Ex-Wall Streeter predicting a crash

[omni550]

Fascinating NYT article on a former Wall Streeter:

"The temptation is to dismiss Mr. Lewis, 73, as a crank, except he once ruled as an eccentric genius of arbitrage, with a preternatural feel for the tectonic movements of the markets. He has railed for decades about venalities now on daily display. Rude truth is his currency.
He knows Wall Street’s heights. He helped hire Michael R. Bloomberg, and he invested the money of two former Securities and Exchange Commission chairmen, making a fortune in the 1980s. And he knows its depths, since he pleaded guilty to stock manipulation in 1989, and was barred from the Street"

"Mr. Lewis sees a banking system in unstable remission. Goldman answers to no one. China and Europe are wobbling, deflation is at the door, another crash is coming. "

http://www.nytimes.com/2012/09/16/ny...general&src=me

We've got some financial types on this board. Would you be willing to provide some insights/commentary?

omni

[Alan]

Dont panic - YouTube

[haha]

Quote:

Originally Posted by omni550 Fascinating NYT article on a former Wall Streeter:

OK, Sandy Lewis has an excellent record of avoiding big trouble on Wall Street. ER.org generally greets any negative idea with scorn. Sometimes correctly, sometimes, as in 2007, disastrously.

As individuals, including those who have or do currently work on Wall Street, we have scant or no track records of the type that Lewis has.

So don't expect anything very helpful from your question. To decide that stocks are dangerous immediately places one in a quandry of what to do. To figure "steady as she goes" avoids that painful position. And to declare misgivings on this venue invites some exposure to mockery.

Personally, I'll take the 5th.

Ha

[HFWR]

Quote:

Originally Posted by haha Personally, I'll take the drink a 5th. Ha

FIFY...

Under more "normal" circumstances, whatever that is, I wouldn't consider the stock market terribly overpriced, but there are too many what-ifs for me to feel very comfy.

As for where else to invest, I'm considering getting out of the bond ETF positions I took back during and immediately after the crash. Sold TIP at $121 and change this past week. Bought around $90, so got a nice cap gain, but lately not much in divvies, so outta here. Still have 5% each in HYG and LQD; all the rest is BSV. Made good cap gains on both, especially HYG, bought at around $70, but at least they're both still sending me nice checks every month. May move all of the bond part to BSV, to reduce the chance for a bond haircut in the future, rather than more "cash", which is doing diddly...

So, currently:

CASH - 9.57%
BONDS - 45.01%
STOCKS - 34.75%
REIT - 6.19%
CCF (PCRIX) - 4.47%

No plan to lower the equity percentage at present, but keeping my ear to the ground. Not a "trader" or DMTer by any stretch, but I'm willing to adapt to changing conditions, in a strategic/tactical way.

[Animorph]

Kind of like buying a mutual funds with large undistributed capital gains, we have deficit reductions coming, and already here in Europe, that will hit GDP's no matter how it is accomplished. I think we can predict a poor global economy for a few years. But how the markets respond to that is another question. I'm building my cash position as the market rises. I'll reinvest if things get bad, or use it for expenses if things just flatten out.

[clifp]

I think I'll invite Sandy to my next party, sounds like he'd be a fun guy

Quote:

So don't expect anything very helpful from your question. To decide that stocks are dangerous immediately places one in a quandry of what to do. To figure "steady as she goes" avoids that painful position. And to declare misgivings on this venue invites some exposure to mockery. Personally, I'll take the 5th. Ha

How long have we be lamenting that all investment choices stink. Seems to me its been at least since 2010. I am using the recent rally to take profits in my IRAs, but I really have no idea what to buy in place of stocks..

The further we dig ourselves into the debt hole the more I'm convinced that guys at the top really don't care about getting out of the hole, just insuring that they are still on top.

[MikeJones]

I doubt we're going to have a crash anytime soon. Too much money being printed for a crash.
Now a war, that's what I'm nervous about.

[Zathras]

Sure, we could have a crash. It is also possible this guy is not right and we won't. Someone is always predicting a crash. And every once in a while they get the timing right.

Stock market crashes are painful for everyone. The way I look at it, is that the best way to avoid the worst of the pain is to be well diversified and not panic.
Unless you believe it won't ever recover and it will be the end of the world. Then you should buy MREs, guns and ammo

[traineeinvestor]

Thanks for posting, but he sounds like a rather bitter has-been venting his spleen.

Nothing quite like troubled economic times to swell the ranks of the economic doom merchants. Sure he and many other people predicting a crash could be right. One day they will be right - there will be crashes in the future and they will hurt - but I have no idea when and have yet to find anyone who can predict the market with sufficient accuracy to be worth risking my retirement on.

I'm reminded of this quote from Paul Samuleson:

Quote:

Economists have correctly predicted nine of the last five recessions

[W2R]

Well, as the market begins once again to approach the breathtaking levels we have been seeing lately, I think we are in another period of mildly "irrational exuberance", lately. At least, I am feeling that way when I look at my all-time-high portfolio balance. Would I be a genius to predict that eventually, yes, the market will crash again? I think that is simply common sense.

But so what? That's what the market does. It goes down, and up ("Whee!!!") and down again, lather rinse, repeat. We're on a roller coaster ride for life. So, enjoy the peaks and when the lows come, grit your teeth.

[MooreBonds]

Quote:

Originally Posted by W2R Well, as the market begins once again to approach the breathtaking levels we have been seeing lately, I think we are in another period of mildly "irrational exuberance", lately. At least, I am feeling that way when I look at my all-time-high portfolio balance. Would I be a genius to predict that eventually, yes, the market will crash again? I think that is simply common sense. But so what? That's what the market does. It goes down, and up ("Whee!!!") and down again, lather rinse, repeat. We're on a roller coaster ride for life. So, enjoy the peaks and when the lows come, grit your teeth.

I agree to stay broadly diversified, and am always reminded of the infamous quote from Peter Lynch:

Quote:

More money has been lost trying to time a market crash than by the market crash and rebound itself

Of course, repeating that mantra to myself as I continuously reinvested dividends and kept every penny invested from 2006-late 2008 wound up to be a bit of a heartache in the ensuing carnage-filled months after. Thankfully, most of it has recovered for the most part.

[HFWR]

Quote:

Originally Posted by MooreBonds Thankfully, most of it has recovered for the most part.

I've fully recovered, except for the added diaper expense...

[haha]

Quote:

Originally Posted by traineeinvestor Thanks for posting, but he sounds like a rather bitter has-been venting his spleen.

If he is a has been, most of us are never have beens.

And as far as being a doom merchant, that implies that he is selling something. Fill me in on what he is selling?

[REWahoo]

Like Paul Farrell, he's just another old man who realizes his best years are behind him - way behind him - preaching the religion of gloom & doom.

Repent ye sinners, the end is nigh!

[traineeinvestor]

Quote:

Originally Posted by haha And as far as being a doom merchant, that implies that he is selling something. Fill me in on what he is selling?

His ego?

Unless he has a book to promote, I don't see him selling anything - it's just an expression which does not imply selling anything: merchant of doom/gloom - definition in British English Dictionary & Thesaurus - Cambridge Dictionary Online

[MichaelB]

Quote:

Originally Posted by haha If he is a has been, most of us are never have beens. And as far as being a doom merchant, that implies that he is selling something. Fill me in on what he is selling?

Do you think he is correct in his warning?

[FinanceDude]

Quote:

Originally Posted by MichaelB Do you think he is correct in his warning?

I do.......

[Zathras]

Quote:

Originally Posted by FinanceDude I do.......

Don't get me wrong, I don't think he is necessarily wrong. Just that it doesn't matter. As said by others, that is what the market does. It goes up, then it goes down.

Best way to prepare is to have no debt, and be well diversified. Which is always good advice. So, this makes little difference of it does happen.

Or, you can sell all your stocks, buy gold, guns and MREs, and develope an ulcer worrying about the comming crash, which may or may not come.

[MichaelB]

Quote:

Originally Posted by FinanceDude I do.......

What do you suggest?

[Bestwifeever]

Never mind the financial side of it, his life and family as described in the article sound like a movie script. Interesting man.