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Asset prices are high across the board. Is it time to worry?
09-10-2017, 08:49 PM, (This post was last modified: 09-10-2017, 09:01 PM by gzbkel.)
Post: #1
Asset prices are high across the board. Is it time to worry?
https://www.economist.com/news/leaders/2...prices-are (Paywalled, 3 articles/week)

With ultra-loose monetary policy coming to an end, it is best to tread carefully

IN HIS classic, “The Intelligent Investor”, first published in 1949, Benjamin Graham, a Wall Street sage, distilled what he called his secret of sound investment into three words: “margin of safety”. The price paid for a stock or a bond should allow for human error, bad luck or, indeed, many things going wrong at once. In a troubled world of trade tiffs and nuclear braggadocio, such advice should be especially worth heeding. Yet rarely have so many asset classes—from stocks to bonds to property to bitcoins—exhibited such a sense of invulnerability.
Dear assets are hardly the product of euphoria. No one would mistake the bloodless run-up in global stockmarkets, credit and property over the past eight years for a reprise of the “roaring 20s”, or even an echo of the dotcom mania of the late 1990s. Yet only at the peak of those two bubbles has America’s S&P 500 been higher as a multiple of earnings measured over a ten-year cycle. Rarely have creditors demanded so little insurance against default, even on the riskiest “junk” bonds. And rarely have property prices around the world towered so high. American house prices have bounced back since the financial crisis and are above their long-term average relative to rents. Those in Britain are well above it. And in Canada and Australia, they are in the stratosphere. Add to this the craze for exotica, such as cryptocurrencies (see Free exchange), and the world is in the throes of a bull market in everything.

[...]

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09-10-2017, 09:13 PM,
Post: #2
RE: Asset prices are high across the board. Is it time to worry?
...
"Asset-price booms are a source of cheer, but also anxiety. There are two immediate reasons to worry. First, markets have been steadily rising against a backdrop of extraordinarily loose monetary policy. Central banks have kept short-term interest rates close to zero since the financial crisis of 2007-08 and have helped depress long-term rates by purchasing $11trn-worth of government bonds through quantitative easing. Only now are they starting to unwind these policies. The Federal Reserve has raised rates twice this year and will soon start to sell its bondholdings. Other central banks will eventually follow. If today’s asset prices have been propped up by central-bank largesse, its end could prompt a big correction. Second, signs are appearing that fund managers, desperate for higher yields, are becoming increasingly incautious. Consider, for instance, investors’ recent willingness to buy Eurobonds issued by Iraq, Ukraine and Egypt at yields of around 7%.

More significant still is the behaviour of long-term interest rates. They have fallen steadily since the 1980s and remain close to historic lows. And that underpins all sorts of other asset prices (see article). A widespread concern is that the Fed and its peers have grossly distorted bond markets and, by extension, the price of all assets. Warren Buffett, the most famous disciple of Ben Graham, said this week that stocks would look cheap in three years’ time if interest rates were one percentage-point higher, but not if they were three percentage points higher. But if interest rates and bond yields were unjustifiably low, inflation would take off—and puzzlingly it hasn’t. This suggests that factors beyond the realm of monetary policy have been a bigger cause of low long-term rates. The most important is an increase in the desire to save, as ageing populations set aside a larger share of income for retirement. Just as the supply of saving has risen, demand for it has fallen. Stagnant wages and the lower price of investment goods mean companies are flush with cash. All this suggests that interest rates will stay low by historical standards."
...

Globally, I agree that asset prices have run up tremendously. U.S. and European stock and bonds at least. On sunny island Singapore, the stock market still seems a little quiet., and most equities are now fairly valued, compared to 5 years ago. 1987, 1997, 2008, and many people said 2017. 3 months to the end of the year so I shall keep my fingers crossed. I think 2018 will be another good year, and the bull may have a 2-3 more years to run, ceteris paribus.

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09-10-2017, 10:04 PM,
Post: #3
Rainbow  RE: Asset prices are high across the board. Is it time to worry?
Good morning valuebuddies,
Life is short.
Time is fast.
No replay.
No rewind.
So enjoy every moment as it comes.

karlmax: "...and most equities are now fairly valued..."

Not sure whether you know my habit of digging for gold nugget using 52 weeks low.
Really enjoyable, feeling the joy of discovery every Saturday.
Super effective in 2015 and 2016.
I was wondering why these gems can be at 52 weeks low.

Sadly, all these gems disappear (I suppose it means fairly valued)
and, now replaced by bluechips (under-value)?

Scary hur...

Watch the video and this is precisely what I thought of current market.




and you?
How are you feeling?
感恩

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09-10-2017, 10:25 PM,
Post: #4
RE: Asset prices are high across the board. Is it time to worry?
LC, you think the market is very cheerful now? But volume is still quite low!

Maybe it will be more cheerful in 2018.

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09-10-2017, 10:35 PM, (This post was last modified: 09-10-2017, 10:36 PM by chialc88. Edit Reason: what are you waiting for? )
Post: #5
Rainbow  RE: Asset prices are high across the board. Is it time to worry?
2018 is too far away.

Definitely Azure in next few weeks...
[Image: Bumble-Bee-landing-on-orange-flower-agai...ue-sky.jpg]
感恩

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09-10-2017, 11:15 PM,
Post: #6
RE: Asset prices are high across the board. Is it time to worry?
common stocks uncommon profit says asset value has no correlation to earning power.

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10-10-2017, 09:27 AM,
Post: #7
RE: Asset prices are high across the board. Is it time to worry?
NOT high then we worry... Big Grin

always high before the crash! Big Grin
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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10-10-2017, 10:46 AM, (This post was last modified: 10-10-2017, 10:46 AM by specuvestor.)
Post: #8
RE: Asset prices are high across the board. Is it time to worry?
(09-10-2017, 11:15 PM)Terry Wrote: common stocks uncommon profit says asset value has no correlation to earning power.

there is correlation to cashflow rather than accounting earnings... both on a business level and on a shareholder level. Most don't understand the difference. And of course there is the timeline to determine your assessment of correlation. This adage I hold very true: Market is a voting machine in the short run and weighing machine in the long run. Those who think markets are efficient obviously never seen how CLOB, dot-cons or even s-chips run
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

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