I read an article* that speaks of a Bretton Woods 3 like event, and Biden himself mentioned the beginning of a "new world order" (again).
I feel like the stock market has stopped reacting to real world fundamentals in any sense and just seems to continue its upwards march forever. Every correction being instantly bought up by all the free money washing around.
What is your opinion?
*https://plus2.credit-suisse.com/content/dam/credit-suisse-research/SearchPDF?DocumentID=1191091&DocumentType=NR%20Publication&documentClick=true&AuthRequired=true&tagFormat=PDF
My opinion? Read less financial "news". Focus on what you can control and don't try to time the market. Build an emergency fund if you don't have one, then invest in broad market funds and focus on earning money.
If you knew for certain there was a crash coming, you would still have to time the market a second time to get back in before the recovery, which will also come.
Sell 1 Dec 16, 2022 SPX $3,600 Put
Midpoint price is $3.60 for $25 max gain if SPX is under $3,600, which implies something like a 14.4% chance that SPX is down by 20% more on Dec 16, 2022.
And what worries me about this is that I'm not certain how deep the contagion goes. In 2008, I did everything I could to stay out of the US real estate market, and some genius investment advisor at my bank managed to sell me bonds issued by a hedge fund that turned out to be backed entirely by real estate derivatives.
Currently that's technology, which happens mostly on the internet globally. I can't really imagine a real world event big enough that would shake up Google, Amazon, Apple, etc. all at once. Sure, individually they can be threatened by innovation, but generally everything on the internet feels very "detached" from real world events.
If possible even russia would still use those services today.
In many, many ways, Covid was a much worse economic disaster than the credit crunch. In the latter, it was "only" banks affected by bad credit (lots of it). In Covid, it was... everything. State and company revenues grinding to a halt. You'd expect financial markets going haywire, and yet they haven't.
The world is in an ugly place, but I don't think a significant financial crisis is coming. Much more likely, if anything, is some kind of prolonged stagnation as the world realigns itself to some kind of new Cold War, with global trade diminishing. Real interest rates may dwindle etc. There will no doubt be many personal strifes and tragedies, but no global meltdown.
Properties lets you leverage debt, i.e. you'll only need to put down a 10-20% deposit and borrow the rest, ideally the mortgage repayments should be lower than rent of an equivalent property. The benefit of leveraged debt is that if your property increases in value, the whole amount of the property increases (i.e. not just your debt), so with rising property value and inflation (i.e. your salary) your debt should become more smaller & manageable over time.
If you can, go for an offset account (common in Australia) so your entire savings works to keep the interest down and you don't need to divide your savings across multiple accounts, as your savings is also your emergency fund whose balance is offset against the mortgage to keep the interest down.
Once you pay off your house you'll have much lower expenses at which point you'll have more freedom to make more risker decisions like quitting your salaried job to start your own consultancy or startup, where the reward is much higher income, but can also mean your without income at the start of your venture so you'll want to have minimal expenses when making the leap.
After you've paid off your home I personally would invest in shares for future investments which in my experience provide greater ROI over property, lower holding costs & less hassles requiring time & resources to resolve.
IMO your focus is should primarily be on making more money, i.e. instead of trying to save as much as possible. So even if you have a salary capped job with no career prospects, I'd be putting my efforts into a side-hustle that has the potential to earn enough to replace your job & work on it full-time where you'll have greater earning potential than working for someone else.
Hey everyone, what's your opinion about how this years crop season will go in northern Texas?
Housing is unlikely to drop to 2008 levels. Building materials are more expensive, and pay is also up.
The correlation between the stock market and real world fundamentals has always been qualified. A lot of investors don't care about today, only tomorrow. You can have big companies with popular products, but if the market doesn't think it's going to grow then the market isn't going to pay much attention.
Central banks has stimulated the economy by lowering interest rate below is natural market price. Central banks try to keep target inflation rate at 2%. Central banks tried to control wage inflation in a globalized market that does not work. We can import lower wages by buying goods from other countries globalization.
We have prize inflation in food oil prize and fertilizer.
Central banks will increase interest rate to target higher inflation.
Some High loan mortage borrowers will not be able to pay higher mortage rate and will be forced to sell. Selling of homes will cause housing prizes to decrease since buyers will look at how much monthly interest rate they can pay at higher interest rate.
Are you all going to eat your emergency fund? What good will that do if there are bread lines? How will timing the market or not, help your family make it through what could be a long stretch of rough times? And if there is a financial collapse, why are you so sure that there will even be a market left to recover? And if there is no financial system, why are you worried about paying your mortgage?
Interest rates can only be raised so high before the US can’t pay the interest on its debt and defaults, then what? And if they can’t raise interest rates beyond a certain point, how does inflation end? This is not just a “recession”, it’s an existential threat to world order.
Not to take any merit from your overall argument but I assume you're talking about the US equities and DJIA is a good proxy signal for that category and it's down ~5% YTD.
"Nobody knows nothing!"
This means nobody can predict what the future will bring. It's a fool's errand. Don't try to guess.
But we should be more resistant against alarming agenda of news that are constant for few years now. Global warming, plagues, financial crisis, war, etc. It makes people scared. And scared people are easily manipulated to accepting new rules and orders.
[1] https://www.cnn.com/2022/03/22/europe/belarus-ukraine/index....
Those continents don't use "human rights" as an ideology like EU .
In Europe ? Almost guaranteed.
Russia announced today it will stop accepting currency from "hostile" nations. One of currency is used by myself in my country its the "EURO"
It's sound simple yet what Putin is pushing toward is "Bretton Woods" Reset.
European have been living with overly high standard compared to their geo-political power, this was made possible because their currency enable them to buy everything for "cheap". ( Energy ,Commodities, Goods etc... )
Russia just broke the European economic machine by determining their currency is worthless.
If European refuse to "pay in ruble" it doesn't matter , it'll be gold , and the result will be 10 time worst. The Euro System was rigged from the start, it's impossible to repair it and get a currency as solid a Swiss Franc. Or at least not with causing a massive recession similar to Greece.
Probably time for me to leave EU and get somewhere with better perspective...
> I feel like the stock market has stopped reacting to real world fundamentals in any sense and just seems to continue its upwards march forever.
It'll continue its upward march until the factors causing the upward march change. What else are people going to do with their wealth? As long as the stock market remains one of the best places for investors to put their wealth, they'll keep buying equities and the prices will keep going up. Perhaps we'll see some stagnation or decline as the baby boomers retire and begin liquidating their retirement accounts.
The Fed isn't going to act very quickly at all.
This feels more like we're at around 2002/2003 right now (which had the stock market collapse in 2000, the 9/11 attacks in 2001 and the Iraq War started in 2003) and the Fed was slowly increasing interest rates.
We also had the pandemic and we've got massive supply shocks, and there's huge amounts of pent-up demand for everything, including workers.
We're more likely to boom in the short term over the next 1-3 years than to bust.
(I do think the bust-to-come will be miserable, but its 2+ years out).
Most of you are also way too worried about what is clearly a negative supply shock causing an increase of prices, which will necessarily be volatile and transitory. The Russian war in Ukraine is clearly not sustainable long-term. They aren't going to be in there for the next 20 years. Putin will probably be removed from power one way or another and then relations with Russia will normalize and we'll start buying their oil so they can pay Ukraine reparations. Then commodity prices will start to fall again, just like they fell after the 2011 commodities peak.
And really in 2003 we had gone through the dot-com collapse, the trauma of 9/11, invaded Afghanistan, invaded Iraq, nothing looked remotely sustainable, the Fed was raising interest rates, housing was going through the roof and was an obvious bubble (and we'd just been through the dot com bubble so the way that people were throwing loans at anyone with a pulse to buy up housing looked clearly insane if you were on the outside of it all). Gold bugs blogs online were talking about Zimbabwe-style hyperinflation, that everyone should buy gold (crypto these days) and that interest rates were going to soar to double digits. Everyone who was yelling about the Greenspan Fed printing money was convinced that a Kondratieff Winter wave was imminent. Well it didn't start rolling over until 2006 and it wasn't until 2008 that we really impacted with reality.
>Inflation out of control
40% is locked in over the next several years. It's virtually impossible for the fed to stop this reality. This means the current ~7% for the next several years. This is very bad but people lived through the 80s with 20%. The problem is that far more inflation is lined up but not locked in. The problem is that the fed just revealed their plan to reduce but the rate in which they plan to do it means far more than 40% will be getting locked in.
>cost of living crisis, energy crisis
This is just inflation. It's complicated but debt = money. If nobody had any debt, nobody would have any money. These things are only problematic because of inflation.
>house prices are in a bubble(?)
Similarly there's lots at play. Housing prices arent in a bubble. Go move to detroit and there's a 6000 sqft 12 bed 4 bath for $79,000. https://www.realtor.com/realestateandhomes-detail/1631-Glend...
This is not a bubble. What you are seeing is housing that is normal in a normal state. Sure there are problems in housing. Your problem is that the $ that housing is measured in has collapsed. It's not the current inflation numbers but rather more real inflation that hasn't been put on paper yet. This is probably around 200% or more inflation coming.
> war in Europe that shows no signs of ending anytime soon.
A putin speech at the world economic forum from years ago about the war of all against all. Has everything to do with economics. The war in Ukraine is economics. https://www.cnbc.com/2021/01/27/russias-putin-warns-of-a-fig...
What's not in the news is far more important. Russia's military seems to be pathetic. However, it's not Russia vs Ukraine. Ukraine isn't what matters in this.
>I read an article* that speaks of a Bretton Woods 3 like event, and Biden himself mentioned the beginning of a "new world order" (again).
What's most important isn't the new world order. Sure, China and their capitalist zones with tremendously low taxes are going to put them into power. Eventually they'll finish migrating their country away from communism. This 'new world order' isn't so much a problem for anyone except the USA. Soon the American people will actually feel their tremendous national debt.
>I feel like the stock market has stopped reacting to real world fundamentals in any sense and just seems to continue its upwards march forever. Every correction being instantly bought up by all the free money washing around.
Lets say everything is normal, nothing exciting going on in the world. Inflation is 2%. All stocks will be constantly at peaks. It's just the nature of how it works. Not being at market peaks is news worthy. Inflation being >7% and stock market not hitting new all time highs is extreme news worthy. That plus extremely cheap debt for years now? The stock market should be struggling to breath for how high it should be.
This actually has significantly more to do with Gamestop and crypto than it does with inflation.
What the USA has done is unique in the world it seems. They made an absolutely crazy rule that you can naked short a stock and you have 2 days to deliver the stock later on.
That's not how a short works. A short requires someone at your broker or similar to have a stock and you 'borrow' it to sell it and later have to buy to give it back.
The big thing about gamestop during covid said they were closing tons of stores. They were going to lose a ton of business. On top of that, they had just expanded and bought thinkgeek. They were going to take a big hit during covid. Shorting them made sense but they got shorted a little too much. There were more shorts on record than total stocks. It means you can buy the stock and short squeeze them. They would be utterly forced by law to buy at any price and lose bigtime. And they didnt... they basically said SEC come at me bro. The SEC didn't seemingly do anything.
It broke the stock market. On paper the gamestop stock should basically be at infinity price. Right now, the stock market is in limbo. The SEC can't move on it. Eventually it will break. Largely speaking the banks went around the exchanges and are completely screwed.
So what these large american banks are doing right now is robbing retirement funds. This is much larger than the reality of inflation being way over the bond rates. Which largely speaking means most retirement funds are not solvent right now in the USA.
That's the point of gamestop. Gamestop the store doesn't matter in the least. This could be happening to any stock.
https://www.computershare.com/us/news/computershare-acquires...
This was announced today. Wells fargo's dark pool basically just died to gamestop. But worse... computershare just got handed far far more than gamestop. People who think they are about to retire are in reality decades away from retiring.
This is not that unlike the bear sterns situation.
Here's the thing. The people who are holding gamestop directly. They could sell. They could let the stock drop back to near $10. That would let these US banks off the hook, but they don't care and don't need to sell. Their stocks are currently worth infinity money. They dont have to sit on it forever. When the Federal reserves starts selling their 'assets' and more people are drawing from those retirement funds. These banks will have their hands forced. This goes down within the next few years for sure.
This is a gamble for sure. I dont own a single stock in any of these meme stocks.
So where are we at here? Will there be a financial crisis again? 100% certain within a few years. Will it be this year? No idea.
So we could have economic stagnation (job losses, increasing inflation, etc) without necessarily a drop in the stock market. In fact, stock market might be the only thing that could hedge inflation.
I don't have any better idea of where to park your money, so I continue to hold large equity positions and pray for the best