Comments on: Don’t fear the bubble http://blogs.reuters.com/felix-salmon/2013/05/22/dont-fear-the-bubble/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: traduceri romana daneza http://blogs.reuters.com/felix-salmon/2013/05/22/dont-fear-the-bubble/comment-page-1/#comment-53480 Mon, 29 Sep 2014 13:55:58 +0000 http://blogs.reuters.com/felix-salmon/?p=21849#comment-53480 This year’s Golden Globe Award was voted the deadline in November 15th, before the World Cup qualifying play offs, which makes the C, not by virtue of its performance in the play offs Shen Yong, the competition become golden weight

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By: FifthDecade http://blogs.reuters.com/felix-salmon/2013/05/22/dont-fear-the-bubble/comment-page-1/#comment-47131 Sat, 25 May 2013 00:03:13 +0000 http://blogs.reuters.com/felix-salmon/?p=21849#comment-47131 Nice comment Ken_G!

Felix, surely it’s got more to do with behaviour and attitude to and perception of risk than it does to interest rates? People are currently falling over themselves to invest right now, and have been doing so in increasing numbers since September of last year. If you remember back to Mario Draghi’s comment about doing everythng necessary to protect the Euro, and that was when confidence returned to the market.

As share prices increased, consumers got more interested and started buying in increasing numbers. Share prices increased further. Despite the sceptics who for years have been berating the rest of us by forecasting nothing but doom and gloom, the Euro didn’t crash and burn, the US economy didn’t collapse under the weight of its rescue plan of QE stimulus, and even the Swiss Franc is now weakening against the USD, the GBP and the EUR as money moves away from safe havens and into areas of higher risk.

It doesn’t seem so long ago you were writing an article about the ever strengthening Swiss France before the Swiss National Bank protected it at a rate of Fr. 1.20 to the Euro; today it has weakened to Fr. 1.24 while yesterday it hit Fr. 1.27 for a time. The USD is now up from Fr. 0.92 to 0.96, and the GBP is up from a low point of Fr. 1.24 to a stronger Fr. 1.45 now.

Yes, there is profit taking, and I guess a lot of options are being cashed in too as they have suddenly become interesting again. As the executives pocket the proceeds of these freebies, they will begin to feel more expansionary in how they look at decisions and I am guessing will psychologically feel more inclined to take higher risks, dipping into their company cash piles and using the money for new projects to generate new profits and new growth.

Happy people invest more, spend more, and the economy benefits as a result. Anyhow, current stock market levels are only just thereabouts as high as they have been before, so how can that be a bubble? Yes, recent growth has been like that out of a recession, but I suspect it has a lot to do with suppressed demand and a wall of money hitting the markets needing a home to go to.

The optimists are returning and the pessimists have been shown up as scaremongers, often with selfish political not economic motivations for their words.

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By: realist50 http://blogs.reuters.com/felix-salmon/2013/05/22/dont-fear-the-bubble/comment-page-1/#comment-47124 Thu, 23 May 2013 23:51:59 +0000 http://blogs.reuters.com/felix-salmon/?p=21849#comment-47124 @TFF17 – a couple ideas I’ll throw out there are:

REIT’s (or a REIT fund). They are yield plays, so there’s a risk if rates rise. At least rental income is tied to inflation, however – often directly (commercial or industrial property) or at least indirectly (residential) so if rates rise due to inflation there’s more protection than bonds. Commercial or industrial real estate income should also broadly increase if rates rise due a more robust economy (higher rents as leases expire and renew, and lower vacancy rates).

Floating rate fund – pretty much invest in leveraged loans, floating rate over LIBOR and reset every 3 -6 months. Credit play without the pricing downside than fixed rate bonds if rates rise. This asset class was hammered on a mark to market basis during ’08/’09, but it was the same phenomenon. Prices tanked, but defaults never got that bad, so anyone who held on through the downturn did OK. (Anyone who bought during the downturn made a tidy profit.) One downside is that these funds have relatively high expense ratios – I don’t think you’re going to find one with less than 1.5% to 2% annual expenses.

Just a couple ideas. I wouldn’t advocate dumping all other investments and piling into these rather narrow categories, but each is worth considering for a 10% to 20% asset allocation if you don’t feel great about other options.

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By: TFF17 http://blogs.reuters.com/felix-salmon/2013/05/22/dont-fear-the-bubble/comment-page-1/#comment-47121 Thu, 23 May 2013 15:36:00 +0000 http://blogs.reuters.com/felix-salmon/?p=21849#comment-47121 @KenG, I’m looking at an expectation of zero three-year returns in the stock market, potentially horrible returns in the bond market, and ~1% returns on cash. Nothing is likely to do well (though rental real estate may be a good investment in some markets, if you care to put the time into the business), but cash isn’t any worse than the alternatives right now. It also offers the flexibility of jumping on a decline for a profit.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2013/05/22/dont-fear-the-bubble/comment-page-1/#comment-47120 Thu, 23 May 2013 12:55:16 +0000 http://blogs.reuters.com/felix-salmon/?p=21849#comment-47120 SteveHamlin, Dollared: thanks. Uh, would either of you happen to be a member of Congress?

TFF, mfw13, yes, a pullback would seem normal, but where will people put the money they get from leaving the stock market? That question fortunately kept me from selling off shares earlier this year. Interest rates are virtually zero, bonds pay so little they can only lose value, and I’m still wary of real estate.

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By: crocodilechuck http://blogs.reuters.com/felix-salmon/2013/05/22/dont-fear-the-bubble/comment-page-1/#comment-47119 Thu, 23 May 2013 07:30:35 +0000 http://blogs.reuters.com/felix-salmon/?p=21849#comment-47119 Update: Australian ASX 200

http://www.smh.com.au/business/markets/t race-of-panic-in-selloff-20130523-2k1y6. html

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By: mfw13 http://blogs.reuters.com/felix-salmon/2013/05/22/dont-fear-the-bubble/comment-page-1/#comment-47117 Thu, 23 May 2013 04:49:58 +0000 http://blogs.reuters.com/felix-salmon/?p=21849#comment-47117 What strikes me amount the market is three things:

1) They there has been no significant pullback in the four years since the market bottomed in Spring 1999.

2) The market seems to be completely oblivious of what is happening in the real world. The Chinese economy is slowly, the Euro is on the verge of collapse, half the Middle East is up in flames, and yet the market keeps chugging upward as if nothing is happening.

3) US unemployment is still above 7.5%

Now it may be that corporate earnings have become completely disconnected from the real world, but it’s not a bet I want to make.

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By: TFF http://blogs.reuters.com/felix-salmon/2013/05/22/dont-fear-the-bubble/comment-page-1/#comment-47110 Thu, 23 May 2013 01:46:13 +0000 http://blogs.reuters.com/felix-salmon/?p=21849#comment-47110 Valuations are high, revenue growth is stalling, and cost-cutting will only take you so far. I don’t know if it is a “bubble”, but it is definitely on the frothy side. A pullback at some point would be healthy.

Disclosure: still have 75% of investment assets in stocks, so I can’t be THAT concerned.

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By: Samrch http://blogs.reuters.com/felix-salmon/2013/05/22/dont-fear-the-bubble/comment-page-1/#comment-47109 Thu, 23 May 2013 01:03:14 +0000 http://blogs.reuters.com/felix-salmon/?p=21849#comment-47109 The vary rich and the very poor are the ones with most variable incomes. But politicians who want cut back do not want hit middle. So say hit those two.

The time hit them is in good times not recessions.

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By: Samrch http://blogs.reuters.com/felix-salmon/2013/05/22/dont-fear-the-bubble/comment-page-1/#comment-47108 Thu, 23 May 2013 00:59:48 +0000 http://blogs.reuters.com/felix-salmon/?p=21849#comment-47108 The only people with secure incomes who do not prosper during recessions are the credit addicts and those who planed leverage their way to wealth. Their loans where called or the asserts behind the leverage became worthless.

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