Where are you parking your cash?

[Bill M]

A crash will happen when the opposite situation occurs, eg risk assets are over priced compared to safe ones.

At the moment this isn’t true, risk assets are cheap and safe assets are expensive.

Warren Buffett said something along those lines. Watch the video at the 5.40 mark.

Warren Buffett: Stocks are 'ridiculously cheap' if interest rates stay at current levels

 

[trading_rookie]

OK a couple of points to add for the above questions. Again only as far as I know, so don't hold me accountable
Lol so no real “guarantee” on what the guarantee really is…I guess the government prefers confusion over this.

So to answer your question, BHP will probably not have trouble funding it's future projects as long as their balance sheet is credit worthy.
Maybe, but what will it be costing them to borrow funds from the banks, if interest rates prove to be exorbitant.

Infact, the intelligent corporations would probably bypass the banks altogether like they did post-GFC and borrow cheaper funds from savvy investors.

A more pressing point is even if they qualify for funding, who will buy their wares?

Remember during the depression, how many sheep were shorn for export, yet the wool remained on the docks rotting and smelling in bails as no buyers could afford it, or wanted it.

Less demand would also mean decreased pricing for minerals, leads to mines and tenements potentially closing down or reducing output and job cuts…affecting share prices and the economy overall.

I’m gonna quit here, as it sounds too depressing for me to contemplate.

What is more probable is to have the loan defaults increase due to a sluggish economy sometime in the future where a portion of the bank's loan book may become worthless (in default).
I’m of the opinion the banks mathematical modelling has this all factored in re: whatever the economic situations maybe.

Once again this is my best guess based on what has happened in the past especially based on the bailouts that happened in the US during the GFC. Past events does not guarantee how the future scenarios will play out. Hopefully my few cents worth will get people thinking to plan for the future.

Agree, as history doesn't repeat, but it does rhyme.

 

[MovingAverage]

*~* Side note*~*
Does anyone ever get the feeling that we are being lured into more risky investments and then once set the markets will just collapse/drop 50% or more and wipe out half our assets? I know I do so I am playing it very cautiously. >Probably to my detriment.<

Absolutely...the current low interest environment will undoubtedly lure a lot of people into risker investments in their chase for a greater return. My fear is that many of these people will not have time on their side to recover from a major wipe out.

 

[aus_trader]

Absolutely...the current low interest environment will undoubtedly lure a lot of people into risker investments in their chase for a greater return. My fear is that many of these people will not have time on their side to recover from a major wipe out.

Have to agree. It's a really interesting time that we are living in. Looks like we are being screwed from both ends:

From Front: Currency devaluation is running rampant and as a result holding low risk assets like Cash and Bonds means we are effectively going backwards against inflation as the yield on these are near zero.

From Back: Being forced to invest in risky assets means there is a risk of having large losses on these riskier investments if the markets tumble. As you said some of us may be turning in the graves waiting for the market to recover if another GFC like event were to happen.

 

[Miner]

On a side note, I was not fully convinced on this but for last one year, I have put money (yes, there are some good looses on the stock side ) on few ETF, investment companies like MHH, BFG, index like NDQ, IVV, and property trust - averaged more than 25% against stocks have averaged less than 10%. I wished not to have invested in stocks at all would give stability and good sleep .
So a conclusion from my side that it is better to park cash on ETF, Investment companies and indexes for a much better return.

 

[aus_trader]

On a side note, I was not fully convinced on this but for last one year, I have put money (yes, there are some good looses on the stock side ) on few ETF, investment companies like MHH, BFG, index like NDQ, IVV, and property trust - averaged more than 25% against stocks have averaged less than 10%. I wished not to have invested in stocks at all would give stability and good sleep .
So a conclusion from my side that it is better to park cash on ETF, Investment companies and indexes for a much better return.

Also having good open profits on BFG as can be seen in my Speculative Stock Portfolio. Haven't really gone into index/ETF investing yet, but may be time to look into some of these as well, although the buying will be at much higher prices now...

 

[peter2]

Excellent selection.

 

[Zaxon]

Looks like we are being screwed from both ends

I hear some people are into that.

 

[basilio]

Really wonder just how "safe and stable" our current economic system. In my view there is a ton of smoke and mirrors with lost of music and dancing and only a few chairs for when the music stops.

Dana Ferrantes highlighted an excellent (IMV) online analyst on the risks of our current systems. There is a similar warning from the hear of the IMF.

IMF boss says global economy risks return of Great Depression
Kristalina Georgieva compares today with “roaring 1920s” and criticises UK wealth gap

Phillip Inman

@phillipinman
Sat 18 Jan 2020 06.01 AEDT Last modified on Sat 18 Jan 2020 10.44 AEDT

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Speaking in Washington, Kristalina Georgieva singled out the UK for its growing inequality gap. Photograph: Jim Watson/AFP via Getty Images
The head of the International Monetary Fund has warned that the global economy risks a return of the Great Depression, driven by inequality and financial sector instability.
https://www.theguardian.com/busines...obal-economy-risks-return-of-great-depression
Speaking at the Peterson Institute of International Economics in Washington, Kristalina Georgieva said new IMF research, which compares the current economy to the “roaring 1920s” that culminated in the great market crash of 1929, revealed that a similar trend was already under way.

 

[basilio]

More detailed analysis of the risks facing us.

Decade of Living Dangerously, Part 1
By John Mauldin

January 3, 2020
https://www.mauldineconomics.com/frontlinethoughts/decade-of-living-dangerously-part-1

 

[lusk]

Really wonder just how "safe and stable" our current economic system. In my view there is a ton of smoke and mirrors with lost of music and dancing and only a few chairs for when the music stops.

But while the music is still playing you need to get up and dance

 

[Dona Ferentes]

Really wonder just how "safe and stable" our current economic system.

Dana Ferangi highlighted an excellent (IMV) online analyst on the risks of our current systems.

My head hurts

 

[JohnDe]

Property.

I’ve been pruning my share portfolio, looking at a property purchase in popular beach location s for quite a while, and took a bite not long ago. So far it’s been good. Still pruning my share portfolio, but also looking at opportunities and made a buy last week.

Looking at another property.

 

[divs4ever]

Property.

I’ve been pruning my share portfolio, looking at a property purchase in popular beach location s for quite a while, and took a bite not long ago. So far it’s been good. Still pruning my share portfolio, but also looking at opportunities and made a buy last week.

Looking at another property.

the caveat with property will be rising costs ( and taxes ) am not saying don't , but be careful you don't over-pay

have thought about some ( properties ) but will they find another excuse for rent freezes or moratoriums

 

[Value Collector]

Warren Buffett said something along those lines. Watch the video at the 5.40 mark.

Warren Buffett: Stocks are 'ridiculously cheap' if interest rates stay at current levels

Can I just point out how right Buffett was in his comments in that video, this is just another example of why he is an investment master, such clear rational thinking.

I think this video in mandatory considering what is happening with interest rate right now.

 

[Value Collector]

An interesting perspective.

Not sure if I agree, disagree or neutral, will have to think about it, but an interesting perspective on it.

What is happening now is exactly what I was describing in that comment 2.5 years ago.

Safe assets like bonds are going up in value because their income returns are rising, this makes the riskier assets start to look over valued in comparison.

 

[wayneL]

What is happening now is exactly what I was describing in that comment 2.5 years ago.

Safe assets like bonds are going up in value because their income returns are rising, this makes the riskier assets start to look over valued in comparison.

¿Que?

Bonds are going up in value?

 

[wayneL]

Worst year in history to be a bond investor:

 

[wayneL]

BTW @Value Collector

Bond *yields are indeed rising, but this is a function of collapsing bond *price. The relationship between price and yield is inverse.

 

[Value Collector]

¿Que?

Bonds are going up in value?

View attachment 147854

I don’t think I chose my words well, and can see how I have confused you.

What I was trying to point out is that as interest rates on bonds rise, It has the affect of making equities less attractive in comparison.

For example, when interest rates on bonds are 3% a business that earns 12% on its capital base is a very attractive thing to own, but when interest rates on government guaranteed bonds are 15% that same business earning 12% on its invested capital suddenly looks inferior.

That’s what I was trying to say,

Of course if you bought 30 year $100 bond with a 3% interest rate last year, and today the Government is selling 30 year $100 Bonds with a 5% interest rate, your old bond is going to crash in value, because it’s now inferior to the new bonds. I wasn’t trying to say buying bonds was a good idea.