Are we headed into a difficult period? [Telegraph "Doomsday" article]

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Maxman
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Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by Maxman » Sun Aug 16, 2015 7:46 pm

merged two nearly simultaneous threads on same article and edited title to fit both threads - admin alex

http://www.telegraph.co.uk/finance/1180 ... ntrol.html

I'm not changing my asset allocation as I am a believer in the long term strength of the markets, but these numbers don't look good for the short term.

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TinyElvis
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How Do You Ignore Headlines Like This?

Post by TinyElvis » Sun Aug 16, 2015 9:23 pm

Scary stuff.

"Doomsday clock for global market crash strikes one minute to midnight as central banks lose control. China currency devaluation signals endgame leaving equity markets free to collapse under the weight of impossible expectations."

http://www.telegraph.co.uk/finance/1180 ... ntrol.html

:shock:

Drewman
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Re: How Do You Ignore Headlines Like This?

Post by Drewman » Sun Aug 16, 2015 9:29 pm

Well that was an entertaining read! I don't retire for about 30 years! Bring on the market crash!

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arcticpineapplecorp.
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Re: How Do You Ignore Headlines Like This?

Post by arcticpineapplecorp. » Sun Aug 16, 2015 9:32 pm

Because headlines are meant to be sensational, not predictive with any reliable degree of certainty. I also think about all of the terrible, horrible, no good news/headlines over the past 100 years and the world has continued to advance despite all that. In addition, what does one do with this terrible news? And since the news changes all the time, are you to change an investment strategy or how you live your life with the whims of every article that comes out?

Besides, what other choice does one have but to "keep calm and carry on"? Is there a better option? Probably not reading sensational headlines to begin with.

I just heard on a podcast the other day ("Talking Real Money with Don MacDonald and Tom Cock) that there are always naysayers, doomsayers, and permabears, but since the market has gone up (in the past) about 2 out of every three years (and therefore the market has gone down only 1 out of every 3 years)...a better strategy than constantly being bearish is to be bullish. That makes more sense to me, otherwise why would you invest in anything? If you truly believe the world's coming to an end or whatever, then short everything.

Then tell us how that worked out for you. (hint: The NPR Planet money reporters tried this recently...it didn't go so well for them).
Last edited by arcticpineapplecorp. on Sun Aug 16, 2015 9:40 pm, edited 2 times in total.
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mhalley
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Re: How Do You Ignore Headlines Like This?

Post by mhalley » Sun Aug 16, 2015 9:32 pm

You look at how many times similar doom and gloom headlines have failed to come true. Here are some past predictions.
http://fundreference.com/articles/2015/ ... ll-street/
Mike

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arcticpineapplecorp.
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Re: are we headed into a difficult period?

Post by arcticpineapplecorp. » Sun Aug 16, 2015 9:37 pm

Maxman wrote:http://www.telegraph.co.uk/finance/1180 ... ntrol.html

I'm not changing my asset allocation as I am a believer in the long term strength of the markets, but these numbers don't look good for the short term.
Then I guess it doesn't really matter what happens in the short term, right? And if the markets do poorly in the short term, that's good if you're adding new money (i.e., continuing to invest for the long term) because you'll be buying more shares at lower prices, right?

So now, what's the problem other than dealing with temporary declines in your investments? If you don't need the money in the short term, then buy and HOLD will work out eventually (once the sky stops falling).

Take on as much risk as you can tolerate or have need to, but no more.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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jimb_fromATL
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Re: How Do You Ignore Headlines Like This?

Post by jimb_fromATL » Sun Aug 16, 2015 9:52 pm

Doomsday criers are nothing new. HERE is a reprint of the Business Week article about the Death Of Equities from 1979.

jimb

sambb
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Re: How Do You Ignore Headlines Like This?

Post by sambb » Sun Aug 16, 2015 10:02 pm

next crash, i am definitely buying a used sports car for the cheap after the crash. I want to upgrade mine, but waiting for someone who has to sell under duress. Always can find a silver lining

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unclescrooge
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Re: How Do You Ignore Headlines Like This?

Post by unclescrooge » Sun Aug 16, 2015 10:06 pm

You should stop reading the news. You'll live a happier, and wealthier life.

Candor
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Re: How Do You Ignore Headlines Like This?

Post by Candor » Sun Aug 16, 2015 10:10 pm

I've seen so many of them over the years that I'm immune. There's always something to be afraid of and the press, or maybe it's the media these days, are experts at keying in on those fears and using them to their advantage. Don't buy into it and you will be fine.

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6miths
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Re: How Do You Ignore Headlines Like This?

Post by 6miths » Sun Aug 16, 2015 10:10 pm

jimb_fromATL wrote:Doomsday criers are nothing new. HERE is a reprint of the Business Week article about the Death Of Equities from 1979.
Thanks for posting this. Always a fun read. Those old people are so smart! I really liked this quote from the article, "For investors, however, low stock prices remain a disincentive to buy."
'It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so!' Mark Twain

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Watty
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Re: How Do You Ignore Headlines Like This?

Post by Watty » Sun Aug 16, 2015 10:18 pm

TinyElvis wrote:Scary stuff.
Not at all.

That is actually an encouraging headline since it could be an indicator that stocks will go up with people realize that once again the world is not really ending this time.

https://en.wikipedia.org/wiki/Magazine_cover_indicator

What would be scary though is if the all the headlines like this were saying wonderful things about stocks or that million dollar cottages in California are good investments.

In the meantime the best I can do it to keep my index funds re-balanced when I need to.
Last edited by Watty on Sun Aug 16, 2015 10:19 pm, edited 1 time in total.

Dimitri
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Re: How Do You Ignore Headlines Like This?

Post by Dimitri » Sun Aug 16, 2015 10:19 pm

I recommend reading a few articles from http://www.zerohedge.com. :happy That will make anything you see in The Telegraph nothing to worry about in comparison.

Suggested reading - American Malls In Meltdown - The Economic Recovery Is Complete & Utter Fraud http://www.zerohedge.com/news/2015-08-1 ... tter-fraud
Let's never come here again because it would never be as much fun.

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Maynard F. Speer
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Re: are we headed into a difficult period?

Post by Maynard F. Speer » Sun Aug 16, 2015 10:33 pm

I'm not usually one to be any less than pessimistic .. But China's markets are still well up on a year ago - they managed to create a bit of a speculative bubble, but I think the currency devaluation's been the only mildly concerning part of that story

As for oil .. It can be a sign of global slowdown - or it can be oversupply and a Saudi price war

Valuations don't look great - I'll give them that - but then you could see commodities and EM as rare buying opportunities right now
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes

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Index Fan
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Re: Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by Index Fan » Mon Aug 17, 2015 12:13 am

Who was it that called a market high in 1929 and blindly got it right?

Sometimes bad things happen and their effects last for years. There's just no way to predict when they will happen.

The question should not be 'are we headed into a difficult period?', the question should be 'if we have a market-distorting black swan event that will statistically happen sooner or later, how am I prepared (or not)?' What would be the cost/benefit ratio to a portfolio of such preparations?
"Optimum est pati quod emendare non possis." | -Seneca

Clive
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Re: Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by Clive » Mon Aug 17, 2015 2:52 am

Overvalued US market

In the US, Professor Robert Shiller’s cyclically adjusted price earnings ratio – or Shiller CAPE – for the S&P 500 stands at 27.2, some 64pc above its historic average of 16.6. On only three occasions since 1882 has it been higher – in 1929, 2000 and 2007.


PE 27.2 = 3.7% earnings yield (versus historic PE 16.6 (6% earnings yield)). I'd guesstimate that historic bond yields averaged 4% so historic 6% stock earnings yield = 2% premium. More recent 2% bond yields versus near 4% stock earnings yield = 2% premium.

As/when interest rates rise so might PE's decline in reflection (earnings yields rise). Can't see much in the way of reason why interest rate rises might extend much above 2% (Fed/Bank of England target rates) and bond yields of perhaps 4%, stock earnings yield of 6%. But that's most unlikely to occur in a rapid transition and instead might be spaced out over 3 or more years i.e. stocks give some of gains back and broadly sideways trading for a few years. Or Fed/BoE might raise rates, only later having to drop them again and we broadly see some zigzagging, possibly to new even higher highs. Or China might implode and a knock on effect sees larger global stock price declines.

Each and any are as valid - so stocks might drop a lot, rise perhaps a lot, flatline or zigzag - business as usual. Place your bets as to which you might believe to be the more probable, or just maintain a neutral balanced portfolio.

Valuethinker
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Re: are we headed into a difficult period?

Post by Valuethinker » Mon Aug 17, 2015 7:29 am

Maynard F. Speer wrote:I'm not usually one to be any less than pessimistic .. But China's markets are still well up on a year ago - they managed to create a bit of a speculative bubble, but I think the currency devaluation's been the only mildly concerning part of that story

As for oil .. It can be a sign of global slowdown - or it can be oversupply and a Saudi price war

Valuations don't look great - I'll give them that - but then you could see commodities and EM as rare buying opportunities right now
Oil is likely both. China is in recession whether the stats show it or not-- various indicators suggest economic growth is not 7% but more like 3%.

As to supply fracking came in and the Saudis are refusing to cut back production-- they are trying to drive fracking into a corner. In fact, it will hit Brasil and Canada (deep offshore and oil sands) relatively much harder, because those projects cost billions and 10s of billions of dollars-- the oil companies just won't make those bets. Fracking is much more flexible and short term responsive to price.

dh
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Re: Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by dh » Mon Aug 17, 2015 9:28 am

Index Fan wrote:Who was it that called a market high in 1929 and blindly got it right?
Are you thinking of Jesse L. Livermore?

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blueblock
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Re: Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by blueblock » Mon Aug 17, 2015 5:52 pm

Wow, the comments on the Telegraph article are something else.

Given the scale of the impending calamity, maybe I should stock up on the "gourmet emergency entrees" with "a 25-year shelf life" as recommended by former celebrity Marie Osmond: https://www.youtube.com/watch?v=3darvifN9oM

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mickeyd
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Re: Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by mickeyd » Mon Aug 17, 2015 6:27 pm

Don't be a chicken little. Don't be afraid. The sky is not falling.

Narrator: So Foxy Loxy led Chicken Little, Henny Penny, Ducky Lucky, Goosey Loosey, and Turkey Lurkey across a field and through the woods. He led them straight to his den, and they never saw the king to tell him that the sky is falling.
http://eleaston.com/chicken.html
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Maynard F. Speer
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Re: Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by Maynard F. Speer » Mon Aug 17, 2015 7:06 pm

The signs are coming thick and fast

I just made a piece of toast .. no word of a lie, it had John Bogle's face in it telling me to tell everyone to sell everything and move into canola oil

So that's: 1) Sell everything, 2) Buy canola oil .. He also said buy-and-hold investors will be punished severely, and live goats and pigs will be useful for bartering
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes

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Index Fan
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Re: Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by Index Fan » Tue Aug 18, 2015 5:59 pm

From Saint Jack himself:

Legends Of Indexing: John Bogle
http://www.etf.com/publications/journal ... bogle.html
What I’m worried about more than anything else though, to be quite honest with you, is the world production economy and its growth, the world political system, the new power nations, religious fundamentalism and terrorism—all those things suggest to me this is an extremely risky time to invest. But you must invest. No one knows when to get out of the market; I don’t try to do it myself.

But I think investors should be aware of the global situation, whether you’re talking about economies, overextended and overleveraged financial systems, challenges from Russia on their own borders, or the ISIS revolution, which came out of nowhere. And I worry here at home about our fragile, stalemated political system. Have we lost the ability to govern ourselves?

These big global issues are challenges and risky for investors, but we really have no choice—I have no choice. I’m not heading for the hills. I have always been very conservative with my investments. Right now, counting all my different kinds of accounts, I am probably about 60 percent in stocks and 40 percent in bonds—Vanguard corporate bond funds in my tax-deferred retirement accounts and Vanguard municipal bond funds in my personal account.

I could scare myself into thinking I know what is going to happen and when it’s going to happen, but the reality is I don’t. But if I were an investor holding 100 percent of my assets in equities, I would probably do something to make my portfolio more conservative.
"Optimum est pati quod emendare non possis." | -Seneca

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Maynard F. Speer
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Re: Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by Maynard F. Speer » Wed Sep 02, 2015 6:55 pm

Maynard F. Speer wrote:The signs are coming thick and fast

I just made a piece of toast .. no word of a lie, it had John Bogle's face in it telling me to tell everyone to sell everything and move into canola oil

So that's: 1) Sell everything, 2) Buy canola oil .. He also said buy-and-hold investors will be punished severely, and live goats and pigs will be useful for bartering
^^17th August

Image

Thank you Jack Bogle
"Economics is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions." - John Maynard Keynes

frugalecon
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Re: Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by frugalecon » Wed Sep 02, 2015 7:43 pm

Alarmist headlines always make me think of that early 1980s bestseller by Howard Ruff, "How to Prosper During the Coming Bad Years." Doing the opposite of what he suggested would have been very wise.

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nisiprius
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Re: Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by nisiprius » Wed Sep 02, 2015 8:04 pm

Maynard F. Speer wrote:^^17th August

Image
Mebane Faber's Cambria Global Asset Allocation Fund, GAA, (43% stocks, 50% bonds, 5% cash, 4% other) isn't one of the things that are going up, either, despite being invested 50% in bonds and 5% in cash (presumably USD), so I guess it mustn't be heavily invested in canola, cattle, or ethanol.

Image
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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arcticpineapplecorp.
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Re: Are we headed into a difficult period? [Telegraph "Doomsday" article]

Post by arcticpineapplecorp. » Wed Sep 02, 2015 8:10 pm

Maynard F. Speer wrote: Image
Meb Faber (or anyone for that matter) can't say what's "going" up. He can only say what "has" gone up (as in the "past"). Nobody knows what will go up in the future.

On a related note, a few weeks ago someone from this board alerted us to a couple of free e-books by Meb Faber. Read one, working on the other. Decent read. But he should stay away from forecasting.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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