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Full Version: The Coming Crash (no later than 1H2012)?
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Somehow I could sense a similarity between the present and the few months leading to a financial crisis in 2008. I do not see a solution to the European sovereign debt crisis. What the European governments are doing are just delaying the inevitable which we would most likely see a meltdown. I can really feel it in my gut sense that the crisis is coming. I see the banks are being hit. They are like the 'canary' in the coal mines. When? Depends on whether the US or Europeans gonna throw in anything to delay the inevitable. Maybe QE3? Who knows we might have a small rally before everything comes to an end. My two cents worth to all? Start to sell. Tempting to average for some stocks but there are huge risks involved so my advice is to let it be. Don't average. It is time to build up cash no matter how tempting the counters are. Well I hope I am way way wrong but then.....facts versus emotions.....
(02-09-2011, 10:59 PM)Behappyalways Wrote: [ -> ]Somehow I could sense a similarity between the present and the few months leading to a financial crisis in 2008. I do not see a solution to the European sovereign debt crisis. What the European governments are doing are just delaying the inevitable which we would most likely see a meltdown. I can really feel it in my gut sense that the crisis is coming. I see the banks are being hit. They are like the 'canary' in the coal mines. When? Depends on whether the US or Europeans gonna throw in anything to delay the inevitable. Maybe QE3? Who knows we might have a small rally before everything comes to an end. My two cents worth to all? Start to sell. Tempting to average for some stocks but there are huge risks involved so my advice is to let it be. Don't average. It is time to build up cash no matter how tempting the counters are. Well I hope I am way way wrong but then.....facts versus emotions.....

Well, if you're right about this, then I guess it's really time to build up more cash reserves to take advantage of Mr. Market's panic attacks! Tongue
nobody can tell for certain how the market will behave. sovereign debts are more likely to be restructured, than defaulted.

the practice of value investing is all about figuring out a business' value. if you know what 'x' is, you'll be able to base your buy/sell decisions on it and i'm certain that you'll do well from it. now, as it is all the time, is a good time to sell overvalued stocks and grab the undervalued ones. buffet is a great valuer who makes big money by low-balling whoever is on the other side of the trade.

if the market tanks, nobody knows how much lower it will go. it is wise to never fully invest all the monies you have set aside for investing, regardless of whether the market is high or low. always have your 'war chest' (as many would like to put it) ready. ideally, capital should be regularly injected into your war chest through savings and/or dividends so that you'll always be ready when opportunity arises.

if the market moves up, just sit on your growing war chest and wait for value buys to emerge. if value buys don't emerge, wait until it does.

we tend to make more emotional buy/sell trades when we do not know 'x', chief reason being that we have nothing solid to base our decision on, apart from our gut feel. this is dangerous because when the outcome of your decision is (almost) entirely left to chance, you're actually gambling.
The next crash may involves inbetween "hyper-inflation type" or "High inflation type" of scenario. As such Cash may be the worst asset to hold.
I will defintely avoid Euro. USD is very tricky.

Gold bubble can also be the next possibility but lesser extend as it is tie to above problem. So a good commodity to hedge against.

For Property it will be interesting to know how loan will be honoured or managed by Banks in hyper inflation scenario.
One think for sure is if you want to hold on to CASH make sure that currency value holds.


Cory
USA will stabilised again after obama is re-elected P for the second and final term. Smile

EU? Well, looking at France and Germany, don't think they will allow EURO crash too...

Stay invested! Big Grin
http://www.newser.com/article/d9pgeru80/...5-pct.html

http://www.informationclearinghouse.info...e28995.htm

http://www.youtube.com/watch?v=E1Fzzs7oVaA

(PS: One radical way is to default and make your balance sheet 'clean' again and you can start afresh and spend again.......but the creditors(banks for example) will be hit hard. My take is somewhere down the road, someone gonna take this path and there will be a repeat of 2008)
(02-09-2011, 10:59 PM)Behappyalways Wrote: [ -> ]My two cents worth to all? Start to sell. Tempting to average for some stocks but there are huge risks involved so my advice is to let it be. Don't average. It is time to build up cash no matter how tempting the counters are. Well I hope I am way way wrong but then.....facts versus emotions.....

Well I hope you are wrong as I have been nibbling at the market in the last couple of weeks. every crash(08, afc, sars, 87) that i have seen before is that nobody seen it coming and valuations was high. now valuations are low and everyone seem to see the crash round the corner. my personal take is that there won't be a crash in 2012 1st half as your thread says as Obama will put the economy on steroids till end of 2012 to ensure his re-election. possibility of 2013...maybe but too difficult to fcst that far now.

Richard C. Koo
Chief economist, Nomura Research Institute

With the unemployment rate staying above 9% after nearly three years of zero interest rates and the $787 billion fiscal stimulus enacted in February 2009 still failing to pump-prime the economy, the American people are beginning to realise that this is no ordinary recession. With both traditional fiscal and monetary policies failing to produce results, the policy debate is running from one extreme to the other. Some are pushing for QE3 while others are calling those actions "treason". Some are pushing for smaller government while others are pushing for more fiscal stimulus. Some are calling for more regulation while others are pushing for less, and so the list goes on. This lack of consensus is making people worry even more as they fear that there may be no cure for this disease.

The same acrimonious debate was taking place in Japan 15 years ago, with no consensus on what was the right thing to do. It took those of us in Japan nearly a decade to realise that the country was suffering from a rare type of recession that happens only after the bursting of a nationwide asset-price bubble financed with debt. In this type of recession, now called balance-sheet recession, the private sector is actually minimising debt instead of maximising profits because the liabilities it incurred during the bubble days are still on the books while the assets it purchased with borrowed funds have collapsed in value, leaving its balance sheets seriously underwater and in need of repair.

When the private sector as a whole starts paying down debt, however, the economy starts losing aggregate demand equivalent to the unborrowed savings in the private sector. If left unattended, the contraction in demand will continue until the private sector has become too poor to save money. That is exactly what happened during the Great Depression when America lost 46% of GDP in just four years.

Monetary policy is largely useless in this type of recession because those with balance sheets underwater are not interested in increasing borrowings at any interest rate. There will not be many lenders either when the lenders themselves have balance-sheet problems. This explains why the Fed's and the Bank of Japan's zero interest-rate and quantitative-easing policies failed to produce economic recovery.

Since the government cannot tell the private sector not to repair its balance sheets, the only way for the government to keep the economy from collapsing is to borrow and spend the unborrowed savings in the private sector and put them back into the economy's income stream. And this stimulus must be maintained until the private sector has regained enough financial health to borrow money again. The Japanese government was basically doing that from the beginning, and that is why Japanese GDP never fell below the peak of the bubble even though commercial real estate prices fell 87% nationwide and the private sector was deleveraging to the tune of nearly 10% of GDP per year.

The American economy has been in balance-sheet recession with its usual attributes since the bursting of the real estate bubble in late 2007. Then in September 2008 Lehman Brothers collapsed, which was a financial crisis. Balance-sheet recession is a problem of borrowers, while financial crisis is a problem of lenders. For the former, monetary easing is useless and fiscal stimulus is essential; but for the latter, monetary easing in the form of liquidity injections, together with capital injections from the government, are necessary for banks to be able to lend money again.

All three policies were in place by February 2009. The V-shaped recovery since the spring of 2009, however, was largely a recovery from the Lehman shock, not from the balance-sheet recession. This is because private-sector deleveraging is still continuing and real estate prices are still weakening. The fact that deleveraging is continuing at zero interest rates, a phenomenon no business schools or economics departments have prepared us for, suggests that the American private sector is still very sick.

The recovery that started in 2009, however, led people to believe that the economy was on its way to full recovery. Not realising that the balance-sheet problems were still there, the American government refused to renew the fiscal stimulus enacted in February 2009. That fiscal package is now expiring. This means the recovery from the Lehman shock will hit a ceiling, which comes from the balance-sheet recession. It appears that the American economy has been hitting this ceiling for some time now.

Those investors who bought equities believing that QE2 would result in an increase in money supply and a stronger economy are now shocked to find that neither the economy nor the money supply is growing to support those equity prices. This realisation is behind the correction in equity prices we are seeing now.

Recovery from financial shock is relatively easy as long as the authorities inject sufficient liquidity and capital in time. Recovery from balance-sheet recession takes time because it requires the recovery of millions of private-sector balance sheets that are currently underwater. Moreover, as Keynes once said, and as was amply demonstrated in America recently, it is almost impossible to sustain fiscal stimulus in a democracy during peacetime.

When the Japanese government lost its patience and switched to fiscal consolidation in 1997 while its private sector was still deleveraging, the economy entered a horrendous double dip. GDP contracted for five quarters and the banking system went down with it. As a result, the deficit, instead of contracting, increased by a whopping 68%. It took Japan ten years to recover from this policy mistake. If the American government stays the course on fiscal consolidation while the private sector is still deleveraging, the probability of repeating Japan's mistake of 1997 is high.

http://www.economist.com/debate/days/view/737
Buy also die, don buy also die.
All i can say is that don think too much to beat the mkt.
Live well and happy.
How much u can earn and eat is fated.
Hello Behappyalways,

Thanks for the economist link! That's an interesting concept! On-line debate - cool!

Hey! Maybe we can try it in Valuebuddies? We choose a "hot" topic and invite debates for a fixed period - like 7 days? Then we do a poll at the end (May need to install a polling tool or gadget in Valuebuddies - not sure whether its possbile as I not IT savvy.

How's that for fun and generating alternative views? The purpose is not to "win"; but to encourage critical thinking.

Moderaters, what do you think?
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