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

[Arado]

“We never saw it coming” will be the response of the naysayers when the next crash happens, just as they did in 2008. The next crisis is a global debt crisis that is already here, but the Fed / BOE / ECB keep pumping money into the markets to male it look like everything is OK and it’s “business as usual”. Smart people however know this, and have taken precautions to protect their assets and businesses going forwards. Educate yourself rather than listening to bankers (I used to be one but got fed up of their bs)...

https://www.icis.com/chemicals-and-...t-for-the-sp-500-will-end-with-a-debt-crisis/

The key is to know what the Fed is thinking - how much volatility in the stock and repo markets are they willing to tolerate before pumping money in? How much inflation (assuming they use real inflation stats and not some bs hedonic modeling) before they are forced to raise rates regardless of the impact on asset prices? Are they going to bail out the insolvent zombie corporations? How much US debt will they monetize? Are they simply just waiting for the end of the US election to let interest rates normalize and stop bailing out hedge funds with toxic assets?

If you can answer these questions then it will be pretty clear what investment strategy to pursue - if you think the Fed will keep printing no matter what then go all out in gold and take on fixed debt to buy assets so that your net worth will rise with inflation and debt will be wiped out.

Or, if you think the Fed will eventually stop feeding the liquidity crunch in the near future (either post election or deep state inspired pre election crash or in response to inflation spike) then just sit back in cash and enjoy the crash, or even short the market.

Given that this whole boom is driven by Central Banks, it's somewhat pointless to try and predict the future without predicting what the Fed will do.

Unless this coronavirus is a true black swan that the printing press isn't able to rescue.

 

[NoMoreTO]

Sometimes I just look at the elections. Do the powers that be want Trump to retain his power? I would guess at this point - yes.

They are still getting their immigration agenda in, he caters to them so they don't crash the economy. Either way, my problem with stocks is that they can crash at anytime, harder than anything else. So much is based on fear. Plus it does feel like its been a long run up.

I sold some stock yesterday, I am working to move to a real investment in land and other hard assets. I am about 35% cash at this point.

 

[SomeOneSomeWhere]

Real estate is a much better bet if you want to do micro apartments for the human cattle agenda.

The stock market on the other end who knows when it will crash. I already thought it was crazy overvalued last year and now it's even more so.

The powers that be force everything into it through negative interest, easy credit etc. and only they know when the next artificial collapse will happen that will be probably be unsurpassed and reign in the end of clown world and the start of an attempt at one world communism.

 

[Australia Sucks]

I thought I would do an update on this thread.

Over a month ago I did make a comment about Australian property and how it would be a good time to buy (in cities other than Sydney and Melbourne). I was planning to follow up with a thread on Australian property but never got round to it. I will say that now there is no point looking at thew Australian property market not because I am overly negative about it but rather given the falls in the Australian stock market peoples attention should be focused on which Australian stocks to buy rather than looking at the property market.

Firstly the Australian stock market (All Ordinaries index) is down around 27% from its all time highs which it hit earlier this year. The all time high on the All Ordinaries Index was around 7290. Its currently around 5333. Smaller stocks have genberally

This downturn is hitting much harder than I expected and I have been accumulating Australian shares on the way down. I just wanted to acknowledge that based on the initial premise of the thread that a crash (which I defined for the purposes of this thread as a fall of 40% or more) would not occur until the mid 2020s. Given the current trajectory of the market I could quite possibly be proven wrong on that call.

I will say that in Australia there is currently plenty of opportunity to buy quality stocks at bargain basement prices. Generally speaking the small and microcap stocks have fallen much harder than the large cap stocks. So the smaller end of the market is where your attention should be focused.

My current top picks would be Credit Corp Group (ASX code: CCP) and Wam Microcap (ASX Code: WMI).

Credit Corp closed today at around $15.52. Anything below $15 (ten times this year's forecast earnings per share of $1.50) you should accumulating. Its currently paying a fully franked dividend of at least $0.72 per annum which at current prices is a fully franked dividend yield of over 4.6%. I think they will still manage to increase earnings per share in the next financial year even if we have a mild recession. This is a company that long-term will keep growing its earnings per share at double digits while paying an attractive dividend.

Wam Microcap is a listed investment company run by arguably the best performing Australian focused fund managers that retail investors can access. The current share price is at $1.10 which is the price it listed at in mid 2017. At current prices and below investors should start accumulating. When the market starts recovering selected microcap stocks should rocket and the fund will benefit from that. It pays an attractive fully franked dividend. Going forward I expect it to be able to pay at least 4 or 5 cents per share in fully franked dividends (its paid at least $0.06 per share per annum since listing). 4 or 5 cents would be a fully franked yield of 3.50 - 4.60% on the current share price.

There are plenty more stocks worth buying but those are my top two for the moment. The market may well continue to slide so I suggest anybody looking to buy stocks (including the two I have mentioned) should gradually average in (i.e. buy some and then buy more if it drops even lower).

Has anybody else been buying Australian shares?

 

[[email protected]]

The stock market has caved in 30% in a short amount of time and I wouldn't be surprised if it caved in another 30%. The ASX and all other markets will crash too, this is just the beginning of a depression thanks to Covid19. Once the jobs start disappearing you can expect the house price to finally fall and become affordable for millennials. Eventually stock and asset prices will return to their highs but it'll probably take 2 years or longer. Like I mentioned earlier, this is only the first wave of economic damage by the virus. Expect more to come before the end of the year. Cash is king right now and the most defensive position is in gold, bonds, and Bitcoin.

 

[Tail Gunner]

Eventually stock and asset prices will return to their highs but it'll probably take 2 years or longer.

I cannot speak for Australia, but in the U.S. manipulation by the Federal Reserve Bank means that while bull markets have become much longer (because of intervention in interest rates) so have the recoveries. You always pay a price in economics. Stated another way, if you create a large bubble, it takes far longer to recover when the bubble bursts. Market drops have become less frequent over time, but the severity of the drops has increased. So, both bull markets and recoveries are now often exaggerated. The most likely path to a quick recovery is if the coronoavirus threat was exaggerated.

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[Australia Sucks]

I just want to point out that anybody that is invested in the stock market needs to keep a long-term perspective (assuming they own sound businesses). If you own shares in a quality company that is going to be around for another 50 or 100 years and increase its earnings over time then 1 or 2 years of bad earnings due to a recession mathematically only makes a very small difference to the intrinsic value of the company. The intrinsic value of a quality stable business does not generally drop by 50% just because of a recession (whereas the price may easily drop 50% or more). Obviously I am not talking about low quality businesses that will not survive a recession.

 

[MichaelWitcoff]

Agree completely ^

I like Phil Town’s 10-10 Rule: if you wouldn’t own a company for ten years, then you shouldn’t own its stock for ten minutes.

 

[kurtybro]

Eventually stock and asset prices will return to their highs but it'll probably take 2 years or longer.

I cannot speak for Australia, but in the U.S. manipulation by the Federal Reserve Bank means that while bull markets have become much longer (because of intervention in interest rates) so have the recoveries. You always pay a price in economics. Stated another way, if you create a large bubble, it takes far longer to recover when the bubble bursts. Market drops have become less frequent over time, but the severity of the drops has increased. So, both bull markets and recoveries are now often exaggerated. The most likely path to a quick recovery is if the coronoavirus threat was exaggerated.

What's a quick recovery in the context of coronavirus health threat being exaggerated whilst the economy was ground to a halt from all the panic? How long of a recovery are we talking here keeping in mind the lockdowns currently occurring now

 

[Australia Sucks]

I thought I would do an update on this thread.

Over a month ago I did make a comment about Australian property and how it would be a good time to buy (in cities other than Sydney and Melbourne). I was planning to follow up with a thread on Australian property but never got round to it. I will say that now there is no point looking at thew Australian property market not because I am overly negative about it but rather given the falls in the Australian stock market peoples attention should be focused on which Australian stocks to buy rather than looking at the property market.

Firstly the Australian stock market (All Ordinaries index) is down around 27% from its all time highs which it hit earlier this year. The all time high on the All Ordinaries Index was around 7290. Its currently around 5333. Smaller stocks have genberally

This downturn is hitting much harder than I expected and I have been accumulating Australian shares on the way down. I just wanted to acknowledge that based on the initial premise of the thread that a crash (which I defined for the purposes of this thread as a fall of 40% or more) would not occur until the mid 2020s. Given the current trajectory of the market I could quite possibly be proven wrong on that call.

I will say that in Australia there is currently plenty of opportunity to buy quality stocks at bargain basement prices. Generally speaking the small and microcap stocks have fallen much harder than the large cap stocks. So the smaller end of the market is where your attention should be focused.

My current top picks would be Credit Corp Group (ASX code: CCP) and Wam Microcap (ASX Code: WMI).

Credit Corp closed today at around $15.52. Anything below $15 (ten times this year's forecast earnings per share of $1.50) you should accumulating. Its currently paying a fully franked dividend of at least $0.72 per annum which at current prices is a fully franked dividend yield of over 4.6%. I think they will still manage to increase earnings per share in the next financial year even if we have a mild recession. This is a company that long-term will keep growing its earnings per share at double digits while paying an attractive dividend.

Wam Microcap is a listed investment company run by arguably the best performing Australian focused fund managers that retail investors can access. The current share price is at $1.10 which is the price it listed at in mid 2017. At current prices and below investors should start accumulating. When the market starts recovering selected microcap stocks should rocket and the fund will benefit from that. It pays an attractive fully franked dividend. Going forward I expect it to be able to pay at least 4 or 5 cents per share in fully franked dividends (its paid at least $0.06 per share per annum since listing). 4 or 5 cents would be a fully franked yield of 3.50 - 4.60% on the current share price.

There are plenty more stocks worth buying but those are my top two for the moment. The market may well continue to slide so I suggest anybody looking to buy stocks (including the two I have mentioned) should gradually average in (i.e. buy some and then buy more if it drops even lower).

Has anybody else been buying Australian shares?

I just want to give an update here. I once again was wrong and again underestimated the severity of the crises. My long-term opinion of Credit Corp (ASX code: CCP) is unchanged and I reiterate my buy call to slowly accumulate on any major dips, but short-term I would expect a substantial decline in earnings and dividends. Also the company may eventually have to take defensive measures such as reducing dividends and reducing investment (making less consumer loans and buying less debt ledgers) to strengthen their balance sheet. If unemployment goes high enough (say 15 or 20% in Australia and the same in the U.S.A.) a highly dilutive and heavily discounted capital raising is not out of the question.

 

[jbkunt2]

I'm in the US. Do you know if there are any US listed or accessible Australia ETFs and would you think they are a decent but for diversification right now?

Thanks.

 

[Tail Gunner]

I'm in the US. Do you know if there are any US listed or accessible Australia ETFs and would you think they are a decent but for diversification right now?

Thanks.

You do know that Australia was one of the few developed nations to avoid recession in 2008, right?

Australia was among just four developed countries that avoided a recession in 2009 along with Israel, Poland and South Korea.

https://www.abc.net.au/news/2018-09-15/10-years-since-australia-responded-to-the-gfc/10248784

I am not saying that there are not undervalued Australian stocks, but Australia is doubly due for a financial crisis, especially in the housing sector.

 

[Arado]

I just want to point out that anybody that is invested in the stock market needs to keep a long-term perspective (assuming they own sound businesses). If you own shares in a quality company that is going to be around for another 50 or 100 years and increase its earnings over time then 1 or 2 years of bad earnings due to a recession mathematically only makes a very small difference to the intrinsic value of the company. The intrinsic value of a quality stable business does not generally drop by 50% just because of a recession (whereas the price may easily drop 50% or more). Obviously I am not talking about low quality businesses that will not survive a recession.

While I agree that one has to have a longer term perspective than the hedge funds focused on yearly returns, the problem now is that because of the pace of technology and disruption it's hard to know which business models will be around and/or viable in ten years. I can think of many quality companies but also of potential innovations that would severely cut into their profits. Will any of the large car companies survive the transition to EVs? Will the iphone still beat Huawei ten years out (will phones even exist?)? Will Microsoft Office be the software of choice? Will the anti trust regulators come after big tech? And so on...companies back in the 70s weren't dealing with this pace of change.

 

[monsquid]

I dropped $20k into MSFT and AAPL. 10k each. Great time to buy at discount.

 

[nomadbrah]

Eventually stock and asset prices will return to their highs but it'll probably take 2 years or longer.

I cannot speak for Australia, but in the U.S. manipulation by the Federal Reserve Bank means that while bull markets have become much longer (because of intervention in interest rates) so have the recoveries. You always pay a price in economics. Stated another way, if you create a large bubble, it takes far longer to recover when the bubble bursts. Market drops have become less frequent over time, but the severity of the drops has increased. So, both bull markets and recoveries are now often exaggerated. The most likely path to a quick recovery is if the coronoavirus threat was exaggerated.

Gen Z are going to be fucked.

And angry.

They were born into neverending war post 9/11.

They became teenagers on the backdrop of the financial crisis.

They come off age during a pandemic that will destroy the job market for years to come.

I don't think they'll take kindly to more boomer lecturing.

 

[crutoy]

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.

 

[John Michael Kane]

Las Vegas will be the ultimate bellwether of the housing market in the United States, much like it was in 2007-2008. There was a huge housing boom once the Great Recession recovery took hold. Developers bought up tons of acres of properties and built out massive master-planned communities with $300+ a month HOA fees, private armed security, golf course access, etc. The amount of inventory that has been flooded into the Las Vegas market in the last few weeks has been astounding. As Las Vegas is all about gambling and conventions, they have no viable path to recovery until a vaccine or treatment can be widely deployed. That is realistically not happening quickly. Housing prices in Las Vegas are still overpriced like the rest of the United States, but headed downwards. There are not enough employed people in the metro area to buy right now. Many homes were built and bought with cheap debt, but now that nobody can afford to pay the piper, banks and developers are staring at massive losses in the coming year and into 2021 (and perhaps beyond).

Here's a house that has had either fire/smoke damage, was purchased for $1.7m in 2007, but is now foreclosed and in bad condition with Chase still wanting a million dollars for this mess:

In the coming years, you'll be able to buy these mega-mansions for 2/3rds off, especially the ones that are in poorer condition.