I found this informative about the next possible crisis

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jayk238
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I found this informative about the next possible crisis

Post by jayk238 » Mon Sep 10, 2018 7:55 am

https://www.bloomberg.com/graphics/2018 ... nd=premium

Via bloomberg.

I think it shows we have inherent risk that is way worse than your standard stock valuations etc. but at least its better than before. Then again, no where to go but up from that point.

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corn18
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Re: I found this informative about the next possible crisis

Post by corn18 » Mon Sep 10, 2018 8:33 am

Interesting article. Seems there will always be the seedy side of debt that will always find a way to flourish and collapse.

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bottlecap
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Re: I found this informative about the next possible crisis

Post by bottlecap » Mon Sep 10, 2018 8:51 am

Ignore the noise.

This is a piece by a jouralism major. It shows a lot of infographics, contains some simplistic cause and effect analysis, and expresses gratuitous opinions and predisposed biases that you would expect from a journalism major.

I'm not staying there isn't anything to worry about - there always is - but these people didn't predict the last crisis and won't predict the next.

JT

2015
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Re: I found this informative about the next possible crisis

Post by 2015 » Mon Sep 10, 2018 9:13 am

The next crisis will result from unknown unknowns. And people won't be prepared because they were too busy helping Bloomberg sell advertising by reading marketing disguised as "information".

As your attention goes so goes your money so goes your life.

JBTX
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Re: I found this informative about the next possible crisis

Post by JBTX » Mon Sep 10, 2018 11:58 am

Actually a very good summary of some of the key drivers of the prior collapse, and where they stand now. Lost in the noise is some of the real progress that has been made. It really seems like the probability of a recurrence due to the same factors seems unlikely any time soon. However, there is still enough fragility in the system that some other shock could bring down the house of cards (China's growing debt, collapse of Euro, geopolitical crisis, war, etc) or longer term growing US govt debt could lead to negative outcomes, depending how Fed, govt, regulators, markets react.

Theoretical
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Re: I found this informative about the next possible crisis

Post by Theoretical » Mon Sep 10, 2018 6:54 pm

This is actually a very reasonable and measured item in the financial press. Frankly, I was shocked by how much smaller the big banks are post Dodd-Frank and how they’ve shifted in a depository direction. That’s good information right there. The cautions of CLOs and the interactions between this kind of shadow bank and the main banks is also useful.

Just because the specific timing of the next bear can’t be known doesn’t mean this sort of analysis isn’t useful. It’s only really actionable if you’ve got a huge chunk of the portfolio in junk bonds or yield-chasing active bond funds, but it does tell some of the picture.

Now if there’s a whole bunch of global inflation, then the concerns about rising corporate debt rather evaporates as the debt becomes easier to pay (save floating rate instruments). So that’s an example of a crisis this information would be a red herring for.

This didn’t strike me as sensational at all.

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Tycoon
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Re: I found this informative about the next possible crisis

Post by Tycoon » Mon Sep 10, 2018 6:56 pm

Blah, Blah, Blah. :sharebeer
Appeal to Pity:When pity is envoked to support a statement | Appeal to Popular Sentiment:Appealing to unrelated prejudices and attitudes | Hasty Generalization:Too little evidence to support the conclusion

bhsince87
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Re: I found this informative about the next possible crisis

Post by bhsince87 » Mon Sep 10, 2018 7:30 pm

I'm mad that I allowed myself to read that entire article, hoping there would be some insight.

Nothing. Totally pointless!
BH87

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CaliJim
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Re: I found this informative about the next possible crisis

Post by CaliJim » Mon Sep 10, 2018 10:18 pm

Thank you for posting. I hadn't heard of CLO's before.

The author IS a journalist, but not all journalists are idiots, and he clearly knows more about how the sausage is made on wall street than I do.

**and I'll keep my cranky old man cynical thoughts to myself**
-calijim- | | For more info, click this Wiki

NoRegret
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Re: I found this informative about the next possible crisis

Post by NoRegret » Mon Sep 10, 2018 10:52 pm

jayk238 wrote:
Mon Sep 10, 2018 7:55 am
https://www.bloomberg.com/graphics/2018 ... nd=premium

Via bloomberg.

I think it shows we have inherent risk that is way worse than your standard stock valuations etc. but at least its better than before. Then again, no where to go but up from that point.
Thanks, I enjoyed that article. I own a couple of leveraged CEFs of senior bank loans. They have been paying 8% with stable NAV’s. I like their short duration in the current rising rate environment.

That said I’m under no illusion that they’ll be safe when the credit cycle turns. The rise of conv-lite loans is a real concern.

NR
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade

gd
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Re: I found this informative about the next possible crisis

Post by gd » Tue Sep 11, 2018 7:32 am

I'd guess it's more informative about the last crisis than the next one.

jayk238
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Re: I found this informative about the next possible crisis

Post by jayk238 » Tue Sep 11, 2018 10:12 am

The negativity is a little surprising. I too felt it was informative.

Its helpful to know that the system is not rock solid.

For an even better and more thought out presentation here is this article in the newyorker:
https://www.newyorker.com/magazine/2018 ... ial-crisis

I respect John Cassidy, and more importantly the author of the book in the article as well.

Its well thought out and sheds light on the issues internationally

The negativity seems to stem from a defensive attitude about buy and hold. I agree buy and hold is the best choice (what better alternative is there?)
but thats not really the purpose of reading this article. Its a way to understand how the system is or as another said how the sausage is currently made.

Maybe its simplified, but my non financial career self learned more from it at least

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willthrill81
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Re: I found this informative about the next possible crisis

Post by willthrill81 » Tue Sep 11, 2018 10:43 am

2015 wrote:
Mon Sep 10, 2018 9:13 am
The next crisis will result from unknown unknowns. And people won't be prepared because they were too busy helping Bloomberg sell advertising by reading marketing disguised as "information".

As your attention goes so goes your money so goes your life.
:beer

If it was a known issue, then it wouldn't lead to a crisis. Unknown issues are what lead to crises.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

hdas
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Re: I found this informative about the next possible crisis

Post by hdas » Tue Sep 11, 2018 11:22 am

willthrill81 wrote:
Tue Sep 11, 2018 10:43 am
:beer

If it was a known issue, then it wouldn't lead to a crisis. Unknown issues are what lead to crises.
Wow, u must be kidding....

I’ve been deeply involved in markets professionally only since 2006, so the only big crisis I know very well is the Great Recesión. From my vantage point at the time, even as a newbie in the industry, almost all of the key elements of the crisis were known issues:

- Housing collapse, Subprime, Debt bubble
- Broker Dealers going bust using 40x leverage

HFund business is to convince ppl their operations are needed and they expend all their time thinking of all the myriad scenarios for a crisis.

Ppl just like to repeat the Rumsfield quote to sound profound.

JBTX
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Re: I found this informative about the next possible crisis

Post by JBTX » Tue Sep 11, 2018 11:25 am

Theoretical wrote:
Mon Sep 10, 2018 6:54 pm
This is actually a very reasonable and measured item in the financial press. Frankly, I was shocked by how much smaller the big banks are post Dodd-Frank and how they’ve shifted in a depository direction. That’s good information right there. The cautions of CLOs and the interactions between this kind of shadow bank and the main banks is also useful.

Just because the specific timing of the next bear can’t be known doesn’t mean this sort of analysis isn’t useful. It’s only really actionable if you’ve got a huge chunk of the portfolio in junk bonds or yield-chasing active bond funds, but it does tell some of the picture.

Now if there’s a whole bunch of global inflation, then the concerns about rising corporate debt rather evaporates as the debt becomes easier to pay (save floating rate instruments). So that’s an example of a crisis this information would be a red herring for.

This didn’t strike me as sensational at all.
Many of the graphs were on a percent to GDP basis, so the improvement on that relative basis would be larger than on a nominal dollar basis.

JBTX
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Re: I found this informative about the next possible crisis

Post by JBTX » Tue Sep 11, 2018 11:33 am

jayk238 wrote:
Tue Sep 11, 2018 10:12 am
The negativity is a little surprising. I too felt it was informative.

Its helpful to know that the system is not rock solid.

For an even better and more thought out presentation here is this article in the newyorker:
https://www.newyorker.com/magazine/2018 ... ial-crisis

I respect John Cassidy, and more importantly the author of the book in the article as well.

Its well thought out and sheds light on the issues internationally

The negativity seems to stem from a defensive attitude about buy and hold. I agree buy and hold is the best choice (what better alternative is there?)
but thats not really the purpose of reading this article. Its a way to understand how the system is or as another said how the sausage is currently made.


Maybe its simplified, but my non financial career self learned more from it at least
Agree. Having a buy and hold Boglehead strategy does not preclude one from understanding macroeconomic drivers and potential macroeconomic risks. If anything it should reinforce it. How many "I'm going to go 100% equity" and " after 10 years in cash I'm ready to jump back in, lump sum or DCA?" threads have we seen.

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corn18
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Re: I found this informative about the next possible crisis

Post by corn18 » Tue Sep 11, 2018 11:38 am

I need to read these sky is falling articles to help keep me @ 60/40. To read here (and other fora), I am an idiot for not being 100% equities, leveraged 3x and buying real estate so I can increase my leverage even more.

2 Tasty
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Re: I found this informative about the next possible crisis

Post by 2 Tasty » Tue Sep 11, 2018 11:44 am

willthrill81 wrote:
Tue Sep 11, 2018 10:43 am
2015 wrote:
Mon Sep 10, 2018 9:13 am
The next crisis will result from unknown unknowns. And people won't be prepared because they were too busy helping Bloomberg sell advertising by reading marketing disguised as "information".

As your attention goes so goes your money so goes your life.
:beer

If it was a known issue, then it wouldn't lead to a crisis. Unknown issues are what lead to crises.
The underlying causes for most crises are in fact known by a decent percentage of people who seek to understand (though of course the timing is always unpredictable). But the herd typically does not listen, and hence a crisis is born. Ignorance and greed are powerful forces.

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willthrill81
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Re: I found this informative about the next possible crisis

Post by willthrill81 » Tue Sep 11, 2018 11:50 am

2 Tasty wrote:
Tue Sep 11, 2018 11:44 am
willthrill81 wrote:
Tue Sep 11, 2018 10:43 am
2015 wrote:
Mon Sep 10, 2018 9:13 am
The next crisis will result from unknown unknowns. And people won't be prepared because they were too busy helping Bloomberg sell advertising by reading marketing disguised as "information".

As your attention goes so goes your money so goes your life.
:beer

If it was a known issue, then it wouldn't lead to a crisis. Unknown issues are what lead to crises.
The underlying causes for most crises are in fact known by a decent percentage of people who seek to understand (though of course the timing is always unpredictable). But the herd typically does not listen, and hence a crisis is born. Ignorance and greed are powerful forces.
:sharebeer
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

2015
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Re: I found this informative about the next possible crisis

Post by 2015 » Tue Sep 11, 2018 6:26 pm

2 Tasty wrote:
Tue Sep 11, 2018 11:44 am
willthrill81 wrote:
Tue Sep 11, 2018 10:43 am
2015 wrote:
Mon Sep 10, 2018 9:13 am
The next crisis will result from unknown unknowns. And people won't be prepared because they were too busy helping Bloomberg sell advertising by reading marketing disguised as "information".

As your attention goes so goes your money so goes your life.
:beer

If it was a known issue, then it wouldn't lead to a crisis. Unknown issues are what lead to crises.
The underlying causes for most crises are in fact known by a decent percentage of people who seek to understand (though of course the timing is always unpredictable). But the herd typically does not listen, and hence a crisis is born. Ignorance and greed are powerful forces.
Where is your evidence for this? If you study history, the "decent percentage of people" who "know" the causes of crises beforehand is almost nil. Read Devil Take The Hindmost. Even after a crisis the "causes" can be suspect due to narrative fallacy and human obsession with finding patterns where none exist. Reality is forever agnostic to human search for meaning. Read anything on psycholinguistics.

Investing exists in a complex adaptive system comprised of unknown and unknowable inputs, agents, and actors. The best way to be a patsy is to believe everyone else represents the herd and not you. Ignorance of oneself is the single most destructive and powerful force in investing (and in much of the rest of life as well). The best we can do is strive to be as rational as possible, which means to create interpretations of reality as close to reality as we possibly can. It is in the nature of humans to regularly fail at this, however. Read Charlie Munger on how this pertains to investing (and other things).

2 Tasty
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Re: I found this informative about the next possible crisis

Post by 2 Tasty » Sat Sep 15, 2018 12:10 am

2015 wrote:
Tue Sep 11, 2018 6:26 pm
2 Tasty wrote:
Tue Sep 11, 2018 11:44 am
willthrill81 wrote:
Tue Sep 11, 2018 10:43 am
2015 wrote:
Mon Sep 10, 2018 9:13 am
The next crisis will result from unknown unknowns. And people won't be prepared because they were too busy helping Bloomberg sell advertising by reading marketing disguised as "information".

As your attention goes so goes your money so goes your life.
:beer

If it was a known issue, then it wouldn't lead to a crisis. Unknown issues are what lead to crises.
The underlying causes for most crises are in fact known by a decent percentage of people who seek to understand (though of course the timing is always unpredictable). But the herd typically does not listen, and hence a crisis is born. Ignorance and greed are powerful forces.
Where is your evidence for this? If you study history, the "decent percentage of people" who "know" the causes of crises beforehand is almost nil. Read Devil Take The Hindmost. Even after a crisis the "causes" can be suspect due to narrative fallacy and human obsession with finding patterns where none exist. Reality is forever agnostic to human search for meaning. Read anything on psycholinguistics.

Investing exists in a complex adaptive system comprised of unknown and unknowable inputs, agents, and actors. The best way to be a patsy is to believe everyone else represents the herd and not you. Ignorance of oneself is the single most destructive and powerful force in investing (and in much of the rest of life as well). The best we can do is strive to be as rational as possible, which means to create interpretations of reality as close to reality as we possibly can. It is in the nature of humans to regularly fail at this, however. Read Charlie Munger on how this pertains to investing (and other things).
I don't necessarily disagree. The vast majority (including myself) are the herd (hence why I index). So for the majority of the laypeople, the unknowns overwhelm the knowns. But, I stand by the fact that most crises result from structural flaws that are known by a decent percentage of those in the industry (a slight refinement of my earlier statement) but ignored by the majority due to self-interest. Look at 2001: The "irrational exuberance" was called several years earlier by some of the brightest and most influential minds in the industry, but very few listened (including myself). Look at 2008: The extreme structural flaws in both the housing market and in having banks too big to fail was well known (though perhaps the specifics of Lehman Brothers being allowed to fail and the full extent of the CDO mess were unknowns but to a few).

The intent of my point was not to imply that I know more than I do (my ignorance is well established through my actions in the two aforementioned bubbles), but rather to refute a blanket statement that unknown issues lead to crises (however that is defined). I feel this train of thought is dangerous in that it leads to defeatism (though the corollary does not suggest taking the egocentric approach).

I appreciate the reading suggestions and will try to add them to the library list.

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