Surviving the coming bank crisis

Ryan_Futuristics

guymo wrote: »

Welcome back, Ryan. Honestly, it's more fun with you here. I wholeheartedly disapprove of the way this particular thread has gone but I was really happy to see you back and promoting your take on investment strategy in the first post you made on this thread.

Me, I apply a healthy dose of skepticism when a fund manager gives a speech (which is what this was, not an interview, by the way) promoting the benefits of active management over passive funds; but I do think it's good to have perspective and open-minded and I think the reactions to Ryan's post on this thread were inappropriate.

Oh that's very nice of you to say .. I'll take a break if ever I feel I'm causing too much ruckus

What I'd say with Woodford is (unlike a lot of fund managers) I don't see him year-in-year-out making the headline-grabbing crash or 'invest now' predictions ... I think his conviction (much like Buffett's) is that whatever markets do, investing in high quality companies at good prices, with a focus on macroeconomics, gives you as good a chance as any

And I think there's definitely a place for efficient market theorists ... But outside the US, and especially moving towards smaller companies and emerging markets, there seem to be much greater discrepancies between investor sentiment and risk/opportunity

This graph from Ian Bremmer I think hints at how out of proportion investor sentiment can become from macroeconomic reality - and surely how inefficient some of these markets are likely to be:

gadgetmind

guymo wrote: »

promoting your take on investment strategy

I think you mean "takes" as there sure are a lot of them!

bowlhead99

Ryan_Futuristics wrote: »

This graph from Ian Bremmer I think hints at how out of proportion investor sentiment can become from macroeconomic reality - and surely how inefficient some of these markets are likely to be:

Another day, another graph eh Ryan?

What does this one 'prove' about efficiencies of markets?

A well developed massive economy, with extremely well developed rule of law and a business environment in which it is easy to be entrepreneurial and establish a new company swiftly, appears to be the one receiving most of the foreign direct investment. Shock horror!

Investors appear to like the relative safety of a well developed financial system and the platform from which many multinational empires are built, using the world's reserve currency, more than they like Kenya and Colombia. Despite those 'developing' / 'third world' economies having higher nominal growth rates, they receive less cash from overseas as foreign direct investment. Does that mean investors have things right or wrong?

Well, Kenya has a seventh of the population of the US and each member of that population has a GDP per head of maybe $1-2k (perhaps $2-3k using purchasing power parity). While the mighty US with its much bigger population, much larger import and export market, much better infrastructure etc, has a GDP per head of $50k. So, there's rather a lot more GDP in the US together with a stable infrastructure, top tier legislative and education system, longer life expectancy etc etc, all the things that make people think that using that country as a base for their investment would be good.

How could you possibly be surprised that it gets rather more absolute dollars of foreign direct investment?

Out of proportion investor sentiment? You are just looking for ever-more colourful ways to back up your previously stated investment strategy that having more than 2% of your assets in the US is too much, because in the long term everything will 'revert to mean' and it will seem overpriced.

You can use statistics to prove any kind of point you like, but throwing out links to other peoples work all day and trying to pass them off as something that demonstrates your supreme investing prowess, does get a little tiring.

IronWolf

Ryan_Futuristics wrote: »

There are always commentators predicting the next crash ... Do a Google search and put any year you want next to it - e.g.: market crash 2012

I always sing the praises of Neil Woodford, because he only seems to talk sense - and of course his track record backs him up ... Here's his take on these issues from an article today:


“The US, UK and Europe followed Keynesian policy in an attempt to insulate their economies, but as a result it has created more debt and deflation ... We have had a recession, but in trying to drag ourselves out of it we have created even more debt. I believe that in the future the response of policy makers will be seen as a fundamental error.”

The actions of the Federal Reserve, the Bank of England and the European Central Bank – namely to pump markets up with quantitative easing – has resulted in a distorted investment environment, in which Woodford says it is impossible to compare and contrast asset classes.

“Finnish sovereign bonds now have negative rates, Nestle has negative rates on its corporate bonds and Unilever is offering 0.5% on a seven year bond – these rates are telling one story, but equity prices are telling another,” he explained. “If I had to bet on one being wrong I would say the equity prices are, and that we are due a major market correction. But I said that in 1999 and the stock market rallied for a further 18 months. When I think about the investment environment I would say it is as challenging as the economic environment. The risks are greater than they were three or four years ago, it is a very difficult situation for fund managers.”

Woodford: Passive Funds Won't Deliver

http://www.morningstar.co.uk/uk/news/134354/woodford-passive-wont-deliver.aspx

Woodford does talk some sense and I take more notice of what he says more than other fund managers.

But he would talk smack about passive funds wouldnt he, being an active fund manager that wants more ££.

TheTracker

Ryan_Futuristics wrote: »

What I'd say with Woodford is (unlike a lot of fund managers) I don't see him year-in-year-out making the headline-grabbing crash or 'invest now' predictions

I'm never quite sure what planet you're on. Five minutes googling Woodford headlines ...

2011 Invest Now "I've been in this business 25 years and only seen an opportunity like this once before – after the technology bubble"

2012 Crash "The current wave of optimism sweeping global stock markets assumes that the developed world will now emerge from the period of low economic growth it has faced since the banking crisis of 2008. Our view is that it will not, and that growth will continue to disappoint and, in the near term, will slow in 2012. ... underlying weakness of Continental Europe is likely to get worse"

2013 Invest Now "the tobacco sector as a whole continues to offer attractive and dependable growth opportunities"

2014 Crash "we are due a major market correction ... indices are pregnant with risk"

Percie_2

Thanks guys for all your valuable advice on where to invest money to ride out the coming bank crisis.

Thank you David Cameron for your input to the debate. (I know at least one of the replies came from David because, as I have seen on Prime Minister's question Time, he likes to have a go at the questioner rather than answer the question.)

Let's bring this thread to a close and get on with stopping the planet from overheating by buying ridiculously expensive electric cars that use even more electricity to charge.

Good luck with the coming bank crisis!

vectistim

doe808 wrote: »

How does one invest in rats?

I sense a strategy here.

You could buy shares in one of the companies that sells them to animal testing labs, snake owners and the like.

byjimini

There would be a big crash if wages continued to slump whilst the cost of living increased as much as it has done, however we're due for a period of deflation which should offer some breathing space, albeit small at best.

The interesting thing is mortgages; capping the rate at which you can borrow has shut a lot of people out since low-cost housing is hard to come by. I'd wager that the market is going to deflate sooner or later (due to lack of new buyers coming on), or else we'll move to a European style whereby most people rent.

EdGasket

Percie wrote: »

Thanks guys for all your valuable advice on where to invest money to ride out the coming bank crisis.

Thank you David Cameron for your input to the debate. (I know at least one of the replies came from David because, as I have seen on Prime Minister's question Time, he likes to have a go at the questioner rather than answer the question.)

Let's bring this thread to a close and get on with stopping the planet from overheating by buying ridiculously expensive electric cars that use even more electricity to charge.

Good luck with the coming bank crisis!

I've said this many times before but here goes again.

There are always doom and gloom merchants. When I were younger it was Bob Beckman and 'The Downwave'; never happened; in fact we had the best bull market of the century. Historically markets always rise at some point past their previous peak and have proved the best investment of all over most long timeframes. So if you don't need cash in a hurry, you can buy a bunch of diversified funds and not come off too badly. If you need cash, keep it as cash and spread it around a few institutions. Job done; back to sleep.

Ryan_Futuristics

bowlhead99 wrote: »

Another day, another graph eh Ryan?

What does this one 'prove' about efficiencies of markets?

A well developed massive economy, with extremely well developed rule of law and a business environment in which it is easy to be entrepreneurial and establish a new company swiftly, appears to be the one receiving most of the foreign direct investment. Shock horror!

Investors appear to like the relative safety of a well developed financial system and the platform from which many multinational empires are built, using the world's reserve currency, more than they like Kenya and Colombia. Despite those 'developing' / 'third world' economies having higher nominal growth rates, they receive less cash from overseas as foreign direct investment. Does that mean investors have things right or wrong?

Well, Kenya has a seventh of the population of the US and each member of that population has a GDP per head of maybe $1-2k (perhaps $2-3k using purchasing power parity). While the mighty US with its much bigger population, much larger import and export market, much better infrastructure etc, has a GDP per head of $50k. So, there's rather a lot more GDP in the US together with a stable infrastructure, top tier legislative and education system, longer life expectancy etc etc, all the things that make people think that using that country as a base for their investment would be good.

How could you possibly be surprised that it gets rather more absolute dollars of foreign direct investment?

Out of proportion investor sentiment? You are just looking for ever-more colourful ways to back up your previously stated investment strategy that having more than 2% of your assets in the US is too much, because in the long term everything will 'revert to mean' and it will seem overpriced.

You can use statistics to prove any kind of point you like, but throwing out links to other peoples work all day and trying to pass them off as something that demonstrates your supreme investing prowess, does get a little tiring.

Because we're talking about perception of risk - not actual risk

It doesn't take a genius to see that with low single digit growth, yet exponentially greater capital inflow relative to the world, you soon reach a point where valuations are severely out of proportion with macroeconomic prospects

Buying when shares are expensive is always the biggest risk - and the US economy's actual health is debatable

We know how much our own employment figures are warped by zero-hour contracts ... The headlines tell one story: the food banks, oil price, bond yields tell a very different one ... All we need to see 50% wiped off US markets is for investors to start thinking more like economists - you don't see that as a risk?

I do think actual data counts for more than pages and pages of unsubstantiated opinion - no matter how populist it is with people who've convinced themselves similarly