Mistakenly
By Barry Ritholtz - April 7th, 2011, 2:30PM
I have this print by Hugh McLeod — Mistakenly — hanging in my office.
It was on my business card for several years (2005-08). Every time I would do a presentation on the dangers of the Credit bubble and housing boom, some manager would say: “But the market keeps going higher — why should we avoid banks or home builders?”
Sure its going higher — that is what blow off tops are about! But we could see a 30, 40 even 50% crash when the bottom falls out. Fair value on the Dow is only 9800, and the panic once we break thru 10,000 could send it down another 3000 points.
“Impossible! Never gonna happen.”
Hence, the card.
Via Gaping Void
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April 7th, 2011 at 3:51 pm
BR horrified:
Sure its going higher — that is what blow off tops are about! But we could see a 30, 40 even 50% crash when the bottom falls out. Fair value on the Dow is only 9800, and the panic once we break thru 10,000 could send it down another 3000 points.
reply:
————-
Looks like I picked bad day to stop sniffing glue.
April 7th, 2011 at 4:01 pm
Who is to say what “fair value” is when the unit of account (the U.S. $) changes as it has……
April 7th, 2011 at 4:05 pm
BR, why isn’t your portfolio in all cash if the fair value is 9800?
~~~
BR: That fair value was in 2006 . . .
April 7th, 2011 at 4:10 pm
Not clear if those quotes refer to current situation or 2005-2008 period.
Even if the latter, wondering why Barry put this out today.
April 7th, 2011 at 4:58 pm
The market can stay irrational longer than you can stay sane.
April 7th, 2011 at 5:38 pm
Barry – are you just reminding what happened during that period, or are you talking about a future possibility of a deep correction ?
If it’s later, I am curious to know your reasoning for it. I am aware that sentiment might be extremely bullish, and valuations may have run ahead of the sluggish recovery. But are you looking for a minor correction to P/E multiples ? Or are you expecting a systemic crisis ?
April 7th, 2011 at 9:03 pm
That was what happened THEN
I still have the print — and the business cards
April 8th, 2011 at 9:09 am
Looks like a perfect rendering of our flimsy-whimsey economy.
April 8th, 2011 at 1:04 pm
Would you send one of your cards? I’d love to see it. Thanks for your unique viewpoint.
April 10th, 2011 at 11:29 am
I was filling up with diesel the other day. I said to the attendant “half a tank, $75, what the hell is going on?”
She replies “no one can afford to live here anymore”.
My reply to her ” I’ve been hearing that for the last 20-30 years and most of us are still here”.
It seems we are all mistaken.