I feel like this is the biggest bubble of all time but what if I am wrong ? And if it is the biggest bubble of all time , what's next ? This could be disastrous, two decades of misery or longer. But the bears have been dead wrong for a long time, I don't want to be part of those bears watching from the sidelines but it seems like it's gonna be time to join them. One thing bothers me, valuations on equities remain very reasonable . Everything else screams of bubble, every where,equities, commodities, collectibles, art, real estate, emerging markets . China looks like a huge bubble like Japan in the 80's , I would say worse because there is so much unknown with China thanks to the involvement of government, and it's just a factory for the US consumer without the product innovation Japan brought to the table.
I agree with you. I've been looking at other alternative investments to invest my capital for the long term..but everywhere I look...i feel like I'm buying a Gigantic Run up (commodities, emerging mkts, real estate, etc) The contrarian in me i thinking to buy not so hot sectors such as Japan, maybe some homebuilders related names that are not homebuilders so to speak (ie HD, USG, even maybe GE) and even foreclosed homes that can generate Postive Cash Flow.but I believe a slowdown in US at least drags everything down ( and for those who don't believe we are already starting a recession...look around) The academic in me is saying to buy Gold, Commodity and even US stock market funds , as we are going to enter a phase of inflation(due to Heliocopter Ben) we have not seen in this country in over 15-20 years and the best hedges vs Inflation have shown to be Large Cap stocks(surpisingly enough) and Commodities Any ideas for long term ASSET CLASSES that should take off would be appreciated...until then..I'll continue to manage a Long Short Stock Portfolio (which is obviously more work..hahah) d
I was in JCrew yesterday and they had brown belts there for $150, I mean wtf is that?? This country is all f-ed up if a store like JCrew is charging that kind of dough for a belt. The above example is a gnat in the grand scheme but I definitely agree with the OP. Things seem like we are headed for tough times ahead, the market just seems artificially held up but who knows how long that can continue.
I hear you, and I wonder about this myself. The only thing I wonder about is the 'latent productivity' contained in those emerging markets. I know that in India, for example, the growth of a consumerist middle class is basically impossible for us to conceive unless we go over there. I think there's a lot of productivity waiting to be realized over there, and even in China. Your comments about the Chinese government are relevant, but could it be that they have realized that the way to world domination is to play the world's game while ruling their citizens with the iron fist? Would the citizenry go for that? Well, the Oriental mindset is different than our own. Would mass consumerism breed the yearning for total freedom that we have here, or would the Chinese be happy to get rich and at the same time be circumscribed in terms of what they can do politically? If they are, China will win everything. In Canada I believe we have room to increase productivity. Plus, we have a bunch of resources up here that people are going to be after for a long while to come. That's what makes me bullish on this country, anyway.
It is correct that a blind asset class bet seems over now. ( Stock, real estate, commodity...etc) I am also in long-short porfolio. I believe in long-term inflation because of Ben, China and India. On the other hand, to say there is no impact from the mortgage credit issue is lying to myself. It seems that slowing growth in US will not hurt oversea markets, but recession or depression in US will hurt oversea markets. look at all recent economic news. 1) Employment looks good so far. 2) Retail sales still grow over last year. There is a few blow up here and there but walmart is doing great. 3) Mortgage foreclosure and credit card default are rising. 4) Commodity is stuck in neutral. 5) Fed keep raising rate. 6) China and India growing like crazy. So, what will be the play here. 1) If we are in staglfation, sounds like a short-US-long-foreign/commodity play is the right one. 2) If we are in recession or depression, sounds like cash is the right play since you won't be able to hide in foreign market. 3) If we are in slow growth, high inflation env, US/foreign stock will all work to a certain extend. Basically, back to inflate the credit bubble. Right now, for 1)/2)/3), it looks like 60/20/10. Comment?
(1) & (3) are the same. Stagflation is slow-to-no growth plus inflation. I don't see the distinction you try to make between (1) & (3) I think we will have recession PLUS inflation. If so how does one play this via an asset-class allocation?
1) could turn sour quickly. If-and-when it does, look-out below. The key here is also: will wages keep-up with inflation ? Likely: NOT. So the consumer will be scared and squeezed....not a great economic environment. 5) Fed funds/discount rate no longer good benchmarks for supply/demand of credit. Example: have you seen Home Equity loan rates recently ? They are soaring ! Home Improvement loans at 13%....if we used them, the cost of the finance charge for new windows for example would have been the same as the purchase price...effectively, DOUBLING the total cost. Japan's great economic slow-down in the 90's proved that central banks lose their ability to control the economy when lenders set such a "high bar" for potential borrowers. Japan's discount rate went to nearly zero and STILL Japan was mired in a recession for quite some time after that. There was no lending occurring. Overall, if the above becomes true, best bet is to short stocks related to all consumer big ticket items....cars, houses, boats, appliances, etc.
Tulip frenzy in Amsterdam, 1600's was the biggest bubble. Looks the same as Japan in the 80's, and several asset classes now (RE, commods, and China). Tricky part is the timing. I always seem to be about a year early on these big macro deals ( too early on tech bubble, and real estate). I'm looking for disaster at any moment, so probably will happen in a year!
Ok, in this case, if I am Ben and I want hyperinflation just like the 70s, I should be able to do that by lowering rates? If I can do that, there won't be a recession or asset class blow up, just everyone will have less debt and their salary is trashed.