Publisher’s Note: Even our own experts here Daily Reckoning Australia At the end of this large bull cycle, it will be split. But whether it’s 2022, 2026, or until Christmas this year, it’s no exaggeration to say that the consequences are very spectacular.
Vern Gowdie of Fat Tail Investment Research is betting that it will happen sooner than it will be late. And he emphasized the four “code red” investments he believes could sell out first … and most difficult … when he changes his mood.
We are releasing that study to Daily reckoning Readers later this week.
Before that, Vern looks at how the previous boom ended … and finds some clues about the upcoming end of “all bubbles” …
How it ends
2021 marks my 35NS Year in the investment industry.
In retrospect, there was a big change at one level, but no change at another.
Thankfully, the regulatory framework these days is much tighter.
Statement of advice. Record of advice. Money laundering prevention.
Sadly, it took a lot of clever practices, inadequate advice, and the Royal Commission to influence regulatory changes. (Cryptographic enthusiasts need to be careful. Troublesome regulations await when stablecoin scams are exposed.)
The Commission — Prepaid and Ongoing — is a relic of the past. The education level is much higher.
This should be praised, but what if “education” was primarily based on market activity over the last 40 years, namely the extraordinary growth in population and debt and the intervention of central banks? What you have learned may turn out to be irrelevant to future market conditions.
And one of the biggest changes is central bank intervention.
They are no longer looking at the market from bystanders.
Central banks are actively participating in the rigging of asset pricing games. What hasn’t changed, and never has changed, is the cyclical nature of the market and investor mood.
You can change the duration of each cycle. However, the decline and flow of emotional drivers is a permanent fixture from past, present and future markets.
In retrospect, there are so many different products and themes that are on fire both inside and outside the industry and investor portfolios.
How to survive Australia’s biggest recession in 90 years. Download the free report to learn more.
When 35 years are compressed into some memories, these are rough chronological products starting in the mid-1980s.
- Portfolio protection insurance
At the time, each had a fascinating and compelling story (and so far, high yield bonds and cryptos are still), but when tested by hostile market forces, they all wanted. Was. Billions have been sent to Ether.
The current hype over the market, why there is no memory of foam and why cryptos endure the challenges of time, has recently recalled the vivid memories of foam’s past.
I feel like I’m on a time machine.
It was returned in 1987, 2000 and 2007.
The faces are different, but the misguided and well-thought-out reasoning is the same.
The other day I heard an interview about Crypt — I really wanted to learn something and be given a “haha” moment about what I was missing — and it was a pure drive ..
“Inference” had a very long belief and a very short fact.
And the “facts” given were pure fantasies. Wow. I just sat there and shook my head.
What I read and hear is that the same BS is applied to different products.
This dangerous combination — the belief that overcomes the facts — Big short..
The belief and confidence that “house prices have never fallen nationwide” was a major source of knowledge for investing in products (which turned out to be toxic).
Investors suffer huge losses if the facts are lacking.
Meanwhile, Michael Burry has spent countless hours investigating the details of mortgage-backed securities and subprime mortgages. Barry was good at the facts … that’s why he was short on the market.
While the mob was blinded by his beliefs, Barry saw the danger of approaching (ironically, with one glass eye) very clearly.
The signs were there … even I could see them.
Throughout 2007, I advised clients (and warned readers of the weekly “Big Picture” newspaper column) to adopt a more defensive portfolio allocation.
Against the bright energy of the crowd was a constant challenge (not different from today).
Thinking back later, you can combine the points to see when the overrated building cracks began to open.
Among the recently published books Bailout and bailin of TARP and other banks around the world, Author Allen N. Burger and the State of Larca Roma (additional emphasis):
‘The global financial crisis began as the 2007 US subprime financial crisis: Q3 When the loss of US Mortgage-backed Securities (MBS) backed by subprime mortgages begins to spread to other markets such as the syndicated loan market, the interbank lending market, and the commercial paper market.‘
Immediately after the third quarter of 2007 (third quarter) was when the Dow Jones Index reached the top.
Smart Money has addressed systemic risk.
Losses from mortgage-backed securities spread across other markets have caused a shift in momentum … it went unnoticed by the untrained eye.
How can I find out that it was overlooked?
By the way, margin lending was the most popular product at that time. Borrowing to invest was believed to be a surefire way to increase your wealth.
Investors (and their advisors) just ignored the facts and believed in extrapolation and they were piled up on the market (with bank money) … “I’ve always been.”
Margin lending increased by more than $ 2 billion in the fourth quarter of 2007 (when the US market reached the top). Think about it … It took 15 years to build up $ 4.7 billion in margin debt, and just 3 months to build up another $ 2 billion.
But that’s what happens with exponential growth. From the fourth quarter of 2007 to the first quarter of 2009 (15-month interval), margin claims were filed and the portfolio was liquidated, halving the amount of margin debt.
If investors took the time to dig a little deeper into the facts, they could have avoided a world of pain and, for some, a lifetime of regret. Looking back and looking forward, it’s clear that there are things that never change.
In 1987, 2000, 2007, and now, in all the booms I’ve lived, most consider the troops active in the market and whether there is a reasonable basis for them to be maintained. Not.
After the horse is bolted, the gate tends to close.
Parliamentary hearings and the Royal Commission will only be called after the event … never before.
Too little is too late.
What makes me wonder is that during these vibrant and excessive times, people are convinced that the pendulum can only swing in one direction.
As the momentum begins to slow down (as smart money changes strategy), the pendulum begins to reverse its direction … but the majority are unaware.
nice to meet you,
for Daily Reckoning Australia
Publisher’s Note: So what about this “Code Red”? Which hot assets could bring down the entire card house? Knowing this in advance can be of great value to the future of your immediate investment. Van came to some shocking conclusions. It will be released this Friday … Stay tuned …
Editor’s Note: Hello, this is Calum. You may remember saying last week that we started hosting company podcasts. I enjoy this a lot and find knowledgeable guests that I can use to gain further insights. I just did beauty with a technique called Tim Davis and a Chinese expert. It’s a cracker! You can see it here.
How it ends
https://www.dailyreckoning.com.au/how-it-ends/2021/10/19/ How it ends