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Maybe Rents Will Go Down?
May 14, 2014 10:13 AM   Subscribe

There are indications of a coming stock market crash. The timing is, of course, unknown, but the historical data might point to this October.
posted by wendyfairy (65 comments total) 15 users marked this as a favorite

 
Is MarketWatch's Paul Farrell Patently Insane?
posted by goethean at 10:22 AM on May 14 [4 favorites]


I'm going to go short a bunch of stocks, just like all the people on Wall Street are doing!
posted by Tell Me No Lies at 10:23 AM on May 14


China’s housing bubble is collapsing, and here’s what it looks like.
posted by 1970s Antihero at 10:27 AM on May 14


But then, a black swan will ignite [...] Chancellor warns investors of a ticking time bomb. His team tracks market bubbles.

Signs of trouble ahead for Mixed Metaphor Index: appears to be nearing all-time peak.
posted by RogerB at 10:35 AM on May 14 [26 favorites]


Chancellor warns most “recent stock market darlings — Netflix, Facebook, Tesla, and Twitter — have little or nothing in the way of profits.

Netflix made 86 cents per share and had revenues of 1.27 billion dollars in the last quarter. The company has seen tremendous growth in earnings over the last decade.

Facebook made 2.5 billion dollars last quarter vs 1.4 billion last year. GAAP earnings per share were .25.

Tesla had revenues were about 700 million and grew by 23% over the previous year. Tesla continues to generate positive cash flow, but is not showing profits because they are spending a lot of money on building factories.

Twitter has really been an overall disappointment in terms of their earnings and business model. Still they managed to grow their revenues from 113 million to 225 million dollars in the first quarter of this year.
posted by humanfont at 10:42 AM on May 14 [10 favorites]


Signs of trouble ahead for Mixed Metaphor Index: appears to be nearing all-time peak.

There can never be Peak Mixed Metaphor. The lingual trails we're blazing cannot be fought to a standstill.
posted by Copronymus at 10:46 AM on May 14 [42 favorites]


But then, a black swan will ignite “around the election or soon after...

That's not a black swan, then. Even leaving aside the spontaneous combustion.
posted by ChurchHatesTucker at 10:51 AM on May 14 [4 favorites]


A swan dipped in crude oil would be both black and inflammable. I.E. the middle east must be involved too.
posted by nobeagle at 10:53 AM on May 14 [2 favorites]


Signs of trouble ahead for Mixed Metaphor Index: appears to be nearing all-time peak.

I'm sure Thomas Friedman could explain why we won't be besting this summit anytime soon.
posted by Noms_Tiem at 10:53 AM on May 14 [2 favorites]


Oh, so the stock market crash is just under one Friedman in the future?
posted by indubitable at 10:57 AM on May 14 [4 favorites]


I can't tell if this post is serious or satire. Seems to be a collection of unrelated, incoherent arguments.
posted by ultraviolet catastrophe at 10:58 AM on May 14 [2 favorites]


Or, as it's otherwise known in the business media world, Wednesday.
posted by ultraviolet catastrophe at 11:00 AM on May 14 [12 favorites]


One of the coolest and non-replicable things I've ever done is accurately predict that the economy was going to crash in 2008. The fall/winter of 07-08 I noticed that all the raw earth geology jobs just disappeared. They dried up from ~20 a month being advertised to zip over just a few months. So I ran around telling everyone something must be wrong with the economy and it was probably going to take a huge nose dive. Of course nobody believed me. It didn't help that the market was peaking. I think at the time the housing market bubble was bursting but maybe nobody had really realized it yet?

Anyway, I read this and go look for those jobs. There aren't any I can see, but I haven't been looking so I don't know what the pattern is. There are a ton of teaching jobs, which means all the profs are probably being lured away by the oil & gas industry. That's been happening for awhile now. I have no idea what that means for market predictions.

I have noticed, however, that bad stock market crashes and strong El Nino events seem to occur together. Or was it years with strong solar flares. I don't remember, I wrote it down once. Anyway, there's a strong el nino predicted this year.

This is a worthless anecdote, much like some of the arguments in these articles.
posted by barchan at 11:12 AM on May 14 [28 favorites]


The fall/winter of 07-08 I noticed that all the raw earth geology jobs just disappeared. They dried up from ~20 a month being advertised to zip over just a few months. So I ran around telling everyone something must be wrong with the economy and it was probably going to take a huge nose dive.

Sorry, can you explain a little bit more about why raw earth geology jobs in particular would indicate this?
posted by troika at 11:19 AM on May 14


Stock market articles are pointless unless the analyst can prove they have invested their own money in accordance with their predictions.
posted by Tell Me No Lies at 11:22 AM on May 14 [2 favorites]


Sorry, can you explain a little bit more about why raw earth geology jobs in particular would indicate this?

I thiiiiink he meant rare earth geologists. It means that companies are predicting they will not need new resources for manufacturing (metals, rare earths, etc.)
posted by Slap*Happy at 11:30 AM on May 14 [4 favorites]


companies are predicting they will not need new resources for manufacturing

Oh, wow. That makes sense! Thanks!
posted by troika at 11:32 AM on May 14


If you were in printing, the signs were equally ominous.
posted by ChurchHatesTucker at 11:33 AM on May 14 [7 favorites]


Also, while the market is overheated and due for a correction, I don't think it's a bubble like the late '90s - companies are sitting on cash instead of reinvesting in growth. Shares are worth a ton of money, because the company has a ton of money it's not using.

Apple alone has what, a quarter trillion in dolla dolla bills and quickly liquidated assets hanging around? The whyfores of this aren't well understood, but unravelling it will lower unemployment, increase GDP growth and cause either a short, sharp correction, or a long and gentle bear in the stock market, and bonds will be where the hot action is.
posted by Slap*Happy at 11:42 AM on May 14 [1 favorite]


the stock market is at an all-time high, and on every previous such occasion in my experience, it has declined. predicting the moment of its decline is like predicting when jesus will come back, except that i am positive there will be a decline.

i was here for 10/87, a 25% decline in one day. "defensive banking" is when you withdraw all your money. it was not to happen again until 9/11, when i did both defensive banking and defensive shopping.

netflix provides a valuable service, and tesla makes cars. i am bearish on facebook and twitter.

i am adequately prepared for a crash or whatever, because i subscribe to "what we have, we hold."
posted by bruce at 11:51 AM on May 14 [1 favorite]


troika and Slap*Happy, I think you might have missed this key statement by barchan:
This is a worthless anecdote, much like some of the arguments in these articles.
posted by IAmBroom at 11:54 AM on May 14


Whoopsie, I* combined raw & rare earth into just raw.

It means that companies are predicting they will not need new resources for manufacturing (metals, rare earths, etc.) Yes. But on the other hand, the oil industry was running so hot at the time they could have been luring away all the geologists from those jobs with filthy lucre and relocation opportunities, and the jobs were then filled. That's why it's kind of worthless.

*and I'm a she, not he *wicked grin* gender biases, my dear, gender biases
posted by barchan at 11:56 AM on May 14 [12 favorites]


I'm going long by shorting Velcro.
posted by blue_beetle at 11:56 AM on May 14


1970s Antihero: China’s housing bubble is collapsing, and here’s what it looks like.

I strongly believe China is in a housing bubble (in fact, a more general construction bubble), and I can't make sense out of that ridiculous set of graphs. Maybe Matt Phillips is really a pseudonym for Paul Farrell...
posted by IAmBroom at 11:59 AM on May 14


bruce: the stock market is at an all-time high, and on every previous such occasion in my experience, it has declined. predicting the moment of its decline is like predicting when jesus will come back, except that i am positive there will be a decline.

Your statement is almost tautological, and therefore devoid of information.

The market has declined (to some degree) every time in the past after Ben & Jerry's introduces new flavors, after contestants on The Price Is Right had a nipple-slip, and after the Dow closed on a value which was a multiple of 0.37.

The market goes up and goes down, and so you are correct. The absolute long-term trend is undeniably upwards. The year-long trends tend to be upwards, but with notable exceptions for years following major declines (and typically only for a year or two; we've had five incredibly great years of stock growth since 2008, for instance).
posted by IAmBroom at 12:05 PM on May 14 [1 favorite]


Good old charts! I think it was John Train (possibly Adam Smith?) who would take a chart of any given stock, remove identifiers, rip it in half, then challenge chartists to extrapolate the second part from the first. Said he'd give pay a thousand dollars if to anyone who got it right.

Never lost a dime on it.
posted by IndigoJones at 12:14 PM on May 14 [4 favorites]


the stock market is at an all-time high, and on every previous such occasion in my experience, it has declined.

You mean that the market doesn't go up every single day forever? You don't say?!?
posted by Justinian at 12:21 PM on May 14 [8 favorites]


lol@iambroom and justinian for the disingenuous reading of my comment.

permabulls are supported in their outlook by none other than led zeppelin: "and a new day will dawn, for those who stand long..."
posted by bruce at 12:36 PM on May 14 [1 favorite]


Paul Farrell is a blowhard who has been predicting the market's imminent collapse since at least 2012. This started not long after it became clear that his 2008 prediction of the next Great Depression was a bust. He made his name when he was one of the few vocal pessimists during the 1999-2000 tech boom, but now it has become pretty clear that he simply predicts doom and gloom at every possible turn, no matter what the actual situation. If you read the 2008 article, it is basically full of the same "black swan" and "megabubble" nonsense as this most recent example.

I've become increasingly convinced that no one can effectively predict the future -- you have voices predicting every possible scenario and after the fact we will pick the ones who were right for special attention, but the fact is that some of them have to be right. These kind of predictive articles are the worst kind of financial drivel there is. In the spectacularly unlikely event that someone could accurately predict the movement of the markets reliably, they would be generating millions of dollars of wealth for themselves. If they could fake the ability to predict it fairly well, the next most lucrative profession would be professional money manager, where they could get fabulously wealthy before anyone caught on. The people who are writing tiresome articles based on their credentials as behavioral economists seem the least likely of anyone to be able to accurately predict future events in the marketplace.
posted by Lame_username at 12:41 PM on May 14 [5 favorites]


proposal: let's replace the terms "bull" and "bear" with "ice cream" and "shit".

I can never remember which is which, and I think this would help
posted by thelonius at 12:44 PM on May 14 [13 favorites]


The second link in the original post is about the Russell 2000 being down 10% since March, and the S&P not down:

"The small-cap Russell 2000 is far below the large-cap S&P 500 ... and this gap will have to resolve."

But this google news chart of both indexes for a year shows them back to even now after big increases in the Russell 2000.
posted by jjj606 at 12:47 PM on May 14 [1 favorite]


Also, while the market is overheated and due for a correction

Ya think? There'd BE no market right now if it weren't for the Fed. Bad news is good news; when unemployment numbers creep up it means the Fed can't possibly proceed with the taper so that means more free money, pile on in!

Turn off the spigot tomorrow and what happens? Right. So no, the spigot can't be turned off, ever; overt intervention in the market is baked into the cake from here on in. That being the case - how can we know the true value of anything?

What's real, in this market? What's of actual value?
posted by kgasmart at 12:49 PM on May 14 [1 favorite]


>>"The small-cap Russell 2000 is far below the large-cap S&P 500 ... and this gap will have to resolve."

> But this google news chart of both indexes for a year shows them back to even now after big increases in the Russell 2000.


Yeah, and that seems to be roughly true for a 1 year, 2 year, or 3 year time span as well. It's also true when calculating from the (approximate) lowest point of both indices. Overall, a big fat slice of nothingburger.
posted by RedOrGreen at 12:52 PM on May 14


I can never remember which is which, and I think this would help

When a bear attacks you, you're down on the ground because it swatted at you with claws. When a bull attacks, you're flying up through the air because he launched you with his horns.


It's weird but it's how I remember.
posted by Nonsteroidal Anti-Inflammatory Drug at 1:11 PM on May 14 [8 favorites]


"Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it."

--Will Rogers
posted by ZenMasterThis at 1:12 PM on May 14 [3 favorites]


Sweet Jesus.

black swan
noun
1. a mainly black swan with white flight feathers, which is common in Australia and Tasmania and has been introduced widely elsewhere.
2. an unpredictable or unforeseen event, typically one with extreme consequences.
"geopolitical black swan events, such as the Arab Spring and the Japanese earthquake, have further complicated the market dynamics"


FTFA:

black swan megatrends - What in FUCK is that even supposed to mean? Trends that are "mega" in size of events that are completely unpredictable, and therefore untrending?

But then, a black swan will ignite “around the election or soon after, the market bubble will burst” - Translation: I can predict unpredictable events, down to the month!
posted by IAmBroom at 1:15 PM on May 14 [4 favorites]


proposal: let's replace the terms "bull" and "bear" with "ice cream" and "shit".

A "Mr Softee market" versus a "Mr Hankey market"?
posted by aught at 1:21 PM on May 14 [5 favorites]


ol@iambroom and justinian for the disingenuous reading of my comment

I'm not being disingenuous, I just think your comment was content-free. Of course the market will go down significantly in the future. That's like saying that the sun will rise in the east tomorrow.
posted by Justinian at 1:22 PM on May 14 [1 favorite]


Well put, Justinian. Seconded.
posted by IAmBroom at 1:26 PM on May 14


What's real, in this market? What's of actual value?

Manufacturing, services and exports. Please do pay attention.

My WAG is that companies are reluctant to invest because the energy market is out of whack - reduced demand, increased supply, and the needle's still pegged at "too damn high."

Housing is still weird - low demand, and lower inventory. Too many people are underwater, so pricing is out of whack. People don't want to take a bath on their house, but buyers don't want to overpay. Correcting this will hurt - a lot - and may be why banks are reluctant to lend. Once this corrects, rents should stabilize a bit as more people buy rather than rent. Or we're in a post-apocalpytic hellscape. One of the two.
posted by Slap*Happy at 1:27 PM on May 14 [2 favorites]


Of course the market will go down significantly in the future. That's like saying that the sun will rise in the east tomorrow.

except that a generation of stockbrokers will panic and cry and say they had NO IDEA that the sun was going to rise in the east tomorrow
posted by pyramid termite at 1:28 PM on May 14 [6 favorites]


What's real, in this market? What's of actual value?

Earnings and cash flows. And I believe they're both pretty solid.
posted by jpe at 1:29 PM on May 14 [1 favorite]


except that a generation of stockbrokers will panic and cry and say they had NO IDEA that the sun was going to rise in the east tomorrow

Stockbrokers are so 1980s. Does anybody even use them anymore?

But the number of market professionals who would tell you that the market will never go down significantly is miniscule. The number who would tell you that they can't predict with accuracy when that will happen is very large. Though not as large as it should be.
posted by Justinian at 1:33 PM on May 14


How To Survive The Next Economic Market Collapse, from today's Marketplace radio report.
posted by Xoebe at 3:32 PM on May 14 [1 favorite]


"bull" and "bear"

Wait which one do I sacrifice a virgin to
posted by Ray Walston, Luck Dragon at 3:51 PM on May 14


the stock market is at an all-time high, and on every previous such occasion in my experience, it has declined.

Wait. If the market is at all-time high, doesn't that mean that it is currently higher than at any time in the past? So actually, looking at any previous stock market high, you'll note that it has gone up.
posted by (Arsenio) Hall and (Warren) Oates at 4:03 PM on May 14 [2 favorites]


A lot of commentators have been calling for a top recently. But markets are somewhat strange in that the consensus is usually wrong. It's like Heisenberg's uncertainty principle where if you try to measure something, you change the outcome. The one consistent feature of markets is that they usually cause the most pain to the maximum amount of people possible.

If enough people are wary of the market pulling back (unlike the euphoria of the 2000's dot com bubble) their collective caution may prevent the market from getting into bubble territory, or burst it before it becomes dangerously overvalued. The classic sign of a bubble is broad participation by retail investors, and from what I've read it is still fairly low.

The other thing about market predictions is that you get no credit from being early; in fact it is usually harmful to be early. I never understand those articles that laud so-and-so for predicting the crisis months before it happened. People predicted the housing bubble years before '07/'08 and went bankrupt betting against it during the final run-up.

A 30-50% stock market pullback is no longer truly a "Black Swan" event in the post-'08 world, because by definition a black swan is something you didn't even think of possibly happening and thus didn't prepare for. Some people have argued the true unknown risk is the "right tail" of hyperinflation. Or maybe we'll just go for years without any market crash, with the blood of those betting against it a needed sacrifice to prevent it from happening.
posted by pravit at 4:30 PM on May 14 [3 favorites]


Yeah, exactly. Predicting a crash is useless unless you know when it's going to happen within a few months at most. I know there will be a crash at some point in the future too but that's not useful.
posted by Justinian at 4:35 PM on May 14 [2 favorites]


I could find you five articles saying the market is due for a huge crash this year and another five articles saying it's not. I could do that all from articles that were only published today. And I could do the same thing tomorrow and the next day and indefinitely thereafter giving you new articles every single day.

I could then put together some charts focusing on one market - say WTI Crude or the Russell 1000 or whatever market you want - and have the charts focusing on the exact same market cause you to draw completely opposite conclusions for the future performance of that market, depending on how I present the data.

There is an incredible amount of financial news out there and 99% of it is pure noise. Trying to predict or time the markets is a fool's game. Don't feed the beast.
posted by triggerfinger at 5:58 PM on May 14 [2 favorites]


People predicted the housing bubble years before '07/'08 and went bankrupt betting against it during the final run-up.

Anything that isn't buy-and-hold in an index of some sort in the face of a collapse is suicidal. My folks were a couple years away from retiring in 2008. They toughed it out as their life saving were halved almost overnight, changed NOTHING in their portfolio, and once the Obama Effect took hold, they can afford the odd European vacation.

Now, that the markets are so high, they're a little spooked at the heights, and are back to buy-and-hold in indexes after cashing out into low-yeild, low-risk stuff to see them thru in the near term.

You can't time the markets. You can only prepare and endure.
posted by Slap*Happy at 6:52 PM on May 14 [1 favorite]


The Paul Farrell piece appears to be quoting from the Q1 GMO newsletter. I've only read Jeremy Grantham's section so far but it is a lot more cautious than Farrell makes it out to be. Grantham thinks the market is well above trend but not in bubble territory.
posted by A dead Quaker at 7:59 PM on May 14


Slap*Happy if they are retired why are they in equities at all instead of, say, bonds?
posted by Justinian at 9:17 PM on May 14


Or maybe I'm misunderstanding your post and they are...
posted by Justinian at 9:17 PM on May 14


Yeah, exactly. Predicting a crash is useless unless you know when it's going to happen within a few months at most. I know there will be a crash at some point in the future too but that's not useful.

Indeed. I think a pretty large % of people who participate in creating bubbles are usually well aware of what it is. The bigger issue is that most people think there will always be a greater fool, and that of course it'll be someone besides themselves.
posted by obliterati at 9:22 PM on May 14 [1 favorite]


barchan: "The fall/winter of 07-08 I noticed that all the raw earth geology jobs just disappeared."

I have worked with and know people involved with a fair number of geologists. For what it's worth, relative to your hypothesis, things sound like they're looking very dire for geos, indeed.
posted by barnacles at 9:28 PM on May 14


barchan: "This is a worthless anecdote, much like some of the arguments in these articles."

(and yes, I read your whole comment before responding; but based on later responses I better footnote that I saw this! Otherwise the internet will JUDGE)
posted by barnacles at 9:29 PM on May 14 [1 favorite]


BEAR DOWN FOR MIDTERMS, you're welcome.
posted by forgetful snow at 5:53 AM on May 15


You're looking at a random graph with high variability and trying to see a pattern. Yes it will go down; then it will go up again. This is not actionable information. The market only makes any kind of sense on the scale of decades, where all the insanity is averaged out.
posted by miyabo at 6:10 AM on May 15 [1 favorite]


Slap*Happy if they are retired why are they in equities at all instead of, say, bonds?
The standard advice for most retirees with the discipline to stick out the inevitable ups and downs is to keep their portfolio somewhere around 60-40% equities. This is particularly important to do when you consider a hypothetical 62 year old woman retiree is expected to live 22 years on average. Being completely out of the market for 20+ years has historically always been a big mistake.

People who are unable to stomach the risk and who might sell at the bottom should, of course, take that into consideration and should probably consider a single premium immediate annuity instead of managing their own investments.
posted by Lame_username at 7:44 AM on May 15 [2 favorites]


Bizarre.

The overall ratio of (sensible arguments) / (outraged political nonsense) in this thread is approaching infinity. Contrarily, the Comments section below most financial market articles in FT, MarketWatch, Forbes, WSJ, etc., approaches zero. ("Sensible" does not mean I agree with them; it means a sensible person might.)

When did Metafilter become a haven of financially educated, not-overtly partisan commenters? And why is there no fly in my soup, waiter?
posted by IAmBroom at 10:35 AM on May 15 [2 favorites]


IAmBroom, I think it's the paywall. The commenters on those sites are usually the permabear goldbug bunker monkeys who think the entire market is a fraud. Conversely, Metafilter threads on finance often have driveby "they're all criminals, they'll be first against the wall!" comments thrown in, but it's been getting better lately.
posted by pravit at 3:30 PM on May 15 [3 favorites]


We are partisan, tho. I fully recognize that we won't have a complete recovery until either a Republican president or a Democratic congress is elected. (2016 in either event.) I believe Obama is fully responsible for the recovery and prosperity of large businesses and the stock market here in the USA, and that any businessman who votes Republican is a fool. I believe that GOP policies are deliberately designed to kill the entrepreneurial spirit of American business - exhibit "a" is their resistance to the ACA.

It's just that both sides aren't equally bad.
posted by Slap*Happy at 6:32 PM on May 15 [1 favorite]


I think that the US is setup for a decent economic boom over the next 3-5 years. My hypothesis is that in the near term US natural gas production will result in cheap energy and increased export earnings. This will benefit domestic manufacturers who will be able to compete with lower safe countries because of cheaper energy and automation. This may be a short lived phenomena but even pessimists think we've got a few years of feasting on the cheap gas before it enters a rapid decline. Abundant American natural gas will inflate the bubble for a couple more years.
posted by humanfont at 9:50 PM on May 15 [1 favorite]


I liked all the random 2-3 word quotes, it's like a Zagat review.
posted by Chrysostom at 9:16 PM on May 17 [1 favorite]


His prose is basically what CNBC would look like written down, so...
posted by PMdixon at 11:21 AM on May 20


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