‘Euphoric’ markets at risk of another crash

When there are still quite some bearish views in the market, it is unlikely that the market in "euphoric" state. To me, the market is more like cautiously optimistic.

(03-07-2014, 02:16 PM)freedom Wrote: When there are still quite some bearish views in the market, it is unlikely that the market in "euphoric" state. To me, the market is more like cautiously optimistic.

Agreed on this,
continue to be trading sideways...

Agreed too. I do not think that Asia market is frothy. Rather, it's the US market that is way more bullish.

(03-07-2014, 12:08 PM)opmi Wrote: ^^ To identify bubbles, you have to see anecdotal evidence. Like people and corporate behaviour.
Read or living thru Japan bubble, Taiwan stock bubble, Msian bubble, HK red chip bubble, dotcom bubble, global credit bubble.

As usual, bubbles can last longer than you think. Rather to avoid bubbles, investors should embrace bubbles. and HOPE to
get out safely.

cannot agree more..indeed is a words of wisdom
holding cash is also bubble..is called cash bubble
abe can attest to it

http://www.businesstimes.com.sg/premium/...e-20140704

PUBLISHED JULY 04, 2014
Stock markets not bubbling over: Bank of S'pore
BYRAPHAEL LIM
raphlim@sph.com.sg
PRINT |EMAIL THIS ARTICLE
BT 20140704 RLOCBC4 1161484
Mr Hou: Confident that the bull market will continue. - FILE PHOTO
DESPITE stock indices such as the S&P 500 and the DAX reaching historic highs, stock markets worldwide do not appear to be in a bubble, said Hou Wey Fook, chief investment officer of Bank of Singapore yesterday.
Briefing the media on the economic and investment outlook for the second half of 2014, Mr Hou said that the bank is confident that stocks will reach higher levels in the next six to 12 months.
"It looks like this bull market can continue," he said, but cautioned that being in the sixth year of a bull market, the ride will be "bumpier" compared to the previous years.
Mr Hou noted that just four industries are showing signs of being "bubbly" - with price to earnings ratio greater than 30 - compared with the 2000 dot com bubble, where 14 sectors, representing some 70 per cent of the market capitalisation in the US displayed such signs.

Irrational exuberance in financial markets is a main characteristic during the penultimate phase when investors make easy money and confidence is sky high

Financial markets are playing down risks: Geithner
• THE AUSTRALIAN
• JULY 24, 2014 12:00AM

Adam Creighton

Economics Correspondent
Sydney
FORMER US Treasury Secretary Timothy Geithner has warned investors that financial markets are underpricing risks but he defended vigorously the Obama administration’s record of huge deficit spending and -unprecedented money creation.
“We live in an inherently messy, risky and dangerous world and there are no easy solutions,” he said, speaking to The ¬Australian from California about his new memoirsStress Test: Reflections on Financial Crises.
Mr Geithner, President Barack Obama’s most senior economic official during the global economic collapse until he stepped down last year, also took aim at emerging countries’ ¬complaints about the Federal Reserve’s withdrawal of quantitative easing.
“I understand it but it’s not in their interest for the US to run policy in a way that gives excessive weight to conditions outside the US,” he said. “That is a world-class problem to have compared to what they faced over the last five years,” he added, arguing the greater economic strength of the US was overall beneficial for the rest of the world.
Now president of Wall Street private equity firm Warburg Pincus, Mr Geithner acknowledged the extremely low levels of perceived risk in financial markets as measured by volatility indices and corporate and government borrowing rates.
“In lots of ways markets’ pricing of risks is implausibly benign at the moment but the risks are not comparable to what we faced before 2008,” he said, arguing policymakers had learned from their response to the global financial crisis and the banking system was now far more resilient.
“We imposed a stress test for banks designed to ensure they could withstand a great depression — it’s not clear it makes much sense to go further than that,” he said, batting away criticism that the new global banking ¬accord was too weak.
Mr Geithner’s remarks come as Reserve Bank governor Glenn Stevens this week questioned whether ultra-low interest rate policies in the US and Japan had generated genuine entrepreneurial activity or simply encouraged speculation in shares and bonds using funds injected into the banking system by major central banks.
Mr Geithner, head of the New York Federal Reserve for six years before being appointed Treasury Secretary in early 2009, is promoting his new book, which has debuted on non-fiction bestseller lists in the US this year.
“I wanted to give people the chance to take a fresh look at the choices we made,” he said, bristling at the idea the US should have let Bear Stearns fail in 2008 or allowed other large US Wall and main street banks to fail. These banks were controversially bailed out with taxpayer funds.
“In severe crises that include financial panics it is necessary to protect the average person from calamity, but that sometimes means acting in ways that appear unfair to the average person.”
Mr Stevens may have even read this book: “The accounts of some of the key decision-makers that have been published give even more sense of how desperately close to the edge they thought the system came, and how difficult the task was of stopping it going over,” he said on Tuesday.
This theme pervades Mr ¬Geithner’s book.

Cash bubble is better than lose all my money bubble. =)

(03-07-2014, 10:31 PM)pianist Wrote: cannot agree more..indeed is a words of wisdom
holding cash is also bubble..is called cash bubble
abe can attest to it

Looking at the US market, the valuations are on the higher end of the spectrum but I think it's a bit stretched to call it a "bubble". Many of the corporations have quite solid balance sheets and reasonable P/E ratios.

I am referring mainly to the S & P 500 companies, and the picture may differ for smaller cap stocks.

Looking at the Asia, I don't really see the kind of complacency. Valuations in Singapore and Hong Kong are relatively reasonable based on P/B or P/E.

Regards,
theasiareport.com

(24-07-2014, 12:17 AM)flinger Wrote: Cash bubble is better than lose all my money bubble. =)

(03-07-2014, 10:31 PM)pianist Wrote: cannot agree more..indeed is a words of wisdom
holding cash is also bubble..is called cash bubble
abe can attest to it

Cash bubble? Er.....?

When you choose to hold more cash rather than equity or gold or others, it should be an option without time and strike price. (Reference to WB. But how many of us can really afford to do like him?)
Cash is a bubble only when our monetary fiat system collapses. imo That's why we better have some asset allocation.

dont let fear paralyse our investment decisions