Fair warning

[ToDo]

http://www.businessinsider.com/roubini-i-dont-believe-in-gold-2009-10

Consequences for Australia - massive deinvestment from shares and crashing down interest rates.

 

[JulieW]

This guy might be right but there are so many people pushing opposite lines on the future - the crash boom opera - I'll take his warning as possible but not influential. Sure we may get rocked to the foundations if there is a full blown deflationary world but that takes a while to settle in and it liooks like the RBA is more concerned about inflation in Australia than continuing deflation.

I read the Daily Reckoning newsletter every day and that dose of negativity helps me keep nervously aware of what could happen to the world economy, but that doesn't mean it will in any particular time frame. I've learned I have the facility to imagine the best and fear the worst so a healthy dose of caution has always been with me despite the famous advice (I think Jimmy Hoffa said it. ' Most of the things you worry about never happens '

 

[ToDo]

Julie,

Market does not care about what Noriel says or I say. But it obeys economic laws, which are as unchengeable as law of gravitation.

Last year market corrected when it was trading at 16 times earnings, now it trades at 19 times earnings, as earnings have crashed.

Not a single time in the history real recovery started before market rolled back to 4 times earnings. This time the most likely it will hit 1.5-2 times mark.

And this is going to happen no matter what sharemarket bulls are convincing themselves of.

 

[Ausprop]

where does he propose it goes? he seems internally torn on his opinions - as most people are at the moment.

 

[Aaron Sice]

he does seem a bit torn - maybe that gives a little more cred to the argument - like he's actually debating it within himself.

i've said it before - i'm no permabull. i'm bullish the Aus economy as a whole, and very bullish WA.

i've been out of the stockmarket since 3500. there's no reason for it to be pumped up so high. i see profit taking coming and have mentioned it elsewhere, but the profit taking will erode about 30% off the top value. have i ridden the wave? yes - since 3000. i thought at 3500 it was overbought but this is insanity.

small caps are gonna get PUMMELLED. CBA and NAB will lead the fall, AMP will be a good buy and BHP will get taken down hard.

there'll be no 7200 this time around - but certainly in the next 3-5 years.

 

[ToDo]

And where you can see Noriel being "torn"? Where is he "arguing" with himself?

I think he is straight as a ruler - major correction between now and middle 2010, then "Armageddon" in 3-4 years time. After that at least a decade of bouncing at the bottom - I see exactly where is coming from, there is no controversy at all - just very professional economic analysis.

 

[Aaron Sice]

he seems to pose some Qs at then end which makes me think that he is still thinking about it and constantly changing his opinion.

nothing wrong with that - just adds more cred because he's not just a spotlight grabber.

you're right - he sees gold going nowhere and a bit of stagnation happening - but i've read a lot of these and his tone is definitely "lets wait and see".

 

[aussierogue]

ToDo

I love your quote regarding ecomoic laws are unchangeable as the laws of gravity. You would think then that economists would get it right occassionally or atleast they would hold some consensus on some things.

But they dont - and they dont because econimics has too many variables. There is no denying the basic idea of demand and supply - but its all the murky stuff in between that makes the 'laws of economics' something I would not treat as a deity or alteast with such dogmatic opinions.

Cheers
Aussie

 

[Aaron Sice]

....or it just confirms that investing is a long term ideal - all the murky stuff in between makes and breaks short term players.

 

[Neophyte]

ToDo, I disagree on the sharemarket. I think economists have been constantly wrong. Don't listen to economists about shares. Listen to traders.

The thing to remember with the US market is that it has constantly been inexplicably high with various experts demanding it drop to fit their models. Key thing to remember in US is that dividends are taxed at 15%, therefore the super rich have a lot of their money in stocks to minimize their tax. Its a tax distortion (like we have in our property market).

Secondly stock prices are based on potential future earning. But they are based on the highest price a decent number of people support. e.g. only 10% of people have to value it that high. This happens for every stock where each sector is proped up by its partisan bulls.

Markets are not economic, they are psychological.

 

[ToDo]

ToDo, I disagree on the sharemarket. I think economists have been constantly wrong. Don't listen to economists about shares. Listen to traders.

The thing to remember with the US market is that it has constantly been inexplicably high with various experts demanding it drop to fit their models. Key thing to remember in US is that dividends are taxed at 15%, therefore the super rich have a lot of their money in stocks to minimize their tax. Its a tax distortion (like we have in our property market).

Secondly stock prices are based on potential future earning. But they are based on the highest price a decent number of people support. e.g. only 10% of people have to value it that high. This happens for every stock where each sector is proped up by its partisan bulls.

Markets are not economic, they are psychological.

You want me not to listen to myself? I am waiting for this crash since 2002, when 2001 crash has failed to materialise to the full extent. Traders can convince themselves in anything they want. Fundamentals never lie.
If the house has no foundations - it is going to fall, no matter how vivid is colour scheme you apply to it. I have only one message for sharemarket - RUN FOR YOUR LIFE!

 

[willair]

You want me not to listen to myself? I am waiting for this crash since 2002, when 2001 crash has failed to materialise to the full extent. Traders can convince themselves in anything they want. Fundamentals never lie.
If the house has no foundations - it is going to fall, no matter how vivid is colour scheme you apply to it. I have only one message for sharemarket - RUN FOR YOUR LIFE!

Must be hard to see it all happen,from 2002 up too one hour ago,someone's not telling the whole truth..willair..

 

[Bill.L]

Hi all,

ToDo, at the beginning of that article is the following line.....

Nouriel Roubini believes that a "wall of liquidity" is chasing all kinds of assets

A wall of liquidity to me means lots of money, perhaps some of the $5 Trillion created by governments around the world. If things start to fall over, more money will be created to stop a depression (or probably even a large recession).

If more and more money is created, yet the asset pool remains the same, then it is not rocket science to figure out what is going to happen, especially assets that return an income.

we are in a world where there are massive amounts of deflation because of a glut of capacity

Glut of what ?? Oil late '90's $10/bbl now $78. Wheat late '90's $2.40/bs now $4.90, Cotton '01 $0.30/lb $0.66/lb now, Iron ore, coal, cattle all similar.
I always thought lower prices meant glut, not higher ones.

bye

 

[Aaron Sice]

You want me not to listen to myself? I am waiting for this crash since 2002, when 2001 crash has failed to materialise to the full extent. Traders can convince themselves in anything they want. Fundamentals never lie.
If the house has no foundations - it is going to fall, no matter how vivid is colour scheme you apply to it. I have only one message for sharemarket - RUN FOR YOUR LIFE!

ah you make me laugh sometimes.

if it's not going up - and you're certain - why not take a put across the index trading share?

money where your mouth is.

 

[Neophyte]

You want me not to listen to myself? I am waiting for this crash since 2002, when 2001 crash has failed to materialise to the full extent. Traders can convince themselves in anything they want. Fundamentals never lie.
If the house has no foundations - it is going to fall, no matter how vivid is colour scheme you apply to it. I have only one message for sharemarket - RUN FOR YOUR LIFE!

Simple question. Do you know any really wealthy economists? Not middle class wealthy because they earn a very decent 6 figure wage.

The problem economists have is they don't allow for psychological feedback loops. The value of everything is set by what the rest of the crowd is doing and the perception of that crowd. A suburb is rising is price, people see it as an area on the up and buy there, they renovate, etc... all of a sudden it is an area on the up because of momentum.

Share market, banks, etc... is similar. Confidence and the velocity of money is everything. Fundamentals are over-rated.

 

[Aaron Sice]

no - fundamentals are NOT over-rated.

both the technical analysis and fundamental analysis must be studied before investing.

the every day stockmarket isn't SP500 cash futures any more than real estate makes the adrenaline pump.

velocity and momentum with money - in futures - is a very good way to describe what you're saying and a perfect example, Neophyte.

however, the momentum of money is directly tied to fundamentals when it comes to property.

 

[charttv]

no - fundamentals are NOT over-rated.

both the technical analysis and fundamental analysis must be studied before investing.

I second that. When both the technical and fundamental pictures align you have very high probability setups. This has been my experience over and over. It's rare when it happens and you may have to wait a long time for these scenarios to occur but when they do, it's a beautiful thing.

 

[blaster]

he does seem a bit torn - maybe that gives a little more cred to the argument - like he's actually debating it within himself.

i've said it before - i'm no permabull. i'm bullish the Aus economy as a whole, and very bullish WA.

i've been out of the stockmarket since 3500. there's no reason for it to be pumped up so high. i see profit taking coming and have mentioned it elsewhere, but the profit taking will erode about 30% off the top value. have i ridden the wave? yes - since 3000. i thought at 3500 it was overbought but this is insanity.

small caps are gonna get PUMMELLED. CBA and NAB will lead the fall, AMP will be a good buy and BHP will get taken down hard.

there'll be no 7200 this time around - but certainly in the next 3-5 years.

Well it's funny isn't it . I've been out since 38 or so , on the way down, and haven't trusted it since .
When the bounce came I was sure it would burn everyone but I wonder how many actually did jump back on, rode the wave to a nice 30 or 40% , maybe now re'bailed , or are they still on the ride . Been quick money if you were in hasn't it.
I wasn't smart enough myself and stayed out but if I was in I would have re' bailed 2 mths back. But here it is for now , still defying gravity.

Cheers

 

[Aaron Sice]

yeah def. overbought IMO.