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Old 09-05-2007, 06:30 PM   #21
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Yeah, a gold or oil bubble would hurt ... oil probably more.

I vote for a beever cheeze bubble.
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Old 09-05-2007, 08:03 PM   #22
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When is a bubble obvious? One can make an argument that valuations are fair because of high growth. What makes it bubblicious to me is the assumption that high growth will continue. Investors (including professional analysts) almost always overestimate future growth by looking at past growth.
I know it is a bubble when I see it.

I view the bubble similarly to you. Sky high growth won't last forever. Economic expansions (proceeding at this rate) don't last forever. We will need to see many years of economic expansion at the current rates just to get to a "fair" valuation level with equity market prices staying constant (assuming potential long term growth rates aren't significantly higher than those typically achievable in other countries).

Whether this bubble ends with a whimper (years of zero returns or slightly negative returns) or with a bang (-50% returns) - who knows. I don't think it'll be pretty.

I've also heard reports of frenzied activity in China. These reports sound like they were cut out of newspapers from 1999 and 2000.
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Old 09-06-2007, 10:53 AM   #23
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For those of us accumulating and rebalancing... bubbles be good!

DD
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Old 09-06-2007, 03:21 PM   #24
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If the US balances our budget, doesn't the dollar get stronger? And this would cause foreign investments to burst, correct? If Demcrats win the white house, I think this bubble will be loud when it pops.

**this is not a criticism of one party or another, just a point that most of the democratic candidates preach fiscal responsibility and balanced budgets usually strengthen dollar while deficit spending weakens it**

International is the next bubble to pop. Not just China, not just Emerging Markets, but even those blue chip, stable international funds which have been returning me 10+% for years will also drop.
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Old 09-06-2007, 06:14 PM   #25
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Its about time for energy to be the bubble. Been long enough since the last episode of hard time for that industry for everyone to forget, and there is plenty of fast and dangerousy stupid money that has since jumped into the pool.
Yup! I know several people who made a wad on oil stocks... I would be averaging out if I owned them directly.
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Old 09-06-2007, 10:49 PM   #26
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International is the next bubble to pop. Not just China, not just Emerging Markets, but even those blue chip, stable international funds which have been returning me 10+% for years will also drop.
Sounds like cash is the way to protect assets now?
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Old 09-07-2007, 04:13 AM   #27
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There are bubbles and there are normal corrections.

The nice thing about a bubble, if one does not get greedy, is the opportunity to cash out early. That is if the person was lucky enough to participate in the run up to begin with.

If we were in the tech bubble again, I would recognize it and make adjustments. My adjustment would be along the lines of rebalancing.


I have been reading some information lately that indicates that Value has had a good ride and it is time for growth to shine again.
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Old 09-07-2007, 10:18 AM   #28
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There are bubbles and there are normal corrections.

The nice thing about a bubble, if one does not get greedy, is the opportunity to cash out early. That is if the person was lucky enough to participate in the run up to begin with.

If we were in the tech bubble again, I would recognize it and make adjustments. My adjustment would be along the lines of rebalancing.


I have been reading some information lately that indicates that Value has had a good ride and it is time for growth to shine again.
I am going to be scaling back international holdings over the next 4-6 months.... lowering contributions and selling some of what I have- even selling to get below my normal allocation for these classes.
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Old 09-08-2007, 06:31 PM   #29
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I have been reading some information lately that indicates that Value has had a good ride and it is time for growth to shine again.
There are a lots of talks about a possible recession. Growth stocks will be hit most.
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Old 09-08-2007, 06:42 PM   #30
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One way to recognize is when many of your friends and co-workers talk about it. I remember working on one contract where everyone and their brother was buying Enron stock.....

Another indicator is when multiple people under legal drinking age are doing workshops on how to make big money in XYZ and talking about their vast market experience.
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Old 09-09-2007, 10:18 AM   #31
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The current rising bubble in energy (oil, nuclear, ethanol) still has legs, but I expect water related stocks and depending on the depths that the U.S dollar goes to, possibly precious metals to be next. One thing that I would stay away from right now is the U.S dollar. Hopefully it will bottom sooner or later, but for now I would keep your cash holdings to daily expenses. The fed "controlling" the dollar is like the fed "controlling" a three wheeled shopping cart.
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Old 09-09-2007, 01:38 PM   #32
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The current rising bubble in energy (oil, nuclear, ethanol) still has legs,
IMO, not everything that has a bull market is a bubble. To take it to a possibly absurd level, eventually oil will be in very short supply. When that happens, although prices will still fluctuate, because that is what prices do, they likely will fluctuate about a much higher level. This will nevertheless not be a bubble, it will be the price mechanism working as it should to ration tight supplies.

Ha
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Old 09-09-2007, 01:42 PM   #33
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IMO, not everything that has a bull market is a bubble. To take it to a possibly absurd level, eventually oil will be in very short supply. When that happens, although prices will still fluctuate, because that is what prices do, they likely will fluctuate about a much higher level. This will nevertheless not be a bubble, it will be the price mechanism working as it should to ration tight supplies.

Ha
Agreed. But I would suggest that the bubble would be in oil and gas companies, ratgher than the commodity itself.
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Old 09-09-2007, 02:20 PM   #34
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Agreed. But I would suggest that the bubble would be in oil and gas companies, ratgher than the commodity itself.
The downside risk would be less, though, right? I mean, oil and gas companies are actually engaged in a genuine commodity vs. the dot com fluff. I think continuing to investigate investments in these companies still makes sense.
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Old 09-09-2007, 02:32 PM   #35
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If you like natural gas, look at UNG- United States Natural Gas. While crude is trading at the top of its channel, NG is near the bottom of recent prices. OTOH storage is very high, it looks like no hurricane can be expected in the Gulf, and a recesion would be hell on demand, not to mention another balmy globally warmed winter.

Still, it won't go bankrupt, and it is not leveraged. On a buy and hold basis it should work out.

Ha
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Old 09-09-2007, 05:38 PM   #36
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IMO, not everything that has a bull market is a bubble. To take it to a possibly absurd level, eventually oil will be in very short supply. When that happens, although prices will still fluctuate, because that is what prices do, they likely will fluctuate about a much higher level. This will nevertheless not be a bubble, it will be the price mechanism working as it should to ration tight supplies.
Maybe bubbles should be determined in relation to some inflation rate like the CPI. IIRC gasoline at $3/gallon was still lagging the 20-year rate of inflation. Perhaps it's a bubble when a year-over-year gain is 2x or even 3x the CPI?
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Old 09-09-2007, 07:29 PM   #37
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Bubble = high valuation in relation to normal pattern. Abbey Cohen once said that valuation was not a very good way to time the market. OK, you are probably saying "so what, there is really no way to time the market". And I sort of agree but when valuations get to perhaps 2x the historical average one should at the very least scale back expectations.

Most of us don't have great stats on things like the China market valuations and historical patterns (what history? you might say). You can definitely look at the history of Exxon's P/E and P/E versus the market. See, for example, ValueLine for the last 15yrs.

The dollar is not at historical lows so I'd stick with my international allocation. See this chart St. Louis Fed: Series: DTWEXB, Trade Weighted Exchange Index: Broad

Can someone point out a bubble based on some real data? I'd be interested in that.

Les
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Old 09-09-2007, 10:26 PM   #38
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IMO, not everything that has a bull market is a bubble. To take it to a possibly absurd level, eventually oil will be in very short supply. When that happens, although prices will still fluctuate, because that is what prices do, they likely will fluctuate about a much higher level. This will nevertheless not be a bubble, it will be the price mechanism working as it should to ration tight supplies.

Ha
I really think that oil is in mid bubble level. 10 yrs ago it was $10 per barrel, now $75. Those multiples look like they have potential to be bubbly to me. The entire economy where I live is oil. Alberta, Canada, alone, has enough oil reserves in the oil sands to supply the world for hundreds of years at current utilization. Billions of dollars are being spent here for plants that separate the oil from sand. If the U.S. goes into a sustained recession, we'll have oversupply and see low oil prices again, and in typical stock market fashion, the trip down tends to be much speedier than up. It's been a rollercoaster of boom and bust since before I was born in the oil industry, and I expect more of the same to come.
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Old 09-09-2007, 10:58 PM   #39
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Alberta, Canada, alone, has enough oil reserves in the oil sands to supply the world for hundreds of years at current utilization.
Let me see if I understand. You are saying that the entire world's oil demand could be satisfied by the oilsands in Canada?

Could you present some documentation for this?

Ha
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Old 09-10-2007, 12:02 AM   #40
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Let me see if I understand. You are saying that the entire world's oil demand could be satisfied by the oilsands in Canada?

Could you present some documentation for this?

Ha
From what I have seen, proven oil (tar) sand reserves in Canada are <200 billion barrels. At present consumption rates approaching 100 million bpd, that's only around 6 years world supply.

Production from oil sands is also 1)costly 2)energy inefficient and 3)more highly polluting than most present drilling operations (this relates to #2, also).

Tar sands may alleviate some immediate oil production concerns, but they certainly aren't a long-term solution to our upcoming energy problems.
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