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      12-05-2018, 08:18 PM   #5
WestRace
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Quote:
Originally Posted by ASAP View Post
I watched a few things recently-

1) Interest rates are rising and steadily will continue to rise.
2) Housing costs are getting very very expensive.
3) Auto loans are effectively maxed, Ford and GM know that and along with changes in tech (electric cars) are in a lot of trouble if they don't adapt. They will soon close factories and layoff a lot of people.
4) Tech is at this point absurd, these valuations that AAPL, AMZN and MSFT are putting down are based on what really? Is it consistent revenue growth or is it trickery with EPS? My understanding is those companies are close to max market penetration.
5)Stock in 2.5 years have gone up 10K points, when was the last time this happened?
6)Wage growth at this point is terrible and companies are not passing on the profits to average people.

I think something will happen very very soon. Not one industry but across the board. I would slowly start to turn liquid and be ready when things take a dump because there will be deals to had.
I agree with what you said. All market downturns are caused by over-leveraging (another word for bubble) but the trick is to know where the bubble is coming from. I remember during the 2008 crash, even two weeks before that nobody was saying anything until two weeks after when Lehman Brothers went bankruptcy.

When an economy is overly-leveraged, it does not take that much to crash because you're already right on the edge (although this time I don't think it will be nearly as bad as 2008 since the FED has printed too much money and willing to do just the same).

Also as you said, housing is way too expensive and pretty much at the same level as 2008 (not taking into account inflation), which means a lot of people who own homes will have a large portion of their income going to pay for the
mortgage and if they loose their jobs, their chance of defaulting is pretty high. For example, I cannot afford to buy my own home today since I would not have the capital for down payment. So now the defaulted home is on the market but few people can afford given the interest rates are a lot higher now. So the bank have to sell the house for a lot less. Sounds a bit like 2008 when things are cascading downward that is very difficult to predict, but as I said personally I don't think it will be as bad as 2008.

A lot of the crashes or mini crashes happen because people don't see it coming like the inverted yield curve on 12/4/2018 or two weeks before Lehman. You listed a few good signs of an overly leveraged condition, but the real one is hidden somewhere behind the smoke and mirrors.
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