3 Aug 2011, 10:41pm
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  • Dr Doom predicts Perfect Storm in 2013, maybe opportunity knocks

    Well, he would, wouldn’t he, after all you don’t pick up the moniker Dr Doom for nothing. 2013 is when the SHTF according to Nouriel Roubini, as private debt that got transformed into sovereign debt falls out of the sky to give us all a sore head. He’s pretty definite on that 2013 date, pointing to a synchronised slowdown across all world economies. He also predicts a Chinese credit crunch as they end up sucking up some of the Fed’s largesse. I’m probably with him on that, I don’t do China even though everybody else does because I can’t understand it, their demographics stink, even in my lifetime and I’ve already taken the indirect fallout from one property bubble, thanks, I see no reason to repeat the experience by choice.

    For a different take on this we have Niall Ferguson on Consuelo Mack in March. Basically he says after 500 years of giving everybody else the shaft we are going to take it. I paraphrase him a tad, but he say we have got lazy, we don’t work hard enough and all those chaps stage right in China, Taiwan and Hong Kong work far harder. He’s sort of like Oswald Spengler but with a more beguiling presentation. We’ve also become lazy at school and university because we were scared to tell the dimwitted that they were, er, dumb because it might impair their self-esteem.

    Me, I say one swallow doesn’t make a summer Dr Doom. You did get it right in 2007. I’m probably more bearish in the medium term than you are, mate. I agree that the second dip is on its way – we kicked all the crap into the air first time.

    I’m going to buy into that sucker. Starting tomorrow with a small spread of £1k. I’ve never bought into a crash before, though I have bought on the way out in April 2009. It’s almost undoubtedly too early, but I have to learn how to tackle the uncertainty and the fear. these are firms that have been on my watchlist for a while, and one has a remarkable NAV discount, the other has a yield and a track record of steady dividend growth even through the last recession, indeed both continued to improve divi through the recession.

    Over the last year I’ve become better at being fearful when others were greedy, which is why I have a fair amount of cash available in my ISA, as I’ve held off buying of late. I am going to study the previous recession/first dip, and some of the basic technical indicators, to try and modulate my future  purchases with the market. This is the anathema of index investing, it’s a naked attempt at market timing. I figure Mr Market is going to be mightily pissed off over the next year or so. Hopefully he’ll be offering some bargains. The time will come to smell the fear as the western word dices with depression, and become greedy but with mindfulness.

    On this first £1k I’m bound to lose money in the coming months, but I have to break new ground and learn to overcome the fear if I am going to take advantage of opportunities to come. At the moment all the newsflow is full of Dr Doom like prognostications, a torrent of money flowing away from the stock market. A small ermine stands at the side, and needs to gauge how to slip into the raging stream and swim against the tide…

    I can be more sanguine about taking on this crash, because I’ve seen success from taking on the market in 2009, and also because of diversification. Owning my house,  and having non-financial assets explicitly to hedge against a financial depression means the stock market is only a part of my net worth. It isn’t necessarily going to stop me being hammered in it – it is easy to screw up. It wouldn’t be the end of the world, I’ve been there before in the dot-com bust. Market crashes are a great opportunity to get more for your cash – the tragedy is that all around the feedback is that this is all trash and you want to be getting out. Been there, done that at the turn of the century. Let’s try it the other way this time.

     

    With you on this. Phased and researched buying in the face of negative sentiment has to be the way to go.

    I, too, am skeptical about China, certainly in the short term. The property bubble is weird, with owners not wanting even to rent out, so as to preserve newness. Not sure I buy the 2013 scenario, that seems too long in Europe

    Good luck with equities. Be careful over NAV valuations, though. Check for large booked intangibles in sectors where they should be small.

    America does the bare minimum towards the defict and the world reacts. Dancing with the deadline also focused attention on global economic woes (unemployment, USA consumers cut spending, corporate profits trending flat, etc.).

    Today’s Wall Street action certainly had me hopping around and selling according to my stop losses. Glad I had just enough free time to handle it!

    Good work on buying in the crash. It can get addictive — trust me!

    As for Dr D, I think he gets put away in a cupboard between slumps. The bull market he dismissed made 70%+ in the UK until the recent correction, and more in the US, Germany, and elsewhere. Truly a Dr Doom — for people’s wealth.

    […] course, Dr Doom predicted the mother of all dooms in 2013, so those interesting times might be on the way again, despite Osborne telling us all about […]

     

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