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Where Is the Next Crash Coming From?
Given that we have had 7 years of stockmarket growth it seems inevitable that we are due a 40% correction in the next 5 years. Is it going to be a purely black swan event or does anyone foresee where it is coming from?
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6 comments
I would agree with the QE point, and the mis allocation of capital that this and the low interest rates has created.
The government has stoked up the property market, now I can understand and agree with doing it when the market was low, but now ? to have help to buy running now ? are they insane ?? that was rhetorical, I think we know the answer. At a time when they want to cool the market and not put up rates, isn't pulling help to buy the logical thing to do ? the election is over now, they've got re elected, pull it !!!
I think the question in itself is interesting. Increasingly, I hear market participants of all shapes and sizes suggest the end is nye and we MUST be due a selloff of biblical proportions. Whilst sell offs naturally occur just as bid markets produce rising markets, certain forecasters seem to want a crash. Are they positioned short or have they got nothing better to do with their time ? Im not suggesting they are wrong but we seem like we want to have crash in some quarters……My philosophy is to continue to buy decent firms that have a commanding position in their sectors that throw off cash and help me sleep at night.
For me the bottom line is: There is no yield anywhere and the fragility of recoveries around the world don't need the shock of interest rate rises which are some way off. Central Bankers are running out of tools but the one they command is rate rises and there will be no hurry to do anything on that for a good while.
Instead of asking the question about black swan events which by definition are totally unforeseen and their impact unpredictable, perhaps it would be more helpful to ask about grey swan events. Stuff we are aware of, but their impact is unpredictable and could be catastrophic.
Top of my list is QE. We just do not know the unintended consequences of years of showering the financial world with printed money. When the printing press stops, we could be in for minor ripples only (good scenario) or major stock and bond market disruptions (catastrophic scenario).
Whatever bubbles up first in the next few years?
Like the last time round, of many many people / organisations, a small handful will, some for the wrong reasons (http://www.economicpredictions.org/who-predicted-the-financial-crisis.htm) and will mostly be ignored.
If anyone really could and enough people listened, prices would be bid down as the knowledge spreads and there would be no crash.
So, almost by definition, if it can be foreseen, it wont happen.
does anyone foresee where it is coming from?
If anyone says they can, then they're either lying or they're Putin.