World ‘lurching towards another market crash’, warns academic

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#1
World ‘lurching towards another market crash’, warns academic
THE AUSTRALIAN NOVEMBER 21, 2014 12:00AM

John Ross

Higher Education Reporter
Sydney

Stock markets plummet after an average of five years of steady economic growth, says Arturo Bris Source: News Limited

AUSTRALIA’S real estate bubble is the “biggest in the world”, adding to the risk factors that are propelling the global economy towards a crash that is due — statistically speaking — in just five months, a European finance professor has warned.

Professor Arturo Bris, who heads the World Competitiveness Centre at Swiss business school IMD, told a Singapore forum the world had become so flush with money that people were paying “crazy” prices for real estate and stocks, and some companies had enough cash on their books to buy entire countries.

Elaborating on predictions he made in June, he said present settings pointed to the continuity of a cycle that has seen the world afflicted by economic crises every six years, on average, since World War II.

The cycle involved roughly 58 months of steady economic growth followed by 11 months of free fall, he said.

The pattern included the Latin debt crisis of 1982, the US savings and loans crisis, which started in 1986, the 1991 Indian economic crisis, the burst of the internet bubble in 2000 and the 2008 Lehman Brothers collapse.

Professor Bris said there were positive signs for the global economy, with the G20 committing to growth, stockmarket indexes rising, a resolution to the European debt crisis, the success of quantitative easing in the US, and economic reforms in countries like India and Brazil.

Nevertheless, his analysis suggested the next crisis point could be expected around April.

“We need to prepare our mindset for what is going to happen next year, because — statistically speaking — things do not look so rosy,” he said.

Professor Bris said Japan’s unexpected plunge into recession this week could be the “black storm” that signalled the next economic crisis was imminent.

It was impossible to say exactly when the crisis would hit, or what would spark it.

He highlighted five “risk factors”: access to cheaper oil and gas; the real estate bubble; a parallel stock exchange bubble; Chinese lending; and a tendency for leading corporations to accrue huge sums on their balance sheets.

He said cheaper methods of energy production could spark a geopolitical crisis, with countries such as Russia and Saudi Arabia liable to respond forcefully against threats to exports, while the real estate and stockmarket bubbles could stimulate something similar to the subprime mortgage crisis.

Two indicators in particular suggested that the stockmarket was in dangerous territory. Excessive cash levels had produced a “buy” mentality, reducing volatility to a level last seen just before the Lehman Brothers collapse. And a yawning disparity between what corporations earned and what they commanded in stock prices was similar to gaps that had emerged at the peak of the dotcom boom and just before Lehman “exploded”.

Professor Bris said the amount of money on some companies’ balance sheets was comparable to the value of entire countries, calculated by applying a typical sales multiple to the country’s GDP and subtracting national debt. By that measure, Citigroup had enough ready cash to acquire 51 per cent of Italy, which Professor Bris valued at $US840 billion ($977bn). Apple could buy a maj­ority stake in Israel and Cisco could purchase Portugal, he said. “A bank that employs maybe 30,000 people could buy a country with 50 million — it shows the magnitude of the problem.”

These levels of cash would send economies into meltdown if they were suddenly released into the markets. Similarly, China could destroy the American economy by suddenly selling off US bonds.

Professor Bris said Chinese lending was the biggest risk factor of all, with “humungous” sums concentrated in a few poorly governed banks. “The next Lehman Brother will be Lim Ma Brothers.”

The reporter travelled to Singapore as IMD’s guest.
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#2
Everyday there will be someone , somewhere who will say that the stock market, the financial markets, the economy, China , Australia, or whatever will collapse. The time frame will differ. Some say next month. others say 6 months later. Some say next year. A few say, a few more years. The lucky ones get quoted in newswires. The very lucky ones get quoted and happen to be right. So what ? Do what ? Buy what or sell what. When ? These are all useless and meaningless talk. Even my dead clock is right twice a day. But what's the point ? It cannot tell me the right time when I want to. There is no need for people to tell us there will be a market crash. Who does not know there will be a crash. We had many crashes, will have more crashes. Nothing new. No need for academics to tell us. Retirees at kopitiam also say there will be a crash. Only difference is they are not quoted by newswires.
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#3
(20-11-2014, 11:03 PM)greengiraffe Wrote: World ‘lurching towards another market crash’, warns academic
THE AUSTRALIAN NOVEMBER 21, 2014 12:00AM

John Ross

Higher Education Reporter
Sydney

Stock markets plummet after an average of five years of steady economic growth, says Arturo Bris Source: News Limited

AUSTRALIA’S real estate bubble is the “biggest in the world”, adding to the risk factors that are propelling the global economy towards a crash that is due — statistically speaking — in just five months, a European finance professor has warned.

Professor Arturo Bris, who heads the World Competitiveness Centre at Swiss business school IMD, told a Singapore forum the world had become so flush with money that people were paying “crazy” prices for real estate and stocks, and some companies had enough cash on their books to buy entire countries.

Elaborating on predictions he made in June, he said present settings pointed to the continuity of a cycle that has seen the world afflicted by economic crises every six years, on average, since World War II.

The cycle involved roughly 58 months of steady economic growth followed by 11 months of free fall, he said.

The pattern included the Latin debt crisis of 1982, the US savings and loans crisis, which started in 1986, the 1991 Indian economic crisis, the burst of the internet bubble in 2000 and the 2008 Lehman Brothers collapse.

Professor Bris said there were positive signs for the global economy, with the G20 committing to growth, stockmarket indexes rising, a resolution to the European debt crisis, the success of quantitative easing in the US, and economic reforms in countries like India and Brazil.

Nevertheless, his analysis suggested the next crisis point could be expected around April.

“We need to prepare our mindset for what is going to happen next year, because — statistically speaking — things do not look so rosy,” he said.

Professor Bris said Japan’s unexpected plunge into recession this week could be the “black storm” that signalled the next economic crisis was imminent.

It was impossible to say exactly when the crisis would hit, or what would spark it.

He highlighted five “risk factors”: access to cheaper oil and gas; the real estate bubble; a parallel stock exchange bubble; Chinese lending; and a tendency for leading corporations to accrue huge sums on their balance sheets.

He said cheaper methods of energy production could spark a geopolitical crisis, with countries such as Russia and Saudi Arabia liable to respond forcefully against threats to exports, while the real estate and stockmarket bubbles could stimulate something similar to the subprime mortgage crisis.

Two indicators in particular suggested that the stockmarket was in dangerous territory. Excessive cash levels had produced a “buy” mentality, reducing volatility to a level last seen just before the Lehman Brothers collapse. And a yawning disparity between what corporations earned and what they commanded in stock prices was similar to gaps that had emerged at the peak of the dotcom boom and just before Lehman “exploded”.

Professor Bris said the amount of money on some companies’ balance sheets was comparable to the value of entire countries, calculated by applying a typical sales multiple to the country’s GDP and subtracting national debt. By that measure, Citigroup had enough ready cash to acquire 51 per cent of Italy, which Professor Bris valued at $US840 billion ($977bn). Apple could buy a maj­ority stake in Israel and Cisco could purchase Portugal, he said. “A bank that employs maybe 30,000 people could buy a country with 50 million — it shows the magnitude of the problem.”

These levels of cash would send economies into meltdown if they were suddenly released into the markets. Similarly, China could destroy the American economy by suddenly selling off US bonds.

Professor Bris said Chinese lending was the biggest risk factor of all, with “humungous” sums concentrated in a few poorly governed banks. “The next Lehman Brother will be Lim Ma Brothers.”

The reporter travelled to Singapore as IMD’s guest.

Marc faber has been saying things will crash since forever.

Jim Rogers has been calling us to be farmers every time.

They will definitely be right eventually.

I mean seriously, I'm a firm believer of the yield curve and it's still steeply sloping and by the way it has predicted nearly every recession and also given us at least 1 to 2 years warning siren.

Coupled with Low inflation rates , AND cheap oil.

It's boom town Charlie but having said that , keep a war chest but start nibbling like now.

I stand to EAT MY WORDS ..and seriously, what does a low volume of share trading tell us?

It's not euphoric and there is slight fear in the market .... Granted there is no blood on the streets yet.. So nibble not show hand
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#4
(21-11-2014, 12:11 AM)amperex Wrote: Retirees at kopitiam also say there will be a crash. Only difference is they are not quoted by newswires.

If we want to have a difference, make sure we CAN do something when a crash happens.
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#5
(21-11-2014, 09:47 AM)violinist Wrote:
(21-11-2014, 12:11 AM)amperex Wrote: Retirees at kopitiam also say there will be a crash. Only difference is they are not quoted by newswires.

If we want to have a difference, make sure we CAN do something when a crash happens.
Ya lol!
What did you do during the last crash?
And the last, last, last....???
And most important what you are going to do now if the crash comes now or tomorrow, tomorrow, tomorrow...?
Say one thing do another will "kill" most of us in the markets.
WB:-

1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.

Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.

NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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#6
(21-11-2014, 02:48 PM)Temperament Wrote:
(21-11-2014, 09:47 AM)violinist Wrote:
(21-11-2014, 12:11 AM)amperex Wrote: Retirees at kopitiam also say there will be a crash. Only difference is they are not quoted by newswires.

If we want to have a difference, make sure we CAN do something when a crash happens.
Ya lol!
What did you do during the last crash?
And the last, last, last....???
And most important what you are going to do now if the crash comes now or tomorrow, tomorrow, tomorrow...?
Say one thing do another will "kill" most of us in the markets.

Well, ppl say hold good stock no need to worry. But in a crash, every stock will sink. I think we should join in the sellin. Anyway in a crash, the selling are not going to stop till much much later. By then we can buy back cheaper and more , so we can profit even more on the way up. But of course, we can never buy at the bottom, but we are sure we bought at one of the low, unless you are very lucky to buy at the very bottom.

It is really no wise to follow your counter down and up again and gain nothing out of the crash. JMO
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#7
Have markets reached Ethiopia yet? In my opinion, we are not even there yet.

Looking at quantitative figures at SG, HK markets, the PE to the indexes is not even reached 18-20.

Is there fear in the market now? Or greed on the street.
Your answer is as good as mine.
失信于民,何以取信于天下...
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#8
With Ebola subsides, America recovering, the world has never been better. There are few areas of concern.

1. World War 3 : Putin is a bully and opportunist but he is not stupid.
It is unlikely to happen as long the Europe and America apply strong measure on him. Meaning no appeasement else that will happens.

2. US$ no longer trade currency
Germany, Japan, UK and USA are strong partners in this. A strong China won't be able to replace. Russia, Africa, S. America are exporters with poor local currency fundamental. So unlikely for now.

3. Gap in Property Price VS Income Gap worldwide
After 2008, USA property price has came down. The issue is inflation is now world wide. Skyhigh property is the real danger with income not growing on par. How long this can last depends on the spark. In Taipei, 14 years of average annual income for an average property prices. Will it burst ? Yes but we just cannot tell when. So UK, Australia, SG may be hit earlier but i think it will calls for recession to hit home. Maybe will be like AFC, it only needs a small ignition in a small country like thailand or 3rd world like India to create the chain effects.

Just my Diary
corylogics.blogspot.com/


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#9
is seems a useless & meaningless post except for the frequent trader or speculator who trades excessively..they would be concerned with such time wasting news article
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#10
yaloh, Big Grin

Crash or not, when will crash, no one knows lah... value-investors continue to seek and find values! Smile
1) Try NOT to LOSE money!
2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
3) CASH in hand is KING in BEAR! 
4) In BULL, SELL-SELL-SELL! 
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