The "perfect storm"?

[Sisyphus]

Hi all,

Just wondering what your thoughts are on this. It seems like we are in the midst of what could be one of the most turbulent times in history. Consider the following:

- Potential real-estate bubble (compounded by the explosion of interest-only mortgages)
- Record personal debt and potentially big jump in personal bankruptcies
- War in Iraq
- Terrorism
- National debt
- Economic impacts of uncontrolled illegal immigration
- Trade defecit
- Inflation
- Potential pandemics (bird flu, for example)
- Energy prices (oil, gas, etc.)

With all these things hanging out on the horizon or already "coming home to roost", is there reason to be cautious or has the market already taken these things into account?

Doesn't EVERY generation think they are living in the most turbulent time ever? Have we been here before? Usually, I'd say that when it seems like the sky is falling, it's a great time to invest, but is it a bit more unique this time around?

Thanks everyone. (I know I may have listed some potentially sensitive topics here... please don't turn this into a flame war. )

 

[shiny]

Ok, I know that I should be more concerned about all of the above listed topics, but...

Cut throat has a christian right-wing ex-wife? I'm shocked.

 

[JPatrick]

Hi all,

Just wondering what your thoughts are on this.  It seems like we are in the midst of what could be one of the most turbulent times in history.  Consider the following:

-  Potential real-estate bubble (compounded by the explosion of interest-only mortgages)
-  Record personal debt and potentially big jump in personal bankruptcies
-  War in Iraq
-  Terrorism
-  National debt
-  Economic impacts of uncontrolled illegal immigration
-  Trade defecit
-  Inflation
-  Potential pandemics (bird flu, for example)
-  Energy prices (oil, gas, etc.)

With all these things hanging out on the horizon or already "coming home to roost", is there reason to be cautious or has the market already taken these things into account?   

Doesn't EVERY generation think they are living in the most turbulent time ever?  Have we been here before?  Usually, I'd say that when it seems like the sky is falling, it's a great time to invest, but is it a bit more unique this time around?

Thanks everyone.  (I know I may have listed some potentially sensitive topics here... please don't turn this into a flame war. )

Sasafrass,  What we have here is a stock market buy indicator.
If your post was on the cover of Time, I'd mortgage the house and bet it all.

Take two Coronas, and wait six months, maybe eight, and your list will look much different---probably more optimistic.  

 

[HFWR]

"Don't tell anyone", he said as he lowered the Cone of Silence, "but Al Queda is planning to hijack a jumbo jet, and drop poultry on a major US city."

 

[Mountain_Mike]

You guys all seem to take this pretty lightly, but I think we may be in for some rough times ahead. Two items that are somewhat related and most likely to affect my daily life are inflation and oil/energy prices. Take a look at the inflation number that came out recently: 1.2% increase in the CPI for September (that would be 14.4% annually). This general inflation is in addition to the 40%- 50% or more for energy alone. The high energy inflation will eventually/soon spill over and feed the general CPI.

No, it is not the end of the world. Inflation has winners and losers...but ERs are not in the best position to weather such inflation unless they see it coming and take steps to protect themselves.

 

[MJ]

"Don't tell anyone", he said as he lowered the Cone of Silence, "but Al Queda is planning to hijack a jumbo jet, and drop poultry on a major US city."

Nothing like terror style Kentucky flight chicken.

 

[REWahoo]

...she was absolute cornballs!

Traded her in for a better model!

Bet you made sure the new model didn't have either...

 

[REWahoo]

... 1.2% increase in the CPI for September (that would be 14.4% annually). This general inflation is in addition to the 40%- 50% or more for energy alone.

Doesn't the 1.2% number include the increase in energy prices?

 

[wabmester]

With all these things hanging out on the horizon or already "coming home to roost", is there reason to be cautious or has the market already taken these things into account?   

Pssst, I'll let you in on a Big Secret.   The stock market is driven by short-term thinking.   Anything that you can imagine happening within the next 3 months is already priced into the market.   Of course, sometimes the market is wrong even about the short-term risks, and then it has a sudden readjustment.

If your horizon for being in the market is very short-term, then you won't be able to second-guess where the market is headed.   The market is smarter than you are at doing short-term analysis.  Most of the people here, on the other hand, are driven by longer-term thinking.   Everybody has their own ideas about where the market is headed over the long term.   There are many possible outcomes.

Hope for the best.   Plan for the worst.

 

[Sheryl]

You forgot the increasing weather issues due to global warming and the impending failure of the ozone layer in your list!

 

[wabmester]

You forgot the increasing weather issues due to global warming and the impending failure of the ozone layer in your list!

Did anybody here read about how global warming is going to solve our energy problems?   The polar ice cap is melting.   They believe the oil and gas reserves in the ice regions are larger than any others on the planet, but they haven't been able to reach them.   Until now!

Many possible outcomes, I tell ya.

 

[wildcat]

I'm not so much worried about the stock market as I am the job market.  I haven't had much luck in the past (graduated 1st time December 2001) and I hope it will be a little different this December.  In 2001 I had to take a job totally unrelated to my area of study and it was one I knew I would hate.  Not a concern for most people but for me at least.  

 

[Ol_Rancher]

Most of the elements of this 'perfect storm' seem to be short term. A possible buying opportunity. My worry in ER is the inflation in your list. The coming cost of entitlements almost assures its return and I am reallocating (see earlier posts) to prepare for it.

Most Boomers might find they will retire into high inflation, less SS, and possible lower market returns. Not a pretty picture.

Conclusions: Short term the market is quite resilient so buy.
                  Long term - look for investments that perform well during inflationary periods and hold them.

                  My strategy: Increase cash (CDs) to survive market pullbacks (for me - 2 to 4 years). Buy them by the end of the first quarter of '06 for possible best rates.

                  Keep an equity core (for me - income and growth/income funds with good track record during bad times) ... "dividends"

                  As for the bond portion of a portfolio, I depend on my teacher retirement and upcoming SS.  I would probably buy tips.

Leave it alone until the entitlement problems are solved and/or the market reacts to another wave of increased productivity.

 

[Mr._johngalt]

My guess is that you are a 'youngster'   (under 40) ??

I remember 1975 - I was leaving the Navy - No Jobs, Vietnam, Inflation, Gas Shortages.  We now have bird flu  - Jerry Ford had swine flu (I even got a shot)!  - Watergate!!  Even worse than Blow** Job* Gate of 1998!

I would not have ever predicted how rosy the 80's and 90's were.

Human Beings are more likely to believe in catastrophes than more of the same. I remember my christian right-wing ex-wife's church about 25 years ago. "The end of the world is coming sooooooon - Give us your money, you don't need it anyway"

Most of the stuff you worry about will never happen, and most of what
does happen is out of your control anyway.
(see my Al Pacino quote on the fragile state of our existence here).

JG

 

[Nords]

You guys all seem to take this pretty lightly, but I think we may be in for some rough times ahead.

I take it pretty lightly because I can't ever remember a period when we WEREN'T in for some rough times ahead. However in retrospect the results seem to be livable, even enjoyable.

Admittedly this is similar to TH's analogy of putting a paper bag over your head and jogging back & forth across a multi-lane interstate. Repeated success does not guarantee future survival.

However the alternative to this dark humor would be spending the rest of your life sounding like Jeremy Grantham or Richard Russell. Sure, they're smart guys, but would you want to spend an afternoon socializing with them?

I'd rather retain my will to live.

 

[JPatrick]

Just to be "fair and balanced", here are a few things to think about that are a bit more positive than the list that started this thread.
Not saying any or all will happen, but they could, and if they did, you'll wish you bought the Oct lows.
1.  War in Iraq mellows out.  Strong talk about bringing the troops home.
2. Bird flu turns out to be a non event in the US. Remember SARS?
3. All of a sudden the deficit looks smaller due to less $$ spent in Iraq, and more inflow due to strong economy.
4. Oil is down to $50.
5. The natural gas scare turns out to be 1/2 as bad as we thought.
6. Merchants discover they are having a ripping Christmas.
7. Due to event # 3 above, the tax cuts are extended.
8. Cost of NOLA comes in well under projections.
9. And the Mother of all good things- - The FED says--hey ,we quit.

Of course if most of these events did occur, the financial markets would explode and the news would just keep getting better.

Actually, I'm betting we will see all of these within 8 months and a substantial chunk of them by Christmas.  8)

 

[73ss454]

If it's not the 9 items you listed causing problems it will be another bunch of crap.
If you look back over the years it's always something we have to worry about.
Although I like your thinking.

 

[saluki9]

Y 1.2% increase in the CPI for September (that would be 14.4% annually).

Not to be picky but 1.2% monthly is 15.38% for 12 months (damn compounding)

 

[TargaDave]

I'm with you Ol-Rancher. Events themselves? They pass and often spur business and opportunities along the way (wealth transfer). But inflation hits everyone. Once it takes hold it tends to stick around like a cancer until something serious puts it back in the bottle (big recession or.......imagine 10-15 years of very anemic growth, a flat market and wimpy inflation fighting measures, then finally bringing in a Paul Volcker type to pull out the big guns). A challenge for anyone to invest in but I like your strategy.

 

[Mr._johngalt]

I'm with you Ol-Rancher. Events themselves? They pass and often spur business and opportunities along the way (wealth transfer).  But inflation hits everyone.  Once it takes hold it tends to stick around like a cancer until something serious puts it back in the bottle (big recession or.......imagine 10-15 years of very anemic growth, a flat market and wimpy inflation fighting measures,  then finally bringing in a Paul Volcker type to pull out the big guns).   A challenge for anyone to invest in but I like your strategy.   

I like his strategy too, plus he has a cool "ranch truck".

JG

 

[Zipper]

At the first whiff of "Bird Flu", crossing the human barrier, I'm going to cash.

 

[wabmester]

At the first whiff of "Bird Flu", crossing the human barrier, I'm going to cash.

Buy Roche.

 

[brewer12345]

At the first whiff of "Bird Flu", crossing the human barrier, I'm going to cash.

Cash? Hell, I'll be going short.

 

[laurence]

Sorry guys, I have to admit a little inflation would almost be a good thing for us young dreamers who are stuck in huge mortgages and in COLA'd jobs. Rumors are the raise pool next year will be the largest in a decade...

 

[justin]

Sorry guys, I have to admit a little inflation would almost be a good thing for us young dreamers who are stuck in huge mortgages and in COLA'd jobs. Rumors are the raise pool next year will be the largest in a decade...

Inflation is one way to repay mortgages and student loans!