Market is down nearly 7% this year

Sullivan

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Nov 24, 2001
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Sleepy Joe and NJPSU told me things were great. What happened? If you can't trust those two guys who can you trust?

Biden is reducing wealth inequality. He is such a success story....

It's sort of like the D governors not allowing employees to go to work. When they are allowed to return to work, Biden then claims that he created a job.
 
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royboy

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Nov 9, 2001
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If Team Biden (and all of us, too) didn't have enough economic concerns, consider this:

  • Federal Reserve balance sheet 2008 -- 850 billion. Today 8.8 Trillion
  • Current US national debt -- 29 Trillion (growing fast)
  • US debt to GDP ratio -- 1.3 times (all-time high)
  • A 1 percent increase in interest rates would add 290 Billion to the national debt
  • What happens if inflation continues to rise (or even stays at current levels)??
 

KnightWhoSaysNit

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Jul 19, 2010
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Meh, Shiller Index. I love how they keep throwing around the "mean" value of 15-16 which is calculated using data going back to 1880. The index hit that ONCE since to the late 1980's which was after the massive drop and low point during the Great Recession.

The Shiller Chart "mean/median," to be a bit more effective, should be corrected based on bond yields and/or the money supply. Someone smarter than me should do a study. In a few years we will have some really good data.

Nevertheless, as is, Shiller's Chart is one of the better ones to show peaks and indicate a market that is out-of-bounds.
 

HartfordLlion

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Sep 28, 2001
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The Shiller Chart "mean/median," to be a bit more effective, should be corrected based on bond yields and/or the money supply. Someone smarter than me should do a study. In a few years we will have some really good data.

Nevertheless, as is, Shiller's Chart is one of the better ones to show peaks and indicate a market that is out-of-bounds.
Nevertheless, as is, Shiller's Chart is one of the better ones to show peaks and indicate a market that is out-of-bounds.

Yes and no. Schiller Index unfortunately treats the economy as a monolithic entity all the way back to 1880. Thing has changed since then. Different industries lead our economy, monetary policy, for good or bad, is different. Growth rates in leading industries are higher, innovation is happening at an accelerated pace. If you look at the past 30 years, your average PE ratio would be more like the mid 20s. Even now we are coming out of a pandemic where growth rates have been suppressed in many industries generating high PEs until those industries return to normal. If you look at the PE of the S&P 500 we are talking about a PE in the 25 range and dropping as earnings increase, earning has tripled since the pandemic low in 1st qtr 2020.

Shiller Index is a great rear view tool when looking at the market but your returns would be really bad if you used it as an investment tool.
 
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HartfordLlion

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Bitcoin down 10% this morning.

I haven't held any crypto to date. Was thinking on picking up a small position a couple of weeks or grab some of the crpto related stocks. Some times procrastination is a good thing, both stocks I was looking at are down ~25% in 3 weeks.
 

bdgan

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May 29, 2008
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Meh, Shiller Index. I love how they keep throwing around the "mean" value of 15-16 which is calculated using data going back to 1880. The index hit that ONCE since to the late 1980's which was after the massive drop and low point during the Great Recession.
I think it's still relevant. I agree that 15-16 is low by modern standards so increase it to 18-20. The market is still expensive even after this 8% correction.
 
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psuted

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Nov 26, 2010
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Thanks Biden/Harris and Congressional Democrats for the worst economy and worse economic malaise experienced in the country since the days of Jimmy Carter. In fact, the Biden economy makes Jimmy Carter look like an economic wizard.
 

HartfordLlion

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I think it's still relevant. I agree that 15-16 is low by modern standards so increase it to 18-20. The market is still expensive even after this 8% correction.

Ok say it is still revelant, at what PE multiple do you sell your stocks or stop buying stocks???
 

bdgan

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Ok say it is still revelant, at what PE multiple do you sell your stocks or stop buying stocks???
I'm not a market timer. Stock prices can act irrationally for a while until they stop. Who knows when that will be?

What I do know is that historical 10 year returns are barely above zero when the starting PE is above 30. At some point stock prices will only grow as fast as earnings.
 
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LionDeNittany

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I'm not a market timer. Stock prices can act irrationally for a while until they stop. Who knows when that will be?

What I do know is that historical 10 year returns are barely above zero when the starting PE is above 30. At some point stock prices will only grow as fast as earnings.

Everyone is a market timer.

LdN
 

LionDeNittany

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If Team Biden (and all of us, too) didn't have enough economic concerns, consider this:

  • Federal Reserve balance sheet 2008 -- 850 billion. Today 8.8 Trillion
  • Current US national debt -- 29 Trillion (growing fast)
  • US debt to GDP ratio -- 1.3 times (all-time high)
  • A 1 percent increase in interest rates would add 290 Billion to the national debt
  • What happens if inflation continues to rise (or even stays at current levels)??

What's interesting about this is the restrictions this places on the Fed.

One one hand we have inflation at 7%
On the other, we have the Fed Funds rate at 0.25%

The first four of your points explain why.

If the Fed raises rates, functionally things blow up.

LdN
 
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jrs1024

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Biden is reducing wealth inequality. He is such a success story....

It's sort of like the D governors not allowing employees to go to work. When they are allowed to return to work, Biden then claims that he created a job.
Like an old Soviet axiom:

A genie says to a peasant, “I will grant you any wish, but remember that I will give your neighbor twice what I give you.” The peasant thinks for a while and responds, “Poke out one of my eyes.”
 
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BW Lion

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Apr 9, 2020
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And inflation is up 7%
As computed fabricated by the likes of Catch50. Actual inflation is double the government's estimate

sgs-cpi.gif
 

BW Lion

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What's interesting about this is the restrictions this places on the Fed.

One one hand we have inflation at 7%
On the other, we have the Fed Funds rate at 0.25%

The first four of your points explain why.

If the Fed raises rates, functionally things blow up.

LdN
This article puts things in perspective regarding the impact of higher interest rates on the government's inability to service it's $29T of debt.

 
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bdgan

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The Shiller Chart "mean/median," to be a bit more effective, should be corrected based on bond yields and/or the money supply.
Agree but you've also got to anticipate future bond yields. They're going to be going up as the Fed stops buying them.
 

KnightWhoSaysNit

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This article puts things in perspective regarding the impact of higher interest rates on the government's inability to service it's $29T of debt.


This is what I've been saying -- that we will have inflation, or more likely, STAGFLATION, as parts of the economy get wiped out.

The Fed actually does have the tools to control inflation. What it will never have is the political will to force the fiscal side into extreme austerity. Much easier to debase the currency and then leave office (after a little insider trading, of course).
 
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LionDeNittany

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I like the comparison. Carjacking of the biggest Brinks Truck.

Proceeds to the bosses and their supporters.

The general rule of thumb is you cant fight money. Truth doesn't win over money. What's right doesn't win over money.

Lockdown meant billions for the very same people forcing it.

Can't fight that.

LdN
 
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BW Lion

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Agree but you've also got to anticipate future bond yields. They're going to be going up as the Fed stops buying them.
Until they have to start buying again. I call this Faux tightening
 

bdgan

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Most people don’t realize, until too late, that passive inaction is just lazy timing.
In 1982 the S&P 500 was trading near 100. Now it's trading near 4,400. You might think that dollar cost averaging into a broad index, reinvesting dividends, and holding is lazy but history says it's pretty smart.
 

LionDeNittany

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In 1982 the S&P 500 was trading near 100. Now it's trading near 4,400. You might think that dollar cost averaging into a broad index, reinvesting dividends, and holding is lazy but history says it's pretty smart.

In 2022 the market was 7% higher than it is today.

LdN
 

KnightWhoSaysNit

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Jul 19, 2010
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In 1982 the S&P 500 was trading near 100. Now it's trading near 4,400. You might think that dollar cost averaging into a broad index, reinvesting dividends, and holding is lazy but history says it's pretty smart.

I have trouble believing that, in real terms, the value of our economy today is 44 times what it was in 1982. We did have a large, productive baby-boomer workforce, the microprocessor, the internet, and many advances in medicine. But we also now have a massive debt relative to what we produce (debt-to-GDP). The last few years provide a crystal clear view, on a grand scale, of what occurred during the 4 decades prior. The scary thing is that debt/GDP is growing exponentially. We are headed towards default. Negative real interest rates are a form of default.

The stock market has started declining while we still have extremely negative real rates. This should be alarming to economists. Yet listen to Yellen and Powell. They are like the choir on the Titanic -- either incredibly stupid or corrupt, they play the music while the ship sinks.