Monday, June 10

12 Reasons not to fear, market bubble

12 Reasons not to fear, market bubble
| By Richard Satran, US News & world report

Investing is never without risk, of course, but memories of the last crash cause investors to miss, the biggest gains in years.

The idea of the financial markets in a another free fall as it will go, which has taken in 2008 never fully by many investors left behind have been. It is one of the reasons, the current has missed rally many of them and stuck with bonds.

Now loans are interest rates, even as risky to spoken bubble, pop is, as soon as the Federal Reserve hikes. Meanwhile, stocks see in 2013, the biggest gains in years.

What is an investor to do? It's not exactly "don't worry, be happy" time. But too much anxiety can be counterproductive.

Investors should start by checking all these dire warnings. You may not all apply. It's never stupid to keep a dose of healthy skepticism. But it's the perception that financial assets completely crazy from the 'Real economy' are hard to.

Here are a dozen reasons why stocks and bonds are not bubbles, bursting wait (along with some reasons why analysts and fund managers say it could still Trouble, even if it not bubble).

Already in August 2008 not much there talk of stocks at risk. Google trends shows that the search terms "bubble has" and "stock crash" fell to the lowest level in nearly five years in the month before the crash. You have increased steadily this year.

But one thing is search queries. Reviews are another. And that could be high. The yields on bonds are close to all-time lows, not even for the costs of inflation. Based on underlying earnings, stocks are close to their average. "The case for a bubble in the bond market is strong. The case for a bubble in the stock market is not a strong", says Hugh Johnson of Hugh Johnson advisors. "The real question: can the Fed let the air out of the bond market in a way that bond market remains orderly trading?"

From the crash of 2008 Rose bonds prices, markets stabilize help. The chance of a "double bubble" is highly unlikely. Unless, of course, this time is different. The threat is that the stocks just get the investor attention because there are no other good option.

"Bullish on, people have shares compared with Treasury bonds with their low historical views. If the upwards, that the story falls apart..., "says James C. Roumell, President and portfolio manager at Roumell asset management.

The most important 10-year Treasury Note fell 25% in price last month its yield jumped 50 basis points (half a percentage point). Prices move to do inverse. But bond investors, nimble bunch, can not simply out of necessity or hold out of habit. "Many people still have their own bonds, because they still think that they are safe.

Sometimes due to investment policy for a fund or an institution, not get,"says Mark Germain, Chief Executive Officer of beacon wealth management.

Shares not steadily, but won in jumps. The first day of trading this year saw a 300-point Dow rally of 2.3%-top winning year, but nowhere in the top 50-day share gains. But just because it is not happening does not mean that investors become more rational.

"If the people on the sidelines suddenly jumped into the market, it could be much damage. Panic buying would, that a bad thing with a market around 10% overvalued", says David Edwards, President of the Heron financial group.

(5) The fear of a "bubble" is partly based on a misconception that people hold huge amounts of interest rate sensitive long bonds

But Treasury data show that the average debt maturity is less than five years. In the last few years the Fed has been to clean up long bonds, and only a few were issued.

This is not to say that higher prices is not that hard to navigate. Price rises would hit major sectors of the economy, including mortgages. "Fixed-rate bonds, the returns have been low for so long... the mentality is still in, will be burned", Brian Levitt, Chief Economist says the Oppenheimer funds. If the Fed raises after all short-term interest rates, it will affect a wide range of borrowing costs.

Housing is a key to stability, since it was the cause of the latest crash and his jump created a perfect storm, froze credit markets and consumer confidence hammered. The bad news is that vulnerabilities in real estate remain. "The recovery of the real estate market is not closed," said David Blitzer, Chairman of S & P index Dow Jones indices as the latest home data was announced. Foreclosures remain high, and rising mortgage interest rates.

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