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How long before the market crashes?

jdog said:
Margin rates are at all time highs, even higher than 2007.
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Well, it's interesting and worth keeping an eye on, but I wouldn't get overly concerned about it at this point. People have been talking about high levels or margin debt since at least 2013. In October, 2007, the market peak before the 2008 crash, the total market cap of NYSE-listed stocks was about $18.3 trillion. Marin debt was $233 billion, or about 1.3%. In August of this year, total market cap stood at $19.6 billion, with margin debt of $471 billion, or about 2.4% of the total. Is that enough debt to cause a crash? I don't know, but offhand I would say no. And if it did I would be buying, as I was at the end of October, 2008 and into 2009 when a lot of people were being panicked out of the market.

NYSEData.com Factbook: Securities market credit ($ in mils.)
NYSEData.com Factbook: NYSE Group Shares Outstanding and Market Capitalization of Companies Listed
 
Ahlevah said:
There are segments of the "market," such as consumer staples and utilities, that seem to be at stretched valuations, but I'm still finding value in this market. For example, earlier this year I bought shares of United Therapeutics (symbol UTHR), a well-managed orphan drug company. This company has a P/E of 5.71, P/CF of 7.47, and an ROE of 70.41. (For the financially non-savvy, the last figure represents how much the company returned on the stockholders' investment in the company, or equity. It basically returned seventy cents for every dollar of invested equity in one year. This is all the more remarkable in that this company has no debt, and thus lacked the advantage of leverage.) A couple other examples: Sanderson Farms (SAFM): P/CF of 7.44, ROE of 12.78, and no debt; AdvanSix (ASIX), a chemical company recently spun off from Honeywell. This company has a P/E of 5.85, a P/CF of 4.56, and no debt. It's suffering because it isn't sexy and institutions that hold Honeywell in, say, an index fund or ETF, are getting it out of their portfolios. That presents an opportunity for patient investors who aren't happy with what banks are paying on CDs.

So do I think there's going to be a market "crash"? No. There will be volatility and some segments will get hammered (as we saw with energy and mining stocks, which have skewed the overall market P/E), but you don't normally get crashes when people are skittish and expecting the sky to fall. Stock ownership by the broader public is well below where it was just before the last crash. Crashes occur when people are giddy, leveraged to their eyeballs, and convinced that "this time it's different."
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The reason stock ownership is lower than before the crash is that the vast majority of the people never recovered from the last crash, and you may want to check current margin levels if you think this market is not leveraged more than it was in 2007.
 
Ahlevah said:
Well, it's interesting and worth keeping an eye on, but I wouldn't get overly concerned about it at this point. People have been talking about high levels or margin debt since at least 2013. In October, 2007, the market peak before the 2008 crash, the total market cap of NYSE-listed stocks was about $18.3 trillion. Marin debt was $233 billion, or about 1.3%. In August of this year, total market cap stood at $19.6 billion, with margin debt of $471 billion, or about 2.4% of the total. Is that enough debt to cause a crash? I don't know, but offhand I would say no. And if it did I would be buying, as I was at the end of October, 2008 and into 2009 when a lot of people were being panicked out of the market.

NYSEData.com Factbook: Securities market credit ($ in mils.)
NYSEData.com Factbook: NYSE Group Shares Outstanding and Market Capitalization of Companies Listed
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Drowning In Debt: 35 Percent Of All Americans Have Debt That Is At Least 180 Days Past Due

Restaurant Industry In Gloom As Number Of Americans Eating Out Tumbles | Zero Hedge

"This Rarely Ends Well" - Traders Fear Ominous Divergence In S&P 500 | Zero Hedge

Staying invested when the writing is on the wall is a good way to wake up to a very depressing day.....
 
jdog said:
The reason stock ownership is lower than before the crash is that the vast majority of the people never recovered from the last crash, and you may want to check current margin levels if you think this market is not leveraged more than it was in 2007.
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They would have recovered if they'd stayed in. They got panicked out and decided stocks weren't the path to easy riches they thought they were. And I'm not saying the market isn't leveraged more than it was in 2007. I'm asking if 2.4% of stocks on margin is enough to ignite or fuel a panic. I don't think that's been proven.
 
Ahlevah said:
They would have recovered if they'd stayed in. They got panicked out and decided stocks weren't the path to easy riches they thought they were. And I'm not saying the market isn't leveraged more than it was in 2007. I'm asking if 2.4% of stocks on margin is enough to ignite or fuel a panic. I don't think that's been proven.
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That is a fallacy. It is based on the indexes being able to substitute failing companies for companies which are not failing. The problem is investors are not able to do that because they cannot trade collapsed stocks for stable stocks like the indexes do.
 
jdog said:
That is a fallacy. It is based on the indexes being able to substitute failing companies for companies which are not failing. The problem is investors are not able to do that because they cannot trade collapsed stocks for stable stocks like the indexes do.
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So don't be a dummy and buy GM or Lehman Brothers before a financial panic. Buy a diversified basket of stocks. If someone had just bought an S&P 500 index fund or ETF at the peak of the market in October, 2007 and held on through the panic, he'd look like a genius at this point while the Chicken Littles are still waiting for the S&P to drop to 400.

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jdog said:
There are several indicators now that show the economy is heading south and that the stock market is substantially over extended. The question is not if the market will collapse, but when. Personally I think it will happen in the next year, what is your opinion?
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If we follow historical trends, we can expect the next depression to be in 2026 (give or take a year) with a possible mid-cycle recession around 2019.

Economists Explain Why Our Economy Crashes Every 18 Years
https://www.theguardian.com/comment...mic-meltdown-panel-repeat-2008-china-slowdown

 
washunut said:
The problem may come when the Fed is forced to move because they can no longer ignore inflation.

Finance is always a game of condfinence, once the bubble bursts for whatever reason is when the markets will fall apart.
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Inflation has been a low threat for a while. I see no reason to believe it will accelerate abnormally. My first prescription to achieve higher inflation to spark a reason to raise rates would be a large tax cut for the middle class that increases disposable income which resulted in increased consumption. However, it could result in increased investment expenditure, putting downward pressure on rates and no effect on inflation.

However, given my personal beliefs, a tax cut is not an appropriate strategy for this state of reality.
 
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sookster said:
My uncle is a broker. The only time the stock market crashed was during the great depression. We got through it. Any other time the stock market has recovered. It's not a big deal and a self proclaimed prophecy because the crash could be the result of other factors.
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It has recovered every time, the crash at the time of The Great Depression was not excluded.
 
Ahlevah said:
So don't be a dummy and buy GM or Lehman Brothers before a financial panic. Buy a diversified basket of stocks. If someone had just bought an S&P 500 index fund or ETF at the peak of the market in October, 2007 and held on through the panic, he'd look like a genius at this point while the Chicken Littles are still waiting for the S&P to drop to 400.

View attachment 67208735
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That is not a chart of a fund genius, it is a chart of the index. The funds do not perform as well as the index because they have to actually absorb the costs of the bankrupt companies.....
 
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