The sky is falling, the sky is falling

[greg]

I've been pretty good about not bringing up "black hole" sorts of stuff, I hope. I found the following article interesting--as a thought piece. I have no opinion regarding it--as yet--other than it is another indicator, if true, of possible trouble somewhere down the road. It may be germain to those who rely on an asset allocation model:

http://www.safehaven.com/article-3563.htm

--Greg

 

[JPatrick]

Things are a bit pricey at the moment.  Not many sectors are screaming slamdunk these days, although oil probably is OK if someone wants to DCA and watch those eggs closely.
Beyond that, the 3% plus the MM's are paying feels fairly comfy for the short term.

 

[Dawg52]

To market time or not? That is the question.    I think I will stay the course and continue with my asset allocation method. 

 

[Cut-Throat]

I've been pretty good about not bringing up "black hole" sorts of stuff, I hope.  I found the following article interesting--as a thought piece.  I have no opinion regarding it--as yet--other than it is another indicator, if true, of possible trouble somewhere down the road.  It may be germain to those who rely on an asset allocation model:

http://www.safehaven.com/article-3563.htm

--Greg

Greg,

The sky has been falling ever since I have been alive. Have you ever read the Book by Ravi Batri (Professor of economics at Princeton) - In the early 80's - the title was something like "The Great Depression of 1990".

It was very convincing. Some Folks sold all of their assets and moved to the cabin in the woods.

Please read it and tell me what you think. 8)

 

[Mr._johngalt]

Greg,

The sky has been falling ever since I have been alive. Have you ever read the Book by Ravi Batri (Professor of economics at Princeton) - In the early 80's - the title was something like "the coming great depression".

It was very convincing. Some Folks sold all of their assets and move to the cabin in the woods.

Please read it and tell me what you think. 8)

For some of us, selling all of our assets and moving to a cabin in the woods
is always an option. It really matters very little what else is going on.

JG

 

[nwsteve]

To market time or not? That is the question.

In case you missed a recent Scott Burns column on the power of index funds
"Basically, the index-fund portfolio blew away the very best managed funds and did it with less risk. The index-fund portfolio returned that 12.7 percent, while the S&P 500 was returning about 12 percent"
http://archives.seattletimes.nwsour...?slug=burns07&date=20050807&query=scott+burns
The article summaries research by Dallas financial planners Whiddon and Alston whose portfolio of DFI funds beat the allocated index portfolio
"While the simple index-fund portfolio crushed the returns earned by active managers, the Whiddon/Alston model portfolio was returning a whopping 14.3 percent. And it did it with less market risk."  See the link above for details
Now only question is does history predict future
nwsteve

 

[JRB]

Greg,

I read the article and it was pretty pursuasive not to mention depressing.

 

[Nords]

I've been pretty good about not bringing up "black hole" sorts of stuff, I hope.  I found the following article interesting--as a thought piece.  I have no opinion regarding it--as yet--other than it is another indicator, if true, of possible trouble somewhere down the road.  It may be germain to those who rely on an asset allocation model:

http://www.safehaven.com/article-3563.htm --Greg

Let's put those charts into perspective-- they're all pretty colors with lines that generally go northeast. And that started in 2003, when just about every sector of the market had spent 2001-2003 going southeast. Is it a big surprise that everything went up together? BTW, where are all the other market sectors? S&P500 has at least 29 last time I checked.

The graphs are also misleading. It would've been more informative to plot all those sectors on ONE chart showing what their percentage gains had been over the last two years. But that would show that some sectors had gone up more than others, which would tend to conflict with the author's bias that everything's correlated. I didn't see any mathematical correlation analysis, either, just a bunch of pictures with scary words.

I've learned that any article containing the words "Bill Gross" or "Jeremy Grantham" is not likely to be a bullish ray of sunshine. But I'm still waiting for "DOW 5000" and their other equally pessimistic projections. Who knows how much profit they'll miss out on while waiting to be proven "right".

 

[haha]

Well Greg, it looks like your article gets mixed reviews. To me, it is preaching to the choir. I agree that liquidity is behind this unusual degree of correlation, and also agree that this destroys at least for a time the whole basis on which asset allocation is built.

I will flat out say that unless this time it really is different, asset allocation will not be much of a lifeboat when the heavy seas come.

And, IMO, although in small areas, at times things really do chage, I don't believe it can happen on such a wide front.

Like the author says, why do 10 year bonds and commodites go up at the same time? Why is oil going through the roof, while at the same time retail stocks are doing even better?

It makes no sense, and I have had a long time to find out that in the end, things do make sense. My operating reality is that if I can't make sense out of the environment, financial, social or what have you- I am looking to get out of dodge.

About 25 years ago I was mountain goat hunting in the North Cascades. I was stalking a goat from above. Suddenly, the usual bird calls, marmot noises, brush rustling stopped. I din't know what was going on, but I knew something was. Just then I caught sight of a huge bear about 50 yards above me. I was seeing the first known grizzly in the Cacades in almost 50 years. Never mind that there were "no grizzlies in Washington".

Right now now there are too many bear market virgins around. IMO, this will change. 

ha

 

[REWahoo]

It makes no sense, and I have had a long time to find out that in the end, things do make sense. My operating reality is that if I can't make sense out of the environment, financial, social or what have you- I am looking to get out of dodge.

So, if you don't mind me asking, where are you going? Cash?

REW

 

[haha]

So, if you don't mind me asking, where are you going?  Cash?
REW

In large part, yes. I also have some high dividend payers, and a large oil and gas position that I may be looking to exit or trim soon. But this last is one that just might be different this time.

Oh yeah, as Wabmester can tell you, I have an underwater put position.

I am either going to become one rich MOF, or get really tired of puts.

ha

 

[dex]

Safehaven.com tends to get a lot of bear market writers

 

[REWahoo]

... where are you going? Cash?

In large part, yes.

Clemenza to Paulie in the Godfather Part 1 "That Sonny's[Ha's] runnin' wild. He's thinkin' a goin' to the mattresses already."

REW

 

[wildcat]

A lot of sectors and countries have had + correlation since '01...hence the similar charts

 

[greg]

I enjoyed reading the responses--one and all. I really think we have a severe liquidity/debt crisis. But I'm also a partial optimist. I think if we have a crunch soon it may not be so severe as to ruin a fair number of lives and retirements. If the market drops about 25% and people start to realize that living regularly beyond their means (i.e. they screw their heads on a little tighter), then things will start to get better. Everyone here understands the dangers of leverage. I believe it's going to take a few mild shock treatments though.

I've read a couple of good historical analyses (sp?) of recessions/depressions/bubbles, and the one thing that stands out about them was this pattern (separate from the liquidity pumping that occurs in all of them): They start with a fad of great expectations, e.g. South Seas Bubble, Tulip mania, our first tech bubble in 1929. The bubble pops and stocks go down for a couple of years. Then the "confidence bubble" starts, e.g. the recession is over, buy, buy; it can't happen again so quickly; don't worry, be happy. Everybody piles into the new bubble (housing anyone?) that has been immune to real recessions for many years. Then pop again! There is always that mild recovery and confidence that the recession is over. Look at the the 1920-40 charts. Look at where and when the serious dip occured. There is always that first, then second serious dip in the bigger cycles.

Allen Greenspan has been blowing serial bubbles in the economy and he is now preparing (by raising short bond rates) for the next pop. I, personally, don't think he'll be able to muster enough amunition unless people begin to see all the manipulation going on over the past twenty years. I believe things will turn out OK, but we need a little shock treatment first. Otherwise, we hyperinflate ourselves into oblivion--German wheelbarrow money. And we all know the consequences of that untidy mess. I see a nice little recession as our salvation.

I also hope I'm wrong about this entire mess.

This is a somewhat tangental issue: When people look at buying RE for gain, they need to look at two due diligence processes: First, the regular slice and dice stuff such as income, expenses, mortgage payments, etc.--there are a few hundred items. Second, they have to examine the external factors such as whether there is a bubble and what will happen if it pops. Will there be clients willing to pay you? Or if the economy crashes will they move home with their parents? Can you hold out without income for a substantial period of time? How substantial? Remember the best time to buy RE is from the bank in forclosure. This will depress prices even further. Make sure you have made your self bullit proof to your own worst case scenerio.

Don't tell Martha I wrote this; it scares the bejeezus out of her when I talk this way .

Always follow your own plan, but make sure it's flexible enough beforehand for you to stick to it--otherwise you end up running off the edge of a cliff with the rest of the herd. Then you join them in the capitulation frenzy. I'm done talking about this stuff for quite some time now. I'm going back under the bed.

--Greg

 

[TargaDave]

I'm done talking about this stuff for quite some time now. I'm going back under the bed.

--Greg

Greg, Don't go back under the bed. I hope you're wrong too but I think the reminders are very helpful. Plus my dad's subcription to Richard Russell and Martin Weiss have run out.

 

[unclemick]

Hello?

Vanguard Balanced Index - 2.57% current yield. What more do you need to know? Select a round parachute if you are old fashioned - or a parasail type if you are confident.

Started investing in the go -go 60's when we had guns AND butter - different nouns and buzz words - Great Society, Vietnam, Nixon sticks it to the French - no more gold standard aka Bretton Woods, oil crisis, etc.

This time it's different - we have a new set of nouns and adjectives for this generation.

P.S. Skip the freeze dryed food this time around.

De Gaul and the Norwegian widow ride on! Same old same old.

 

[TargaDave]

Mick,

Are sure you're not related to Greg Davis or Mike Perre?

 

[unclemick]

?Who - don't recognize the names.

 

[greg]

I'mmmmm back! Uncle Mick is right. Determine your plan and stick with it--just make sure it's a rock solid plan that works in all ups and downs, e.g. dividends and interest payments that can get you thru any trouble spots.

My 'sky is falling' theme accomplishes nothing, just causes frustrations that can't be resolved. No amount of arguing on my side will turn the optimists into pessimists; no one will turn me. For those in the middle, if you perceive any imbalances in the US or world economy, go find them and turn them to your advantage--or not.

Different objects, but the same problem with politics. The lines have been drawn and have become almost brittle; no one is going to change political allegiances until forced by circumstances. The middle, balanced road is always the correct one.

--Greg

 

[unclemick]

"Medius tutissimus ibis You will go safest in the middle course." page 325 - 4th ed The Intelligent Investor.

Ben Graham - May 1958.

Circa - the time of the great line crossing - average div yield of the S&P fell below bond interest rates.

 

[LovesLife]

Whenever I start to get a little nervous about the market all I need to do is read some of Unclemick's posts and I feel better.

Unclemick,

You have a very calming approach to the market environment and as a newbie investor I really appreciate it.

LL

 

[JPatrick]

Whenever I start to get a little nervous about the market all I need to do is read some of Unclemick's posts and I feel better. 

Unclemick,

You have a very calming approach to the market environment and as a newbie investor I really appreciate it.

LL

I hope you are still calm after unclemicks uncle,  Alan G. raises interest rates a few more times

 

[haha]

The middle, balanced road is always the correct one.
--Greg 

Well Greg, you aren't much of a bear. Come on man, the middle of the road is for roadkill!

Ha

 

[sgeeeee]

. . . Come on man, the middle of the road is for roadkill!

Ha

Now that's a quote I can make use of.