The next financial crisis?

[Pharmmgr]

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.

 

[ERhoosier]

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.

 

[REWahoo]

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.

 

[brewer12345]

Did you forget about the zombies?

 

[MichaelB]

Would love to hear some others opinions.

Stick to your plan.

 

[racy]

The market goes up, the market goes down. The long-term trend is up. Stay the course.

 

[Midpack]

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...

 

[karluk]

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.

 

[jollystomper]

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.

 

[CaliforniaMan]

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.

 

[NW-Bound]

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...

 

[NYEXPAT]

The "financial crisis" came early to "JCP", just loaded the wheelbarrow this morning!

 

[Turboslacker]

Well you have proven you survived 2007-2008 crisis, why couldn't you do it again?

 

[SVHoper]

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

 

[dontworry]

There is constant "noise". Our plan is to try to ignore and stay the course.

 

[Tykimeister]

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?

 

[target2019]

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.

 

[Midpack]

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?

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.

 

[Chris M]

"Those who have knowledge, don't predict. Those who predict, don't have knowledge."

- Lao Tzu

 

[Lisa99]

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.

 

[Koolau]

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.

 

[34rlsa]

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?

 

[haha]

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

 

[Chuckanut]

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.

 

[34rlsa]

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?