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Author Topic: Devastating market crash. When ?  (Read 51968 times)

Bevan

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Re: Devastating market crash. When ?
« Reply #60 on: November 01, 2014, 11:28:16 am »
It is interesting. Debt is a given. It will typically always get bigger. The question becomes, at what point do the lenders get nervous about not getting their money back? This is the situation that China is in and why we will probably not see an alternative to the USD as global traded currency for some time.

I'm not sure that we will see a global financial meltdown because any debt blow-out will be controlled through various measures i.e. creditors taking a haircut, more quantitative easing, more printing of money etc. However, one cannot escape the fact that the financial system is engineered 80% of the time to rise whereas nature is much more a natural cycle of birth, growth, then death, coming back to square one again. Our financial system, together with inflation, will never accept this. It is engineered that the rich (the informed and those with access to the markets) will get richer and the poor will get poorer. We do need an alternative and I don't see cryptocurrencies (the block chain etc.) being the answer. What we need is for people to understand sustainability in nature and in the way they live their lives first. Then we can start fixing the financial system.
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Moonraker

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Re: Devastating market crash. When ?
« Reply #61 on: September 11, 2015, 02:19:27 pm »
Thread revival.

Anyway short extract of article below. Read full version That Was Not a Crash

The market decline of recent weeks was not a crash. It was merely an air-pocket. It was probably just a start. Such air pockets are typical when overvalued, overbought, overbullish conditions are joined by deterioration in market internals, as we’ve observed in recent months. They are the downside of the “unpleasant skew” that typically results from that combination – a series of small but persistent marginal new highs, followed by an abrupt vertical decline that erases weeks or months of gains within a handful of sessions (see Air Pockets, Free-Falls, and Crashes).

Actual market crashes involve a much larger and concerted shift toward investor risk-aversion, which doesn’t really happen right off of a market peak. Historically, market crashes don’t even start until the market has first retreated by 10-14%, and then recovers about half of that loss, offering investors hope that things have stabilized (look for example at the 1929 and 1987 instances). The extensive vertical losses that characterize a crash follow only after the market breaks that apparent “support,” leading to a relentless free-fall that inflicts several times the loss that we’ve seen in recent weeks.

Our strategy is to align our investment stance with the market return/risk profile we identify based on observable conditions. There’s no need to make projections about a crash, but it’s fair to say that we can’t rule it out given that every major crash in history has emerged from the 8% of historical market conditions matching what we currently observe (see Risk Turns Risky for a review of cumulative market losses in this subset of history). We can only say that on average, stocks have continued to lose considerable ground under the return/risk classification we identify here, so we remain defensive.

The reason why the word “crash” has been bandied about to describe the recent selloff, I think, is partly because investors have lost all perspective of the losses that have historically been associated with that word, but mostly because it gives market cheerleaders the needed "cover" to encourage investors to continue speculating near record market valuations. After all, everyone “knows” that investors shouldn’t sell after a crash, thus the endless flurry of articles advising “selling in a crash is a textbook mistake,” “selling off stocks during a crash is a terrible idea”, “whatever you do, don’t sell”, “market crash: don’t rush to press the panic button,” “the worst investing move during a market crash,” … you get the idea.

BTW. what % of your portfolios do you hold in cash ?
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