"Goldman's Bear Market Indicator Shows Crash Dead Ahead"

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abw
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"Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by abw » Sun Sep 17, 2017 1:28 pm

This is a story just out on Zerohedge. I found it an interesting read, although mostly synthesizing views from GS.

http://www.zerohedge.com/news/2017-09-1 ... dead-ahead

One snippet that summarizes the main point:
On historical relationships this would imply a 50/50 probability of a bear market in the next 12 months. The chances of a bear market are still high (based on the historical relationships) over the next 2 years, but remember that at any point in time the chances over 2 years can go up.
But I found this discussion more interesting:
Next, Goldman reminds its clients that even if it is right, and a crash is imminent, they still have a chance to sell during the so-called "bear market bounce."
I won't quote the entire thing because I suspect that violates TOS, but it's an interesting read.

I suspect the question many would have is given that we're in an "unprecedented" bull market, what would the bear look like? And would it follow the historic pattern, so that investors wouldn't have a chance to shift assets as the bear starts?

I know the correct response is to follow an investment strategy that doesn't rely on shifting assets (i.e., timing, whatever), but this is an intriguing view into investors' beliefs about what has typically happened in these types of markets, and of course into beliefs about what would happen in the next one.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by Daryl » Sun Sep 17, 2017 1:53 pm

If the Bull market in equities continues, I'll be buying fixed income. If equities tank, I'll be adding to my Total Stock Market fund. I'll be OK either way.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by nedsaid » Sun Sep 17, 2017 1:58 pm

Zerohedge always seemed pretty sensationalist to me.
A fool and his money are good for business.

abw
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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by abw » Sun Sep 17, 2017 2:03 pm

nedsaid wrote:
Sun Sep 17, 2017 1:58 pm
Zerohedge always seemed pretty sensationalist to me.
I probably should have been clearer that the story is a summary of a Goldman report. There's little editorializing, except at the end.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by CyclingDuo » Sun Sep 17, 2017 2:05 pm

nedsaid wrote:
Sun Sep 17, 2017 1:58 pm
Zerohedge always seemed pretty sensationalist to me.
ZeroHedge has been bleating the bear case for how many years now? At least 4 - which, if you follow the true chartists, is when this bull market actually began (2013).

So they called it and when it happens, it will be just a few too many years early. :mrgreen:

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TheTimeLord
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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by TheTimeLord » Sun Sep 17, 2017 2:05 pm

I expect to buy equities every month between now and retirement. I have enough FI to SWAN so that will be the way I roll.
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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by Ged » Sun Sep 17, 2017 2:11 pm

Zero Hedge has accurately predicted 200 of the last 2 crashes.

Citation: https://rationalwiki.org/wiki/Zero_Hedge

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by nedsaid » Sun Sep 17, 2017 2:15 pm

abw wrote:
Sun Sep 17, 2017 2:03 pm
nedsaid wrote:
Sun Sep 17, 2017 1:58 pm
Zerohedge always seemed pretty sensationalist to me.
I probably should have been clearer that the story is a summary of a Goldman report. There's little editorializing, except at the end.
Well, we have been in a bull market since March 2009, so we are about 8 1/2 years into this. We did have a 20% correction from about August 2015 through February 2016 and the market smartly rebounded from that. So if we have a bear market within the next year or so, I would not be shocked. We have had a long bull market. On the other hand, our recovery has been slow but steady, we have not seen robust 4% GDP growth but more like 2%. It appears we might be edging up to 2 1/2% growth. Interest rates are still very, very low.

The thing is, every day I read something like this, impending doom for the US Stock Market. Bull markets usually don't end in pessimism, I certainly don't see a lot of euphoria out there.

If the new market highs make you nervous, might be a good time to rebalance.
A fool and his money are good for business.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by F150HD » Sun Sep 17, 2017 2:16 pm

Ged wrote:
Sun Sep 17, 2017 2:11 pm
Zero Hedge has accurately predicted 200 of the last 2 crashes.
LOL

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by nedsaid » Sun Sep 17, 2017 3:23 pm

Ged wrote:
Sun Sep 17, 2017 2:11 pm
Zero Hedge has accurately predicted 200 of the last 2 crashes.

Citation: https://rationalwiki.org/wiki/Zero_Hedge
'Nuff said.
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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by nisiprius » Sun Sep 17, 2017 3:51 pm

Keep in mind that Zero Hedge is a dubious source.

https://en.wikipedia.org/wiki/Zero_Hedge
Zero Hedge is an English-language financial blog that aggregates news and presents editorial opinions from original and outside sources. The news portion of the site is written by a group of editors who collectively write under the pseudonym "Tyler Durden" (a character from the novel and film Fight Club).

Zero Hedge's content has been classified as anti-establishment, conspiratorial, and economically pessimistic, and has been criticized for presenting extreme and sometimes pro-Russian views.
As required by its core policies, the Wikipedia article cites references supporting the "pro-Russian" statement. I've decided not to summarize or quote their references, but I'll just mention that although the Bloomberg article they cite is paywalled, what appears to be a copy of it can be read here.
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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by nedsaid » Sun Sep 17, 2017 4:01 pm

I place very little credence in anything that Zero Hedge writes. I have always viewed it like the National Enquirer or the Weekly World News.
Last edited by nedsaid on Sun Sep 17, 2017 11:41 pm, edited 1 time in total.
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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by nisiprius » Sun Sep 17, 2017 4:04 pm

Ned, I decided that quoting and describing Wikipedia's supporting reference for the pro-Russian claim wasn't appropriate in the forum, so if you wouldn't mind... could you remove them from the place where you quoted me?
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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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by alpine_boglehead » Sun Sep 17, 2017 4:20 pm

Ged wrote:
Sun Sep 17, 2017 2:11 pm
Zero Hedge has accurately predicted 200 of the last 2 crashes.
And that might still be an understatement. If you care to verify, scroll through their posts tagged "market crash" (http://www.zerohedge.com/category/tags/market-crash) - it's one article like this after the other.

They seem to have the same business model that the peak oil sites had back a decade ago (which are now defunct, of course) - fear sells.

But it's not just them. Google : stock market crash in [current year here]. Lots of articles show up. Google: stock market crash in [year before]. The same, and the same for the year before that and so on. But it's a nice strategy, it draws some audience, and if they keep repeating it, the time will arrive when this broken clock is right.

If Goldman and other Big Finance companies were really convinced that the stock market will crash, it would already be priced in, wouldn't it? So if there's no market crash, and they realize that their fears were actually unfounded, we should soon see S&P 500 at 3000 :twisted:

I know nothing. And neither does Tyler Durden. (except he better knows how to build a following by quoting anyone who is pessimistic about the stock market).

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by Grt2bOutdoors » Sun Sep 17, 2017 5:30 pm

Please, please, please let there be a crash, I like buying my steaks 50% off! I will sell my potatoes to fund my purchase of protein.
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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by jcavana1 » Sun Sep 17, 2017 6:30 pm

Predicting what the market will do in the next 12 months with any degree of certainty is impossible. Not hard, impossible.

They are probably about right with "50/50 chance", but you could say that at any time.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by aegis965 » Sun Sep 17, 2017 7:56 pm

nedsaid wrote:
Sun Sep 17, 2017 1:58 pm
Zerohedge always seemed pretty sensationalist to me.
understatement of the year lol
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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by garlandwhizzer » Sun Sep 17, 2017 8:32 pm

The article by GS is interesting. It predicts a 67% chance of a bear market in the next two years which doesn't seem like an outlandish prediction to me. It gives them plenty of wiggle room. 2 years is a long time frame and even over 2 years they estimate a 33% chance that there will be no bear market. All bull markets eventually die, nothing new, and this one has gone on for 8+ years now. In addition at the end of the GS piece they offer the following commentary doubtless designed to cover their rear ends in case customers who sell prematurely complain about the absence of a bear market in the next 24 months.
... we believe there are three potentially mitigating factors: (1) structurally lower inflation, (2) a lack of financial imbalances or excessive leverage in the financial system, and (3) valuation is the most stretched of the five indicators. This is largely a function of very loose monetary policy and bond yields; excluding valuation reduces the level of the indicator to a more comfortable level. Consequently, we conclude that an extended period of low returns is more likely than an imminent bear market.
GS feels that the most likely outcome from our current situation is not an abrupt severe bear market in the near future, but rather "an extended period of expected low returns," exactly what Larry, Bogle, Bernstein, Vanguard, Asness, Arnott, and many other reputable observers expect. There could be trouble ahead, and we have lofty valuations--true--but in equity markets there is never a time when an unforeseen bear market is not a real possibility. Risk is always with us whether we realize it or not.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by incognito_man » Sun Sep 17, 2017 11:20 pm

my number cruncher machine/spreadsheet doesn't look at short-term returns, but I am anticipating a future annual return of 6.42% from all money vested in S&P at this date. :D

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by nedsaid » Sun Sep 17, 2017 11:41 pm

nisiprius wrote:
Sun Sep 17, 2017 4:04 pm
Ned, I decided that quoting and describing Wikipedia's supporting reference for the pro-Russian claim wasn't appropriate in the forum, so if you wouldn't mind... could you remove them from the place where you quoted me?
Done.
A fool and his money are good for business.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by Valuethinker » Mon Sep 18, 2017 4:03 am

incognito_man wrote:
Sun Sep 17, 2017 11:20 pm
my number cruncher machine/spreadsheet doesn't look at short-term returns, but I am anticipating a future annual return of 6.42% from all money vested in S&P at this date. :D
Nominal or real?

Nominal I think is pretty credible. Real? Stretching it from here-- we'd need to see some pretty big deviations from historical patterns*.

* to be fair, the level of corporate profits to GDP has risen, and appears to have sustainably risen-- workers take less, capital takes more. In addition, companies exhibit a much greater preference to buy back shares than historically, so the amount of equity out there is net probably shrinking, which makes it easier for equities to do well. So it's possible-- it's just not likely.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by oldcomputerguy » Mon Sep 18, 2017 5:28 am

Grt2bOutdoors wrote:
Sun Sep 17, 2017 5:30 pm
Please, please, please let there be a crash, I like buying my steaks 50% off! I will sell my potatoes to fund my purchase of protein.
I'm gonna print that out, frame it, and hang it on my office wall :!: :!:

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by selftalk » Mon Sep 18, 2017 6:14 am

J. Bogle was so very right when he said "Don`t Peek" and W. Buffett was so very right when he said "market forecasters make fortune tellers look good." Who cares what comes out of Goldman`s mouth and writings. It surely won`t help the average investor one bit. Goldman will not be and has not been charitable to the investing public. If Goldman really knew when the bear market would be here do you think Goldman would tell you ?

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by midareff » Mon Sep 18, 2017 6:43 am

As of Fridays' close I'm 46.5% equities and 53.5% FI and cash. I'm pretty comfortable there and I recall the old adage..... bulls will make money and bears will make money but it is the destiny of a pig to go to slaughter. OTOH, my charming Thai bride and I have been married 7 years this date. Happy Anniversary to us.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by naha66 » Mon Sep 18, 2017 6:59 am

Is is fact that the average bull market is 9 years and growth is 4%. We still haven't hit 9 and growth is still about 2%.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by lostdog » Mon Sep 18, 2017 7:01 am

Time in the market is better than timing the market. Keep investing in good times and in bad times.
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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by ignition » Mon Sep 18, 2017 7:25 am

abw wrote:
Sun Sep 17, 2017 1:28 pm
I suspect the question many would have is given that we're in an "unprecedented" bull market, what would the bear look like? And would it follow the historic pattern, so that investors wouldn't have a chance to shift assets as the bear starts?
We're not in an unprecedented bull market. CAPE in 2000 was 45, today it is only 30.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by stemikger » Mon Sep 18, 2017 7:48 am

When the bull dies and a correction happens, I rebalance my portfolio, so I get some stocks on sale.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by nedsaid » Mon Sep 18, 2017 9:52 am

selftalk wrote:
Mon Sep 18, 2017 6:14 am
J. Bogle was so very right when he said "Don`t Peek" and W. Buffett was so very right when he said "market forecasters make fortune tellers look good." Who cares what comes out of Goldman`s mouth and writings. It surely won`t help the average investor one bit. Goldman will not be and has not been charitable to the investing public. If Goldman really knew when the bear market would be here do you think Goldman would tell you ?
The problem is that eventually the gloomy forecasts like this will be right. Then many investors will ask themselves why they didn't listen to the warnings? Broken clocks are right twice a day, these market forecasters will have one seemingly uncanny prediction and then be wrong time after time after that. Individual investors need strong convictions and patience to get through all of the gloomy forecasts. The thing is, the stock market is up about 2/3 of the time and historically has an upward trend, thus it historically has paid to be optimistic rather than pessimistic.
A fool and his money are good for business.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by Wakefield1 » Mon Sep 18, 2017 4:49 pm

nedsaid wrote:
Sun Sep 17, 2017 4:01 pm
I place very little credence in anything that Zero Hedge writes. I have always viewed it like the National Enquirer or the Weekly World News.
A broken alarm clock is right twice a day.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by Wakefield1 » Mon Sep 18, 2017 4:50 pm

Wakefield1 wrote:
Mon Sep 18, 2017 4:49 pm
nedsaid wrote:
Sun Sep 17, 2017 4:01 pm
I place very little credence in anything that Zero Hedge writes. I have always viewed it like the National Enquirer or the Weekly World News.
A broken alarm clock is right twice a day.--if it is the kind with real hands,not the electric kind with red numbers.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by lws6772 » Mon Sep 18, 2017 6:06 pm

Several weeks ago I was made aware of a little known indicator that preceded the 2008 downturn and that same indicator has been happening again, albeit not quite at it's 2008 level. It will be interesting to see if it holds true this again.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by incognito_man » Mon Sep 18, 2017 6:09 pm

Valuethinker wrote:
Mon Sep 18, 2017 4:03 am
incognito_man wrote:
Sun Sep 17, 2017 11:20 pm
my number cruncher machine/spreadsheet doesn't look at short-term returns, but I am anticipating a future annual return of 6.42% from all money vested in S&P at this date. :D
Nominal or real?

Nominal I think is pretty credible. Real? Stretching it from here-- we'd need to see some pretty big deviations from historical patterns*.

* to be fair, the level of corporate profits to GDP has risen, and appears to have sustainably risen-- workers take less, capital takes more. In addition, companies exhibit a much greater preference to buy back shares than historically, so the amount of equity out there is net probably shrinking, which makes it easier for equities to do well. So it's possible-- it's just not likely.
Nominal. Which gives an expected risk premium of 4.22% for the S&P 500. Still invest-worthy in my humble opinion!

Not a lot of lifetime cases where it becomes disinvest-worthy from a risk premium perspective.

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Re: "Goldman's Bear Market Indicator Shows Crash Dead Ahead"

Post by TheHouse7 » Tue Sep 19, 2017 1:41 pm

lws6772 wrote:
Mon Sep 18, 2017 6:06 pm
Several weeks ago I was made aware of a little known indicator that preceded the 2008 downturn and that same indicator has been happening again, albeit not quite at it's 2008 level. It will be interesting to see if it holds true this again.
(Consumer credit card debt)lol mostly bogleheads getting cash back rewards! :beer
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