‘Euphoric’ markets at risk of another crash

(24-07-2014, 09:19 AM)theasiareport Wrote: 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

Agree but the bubble is from 2 areas: Asset bubble and Government debt, including monetary policies. The former affects consumers and the latter affects fiscal flexibility.

As long as inflation monster is subdued, all is fine. Obviously past few years that is not the case for Asia. These 2 bubbles have to unwind... the question is how. China, Singapore and to a certain extend HK has been very proactive. Even our neighbours see the risk.

Again nobody can say that we cannot foresee bubbles. I think that is rubbish. But nobody knows when it will pop. And policy makers should have the faith that popping it themselves is MUCH better than letting the markets pop it. Question again is political will when you are the party pooper.

Stalled recovery leaves Europe defenceless against economic shock from Russia
http://www.telegraph.co.uk/finance/comme...ussia.html

Hi all, is there any nice websites that we can reference regarding STI's (or for that matter other indexes) various P/E, P/B, dividend yield etc numbers? Perhaps we can pull that out to have a clearer understanding of the market situation now compared to the past.

(24-07-2014, 09:46 PM)investright Wrote: Hi all, is there any nice websites that we can reference regarding STI's (or for that matter other indexes) various P/E, P/B, dividend yield etc numbers? Perhaps we can pull that out to have a clearer understanding of the market situation now compared to the past.

You can get indirectly from the ratio of the respective ETF funds, or via paid sites.

Base on shareinvestor.com, a paid site, the STI up-to-date ratios are

PE: 16.1
PB: 1.5
Dividend Yield: 2.8%

When every valuation metric is going bright red, you have to be pretty oblivious to not start to take money off the US equity table.

Beware of anchoring and endowment biases.

(03-07-2014, 08:05 AM)scottleey Wrote: I think it is important to engage in second level thinking of current situation.

In particular, I think investors should consider the fact that bubbles form during mass delusion of prosperity.

Which also means that if big organizations and institutions recognise bubbly scenarios, how then can bubbles inflate beyond recognition?

Of course it is easy to say that stock market has risen and is ahead of fundamentals. But there has never been one rule that demands stock market valuation to correlate directly with fundamentals. In fact, it is often ahead. So being looking at fundamentals and then at valuation lends itself to poor investment decisions.

I am not saying that we should not look at fundamentals. But I need to stress that markets have been slightly overvalued/undervalued throughout history (like the current scenario). Looking at fundamentals does not lend credence unless its mass exuberance of extreme prosperity or pessimism.

Until then, looking at macro picture almost certainly leads to wrong decisions in these slight over/undervaluation scenarios. The most important thing is still looking for undervalued companies.

Disclaimer: I am solely referring to the US market though since I am a US investor. But I hope it trigger some thinking on our part in these scenarios.

‘Euphoric’ markets???

nah.... still some way to go!

WAKE ME UP BEFORE YOU GO-OH!

I think China's debt bubble is very worrying. But I guess my next question is how does one decide what a bubble is?

After 2008, I've heard it used to describe any significant increase in price, and that it has seemed to have lost any real meaning.

GMO (Jeremy Grantham) has identified it as a 2 s.d. away from the mean, and has about 40+ bubbles on record. But it seems that everything is a bubble today.

Regards,
theasiareport.com

(24-07-2014, 12:43 PM)specuvestor Wrote:

(24-07-2014, 09:19 AM)theasiareport Wrote: 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

Agree but the bubble is from 2 areas: Asset bubble and Government debt, including monetary policies. The former affects consumers and the latter affects fiscal flexibility.

As long as inflation monster is subdued, all is fine. Obviously past few years that is not the case for Asia. These 2 bubbles have to unwind... the question is how. China, Singapore and to a certain extend HK has been very proactive. Even our neighbours see the risk.

Again nobody can say that we cannot foresee bubbles. I think that is rubbish. But nobody knows when it will pop. And policy makers should have the faith that popping it themselves is MUCH better than letting the markets pop it. Question again is political will when you are the party pooper.

World is at inflexion point as Fed tightening looms
http://blogs.telegraph.co.uk/finance/amb...ing-looms/

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