Is the big one coming?

PipPip

I work for one of the world's biggest insurance companies and wanted to share with you what a few of the very senior global investment strategists were chatting about at the end of my last meeting. They were saying that increasingly they fear that stock markets are currently hugely overvalued (looking at PE ratios and true underlying performance of companies) and that we are experiencing the start of a new mini bubble, which could last 2 to 3 years. After that they speculate that we will experience "the big one", a recession to dwarf anything we have seen to date as economies are dragged down for possibly a whole generation by the enormity of government debt. It sent shivers down my spine. Any economists or real specialists on here with a similar view?

bendix

PipPip wrote: »

I work for one of the world's biggest insurance companies and wanted to share with you what a few of the very senior global investment strategists were chatting about at the end of my last meeting. They were saying that increasingly they fear that stock markets are currently hugely overvalued (looking at PE ratios and true underlying performance of companies) and that we are experiencing the start of a new mini bubble, which could last 2 to 3 years. After that they speculate that we will experience "the big one", a recession to dwarf anything we have seen to date as economies are dragged down for possibly a whole generation by the enormity of government debt. It sent shivers down my spine. Any economists or real specialists on here with a similar view?

Who knows? As you said, they are just speculating without any substance. For every argument that says there will be a worse recession, one could easily find arguments to justify exactly the opposite. Facts and trends can be shaped anyway you like.

Jeez, this forum can't even decide on market trends today, let alone 2-3 years hence.

FATHEROFTWO_2

Hypothetically suppose this actually happens.

With a completely portfolio Balanced then the shares bonds and commodities will fall as shown last year when everything including corporate bonds fell sharply.

If you in hindsight knew when the fall was where would you place your investments.

Gold ?
Agriculture?
Absolute funds?

Any thoughts on the nightmare scenario ?

sabretoothtigger

If theres a big fall it cant be avoided really but choose assets with a good base line and that are liquid. So the price falls but their absolute worth doesnt, commoditys are good long term for that I reckon



Theres no big depression coming because companies that are international will serve a shift to countries that are still growing

Domestically its very likely some countries are overcooked but in a wider view the global gdp will continue to rise long term. Any country that can adapt and innovate without hesitation to meet that demand will be fine I think.

People might be poorer then previously but its not a doomsday scenario really

Shares arent overvalued massively going on present forecasts, but if those forecasts are incorrect then yes I'd agree prices would have to fall.
Commoditys are in a bubble because of currency weakness, that means low profits for companies greatly reliant on those prices I guess.

Low growth is the big negative, total collapse doesnt occur unless somebody tries to rock the boat and unbalance the situation in their favour, like america Im thinking of but they wont turn off international trade like the 30's so I dont believe in a big crash at present just poorer results


Negatives on the horizon I guess would be that UK is the 3rd largest holder of USA gilts and China seems set to continue to move away from supporting the dollar so I wonder if something big happens there - http://www.ft.com/cms/s/5683a16e-9c3f-11de-ab58-00144feabdc0.html

Aegis

PipPip wrote: »

I work for one of the world's biggest insurance companies and wanted to share with you what a few of the very senior global investment strategists were chatting about at the end of my last meeting. They were saying that increasingly they fear that stock markets are currently hugely overvalued (looking at PE ratios and true underlying performance of companies) and that we are experiencing the start of a new mini bubble, which could last 2 to 3 years. After that they speculate that we will experience "the big one", a recession to dwarf anything we have seen to date as economies are dragged down for possibly a whole generation by the enormity of government debt. It sent shivers down my spine. Any economists or real specialists on here with a similar view?

Which company is that? I ask because the economic outlooks from most large organisations don't seem to tie in with that at all, and it seems odd that a large company would state something so at odds with their peer group.

purch

Is the big one coming?

Unfortunately that fit's pretty closely with how I view things ( I was hoping I was the only one, and that I'm badly wrong )

I think that currently we are being dragged out of the hole we have dug for ourselves by the economies of the Far East and Emerging nations. We can continue like this for a few years, but at some stage in the near future these economies are going to detach themselves from ours, and we will be left on our own with very little going for us. This isn't just the U.K.,it includes the U.S.A. and most of Western Europe although it will affect each nation in different ways.

When it comes to the huge Government borrowing that we and the others will have to finance......they will still help us fund it, but it will cost.

I think we will be treated like an OAP with Alzeimers. Stuck in the corner, and largely ignored, but looked after benevolently by our younger and more vibrant relatives.

PipPip

Aegis wrote: »

Which company is that? I ask because the economic outlooks from most large organisations don't seem to tie in with that at all, and it seems odd that a large company would state something so at odds with their peer group.

Lets be clear, this is not a public statement by my company, who shall remain anonymous. It was a casual conversation after a meeting I was involved in, which started with a discussion of our share price. The people involved in the discussion are no lightweights and the scenario shocked me but I'm not saying I agree with their pessimistic speculation. I merely asked if others share this view. As someone said, none of us can predict what will happen and my work in strategy is currently a total nightmare.

FATHEROFTWO_2

Like I said if this happens then hypothetically where would we invest our cash ?

tradetime

purch wrote: »

Unfortunately that fit's pretty closely with how I view things ( I was hoping I was the only one, and that I'm badly wrong )

I think that currently we are being dragged out of the hole we have dug for ourselves by the economies of the Far East and Emerging nations. We can continue like this for a few years, but at some stage in the near future these economies are going to detach themselves from ours, and we will be left on our own with very little going for us. This isn't just the U.K.,it includes the U.S.A. and most of Western Europe although it will affect each nation in different ways.

When it comes to the huge Government borrowing that we and the others will have to finance......they will still help us fund it, but it will cost.

I think we will be treated like an OAP with Alzeimers. Stuck in the corner, and largely ignored, but looked after benevolently by our younger and more vibrant relatives.

I have a similar view to some extent, in that we have made our choices, played our hand and the outcome is somewhat inevitable, however, when the going gets tough, I believe the militarily inclined and capable go to war.

welshmoneylover

I wouldn't be at all surprised if the amount of government debt creates a recession.

This debt has to be paid back at some point, probably through higher taxation. Thing is people are squeezed enough right now; if they pay any more taxation, will they have enough disposable income to generate enough aggregate demand to get the economy moving again?

bendix

FATHEROFTWO wrote: »

Like I said if this happens then hypothetically where would we invest our cash ?

As it's hypothetical, I'd hypothetically invest in a flight back to Thailand and some new golf clubs.