Why stock and Property market "crashes" are still years away

Leonard D Neubache

Owl
Gold Member
If everyone posting on this thread listed by percentage the increase in the net worth of their investments by year for, say, the last ten years, then we'd soon see what was what.

Frankly I can come in here and say "I talked to a guy who talked to a guy that said a hideous new virus is going to be released for which the only cure is bananas, so buy banana futures now!" Who's to say I'm wrong?

Who can say they've walked the walk, gained the gains, and why should we listen to anyone else?
 

Australia Sucks

Kingfisher
Leonard I get where you are coming from but we need to try to keep the thread objective and not turn it into a dick swinging contest. If everyone did what you suggested it would cause the thread to devolve into a bragging contest, besides people can easily lie as nobody is verifying the results, so I do not see what purpose it serves.

Also comparing increases in net worth is only part of the story because different investors take different levels of risk and have different levels of income and savings. Do you really think the guy that made 500% in less than a year from Ethereum is smarter than the guy who made 30% in the same period in the stock market? Or is he just luckier or more risk tolerant?

That said if you feel this type of information is useful to you I am happy to send you some basic financial description/details about myself or answer questions via p.m. (I don't like to give a detailed run down of my personal financial situation on a public forum).

Rather than people stating empty opinion or idle speculation they should offer analysis/predictions/opinion backed by facts as I have tried to do. The analysis/predictions might be wrong but at least there is use of facts and analysis which others can use to form their own judgements.

People need to post and discuss figures like corporate earnings, interest rates, housing affordability, manufacturing, inflation, market history of returns, etc rather than just saying stuff like "my mate who works at Goldman says the market is primed for a crash" or "the market has been going up for 8 years so it must be due for a crash". Sure, they might have a mate who works at Goldman and he might have said that but it provides little analytical value.
 

Australia Sucks

Kingfisher
Another indicator which does not indicate trouble as of yet is margin debt in the U.S. stock market.

https://www.advisorperspectives.com.../27/a-look-at-nyse-margin-debt-and-the-market

If you look at the graphs in the article, in the first and third graphs you will note that the increase in margin debt over the past two years has been relatively modest as opposed to the parabolic rate of increase just prior to the bursting of the tech bubble or the Global Financial Crisis. A parabolic increase typically occurs right before a major market crash. If you decide to dig into data going further back than 1995 (where the graphs start) it will still confirm this general notion.

For Australian based readers the following link shows the total returns (price change plus dividends) returns of the Australian share-market from 1900 until 2016.
http://www.marketindex.com.au/sites/default/files/statistics/historical-returns-infographic.pdf

Only in 10 out of 116 years did the Australian share-market (All Ordinaries) post a total annual return (share price change plus dividends) that was a double digit negative figure, which shows how rare crashes actually are. Now I admit this is not comparable to a statistical coin flip/roulette wheel because obviously after a strong run the chance of a crash increases, but I still think its less likely than people seem to think. Also its noteworthy that out of 116 years, 94 years (81% of the time) the market posted a positive return.

Look at the long term chart (pick the maximum option) of household debt to GDP in Australia:
https://tradingeconomics.com/australia/households-debt-to-gdp
You will see from 2002 until around 2007/2008 the ratio increased from around 75% to around 110%. From 2009 until now its increased from around 105% to 125%. That is a much slower rate of increase. Usually credit growth hits frenzied levels just before a crash. We are not seeing that now. In fact over the past 12 months household debt to GDP has been flat. The fact that absolute levels of debt to GDP are higher now is merely a function of the fiat money system that we operate in.

Look at this graph (pick the max option)
https://tradingeconomics.com/australia/private-sector-credit
You will see private sector credit growth is actually currently low by historical standards. Again a low level (low percentage increases) of private sector credit growth is not what typically precedes a crash.

Look at the Australian Household savings ratio (again pick the max option for the chart)
https://tradingeconomics.com/australia/personal-savings
It has been trending down in recent years but its still nowhere near as low as it was during the tech wreck or global financial crisis indicating that perhaps households are not as confident and not engaging in the level of optimism/recklessness that you would expect to see before a major crash.

Now I could discuss all of these indicators for the U.S. market or the U.K., etc but they would paint a similar story so its not necessary.

Conclusion:
Crashes are rare. Also although debt levels are historically high (and savings rates are low) we are not seeing an exponential blow off top or extreme levels of speculation that you typically expect to see immediately prior to a major market crash.
 
One of the best points AS has set forth is that usually the big crashes are in fact when everyone thinks "Things are great!" That's hardly the case right now. Ask Peter Schiff, lol

I have gone near 180 from thinking the fundamental flaws of the USA would catch up to realizing they'll be a nice correction and then another steamroll bull run, which everyone will still also claim to be skeptical of. It'll last, I agree, towards the middle of next decade if I had to guess. That also perfectly fits with the huge zenith of boomers and their sure fire social system stresses of mid 2020s.

This is where I have been convinced Martin Armstrong is right --- ECB and other world markets are in WAY bigger trouble than the US, if anyone is in fact in trouble. That just creates more momentum towards capital shifting even more out of those and ... into the US equities.
 

Australia Sucks

Kingfisher
Currently all the bears/Cassandras like Peter Schiff, Jim Rogers, etc who keep warning of a market crash a getting a lot of air time and consideration and nobody is ridiculing them. Not to mention all the China bears who get a lot of respect.

Typically by the time a crash is about to hit all the bears/cassandras will either be dead or broke or if they are still around people will be laughing at them and insulting them. Go and watch youtube videos of Peter Schiff back in 2007. He was warning about the crash on financial tv shows and guests and hosts on the shows were laughing at him, insulting him, etc Compare that to when he speaks today and you can see people actually consider his viewpoint (even if they disagree).

Very few people are strongly bullish on the market. How many people do you know of talking about a continuing/coming stock market boom?
 
Interesting, all the financial analysis is out of my sphere of knowledge, but I believe it is important to look at bigger cultural macro trends, when analysing real estate.

First of all, a crash in real estate now would mean a crash in city real estate. All the rural real estate never recovered. Can't be sold. Not in a bubble.

So it's city real estate we're talking about and there are some strong drivers of demand:

- Continued singles lifestyle (double demand for apartments)
- Immigration (feeds locals into private real estate)
- Increased migration from rural to city
- Increased college education rates

And so on. All these things means a lot more people into the cities.

In most countries, the real estate people should look at is suburban houses, because these are owned by debt-ridden boomers.

When they die off en masse, what is going to happen? At the moment a lot of financial policy is done to keep a hand under these insolvent boomers. Then they die. No more bail outs.

Boomers are about 65-70 years old. They have generally aged well and will live fairly long. Lets say 80 years on average. That puts the impending melt down about 10-15 years away realistically.
 

Leonard D Neubache

Owl
Gold Member
Australia Sucks said:
Leonard I get where you are coming from but we need to try to keep the thread objective and not turn it into a dick swinging contest. If everyone did what you suggested it would cause the thread to devolve into a bragging contest, besides people can easily lie as nobody is verifying the results, so I do not see what purpose it serves.

Also comparing increases in net worth is only part of the story because different investors take different levels of risk and have different levels of income and savings. Do you really think the guy that made 500% in less than a year from Ethereum is smarter than the guy who made 30% in the same period in the stock market? Or is he just luckier or more risk tolerant?
...
Did you read my post? I was very careful with my wording.

If everyone posting on this thread listed by percentage the increase in the net worth of their investments by year for, say, the last ten years, then we'd soon see what was what.
There are a million idle speculators on the internet that can come up with a good economic rationale for anything.

Nobody should trust the advice of anybody in this field unless they have a good ten year track record behind them ("and still some skin in the game" I would hasten to add).

Most people aren't even willing to say "on the basis of these predictions I have invested $xxx,xxx". Call me a grumpy Gus if you like. I don't get my kicks out of idle market speculation. Perhaps others do. But with no skin in the game isn't it just a bit of a circle-jerk? Say what you want about people that go to the races and don't bet, but at least the horses are exciting to watch. To my mind this is like going to the races with empty pockets when the horses run at .0002 kilometers per hour.

Maybe what the RVF needs in this field is a provable and quantifiable competition where people list their investments which can be tracked over time. Like a unbiased rep system for economic nous.
 

TheFinalEpic

Pelican
Gold Member
Historically, interest rates have not been this low, so your argument that they need to be much higher to constitute an indication of a crash is flawed. You also clearly are unaware of what is going on in the Canadian real estate market. Now, do I believe doomsday is around the corner? Couldn't care less, my strategies are over a much smaller time period. However the growing P/E of many companies is indicative of a system that is bloating.
 

TheFinalEpic

Pelican
Gold Member
Travel Museums said:
Kid twist what are you talking about? How on earth has it been proven false that the market always grows. You're obviously missing my point. I'm not talking about a little bit of stagnation that's a blip in an 80 year investment portfolio. Big picture.

There will always be ups and downs. The Great Recession, even Depression was a down. Prolonged but temporary downs, after long ups. Followed by more ups. Look at every economic measure from GDP to the total NYSE points. The market always grows. LONG TERM.

What is the only way to keep your cash worth than inflation? Invest. Equities, housing, etc.

The market is down. Your cash is more valuable. Equities are undervalued. What do you do? Buy. Invest. It's so simple.

The markets up. You're worried it's overvalued. What do you do? Invest. Oh wait I should sell and clear profit first right? Wrong. The unmanaged index still outperforms slick Rick in the long run.

The USA always recovers and grows. Our military industrial complex supported by all your tax dollars insures this. Why do you think there are only two real political parties both of whom are controlled by the same donors?

Invest $50 a week for your entire life. If you have extra cash in a recession make a big move (odds are you'll chicken out).

Whats the point of all this analysis? How is it going to change anything in 99% of people's lives. It's a farce. Are you going to retire any earlier or have anymore money?

If you're not disciplined enough to actually invest a set amount regularly the answer is no. Your manipulating yourself.

How about I don a suit. Then you can pay me to manage your money buy-sell-buy-sell and in 50 years I'll be outperformed by a broad basket. You can pay me and still pay more for newspapers and cable tv shows. Devote time to it. And for what? Most of the growth is Facebook, Amazon, a few others. Take them out and your left with boring stuff.

I'm not some bull investor. Our economic system runs on debt. It's a Ponzi scheme. But unlessyour going to invest every cent into an off grid paradise you really have no choice but to play ball. In the event of a true collapse your money will be itchy toilet paper anyway.
This is a dangerous mindset. It's why real estate crashed so hard in 07-08 because "it can only go up!"

Read a book or two on hedge funds then tell me the market can't be beat.
 

Australia Sucks

Kingfisher
Leonard you can start a thread where people post there total investment portfolio and their buy and sell decisions live and see how it goes. It could turn out to be an interesting thread.

However it should be noted a lot of people do not like to post their whole investment portfolio on the internet apart from the usual privacy reasons. One reason people might not like to do that is because it creates competition for their ideas.

Sure if you are buying shares in Apple and you write about its not going to make any difference to the price of Apple shares, but what about if you are trying to accumulate a position over a long period of time in an illiquid micro-cap stock? 5 or 10 other guys buying into stock could push the price up before you are finished buying. What about if you are buying multiple properties over time in a small niche tightly held suburb where very few properties come onto the market?

Yes an ideal world we would have evidence of everybody's track record before they posted their economic/market commentary but it does not appear likely to happen. So if you want you can choose to read the opinions and analysis that people post and use your own judgement and research to determine if you think it has merit or not. That or you can choose to ignore people's opinions. The point is to be exposed to different opinions and sources/links to research you have not read before. Its not supposed to be that somebody says something and you think "right this guys a genius so whatever he says is likely to be right so I'll just blindly follow his recommendations"

In regards to my own market commentary like I said before I am happy to p.m. you details about my investments and track record if you want it. I never claimed to be a financial genius. I am just a guy who has done above average and made a bit of money from the markets over a ten year period.

TheFinalEpic Canada's housing market is admittedly a mixed bag with some cities doing well and others not so well. However the overall Canadian housing market has not collapsed yet and is still doing okay and I do not believe it will collapse in the near term. Am I not suggesting people should rush out and buy any old overpriced Canadian property on a low yield for investment. I am just saying people should not be unduly worried about a collapse in the near term.

For example if you live in Canada and own a house and have a mortgage on it, there is no need to sell your house and rent because you think the market is about to collapse. Also I think if people in Canada want to buy a home to live in they should do it (although proceed with caution and careful planning) rather than wait for a market collapse that is unlikely to come.

To me the fact that in Canada central bankers, bank economists, housing market analysts, etc all seem worried about a housing crash seems to confirm (of course when considered in conjunction with all the other evidence I talked about) that its not likely to come soon. If everybody is worried about crash its unlikely to happen because their money is not in the market. Also a market whether the housing market or the stock market can keep moving higher for a long time on falling transaction volumes. There is no reason that falling transaction volumes must cause a crash. Could Canadian house prices drop 5% sometime this year or next? Sure, but that is no reason to get your knickers in a knot.
 

Christhugger

Kingfisher
^ Haven't you heard? Toronto housing is crashing as we speak.

http://www.lowestrates.ca/blog/homes/has-toronto-housing-bubble-burst-june-prices-have-dropped

New Ontario Lesberal laws that tax foreign buyers and even further tighten rental regulations. (Perhaps some real estate "investors" are starting to realize that a 4% cap rate doesn't make for a good business plan?)

Plus interest rate increases and more on the horizon, which if America keeps tightening Canada will have to follow suit no matter what.

And lastly demographics are really coming to a head. Boomers aren't retiring in the near future anymore, they are ready, now.
 

Australia Sucks

Kingfisher
Christpuncher my view is that its more than likely a temporary correction and you may well see Toronto house prices at new record highs sometime next year. Also to put into context when you are looking at very short-term periods prices can be volatile. Prices are still higher than they were in January. Can prices drop a little lower? Sure they can.

At the very real risk of ending up with egg on my face I think you will likely see record highs (or at the very least higher prices than today) in Torronto again sometime next year.
 

Australia Sucks

Kingfisher
Although I have some relatives in Canada I am obviously no expert on the Canadian housing market. Even if I am wrong on Toronto I still don't think the overall housing market in Canada will crash anytime soon. Besides the property market of one city crashing by itself is usually not enough to implode the economy. The overall housing market in Canada has started to drop already but not as much as Torronto and I think its likely to be a shorter term pullback before it starts heading higher again.

Here is someone with a bullish view (admittedly though its self-interest/bias)
https://www.thestar.com/business/re...sing-markets-downturn-may-have-an-upside.html

Here is another bullish article:
http://www.huffingtonpost.ca/nathan...toronto-housing-market-wont-crash_a_22492197/
 

TheFinalEpic

Pelican
Gold Member
Australia Sucks said:
Although I have some relatives in Canada I am obviously no expert on the Canadian housing market. Even if I am wrong on Toronto I still don't think the overall housing market in Canada will crash anytime soon. Besides the property market of one city crashing by itself is usually not enough to implode the economy. The overall housing market in Canada has started to drop already but not as much as Torronto and I think its likely to be a shorter term pullback before it starts heading higher again.

Here is someone with a bullish view (admittedly though its self-interest/bias)
https://www.thestar.com/business/re...sing-markets-downturn-may-have-an-upside.html

Here is another bullish article:
http://www.huffingtonpost.ca/nathan...toronto-housing-market-wont-crash_a_22492197/
Real estate is gaining in our percentage of GDP, and represented half of it's growth in 2016. Vancouver has cooled off significantly as normal people cannot afford housing. The Canadian market is essentially 2 cities. All other provinces are currently struggling tremendously.
 

Australia Sucks

Kingfisher
I read the article in your link Troller. To me its a bullish sign that investors are bearish/conservative. If the majority of investors were raging bulls that would be the time to get worried.
 

Repo

Hummingbird
Many people are expecting a decline in the US around 2019 or 2020, maybe not a "crash", but a decline of sorts.

Recovery the last few years has been slower and gradual than previous recoveries, but non-mortgage consumer debt is increasing rapidly. Banks are already bumping up their reserves for credit cards losses, as delinquency rates are on the rise. Consumer delinquency is on the rise, despite the fact that overall employment isn't that bad. The simplified idea is that when job growth slows, delinquencies will already be on the rise, prompting a pullback in lending further agitating the decline.

Of course that is a ways off and there are things that can be done that can change our trajectory.
 

Troller

Woodpecker
High end real estate is crashing. Mostly targeted at wealthy foreigners for money laundering. This segment of real estate will have come down to national levels affordability. Chinese who sustained most of this market dried up. Since they are being scrutinized heavily. I heard Jinping spends his life in undergound tunnels because of fears of being killed. Chinese officials have to disguise liquor on water bottles. Since they are not allowed to drink expensive booze.
I don´t think luxury real estate is a falling knife. It will stop falling when nationals can afford it. Was overpriced from foreigners. The profit margins of developers will be reduced. But houses will still be sold.

Low and mid real estate will probably continue going up. Since the banks will more and more ease the requirements for loans. As soon as 100% financing home loans starts being advertised we are in the peak of the bubble. As for now there´s still time to inflate the bubble a little more.

Central banks actions are also to consider specially: End of QE, raising rates and fractional banking. There seems to be in motion for the 2019/2020 event. Will see.

I check this bear blog from time to time:
http://thehousingbubbleblog.com/index.html
 
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