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Bubble will burst when S&P 500-stock index reaches 2250.

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Yes, this is a prediction by an expert. According to Jeremy Grantham, chief investment strategist at Boston-based money-management firm GMO, there is already a stock bubble but this bubble will not be bursting yet, not until the S&P 500-stock index reaches 2250. That’s another 10% to go. What’s the current S&P 500-stock index? Refer to the chart which I googled from google.com of course. The main reason was because of Federal Reserve’s easy-money policies. Once the index hits 2250,bubble would burst and the stock market would drop 50%!! That’s a very scary thought. Think how this drop would affect all the other stock markets around the world including Malaysia.

If you think he may be wrong, well, it was reported that he was right about the Japanese bubble in the 1980s as well as the dot-com craze in the 1990s. The truth is, the stock market today is already overvalued because there are already many negatives which are somehow not priced into the market. For example, the ending of Federal Reserve’s bond purchase program, the potential interest rate increase early ext year as well as even the recent Ebola outbreak. To him, there’s just too many negatives, both technical and psychological and this makes the overvaluation, ‘disturbing’.

There werea few gloomy predictions recently. For example, the end 2015 recession. Most if not all of them pointed to 2015 as the year when all these would happen. Well, if all these do happen in 2015, the choice of 2015 for GST introduction in Malaysia seems pretty okay. There’s not a lot of things to disrupt. Oh yeah, if you believe these predictions, then the steps to take would be sell and save. Sell your properties now and save the money. It will come in handy in 2015 or perhaps 2016. Note: Only if you believe them. If you do not believe their predictions, then the strategy should just be   keep buying good value properties for rental. That should be quite a safe strategy to have, especially now, some owners are more willing to negotiate. Rewind back to 2012 and you would notice that the sellers were very demanding. ‘Nothing lesser’ than what they expect or else they sell to other buyers. Today, I do not yet see desperate sellers but they are definitely friendlier to potential buyers. Happy thinking if it’s worth believing.

written on 29 Nov 2014

Next suggested article:  Next crisis is looming – PM of 6th largest economy in the world

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