we'll all be singing his praises in a few months.

Incidentally, just picking a Chinese ETF at random, I see that FXI is down about 7% YTD. In comparison U.S. stocks are roughly flat. If Mr. Taylor had less of an apocalyptic world view, he might offer his clients an informed opinion of what this means. I can see it going both ways: 1. "China has good long-term growth prospects and their stocks are down right now, so my clients should be taking advantage of this buying opportunity" or 2. "China's credit problems are ongoing and make it an unattractive investment for the present". But Mr. Taylor prefers to play Chicken Little, so we never get his take on which stock markets offer the best prospects.
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Old 01-21-2014, 10:32 AM   #9
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I look at these "financial crisis" forecasters the way I look at death. I know I'm going to die someday. That doesn't mean I live in fear every day worrying about when that event will happen. I just go about trying to do the best with what I have every day. If a financial crisis hits, I'll deal with it as best I can... but until then, I'll do my best to balance prudent planning with daily enjoyment of life.
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Old 01-21-2014, 10:55 AM   #10
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I look at these "financial crisis" forecasters the way I look at death. I know I'm going to die someday. That doesn't mean I live in fear every day worrying about when that event will happen. I just go about trying to do the best with what I have every day. If a financial crisis hits, I'll deal with it as best I can... but until then, I'll do my best to balance prudent planning with daily enjoyment of life.
But hopefully our portfolio will come alive again afterwards.
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Old 01-21-2014, 11:00 AM   #11
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Diversify, diversify...

Then, I will spend the time to plan for my travels, rather than to fret about the next calamity. When it comes, we are all in it together. Misery loves company.

PS. Like today, the market opens up, then the Dow suddenly tanks. I am not down as much because foreign stocks still show gains, and cancel out the drop. Diversify, diversify...
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Old 01-21-2014, 11:42 AM   #12
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The "financial crisis" came early to "JCP", just loaded the wheelbarrow this morning!
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Old 01-22-2014, 12:26 AM   #13
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Well you have proven you survived 2007-2008 crisis, why couldn't you do it again?
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Old 01-22-2014, 12:55 AM   #14
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Hi,

I read your post but did not follow the link... because no matter what the link said it was not going to result in anything actionable for me.

China's growth is slowing but I don't think that has any implications for my portfolio management.

The way I think is: Sizable market corrections are certain; Unfortunately, I am not capable of forecasting the timing (and even less able to forecast the timing twice - to also get the optimal re-entry time) so I have a diversified portfolio of mainly index funds; Re-balancing the asset allocation percentages will ensure that I sell high and buy low. I am fairly confident I can "do the right thing" (not sell and buy with available $) through another 2008... so that is all the action available to me- :-(.

I enviously acknowledge that others are capable of successful market timing, but IMHO the percentage is <<< than those who write timing articles.

As I read your post, I wondered whether you are a successful market timer? or hope to be a successful market timer? or perhaps your equity % may be a bit high to ensure that you don't sell low during a crisis? or just wanted a discussion on world affairs or
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Old 01-22-2014, 02:00 AM   #15
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There is constant "noise". Our plan is to try to ignore and stay the course.
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Old 01-22-2014, 04:52 AM   #16
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So what exactly is this guy trying to say in this article?

From what I understand, China has been pretending to be doing so well for the past several years and all of a sudden realization hits in and they are in for a serious downfall?
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Old 01-22-2014, 05:04 AM   #17
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Mr. Taylor writes well. He hits all of the expected buttons and you have only his team left between you and the next financial crisis.

The graph at top tells me there are 4 ratios that describe valuation. Right now we are at an average valuation that matches the last recession. Collapse is imminent. Action is required. Mr. Taylor has the knowledge to guide you through the murky waters.

He could be right, but I am not acting on this. I would ask him to show me results of his clients' average returns since 2005. I would compare that to a few portfolios, and then decline his offer.
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Old 01-22-2014, 07:51 AM   #18
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The graph at top tells me there are 4 ratios that describe valuation. Right now we are at an average valuation that matches the last recession. Collapse is imminent. Action is required. Mr. Taylor has the knowledge to guide you through the murky waters.
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?
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Taylor Investment Management is paid a fee based on the dollar amount of a client's assets under our management. Our fees are a straightforward, very reasonable 0.5% of the assets under our management. We do not sell any investment products or proprietary funds from custodial or affiliated companies. We provide purely unbiased investment and wealth management solutions to our clients in exchange for a fair, transparent fee.

If you are not an investment management client, but want to employ us for financial planning or professional coaching, we charge an hourly fee for those services.
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Old 01-22-2014, 12:18 PM   #19
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"Those who have knowledge, don't predict. Those who predict, don't have knowledge."

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Old 01-22-2014, 12:59 PM   #20
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Even if we have another 2008 (heaven forbid), my AA allows me to leave our investments alone and sleep at night... so I don't read this kind of stuff because it has no relevance to my plan.
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