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hedi

Hear Me Out Just For A Moment.

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i know a lot of people are expecting the markets to fall soon. and well they might. but they might not.

the bubble over the last decade was in housing, and i am firmly on the side of the bull trap at present. i think housing has a long way to fall.

however, was the stock market in a bubble. of that i am not so sure. it had not yet reached the highs of 1999, when it fell, and still has not reached the value highs of 1987.

so what happens if actually we might be missing something here. just a possibility.

on top of that i think what could be holding the market up is not over optimisum, but something much more worrying. could this be a DASH, OUT OF CASH. because if it is we ought to join pretty pronto.

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Mathematically they cannot do anything else, it's a bit like gravity, you can watch all the Superman films you want, but if you chuck yourself out your second floor window you will plunge to earth with a bump. Of course, most people use wishful thinking as the basis of most purchases/investments. The market will keep going down, that's the trouble with deflation.

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Mathematically they cannot do anything else, it's a bit like gravity, you can watch all the Superman films you want, but if you chuck yourself out your second floor window you will plunge to earth with a bump. Of course, most people use wishful thinking as the basis of most purchases/investments. The market will keep going down, that's the trouble with deflation.

my trouble is, the only thing i see deflating is the value of my money.

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Guest DisposableHeroes
i know a lot of people are expecting the markets to fall soon. and well they might. but they might not.

the bubble over the last decade was in housing, and i am firmly on the side of the bull trap at present. i think housing has a long way to fall.

however, was the stock market in a bubble. of that i am not so sure. it had not yet reached the highs of 1999, when it fell, and still has not reached the value highs of 1987.

so what happens if actually we might be missing something here. just a possibility.

on top of that i think what could be holding the market up is not over optimisum, but something much more worrying. could this be a DASH, OUT OF CASH. because if it is we ought to join pretty pronto.

The finite global financial stimulus packages are what's holding the market up.

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i know a lot of people are expecting the markets to fall soon. and well they might. but they might not.

the bubble over the last decade was in housing, and i am firmly on the side of the bull trap at present. i think housing has a long way to fall.

however, was the stock market in a bubble. of that i am not so sure. it had not yet reached the highs of 1999, when it fell, and still has not reached the value highs of 1987.

so what happens if actually we might be missing something here. just a possibility.

on top of that i think what could be holding the market up is not over optimisum, but something much more worrying. could this be a DASH, OUT OF CASH. because if it is we ought to join pretty pronto.

I totally agree and have posted this before. It doesn't seem to attract much interest (I don't know why) and there are constant posts that run together house prices and stock prices when only property was the recipient of the credit bubble funds.

I am very bullish on stocks in the medium-term but expect a few short-lived shocks on the way, in which I will be buying.

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my trouble is, the only thing i see deflating is the value of my money.

Deflation (the reduction in the supply of money boradly speaking) causes all sorts of problems. It may be expected that generally wages, the price of goods and services will go down, but this isn't across the board. They should decline at different rates,indeed, depending on the commodity in question, they could even increase in price. The value of your money will go down if there is a corresponding decrease in the availablity of goods and services.

It will certainly be better to have access to money and no debt, but the majority will suffer to some extent. A small band at the top of our pyramid will do very well, but they will need to pay a large amount of poor people to protect them from other poor people.

Asset prices such as property will continue to decline. The cost of putting food on your table will however continue to rise.

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i know a lot of people are expecting the markets to fall soon. and well they might. but they might not.

the bubble over the last decade was in housing, and i am firmly on the side of the bull trap at present. i think housing has a long way to fall.

however, was the stock market in a bubble. of that i am not so sure. it had not yet reached the highs of 1999, when it fell, and still has not reached the value highs of 1987.

so what happens if actually we might be missing something here. just a possibility.

on top of that i think what could be holding the market up is not over optimisum, but something much more worrying. could this be a DASH, OUT OF CASH. because if it is we ought to join pretty pronto.

Hedi, if this current surge in housing sales was driven by a dash out of cash, it would mean that the house buyers had a clue about financial markets and the possible inflatory aspects of QE. I know a few people who are buying right now, and they do not have a clue about financial markets and QE. They are buying because 'houses have gone down 10%/20% which means they are cheap'. It is just a suckers rally.

And, being in the market for new wellies right now, I will avoid Hunters and go for Le Chameau ;) Any reason for the dislike of Hunters?

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i know a lot of people are expecting the markets to fall soon. and well they might. but they might not.

the bubble over the last decade was in housing, and i am firmly on the side of the bull trap at present. i think housing has a long way to fall.

however, was the stock market in a bubble. of that i am not so sure. it had not yet reached the highs of 1999, when it fell, and still has not reached the value highs of 1987.

so what happens if actually we might be missing something here. just a possibility.

on top of that i think what could be holding the market up is not over optimisum, but something much more worrying. could this be a DASH, OUT OF CASH. because if it is we ought to join pretty pronto.

PE historicaly can go much lower than where we are, coupled with falling E side of the equation stock IMHO are not a screaming buy yet.

Dash for assets/crack up boom can not be rulled out.

spandpe10large.gif

valo.jpg

picture1yrp.jpg

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I totally agree and have posted this before. It doesn't seem to attract much interest (I don't know why) and there are constant posts that run together house prices and stock prices when only property was the recipient of the credit bubble funds.

Not true. The real estate boom drove all sorts of funds - notably pensions - which are now on the edge or over. Given the sheer scale of the asset 'wealth' created during this boom (trillions of $$$$s) and the large proportion of which is held by industry, surely you must believe that a lot of companies out there are sitting on piles of non existent assets. If you can manage to seperate the wheat from the chaff, you will probably do fine - but what is what these days?

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And, being in the market for new wellies right now, I will avoid Hunters and go for Le Chameau ;) Any reason for the dislike of Hunters?

quality is shot to pieces. my first pair lasted 18 years then replaced and within 18 months literally fell apart. could they care, not a jot. outside 1 year you are on your own. well for the cost i think they should last a bit longer than 1 year. so please buy something else instead. you have made my day.

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Mathematically they cannot do anything else, it's a bit like gravity, you can watch all the Superman films you want, but if you chuck yourself out your second floor window you will plunge to earth with a bump. Of course, most people use wishful thinking as the basis of most purchases/investments. The market will keep going down, that's the trouble with deflation.

Yes, it's not like governments can manufacture money out of thin air.

hang on.......

Edited by Sour Mash

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Not true. The real estate boom drove all sorts of funds - notably pensions - which are now on the edge or over. Given the sheer scale of the asset 'wealth' created during this boom (trillions of $$$$s) and the large proportion of which is held by industry, surely you must believe that a lot of companies out there are sitting on piles of non existent assets. If you can manage to seperate the wheat from the chaff, you will probably do fine - but what is what these days?

Oil, miners, utilities, brewers all float my boat.

And I'm talking about the UK stock market, I'm not (directly) investing in US shares.

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i know a lot of people are expecting the markets to fall soon. and well they might. but they might not.

the bubble over the last decade was in housing, and i am firmly on the side of the bull trap at present. i think housing has a long way to fall.

however, was the stock market in a bubble. of that i am not so sure. it had not yet reached the highs of 1999, when it fell, and still has not reached the value highs of 1987.

so what happens if actually we might be missing something here. just a possibility.

on top of that i think what could be holding the market up is not over optimisum, but something much more worrying. could this be a DASH, OUT OF CASH. because if it is we ought to join pretty pronto.

No it's just the QE money leaking into the market.

I agree though, if they keep QE up it could keep on leaking into the market. I shudder to think of the longterm consequences if they do.

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the bubble over the last decade was in housing,

No. It was a credit bubble not a house price bubble.

Assets became inflated as a result particularly property.

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No. It was a credit bubble not a house price bubble.

Assets became inflated as a result particularly property.

Nope, it really was a housing bubble.

The rising value of the housing stock allowed people to purchase more credit.

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No. It was a credit bubble not a house price bubble.

Assets became inflated as a result particularly property.

Nope, it really was a housing bubble.

The rising value of the housing stock allowed people to purchase more credit.

I'm with Flat Bear on this one. You get credit bubbles and they inflate an asset class. It happened to be property this time; the credit needs to go into something - it was tulip bulbs once.

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snip

Asset prices such as property will continue to decline. The cost of putting food on your table will however continue to rise.

sounds like a typical BUST phase of the economic cycle.

fixing a BUST just prolongs it. fix it too much and the BUST becomes a bomb.

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I'm with Flat Bear on this one. You get credit bubbles and they inflate an asset class. It happened to be property this time; the credit needs to go into something - it was tulip bulbs once.

The credit doesn't need to go anywhere. Its forced out of people because they have no choice other than to pay for access to housing.

The price of housing rose and so people needed to take on more credit to purchase housing. To put it another way if the price of the housing stock remained constant and low the 'credit bubble' would have never materialised because there would have been no mechanism for allowing speculation.

Edited by chefdave

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I'm with Flat Bear on this one. You get credit bubbles and they inflate an asset class. It happened to be property this time; the credit needs to go into something - it was tulip bulbs once.

Look at my previous post, the bubble is in stocks also, the housing bubble was blown to alleviate/pull us out of the stock market bubble collapse in early 2000. The market was pumped back up to it's previous high on the back of the credit bubble continued growth.

I can't find the chart of the Japanese Nikkei that I recently posted which showed it's performance over the last 20 years, quite sobering for anyone turning bullish on equities at this time in the crisis. I don't think we will get to the 90% down seen in 1930's because of the modern market management techniques but we could see 70% off peak at the extreme. More likely they will try and hold the markets between 50% down and peak for the next 10-20 years if they are successful in avoiding the Japanese relentless decline from 38000 to 7000.

Some more charts

totalcreditmarket.jpg

ej4.gif

ej5.gif

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Look at my previous post, the bubble is in stocks also, the housing bubble was blown to alleviate/pull us out of the stock market bubble collapse in early 2000. The market was pumped back up to it's previous high on the back of the credit bubble continued growth.

I can't find the chart of the Japanese Nikkei that I recently posted which showed it's performance over the last 20 years, quite sobering for anyone turning bullish on equities at this time in the crisis. I don't think we will get to the 90% down seen in 1930's because of the modern market management techniques but we could see 70% off peak at the extreme. More likely they will try and hold the markets between 50% down and peak for the next 10-20 years if they are successful in avoiding the Japanese relentless decline from 38000 to 7000.

The stock market is just a well covered up subsidiary of the land market IMO so when the housing bubble burst in Japan it took the stock market down with it. As the housing market has remained relatively subdued Japanese stocks have had no reason to hyperinflate since.

I expect that a lot of these blue chip companies have significant real estate assets which crash their overall valuation once recession hits.

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on top of that i think what could be holding the market up is not over optimisum, but something much more worrying. could this be a DASH, OUT OF CASH. because if it is we ought to join pretty pronto.

The market movers don't actually have cash though do they. Not until you give them yours anyway.

If you are going to buy stocks don't do it out of fear of losing out!

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Yes, it's not like governments can manufacture money out of thin air.

hang on.......

Government's don't, banks do, government's merely provide the collateral. So in essence, yes banks can produce an infinite amount of fiat money. The problem is that it will always involve interest, so they will never be able to catch up, they will always be chasing their tails. More money will therefore need to created.

As in the world of the Carnie, those that get "first count" will always help themselves to the lion's share of the wealth. Hence those involved with the creation will always skim off the top, and by "skim" I mean take a large proportion.

In the end though the money itself becomes worthless.

In the end our money will be worthless, we will get hyper-inflation, however till then we will have deflation. That doesn't mean that the price of unleaded is going to go down anytime soon..............

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The credit doesn't need to go anywhere. Its forced out of people because they have no choice other than to pay for access to housing.

The price of housing rose and so people needed to take on more credit to purchase housing. To put it another way if the price of the housing stock remained constant and low the 'credit bubble' would have never materialised because there would have been no mechanism for allowing speculation.

You have the cause and effect inverted. The housing only became expensive because people were able to borrow more than they traditionally could. If lending were tight at 3.5x single or 3+1 to reasonable credit risks and btl was not allowed at anything over 60%ltv or only on an audited commercial basis, then there would not have - in fact could not have - been a problem.

Edited by RichB

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