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Stock Market
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Well, I suppose if you were to compare Any market in the world against the cost of gold over the last five years of course the rest of it would look flat. You can choose any asset that has seen a markedly inflated value (such as gold above) and compare it to the stock market to give the appearance of flat.
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Bernanke has tripled the monetary base. Are you seriously suggesting we should take the dow at face value and conclude the economy is significantly improved? Gold may not be a perfect comparison but to suggest the US dollar is a more adequate benchmark is laughable.
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bill,
agreewith you in priciple — except that you don’t buy things with gold – you use dollars. If you sell equities now you have a lot of dollars, which you can use to go out and buy stuff-
You have a great point. But stuff is getting more expensive. Much more expensive. The govts bullcrap CPI numbers don’t show Give a true picture. The Bernanke-approved core CPI is based on the fantastical concept that people don’t usually buy gas or food!!!!!!!!!!! I fully 100% agree gold ain’t perfect, we should maybe measure the Dow in beer cuz thats what I buy the most. I would only like to raise the point we are overstating the strength of the economy when we measure the Dow in inflated Bernanke Dollars(tm).
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One point, on the topic of economic theory. Look at the above discussion. If measured in dollars the DJIA looks epic, if measured in gold its the pits. If we use the standard measure of unemployment—its moderatley bad but not horrendus–and it’s improving. If we measure employment or measure unemployment and include the long term dejected workers, unemployment is horrendus and getting worse.
The point is there are no hard and fast rules in economics, yet the Keynsians claim their models are accurate and can be used for central economic planning. Laughable.
[link=http://Www.mises.org]Www.mises.org[/link]-
Whether you like it or not we don’t have a gold standard so gold is just as likely to have inflated value as you accuse the stock market of having. But I guess you could compare the DJIA to itself and claim that ratio flat too
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Quote from Thor
Whether you like it or not we don’t have a gold standard so gold is just as likely to have inflated value as you accuse the stock market of having. But I guess you could compare the DJIA to itself and claim that ratio flat too
Are you a disciple of Robert Mugabe’s economics?
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The problem is that you are implying that somehow gold is a fixed value iunit and therefore can be compared as a standard measure to other stock market values. That is an incorrect assumption.
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Quote from dergon
The problem is that you are implying that somehow gold is a fixed value iunit and therefore can be compared as a standard measure to other stock market values. That is an incorrect assumption.
Don’t mean to imply that. I meant to say the dollar is a terrible benchmark and commodity prices (in this case, gold) shows that.
I find it hard to believe the monetary basis can triple and people celebrate a new high—-but the Dow is only up 30% from 2001—-roughly the same as the CPI (NB: The govt has cooked the CPI from 1992 to minimize true inflation)-
Quote from billainsworth
Quote from dergon
The problem is that you are implying that somehow gold is a fixed value iunit and therefore can be compared as a standard measure to other stock market values. That is an incorrect assumption.
Don’t mean to imply that. I meant to say the dollar is a terrible benchmark and commodity prices (in this case, gold) shows that.
I find it hard to believe the monetary basis can triple and people celebrate a new high—-but the Dow is only up 30% from 2001—-roughly the same as the CPI (NB: The govt has cooked the CPI from 1992 to minimize true inflation)
Now I feel you are giving a floating argument. First it was “Because the DJIA has been flat against the value of gold, the recovery since 2008 is a farce and because of this “fact” the Obama adminstration has failied.”
Then you changed to “The performance of the Stock Market relative to inflation has been poor since the year 2001.”
These are two very different statements. One of them is reasonable. The other is not.
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Now I feel you are giving a floating argument. First it was “Because the DJIA has been flat against the value of gold, the recovery since 2008 is a farce and because of this “fact” the Obama adminstration has failied.”
Let me be clear: The current nominal value of the DJIA is high, but this doesn’t mean the economy is strong. We need to consider the effects of inflationary monetary policy.
Just like in medicine, look at the whole patient, don’t treat the numbers. -
Oh dergon, if you are optimistic about the Obamaconomy you need to be buying treasury bills/bonds/notes, banking stocks, and home builders. Go for it (kids college funds, too). I’ve moved into hard assets.
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S and P is almost there
NASDAQ is about 50% off its high during the tech bubble
All as know is my portfolio is going up and I have some cash off the table if in fact hoping there is correction
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Also
For those of you who think this is all inflationary monetary policy
Wouldn’t you be better off at least riding that wave some?
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Here is the inflation corrected Dow—using two different ways to calculate CPI. With the most aggressive model, despite the productivity gains over the last 50yrs, we are DOWN from 1965. But I guess we’re not broke if we can still print money.[image]http://www.nowandfutures.com/images/dow_cpi_lies1963on.png[/image]
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as soon as the fed takes away the punchbowl it is gonna be ugly.
even the notion of removing the fed juice causes market shivers.
so unless it is truly QE forever, I foresee a very bad outcome down the road (but your guess as good as mine how far down the road this will be) -
Quote from Xpert
as soon as the fed takes away the punchbowl it is gonna be ugly.
even the notion of removing the fed juice causes market shivers.
so unless it is truly QE forever, I foresee a very bad outcome down the road (but your guess as good as mine how far down the road this will be)
Bernanke has already said his strategy is to let the treasuries he bought with created money mature and then retire the debt. But the average maturity is 10yrs!!! Can he keep the charade going that long? And if he plans to sell them off early, he can’t hope to dump all those treasuries on the open market without a huge drop in bond prices. The federal reserve system is looking down it’s most logical conclusion–economic collapse. The only thing that remains is finding an appropriate scapegoat. I’m guessing that’ll be, like in 2008, capitalism. Except we haven’t had capitalism since central control of the monetary system occurred in 1913.
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yup–when the creature from jekyll island was unleashed
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Quote from billainsworth (a couple years ago)
Oh dergon, if you are optimistic about the Obamaconomy you need to be buying treasury bills/bonds/notes, banking stocks, and home builders. Go for it (kids college funds, too). I’ve moved into hard assets.
[link=http://www.bloomberg.com/news/2014-09-08/you-missed-1-trillion-return-agreeing-with-fed-naysayers.html]http://www.bloomberg.com/…ith-fed-naysayers.html[/link]
This article was pretty much written for Bill:
[b]You Missed $1 Trillion Return Agreeing With Fed Naysayers[/b]
If you [link=http://www.hoover.org/research/open-letter-ben-bernanke]agreed[/link] with all the academics, billionaires and politicians who denounced Federal Reserve monetary policy since the financial crisis, you missed $1 trillion of investment returns from buying and holding U.S. Treasuries.
Thats how much the [link=http://topics.bloomberg.com/government-bonds/]government bonds[/link] have earned for investors since the end of 2008, when the Fed dropped [link=http://topics.bloomberg.com/interest-rates/]interest rates[/link] close to zero and embarked on the first of three rounds of [link=http://www.bloomberg.com/quote/FARBAST:IND]debt purchases[/link] to resuscitate an economy crippled by the worst recession since the Great Depression.
The resilience of Treasuries represents a rebuke to the chorus of skeptics from [link=http://topics.bloomberg.com/stanford-university/]Stanford University[/link]s [link=http://topics.bloomberg.com/john-taylor/]John Taylor[/link] to billionaire hedge fund manager [link=http://topics.bloomberg.com/paul-singer/]Paul Singer[/link] and U.S. House Speaker[link=http://topics.bloomberg.com/john-boehner/]John Boehner[/link], who predicted the Feds unprecedented stimulus would lead to runaway inflation and spell doom for the [link=http://topics.bloomberg.com/bond-market/]bond market[/link].
This year alone, longer-dated U.S. bonds have rallied 14.2 percent, beating the 10.2 percent return for the Standard & Poors 500 Index of American stocks. They have almost tripled the gain in gold, which some investors buy to preserve wealth when they foresee rising costs eroding the dollars value.
While the Feds most-aggressive measures in its 100-year history helped to restore the worlds largest economy and reduced [link=http://www.bloomberg.com/quote/USURTOT:IND]joblessness[/link] from a peak of 10 percent, the stimulus has yet to generate the price pressures that some have warned about since the central bank began quantitative [link=http://www.bloomberg.com/quote/TREFTOTL:IND]easing[/link] in 2008.
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Anyone out there going to try to buy the IPO Alibaba?
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Quote from Lux
Quote from billainsworth
I’ve posted more graphs data and links on this board than anyone else. Wheres yours?
The USA today, hardly a right wing publication, agrees with me!The graphs you post may represent data, but none of it supports the point you are trying to make. You ALWAYS misinterpreted every graph you’ve ever posted here. Don’t fool yourself.
And USA Today is indeed a rightwing paper. You are out of your mind. It is owned by Gannett and was founded by Al Neuharth, of extreme right wing notoriety.
Ground Control to Major Bill, your circuit’s dead…again.
I’ll ask again, where’s your data and what graphs did I mis-interpret?
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Quote from billainsworth
Here is the inflation corrected Dow—using two different ways to calculate CPI. With the most aggressive model, despite the productivity gains over the last 50yrs, we are DOWN from 1965. But I guess we’re not broke if we can still print money.[image]http://www.nowandfutures.com/images/dow_cpi_lies1963on.png[/image]
Bill, will you PLEASE stop trying to use the stock market as a tightly coupled indicator of the state of our economy!!!
Yet another example of your complete inability to correctly interpret any graph.
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Lux,
Why shouldn’t he? The stock market and it’s “wealth effect” are exactly what the geniuses who print the money are targeting. My fear is that the (manipulated) mainstream media is now headlining the new market high such that the “dumb money” will now flow in, putting many lower to middle class families at significant risk if a correction occurs…-
Quote from Xpert
Lux,
Why shouldn’t he? The stock market and it’s “wealth effect” are exactly what the geniuses who print the money are targeting. My fear is that the (manipulated) mainstream media is now headlining the new market high such that the “dumb money” will now flow in, putting many lower to middle class families at significant risk if a correction occurs…
Xpert you are describing a bubble economy. Those types of things hapen only once in a lifetime. Stop being such a paranoid rabble rouser[/sarc]
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Quote from billainsworth
Quote from Xpert
Lux,
Why shouldn’t he? The stock market and it’s “wealth effect” are exactly what the geniuses who print the money are targeting. My fear is that the (manipulated) mainstream media is now headlining the new market high such that the “dumb money” will now flow in, putting many lower to middle class families at significant risk if a correction occurs…
Xpert you are describing a bubble economy. Those types of things hapen only once in a lifetime. Stop being such a paranoid rabble rouser[/sarc]
And once again you show your complete lack of knowledge about economic priiciples. Bubble economies occur every 9-10 years (e.g., ’87, ’99, ’07) and cause in a corresponding severe correction in the stock market. Sure some bubbles are bigger than others, but the economy is just one of the many forces that determine the behavior of the stock market. To somehow turn around and therefore use the stock market as a direct indicator of the economy is totally illogical. It’s like saying a thumb if a finger, and therefore all fingers must be thumbs!
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Lux,
No matter what you just criticize when asked for data you just deny burden of proof. So answer one simple question: is the economy doing well or poorly. Feel free to provide data to support your answer.-
Bottom line, the “resurrection” of the stock market is not due to economic fundamentals, but rather manipulation by the Fed. You can thank Ben for you gains…
[link]http://www.cnbc.com/id/100524681[/link]
(but remember they are only gains of you cash in your chips while you are still up)-
Xpert, you are talkin’ some crazy nonsense. Because my portfolio is up, i rolled my mortgage from 30yr fixed into an ARM and took a nice chunk out as cash. I’m planning to buy a boat and some new big screen TVs. Doing my part to stimulate the economy! (what are you doing?). What could possibly go wrong??????
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Quote from billainsworth
Lux,
No matter what you just criticize when asked for data you just deny burden of proof. So answer one simple question: is the economy doing well or poorly. Feel free to provide data to support your answer.I reject your question. The economy is moving in the right direction according to virtually every parameter according to the CBO and most economists. I’ve cited much info from the CBO and have taken the time to explain their data and how it applies to the economic principles at play at the moment.
You, on the other hand, post single graphs with no citation, no explanation, and no justification, as if to use them as bait. A pretty obvious troll ploy. You assume the reader will glean your intent through divine revelation and when anyone calls you on it, you demand that they provide data to prove him wrong. I recall school students flunking English 101 when they dared to debate the way you do.
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No confusing graphs this time. I used the KISS principle, just for you Lux.
from CBO:
Nevertheless, the unemployment rate is expected to remain above 7½ percent through next year; if that happens, 2014 will be the sixth consecutive year with unemployment exceeding 7½ percent of the labor forcethe longest such period in the [b]past 70 years[/b].
As a result, federal debt held by the public is projected to remain historically high relative to the size of the economy for the next decade. By 2023, if current laws remain in place, debt will equal 77 percent of GDP and be on an upward path, CBO projects. Such high and rising debt would have serious negative consequences.
Translation: Obamaconomy sucks.-
Quote from billainsworth
Obamaconomy sucks.
Compared to [i]what[/i], Bill? I sincerely do not recall any defendable alternate proposal ever being discussed.
And it’s discouraging that after all that’s been said in these discussions, you persist in changing to yet [i]another[/i] citation without ever substantiating why you’ve posted each [i]previous[/i] one so far.
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Quote from Lux
Quote from billainsworth
Obamaconomy sucks.
Compared to [i]what[/i], Bill? I sincerely do not recall any defendable alternate proposal ever being discussed.
And it’s discouraging that after all that’s been said in these discussions, you persist in changing to yet [i]another[/i] citation without ever substantiating why you’ve posted each [i]previous[/i] one so far.
Read the CBO quote. Compared to the last 70yrs.
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I think a reasonable argument can be made that the stock market can be up (really truly up) at the same time as the overall economy is limping givingthe new economic realities.
The stock market is not the economy, it is a collection of the stock of public corporations. Those corportations are doing pretty darned well over the last few years. The productivity gains are adding to their bottom line but the profitability is going much much more to shareholders and much less to workers than it did in the past. Hence a greater disconnect from the market to the overall economy.
Oh- and here is a nice piece on Motley Fool today:
[link=http://www.fool.com/investing/general/2013/03/07/yes-stocks-really-are-at-a-record-high.aspx]http://www.fool.com/investing/general/2013/03/07/yes-stocks-really-are-at-a-record-high.aspx[/link]
[b]Yes, Stocks Really Are at a Record High After Inflation:[/b]
“Actually, the real Dow is still 11% below its record,” wrote CNN.
“The Dow Isn’t Really At A Record High,” warned NPR.
Pardon me, but yes, it is.
It is true that the Dow is below its 2007 high when adjusted for inflation. But Dow companies have paid hundreds of billions of dollars in dividends over the last five years. Dividends are every bit as much a part of an index’s returns as price movements are, so they have to be added back in to get a sense of actual performance.
Dow Jones tracks a version of its famous index that includes dividend payments. Adjust it for inflation, and stocks really are at an all-time high:
[image]http://g.fool.com/editorial/images/22117/realdowdiv_large.png[/image]
It was similar in the 1970s and ’80s. If you look at inflation-adjusted stock prices, the S&P 500 was virtually flat from 1968 to 1992 — almost a quarter-century! But add in dividends, and the index actually returned 170% during the period, even after inflation.
What’s odd is that most investors are well aware of the destructive power of inflation but often oblivious to the compounding power of dividends, even though the latter has historically been higher than the former. Why? Perhaps because inflation is ever-present regardless of what you do, while harnessing the power of dividends takes patience to stick it out through bear markets.-
Quote from dergon
I think a reasonable argument can be made that the stock market can be up (really truly up) at the same time as the overall economy is limping givingthe new economic realities.
The stock market is not the economy, it is a collection of the stock of public corporations. Those corportations are doing pretty darned well over the last few years. The productivity gains are adding to their bottom line but the profitability is going much much more to shareholders and much less to workers than it did in the past. Hence a greater disconnect from the market to the overall economy.
Oh- and here is a nice piece on Motley Fool today:
[link=http://www.fool.com/investing/general/2013/03/07/yes-stocks-really-are-at-a-record-high.aspx]http://www.fool.com/investing/general/2013/03/07/yes-stocks-really-are-at-a-record-high.aspx[/link][b]Yes, Stocks Really Are at a Record High After Inflation:[/b]
“Actually, the real Dow is still 11% below its record,” wrote CNN.
“The Dow Isn’t Really At A Record High,” warned NPR.
Pardon me, but yes, it is.
It is true that the Dow is below its 2007 high when adjusted for inflation. But Dow companies have paid hundreds of billions of dollars in dividends over the last five years. Dividends are every bit as much a part of an index’s returns as price movements are, so they have to be added back in to get a sense of actual performance.
Dow Jones tracks a version of its famous index that includes dividend payments. Adjust it for inflation, and stocks really are at an all-time high:
[image]http://g.fool.com/editorial/images/22117/realdowdiv_large.png[/image]It was similar in the 1970s and ’80s. If you look at inflation-adjusted stock prices, the S&P 500 was virtually flat from 1968 to 1992 — almost a quarter-century! But add in dividends, and the index actually returned 170% during the period, even after inflation.
What’s odd is that most investors are well aware of the destructive power of inflation but often oblivious to the compounding power of dividends, even though the latter has historically been higher than the former. Why? Perhaps because inflation is ever-present regardless of what you do, while harnessing the power of dividends takes patience to stick it out through bear markets.We need to see the dividend adjusted chart back to the 50s. The dow is, as was discussed, flawed because of the way companies are selected. For example, when bad companies get de-listed. Second, I’m sure they are using the CPI, which has been total bullcrap since it was reformulated in the early 90s
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Quote from dergon
I think a reasonable argument can be made that the stock market can be up (really truly up) at the same time as the overall economy is limping givingthe new economic realities.
I’m on record in these AM discussions as saying many times that the stock market is only very loosely related to the economy. What amazes me is how vehemently some people disagree with me. But if you look at the tracking data, you rarely find the stock market paralleling the economy. In fact, by definition it CANNOT follow the economy because if it did it would be predictable and no one would lose much in the stock market.
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This is not jsut a US rally btw. The FTSE is at an all time high too.
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Times are great. The market never goes down. Where have I heard that? Oh. Right 2008.
[link]http://www.youtube.com/watch?v=2I0QN-FYkpw[/link]
We tripled the money supply. But the market is up on fundamentals, not inflation? Ha!
Low interest rates caused the previous bubbles, but its different this time. Ha!
Record numbers on food stamps. Record numbers on SSI disability, but we dont have enoug govt spending. Ha!
Record trade deficits, because we dont produce anything, and fundamentals are strong. Ha!
The world will continue to buy our debt for all eternity. Ha!-
The market is actually up because profits are up
There is a QE effect but if profits weren’t up the market wouldn’t be up
You selectively tell a story over and over again but that doesn’t make it true
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Quote from kpack123
The market is actually up because profits are up
There is a QE effect but if profits weren’t up the market wouldn’t be up
You selectively tell a story over and over again but that doesn’t make it true
And they said the same thing in 2008.
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Quote from kpack123
The market is actually up because profits are up
There is a QE effect but if profits weren’t up the market wouldn’t be up
Agreed. The P/E overall for the S&P is much lower than it was at the 2007 peak as well, arguing against a loose money bubble as the sole cause of the global market highs.
That’s not to say that all this loose monetary policy won’t have consequences at some point in the form of inflation or the need for a dollar devaluation but the market is up based on profitability of corporations.
The fact that food stamps and disability and unemployment are so high is more a reflection of the growing income inequality in the US where the bulk of americans (who have little to no stake in the market) do not generate any wealth when corporations make money.
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Usually the economy trails the market
It doesn’t follow it in parallel
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Quote from billainsworth
Quote from Lux
Quote from billainsworth
Obamaconomy sucks.
Compared to [i]what[/i], Bill? I sincerely do not recall any defendable alternate proposal ever being discussed.
And it’s discouraging that after all that’s been said in these discussions, you persist in changing to yet [i]another[/i] citation without ever substantiating why you’ve posted each [i]previous[/i] one so far.
Read the CBO quote. Compared to the last 70yrs.
Still in standard deflection mode, huh? I asked you “compared to what” and you tell me to read a CBO report? Stop yammering and produce a lucid proposal with a logical basis for improving the economy faster than what we’ve been experiencing in the post-Dubya years. CBO isn’t going to tell us about any alternative economic policy.
You’re just a hit-and-run ideologue.
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236,000 jobs in Feb. Not bad.
[link=http://online.wsj.com/article/SB10001424127887324582804578348003808298508.html?]http://online.wsj.com/art…8348003808298508.html?[/link]-
Quote from Frumious
236,000 jobs in Feb. Not bad.
[link=http://online.wsj.com/article/SB10001424127887324582804578348003808298508.html]http://online.wsj.com/art…8348003808298508.html?[/link]
And unemployment goes down another notch to 7.7%
But of course, the billainsworth’s of these discussions will find a way to insist it’s still[i] “not good enough”[/i] as if a better way was obvious even though we only hear static whenever we ask for a viable alternate plan.
What a bunch of hypocrite trolls.
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89.3M ppl are not in the labor force, up from 89.0M in Jann.
Basically the govt is puttin the unemployed on long term welfare and is no longer counting them as unemployed.
But low IQ types will believe anything the govt feeds them. (as lon as it comes with a check)-
But there are still 236,000 new jobs right? You can take issue with labor participation rate and the calculation of the unemployment rate, but the hard jobs number is still real and a good number.
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Quote from dergon
But there are still 236,000 new jobs right? You can take issue with labor participation rate and the calculation of the unemployment rate, but the hard jobs number is still real and a good number.
QE3 is pumping $40B/mo into the economy for 236,000 jobs. Thats roughly $170,000 per job per month. Annualized, each new job could pay $2,000,000/yr. Only government could be stupid enough to call that success.
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So all the job growth is QE? You can’t even entertain the possibility that after a long recession an economic recovery is underway? It is all awful, it’s BHO’s fault, and all the appearance of good is entirely due to the Fed?
*shakes his head*
No way.
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Quote from billainsworth
Basically the govt is puttin the unemployed on long term welfare and is no longer counting them as unemployed.
Please confirm that assumption with a CBO citation.
Also stop ignoring the fact that 236k more jobs were created last month than in the previous month.
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Wow troll, you are dense. Ive already cited employment (not to be confused with unemployment) numbers. I have posted charts demonstrating massive increases in SNAP, and SSI disability.
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Quote from billainsworth
Wow troll, you are dense. Ive already cited employment (not to be confused with unemployment) numbers. I have posted charts demonstrating massive increases in SNAP, and SSI disability.
Sure you’ve posted many graphs, but you neglect to indicate your source. Therefore your graphs are meaningless. You must provide citation so that we can do our diligence. The reason you consistently neglect to provide such background info is quite clear. For example, the only graphs you’ve posted in this discussion are about the stock market, and neither prove the point you try to make.
For example, here you are assuming that all readers of this discussion somehow are aware of all the other posts you’ve made in all other discussions. If you’ve posted graphs in other discussion and somehow expect readers to keep track of the details in all other discussions and do the work themselves to draw inferences back to this discussion from all those twisted points, then you have no idea how to carry on a debate.
I’ll say this as clearly as possible: When you want the reader to understand something pertinent to a point make in a discussion, then it is incumbant on you to provide the relevant backgound IN THAT SAME DISCUSSION since you would place an unfair burden on the reader to assume they have read, studied, and understand the point the were trying to make in those other discussions.
Provide a direct citation to your statement about government putting[i] “the unemployed on long term welfare and no longer counting them as unemployed”[/i]. Then we can continue this discussion.
Now let’s see if you can focus just ONE time in a debate volley, or if you insist on changing and deflecting to another point, just like you ALWAYS do.
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Bernanke said today, (I’m paraphrasing from the video-Cspan @ 31:18min) “The Dow may be hitting a high, but it’s in nominal terms, not in real terms. If you adjust for inflation, we’re still some distance from the high”
Basically admitting the economy is crap and stock market gains are due to his money printing.-
Really is that how you read it?
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Quote from kpack123
Really is that how you read it?
Don’t even bother…….
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Quote from dergon
Quote from kpack123
Really is that how you read it?
Don’t even bother…….
Don’t bother, because helicopter Ben’s quote runs directly opposite to what Dergon has been posting:
Quote from dergon
Yes, Stocks Really Are at a Record High After Inflation:
[b]
[/b]
[b]
[/b]-
Quote from billainsworth
Quote from dergon
Quote from kpack123
Really is that how you read it?
Don’t even bother…….
Don’t bother, because helicopter Ben’s quote runs directly opposite to what Dergon has been posting:
Quote from dergon
Yes, Stocks Really Are at a Record High After Inflation:
[b]
[/b]
[b]
[/b]
OK, bill… this is very close to a misquote. That was the [i]title[/i] of a piece I linked. Here is the whole of that statement (taking in to account dividends reinvested over time):
I think a reasonable argument can be made that the stock market can be up (really truly up) at the same time as the overall economy is limping givingthe new economic realities.The stock market is not the economy, it is a collection of the stock of public corporations. Those corportations are doing pretty darned well over the last few years. The productivity gains are adding to their bottom line but the profitability is going much much more to shareholders and much less to workers than it did in the past. Hence a greater disconnect from the market to the overall economy.
Oh- and here is a nice piece on Motley Fool today:
[link=http://www.fool.com/investing/general/2013/03/07/yes-stocks-really-are-at-a-record-high.aspx]http://www.fool.com/investing/general/2013/03/07/yes-stocks-really-are-at-a-record-high.aspx[/link][b]Yes, Stocks Really Are at a Record High After Inflation:[/b]
“Actually, the real Dow is still 11% below its record,” wrote CNN.
“The Dow Isn’t Really At A Record High,” warned NPR.
Pardon me, but yes, it is.
It is true that the Dow is below its 2007 high when adjusted for inflation. But Dow companies have paid hundreds of billions of dollars in dividends over the last five years. Dividends are every bit as much a part of an index’s returns as price movements are, so they have to be added back in to get a sense of actual performance.
Dow Jones tracks a version of its famous index that includes dividend payments. Adjust it for inflation, and stocks really are at an all-time high:
[image]http://g.fool.com/editorial/images/22117/realdowdiv_large.png[/image]It was similar in the 1970s and ’80s. If you look at inflation-adjusted stock prices, the S&P 500 was virtually flat from 1968 to 1992 — almost a quarter-century! But add in dividends, and the index actually returned 170% during the period, even after inflation.
What’s odd is that most investors are well aware of the destructive power of inflation but often oblivious to the compounding power of dividends, even though the latter has historically been higher than the former. Why? Perhaps because inflation is ever-present regardless of what you do, while harnessing the power of dividends takes patience to stick it out through bear markets.
Just so that we’re all clear on what I have been actually writing-
S&P 500 closes the quarter at all time high.
In the same hour yesterday I heard both a call for Dow at 20,000 by end 2014 and a call for a 30-40% drop in the market in the next 12 months.
Guess I’ll just keep dollar cost averaging and plow ahead. 🙂-
Quote from dergon
S&P 500 closes the quarter at all time high.
In the same hour yesterday I heard both a call for Dow at 20,000 by end 2014 and a call for a 30-40% drop in the market in the next 12 months.
Guess I’ll just keep dollar cost averaging and plow ahead. 🙂
Idiot Bernanke has tripled to monetary base, but the market hasn’t tripled, so there is room for short term upside.
On the other hand, the fed has ZERO tools to intervene if inflation becomes more of a problem. A rise in interest rates, even a little, will crash the overbought bond market and make our national debt increasingly un-serviceable. In the long term, a hyperinflationary death spiral is a certainty.
Lux will be here with a hearty “Obama rules, the economy is awesome!” in 5….4….3….2….1….-
In the long term, a hyperinflationary death spiral is a certainty.
I disagree. Risk for inflation is there. There is *some* risk for future hyper-inflation.
Hyperinflationary “death spiral” a “certainty” ……. nope.-
DCA. be patient with DRIPs. look for value. we’re (more or less) along historical average valuations by most parameters right now.
it’s funny, rereading Ben Graham’s book for the 2nd/3rd time now, it’s fun to read it every 10 years or so and just watch history repeat itself over and over again.
Buffet’s book is a must read as well (security analysis).
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Quote from billainsworth
Quote from dergon
S&P 500 closes the quarter at all time high.
In the same hour yesterday I heard both a call for Dow at 20,000 by end 2014 and a call for a 30-40% drop in the market in the next 12 months.
Guess I’ll just keep dollar cost averaging and plow ahead. 🙂
Idiot Bernanke has tripled to monetary base, but the market hasn’t tripled, so there is room for short term upside.
On the other hand, the fed has ZERO tools to intervene if inflation becomes more of a problem. A rise in interest rates, even a little, will crash the overbought bond market and make our national debt increasingly un-serviceable. In the long term, a hyperinflationary death spiral is a certainty.
Lux will be here with a hearty “Obama rules, the economy is awesome!” in 5….4….3….2….1….
There you go again with your imaginary future, Bill, and then you start judging people as though your baseless fantasies have materialized before our eyes.
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Quote from billainsworth
Quote from dergon
S&P 500 closes the quarter at all time high.
In the same hour yesterday I heard both a call for Dow at 20,000 by end 2014 and a call for a 30-40% drop in the market in the next 12 months.
Guess I’ll just keep dollar cost averaging and plow ahead. 🙂
Idiot Bernanke has tripled to monetary base, but the market hasn’t tripled, so there is room for short term upside.
On the other hand, the fed has ZERO tools to intervene if inflation becomes more of a problem. A rise in interest rates, even a little, will crash the overbought bond market and make our national debt increasingly un-serviceable. In the long term, [b]a hyperinflationary death spiral is a certainty. [/b]
Lux will be here with a hearty “Obama rules, the economy is awesome!” in 5….4….3….2….1….
Figured I would do our conservative friends a favor and bump this thread from 2013.
Time to start calling for the impending hyperinflation death spiral/ massive US dollar devaluation / US becoming Greece.
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And of course millions of buy gold Fox News breviary and OAN infomercials
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For bill:
Jeremy Siegel on a market-friendly way for the Fec to exit
Fortunately, there is a solution to the Feds exit problem that does not involve selling securities. It employs one of the Feds oldest policy tools: [link=http://www.ft.com/cms/s/0/ff1e7ff6-79ea-11e2-b377-00144feabdc0.html]raising reserve requirements[/link].
All textbooks on money and banking highlight the three principal policy options open to central banks: discount lending, open market operations, and reserve requirements. Since the financial crisis broke, the Fed has vigorously used the first two.
Massive discount lending to banks following the Lehman collapse prevented a devastating run on banks. Then huge open market purchases of Treasury and mortgage-backed securities provided the financial system with much-needed liquidity. But the Fed has not altered reserve requirements in more than 20 years and has not raised any reserve ratio on any deposit in almost four decades.
….A reserve ratio as high as 15 per cent may appear to be extraordinarily burdensome to banks. But in 2008 Congress allowed the Fed to mitigate this cost by paying interest on reserves. As the Fed exits from quantitative easing, one feasible policy for the central bank to pursue is to set the interest rate on reserves at one half of the level of the Fed funds target.
Data from the Fed show that most FOMC members expect the long-run Fed Funds target to be about 4 per cent, which would imply that the Fed would pay a 2 per cent rate on reserves under this policy. Given $1.7tn dollars of reserves, these payments would amount to a $34bn cost to the Fed, which is less than half of the $77bn that the central bank earned in 2012. This means that after paying interest on bank reserves, Fed profits, which are remitted to the US Treasury, would still exceed profit levels that prevailed before the financial crisis.
Another attractive feature of higher reserve ratios is that it allows the government to modify and in some cases eliminate the liquidity and capital ratios dictated by new Basel III banking regulations. Reserves are deposits at the Fed that can be turned into currency on demand and as such are the worlds most liquid asset. The higher reserve levels achieved by this policy will satisfy many of the liquidity requirements in the Basel Agreement.
The bottom line is that by increasing required reserves and bringing the Feds third policy tool out from hibernation, the Feds exit strategy can be made far easier. And since these reserves satisfy many of the Basel III provisions, this policy can be a win-win for the Fed, the banking industry and the US economy.
The point is, the impending death of the American economy and the US dollar are being overblown.
Yes there are downside risks…. there always are….. but the end is *not* nigh.-
Quote from dergon
The bottom line is that by increasing required reserves and bringing the [b]Feds third policy tool out from hibernation,[/b] the Feds exit strategy can be made far easier. And since these reserves satisfy many of the Basel III provisions, this policy can be a win-win for the Fed, the banking industry and the US economy.
The bottom line, is that the fed is, admittedly, in uncharted waters with respect to how we got into this mess. Clearly “let’s try this third policy thing we haven’t used in like, forever, and see if it works” should not inspire confidence. Furthermore, the fed’s macro models have been completely debunked by the unforseen (LOL!!!) housing crisis, yet they still cling to the same failed theories. Multipliers? LOL. Recent studies are pointing to a negative multiplier—how much did fed actions [b]HURT [/b]us?
Fact: Fed is in uncharted waters, fed officials have admitted as much.
Ergo: So any exit plan is largely speculation
Fact: Fed’s macro models failed to predict the degree of danger low interest rates created prior to ’08 (Geithner has admitted interest rate policy was misguided)
Ergo: The EVEN LOWER interest rates we have now should correlate with even MORE risk of calamity.
Fact: Any win-win-win policy should be implemented immediately and in spades as there is ZERO downside.
Ergo: In the 100 yrs or so of modern economics any win-win-win policy should have already been instituted, created untold sums of wealth for the entire planet.-
Yes. We are in uncharted waters. I do not see how that supports your attestation that it automatically gets us to a guarantee of hyperinflation that results in the collapse of the US economy.
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Quote from dergon
Yes. We are in uncharted waters. I do not see how that supports your attestation that it automatically gets us to a guarantee of hyperinflation that results in the collapse of the US economy.
I also disagree with Bill’s assertion that the feds don’t know what got us into this mess. The uncharted waters are about how to get us OUT of this mess, but let’s not fool ourselves about the CAUSE.
Wrong again, Bill.
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Quote from Lux
The uncharted waters are about how to get us OUT of this mess,
wrong:
“Bernanke Steers Into Uncharted Waters”–Real Clear Politics 12/13/12
“Bernanke navigating uncharted waters”–Winnipeg Free Press 9/15/12
“[i]Bernanke[/i] himself admits that we are in [i]uncharted waters[/i],”–Seeking alpha 3/21/09
“[the fed is] in uncharted waters, said [link=http://search.bloomberg.com/search?q=Stephen+Stanley&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1]Stephen Stanley[/link], chief economist at RBS, who previously worked as an economist at the Richmond Fed. — Bloomberg 1/27/09
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Quote from billainsworth
Quote from Lux
The uncharted waters are about how to get us OUT of this mess,
wrong:
“Bernanke Steers Into Uncharted Waters”–Real Clear Politics 12/13/12
“Bernanke navigating uncharted waters”–Winnipeg Free Press 9/15/12
“[i]Bernanke[/i] himself admits that we are in [i]uncharted waters[/i],”–Seeking alpha 3/21/09
“[the fed is] in uncharted waters, said [link=http://search.bloomberg.com/search?q=Stephen+Stanley&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1]Stephen Stanley[/link], chief economist at RBS, who previously worked as an economist at the Richmond Fed. — Bloomberg 1/27/09Yes Bill, as I said the “uncharted waters” metaphor is about how to get OUT of this mess. This is exactly what your quotes say. What you fail to understand is that those quotes say nothing about what got us INTO this mess. Bernanke knows damn well how we got INTO this mess because years ago he was part of the industry that put us there (with the help of Greenscam) and now he’s working for the organization that’s in “uncharted waters” as it tries to get us OUT of this mess. The only problem is that the House Republicans are trying their hardest to keep us IN this mess which is why we’re experiencing only a slow recovery.
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Whoo hoo!
More highs…. words I was hearing over and over today was “escape velocity”…. economy might be able to make it!
Fed might be able to ease up on the easing while the BoJ,BoE, and ECB picks up the load for a while.-
[h1]Why repeat of ’87 unlikely[/h1] If you are wondering why strategists, economists and journalists made such a fuss about the anniversary of the stock-market crash, dubbed “Black Monday,” the answer comes down to one word: nervousness.
Could a crash of that magnitude happen again?
The Dow Jones Industrial Average defined the crash with its harrowing 22.6-per-cent one-day plunge, taking other world indexes down with it and creating fears of a global recession and a permanent change to the way investors look at financial markets.
True, there are a number of similarities between then and now.
However, the world is also a very different place than it was 20 years ago. [b]Central bankers around the world have a far better understanding of financial markets than they did then.[/b]
Today, [b]the U.S. Federal Reserve and many other central banks are largely on the side of the investor[/b], quick to free up liquidity in times of trouble and often in remarkable co-ordination with one another.
Their response to this summer’s credit crisis, including the half-percentage-point cut in short-term interest rates by the Fed, stands as a good example.
For nightmares like Oct. 19, 1987, [b]the odds of a repeat look very slim.[/b]
Published: OCTOBER 21, 2007-
[b]SHARE DAY BIGGEST IN HISTORY[/b]; MOTORS TOUCHES 199; Buying Wave Sweeps 37 Stocks to Record Highs, With Gains Up to 12 3/8 Points. SEATS SOAR TO $375,000 $152,250,000 Added to Value of General Motors in Turnover of 584,400 Shares. WILD SCRAMBLE TO BUY Orders Pour In From All Parts of the Country, Brokers Battling for Favorite Stocks.
3/27/28-
Plugging along. Glad I’ve been fully invested this whole way through the crash and recovery.
[link=http://www.bloomberg.com/news/2013-07-18/u-s-stock-index-futures-little-changed-before-earnings.html]http://www.bloomberg.com/news/2013-07-18/u-s-stock-index-futures-little-changed-before-earnings.html[/link]
Jobless claims OK, earnings not awesome but still OK…. I continue my cautious optimism for the short term as well as my long range bullishness of the American economy. 🙂 -
Quote from dergon
Plugging along. Glad I’ve been fully invested this whole way through the crash and recovery.
[link=http://www.bloomberg.com/news/2013-07-18/u-s-stock-index-futures-little-changed-before-earnings.html]http://www.bloomberg.com/news/2013-07-18/u-s-stock-index-futures-little-changed-before-earnings.html[/link]
Jobless claims OK, earnings not awesome but still OK…. I continue my cautious optimism for the short term as well as my long range bullishness of the American economy. 🙂
My current perspective and strategy also.
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Quote from dergon
Plugging along. Glad I’ve been fully invested this whole way through the crash and recovery.
[link=http://www.bloomberg.com/news/2013-07-18/u-s-stock-index-futures-little-changed-before-earnings.html]http://www.bloomberg.com/news/2013-07-18/u-s-stock-index-futures-little-changed-before-earnings.html[/link]
Jobless claims OK, earnings not awesome but still OK…. I continue my cautious optimism for the short term as well as my long range bullishness of the American economy. 🙂
I think short term there’s going to be some turbulance. I believe it’s debt ceiling 2.0 as you posted. Congress is ineffectual dealing with important things like making and sticking to a sound budget.
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[b]S&P 500 Index Climbs Above 1700 for First Time[/b]
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And after a bit of a dip, a “No immediae war with Syria and we love Janet Yellin” rally brings the S&P 500 back up over 1700 again today.
I still figure the debt showdown over the next few weeks will knock some %points off in the short term. But in the longrun unless the GOP goes balls out with a lengthy government shutdown earnings are looking.
Been a damn good investing year so far 🙂
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Quote from dergon
Yes. We are in uncharted waters. I do not see how that supports your attestation that it automatically gets us to a guarantee of hyperinflation that results in the collapse of the US economy.
It’s only my opinion there will be hyperinflation. I only brought up uncharted waters to point out it’s far from 100% the fed can successfully unwind.
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Quote from billainsworth
It’s only my opinion there will be hyperinflation. I only brought up uncharted waters to point out it’s far from 100% the fed can successfully unwind.
Quote from billainsworth
In the long term, a hyperinflationary death spiral is a certainty.
OK – now you’re like trying to hit a moving target again.
The above two quotesgiven on the same day are wildly different levels of supposed certainty on the matter.
One of them is a somewhat reasonable statement. The other is hyperbolistic fear mongering.
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I don’t think low interest rates are that much of an issue. The issue was the banks like Countrywide, Angelo Mozillo, had the philosophy that if a person can fog up a mirror they get credit. Those were his own words according to the guy that blew the whistle on countrywide. Everyone got credit. When interest rates were at 20% if you were to have borrowed $150K to buy a house over 30 years that’s something like $1million and change in payments. So what’s the magic number on interest rates? It certainly doesn’t seem like 20% is reasonable.
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Quote from DICOM_Dan
I don’t think low interest rates are that much of an issue.
Geithner would disagree. So would I.
Supply and demand. Interest rates are the price of money. Cheap money equates to huge demand. That’s why before the crash, not only housing prices shot up, but commodities and equities, as well.-
Quote from billainsworth
Quote from DICOM_Dan
I don’t think low interest rates are that much of an issue.
Geithner would disagree. So would I.
Supply and demand. Interest rates are the price of money. Cheap money equates to huge demand. That’s why before the crash, not only housing prices shot up, but commodities and equities, as well.
I still don’t see the interest rate as the problem. It’s the fact that money was given out to anyone. Sure people want to borrow money at a low interest agreed. However, not all borrowers are credit worthy. The example I gave was Countrywide’s practice of giving mortgages to anyone with a heart beat and that speaks directly to the financial crisis. Bad loans are bad loans at whatever interest rate.
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Quote from DICOM_Dan
I still don’t see the interest rate as the problem. It’s the fact that money was given out to anyone. Sure people want to borrow money at a low interest agreed. However, not all borrowers are credit worthy. The example I gave was Countrywide’s practice of giving mortgages to anyone with a heart beat and that speaks directly to the financial crisis. Bad loans are bad loans at whatever interest rate.
Cheap money has many many more bad effects than just easy lending. Rapid influxes of cash have been linked to tulipmania in 1600’s Holland, The Mississippi Bubble(1700s France) and in Rothbard’s classic tome, “America’s Great Depression”. There are system wide effects of artifically low interest rates. Again, if this was housing, only, then why the massive spike in commodities?
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Quick question Who was the The poster that said Gold 3500?
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And the Fed continues stimulus.
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So the hospitals seem to be doing pretty well these days. If you can’t beat ’em, join ’em? Anyone like hospital stocks?
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Quote from IGotKids2Feed
So the hospitals seem to be doing pretty well these days. If you can’t beat ’em, join ’em? Anyone like hospital stocks?
That’s an interesting notion. The general notion of diversification recommends that a person not invest large amounts of cash in their own employment sector.
But maybe now due to changes in the nature of the American health care system you could argue that since hospitals interests are contrary to those of physicians that Hospital stocks could be a hedge play.
Anyway … I just try to get market returns as cheaply as possible Boglehead style, so I don’t have to ponder such grand notions.
All I know is that so far it’s been a good year.
Alda, you ever put your money back into play?-
Oh… and if the medical device tax does end up on the cutting room floor as part of the Washington negotiations you could see a nice little short term bump in the whole health care sector.
Could be a nice time to take a flyer for those so disposed.-
The entire healthcare industry is going to recover at the end of this episode. It almost doesn’t matter what sub-sector you invest in, although I agree there may be an added bump in the device sector.
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ppingofr but …
[link=http://navelliergrowth.investorplace.com/blog/archive/2013/10/red-washington-green-wall-street-investinglessons.html]http://navelliergrowth.investorplace.com/blog/archive/2013/10/red-washington-green-wall-street-investinglessons.html[/link]
While the government shutdown isn’t good news for government employees, [link=http://navelliergrowth.investorplace.com/blog/archive/2013/09/wall-street-government-shutdown-pgratings.html]we’ve established[/link] that it shouldn’t derail the stock market. That’s because while the mess in Washington has given the media fodder for various doomsday scenarios, history paints a very different picture. In the year following the last government shutdown (1995), the S&P 500 rallied 21%.
When you consider all of the government shutdowns since 1976, the market rose an average 11% in the following twelve months. That’s because greed eventually trumps fear.-
Quote from dergon
ppingofr but …
[link=http://navelliergrowth.investorplace.com/blog/archive/2013/10/red-washington-green-wall-street-investinglessons.html]http://navelliergrowth.investorplace.com/blog/archive/2013/10/red-washington-green-wall-street-investinglessons.html[/link]While the government shutdown isn’t good news for government employees, [link=http://navelliergrowth.investorplace.com/blog/archive/2013/09/wall-street-government-shutdown-pgratings.html]we’ve established[/link] that it shouldn’t derail the stock market. That’s because while the mess in Washington has given the media fodder for various doomsday scenarios, history paints a very different picture. In the year following the last government shutdown (1995), the S&P 500 rallied 21%.
When you consider all of the government shutdowns since 1976, the market rose an average 11% in the following twelve months. That’s because greed eventually trumps fear.
That’s the one saving grace about the stock market, and I wouldn’t be surprised if many members of Congress spent a small fortune on stocks last week knowing full well there would be a quick rebound after the 17th.
Unfortunately, too many conservative pundits last night were lamenting on how the shutdown also tarnished our reputation around the world, how we lost credibility as the economic authority to the rest of the world, and how the rest of world won’t value our Treasury as much as it did before this mess. And that particularly pesky problem won’t just [i]”go away”[/i] any time soon…unless Americans take clear steps to publicly purge such a destructive traitorous element from our government.
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Well…. another friday close, another record close.
I’m full “balls out” in the market…. have been since 1998.
I told myself in 2009 that when the market recovered I would slowly begin the process of moving from 100% equities into some fixed income, but now that that has happened bonds spook me more than stocks.
This year’s rally has put me a bit out in front of my projected retirement savings needs for this point in my life. Here’s hoping this is a boom and not a bubble.
(( ps – In a totally unrelated note: my add on spine biopsy for late Fri afternoon cancelled – that makes it a pretty good day. 🙂 ))
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Don’t know if the boom continues but I don’t see a near term bubble
Bubbles contains sectors that are way overpriced
The dot com. The real estate industry
Nothing today is really vastly overpriced
I won’t be surprised to see a pul back or mild correction. But a huge sell off is unlikely
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Quote from kpack123
Bubbles contains sectors that are way overpriced
The dot com. The real estate industry
Nothing today is really vastly overpricedKpack123, can you comment on whether derivative activity is up or down compared to straight purchases of securities?
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Not really
I rarely speculate or pay much attention to speculators accept when huge manipulation is occurring
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It feels like an overall bubble to me, although I agree PE ratios are not sky high. A significant pull back is likely, I agree, say for a month or so once the fed stimulus is cut at first.
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Yes, the next Fed pullback (given all the obnoxious QE, which can’t and won’t stop) will signal that we’re in more trouble.
kpack, you’re right about the pricing but the new “pricing” is actually devaluation and lack of confidence in the gov’t due to liabilities and the realization that the only way to cover them is through … more QE-
Look Please don’t give me advice
I have been in this a lot longer than you and I have done pretty darn well
I don’t base my investment on politics, hysteria or biased talk show hosts-
I also divorce my politics from my investment strategy.
I think there are a couple of factors that weight against the run-up being solely or even primarily QE driven related to devaluation.
First, gold has crashed from $2000 and lost 40%. Was the market run only on the basis of money printing, commodities would not have likely to fall.
Second, while stocks aren’t cheap right now, as MSK/SW said the valuations aren’t sky high. If the QE and low rates were forcing people out of bonds and into stocks valuations would be through the roof.
And finally, corporate books look great. Profits and cash on hand are both up. Now at some point those companies won’t be able to push profits with cost cutting and efficiency and they will need growth (global and domestic) in order to maintain. But for now, they’re doing well.
Now, none of this means anything to my personal strategy. I just DCA the same amount of cash every month and don’t try to time tops or bottoms. Corrections and bear markets are part of a cycle. I still have 20 years before I need to withdraw any of the money I have invested right now, so dips and bumps don’t alter my long term approach.
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What works the best for me over the years has been to buy stocks that have of track record of increasing their dividends yearly of at least 10 consecutive years and timing my buys to coincide with a time of the year that they are close to or at their 52 weeks lows and I reinvest all the dividends.
It is not sexy or glamorous but its been amazingly lucrative.
What you get is a slight discount on a good company that will be paying you more year after year.
Before you know you have doupbeld your money………..usually 4-7 years-
Quote from kpack123
What works the best for me over the years has been to buy stocks that have of track record of increasing their dividends yearly of at least 10 consecutive years and timing my buys to coincide with a time of the year that they are close to or at their 52 weeks lows and I reinvest all the dividends.
It is not sexy or glamorous but its been amazingly lucrative.
What you get is a slight discount on a good company that will be paying you more year after year.
Before you know you have doupbeld your money………..usually 4-7 years
I have a slight dividend bias in my portfolio, but through low cost mutual funds (VDIGX). I’ve tilted a bit toward dividends as a (poor) substitute for what would be fixed income in my portfolio since dividend stocks tend to be less volatile and drop less in a pull back.
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Quote from kpack123
Look Please don’t give me advice
I have been in this a lot longer than you and I have done pretty darn well
I don’t base my investment on politics, hysteria or biased talk show hosts
When did I tell you what do with your money?
You guys really read into things that aren’t stated. In your own world, I guess. Read the comments, don’t make conclusions that aren’t stated therein, please.-
Dow at 16,000. S&P nibbling at 1,800. ! 🙂
the new “pricing” is actually devaluation and lack of confidence in the gov’t due to liabilities and the realization that the only way to cover them is through … more QE
I’ll give you that the low interest rate & QE of the Fed have contributed to an environment favorable to equity investment in the face of a lower real GDP.
But, do a basic study on the market conditions that existed in 2009: Markets down 57%, less than 5% of equities over 200 day moving average, sentiment metrics, valuation analysis, etc. What you will find is a range of possible market returns that were all likely to be very positive. After a secular bear market cycle, there was a median gain of 70% over 17 months, with a range of 41% (Italy 1960s) to 295% (Finland, 1990s). On the domestic side, the US market gained 170% in the 1930s.
We shouldn’t be willing to dismiss this history of cyclical market gains to “it’s just QE and the fed”.
Also, the other things I mentioned like current P/Es and commodity prices argue against a “devaluation” market boom.
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Quote from dergon
Dow at 16,000. S&P nibbling at 1,800. ! 🙂
the new “pricing” is actually devaluation and lack of confidence in the gov’t due to liabilities and the realization that the only way to cover them is through … more QE
I’ll give you that the low interest rate & QE of the Fed have contributed to an environment favorable to equity investment in the face of a lower real GDP.
But, do a basic study on the market conditions that existed in 2009: Markets down 57%, less than 5% of equities over 200 day moving average, sentiment metrics, valuation analysis, etc. What you will find is a range of possible market returns that were all likely to be very positive. After a secular bear market cycle, there was a median gain of 70% over 17 months, with a range of 41% (Italy 1960s) to 295% (Finland, 1990s). On the domestic side, the US market gained 170% in the 1930s.
We shouldn’t be willing to dismiss this history of cyclical market gains to “it’s just QE and the fed”.
Also, the other things I mentioned like current P/Es and commodity prices argue against a “devaluation” market boom.
I disagree with Cigar’s “more QE” statement. If such “easing” was the main thing causing the rise in the stock market, then everyone’s P/E would be rising too, but that’s not what’s happening. The P/Es for many companies are staying relatively low and healthy, and that signifies real profit, not just “confidence”.
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Oh, there’s no doubt there’s real profit. I’m not arguing that they aren’t making real gains. But they are gains within the gains, more handouts and breaks from the administration that claims to be against them but acts completely opposite. To deny that the manipulation of currency and propping up of banks and trading devices (which have been that way since repeal of Glass Steagal) isn’t part and parcel to what I”m talking about is not living in reality of what the Fed and TARP type programs do. They do absolutely nothing for real production but rather make the “1%” that much wealthier, which is the irony.
As an aside, the gov’t avoiding “default” by just signing a piece of paper and flooding more money in ALWAYS results in the latter moving the market up. Since 2009 this has been what has been happening on various levels. Some extreme, some crises, some subtle, but consistently created out of thin air. That’s my point.-
Quote from Cigar
Oh, there’s no doubt there’s real profit. I’m not arguing that they aren’t making real gains. But they are gains within the gains, more handouts and breaks from the administration that claims to be against them but acts completely opposite. To deny that the manipulation of currency and propping up of banks and trading devices (which have been that way since repeal of Glass Steagal) isn’t part and parcel to what I”m talking about is not living in reality of what the Fed and TARP type programs do. They do absolutely nothing for real production but rather make the “1%” that much wealthier, which is the irony.
As an aside, the gov’t avoiding “default” by just signing a piece of paper and flooding more money in ALWAYS results in the latter moving the market up. Since 2009 this has been what has been happening on various levels. Some extreme, some crises, some subtle, but consistently created out of thin air. That’s my point.
I think it’s easier to argue that it’s better to do something to stimulate a economy (which has undergone 30 years of momentum to make it crash) in an effort to dampen the freefall (which is what the stimuli did) than to let it to just continue spiraling downward on its own glide. The alternative is Romney’s “let them all fail” which is an interesting but unproven approach, unlike stimulus spending which historic trends have shown does stabilize a faltering economy. In fact, the current the recent round of stimuli seems to have better than expected result since inflation is still at a minimum. Personally, I believe the reason for this is that we are now in more of an asset-based economy rather than a credit driven economy. People are not nearly spending at their credit limits beyond their means like they did before ’06. The economy stabilizes tremendously when it becomes more cash-based.
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Where are the jobs?
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there’s jobs to be had. Find some qualified people and they can get jobs. there’s even a bonus if you refer someone for nursng and I believe PAs.
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Quote from aldadoc
Where are the jobs?
Where are the Republicans who are trying to propose policy to create more jobs?
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Quote from Lux
Quote from aldadoc
Where are the jobs?
Where are the Republicans who are trying to propose policy to create more jobs?
As usual soapy you made a ridiculous statement. Nothing the House proposes can get by light-in-the-loafers harry. Can you say 375,000 new claims last week? The obummer is a bummer.
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All times highs yesterday …. again …. even with the taper announcement.
Low inlfation (maybe too low) despite QE, GDP plugging along starting to look like 3% ish (most economies that come out a financial crisis have a baseline GDP 1-2% lower than pre-crisis norm for a decade or so), improving job market (alos slow to recover after a financial crisis), Washington politics showing a hint of bipartisanship on fiscal issues, and the Fed beginning to move toward normalized monetary policy. Is it time to sound the “all clear”?
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Quote from dergon
All times highs yesterday …. again …. even with the taper announcement.
Low inlfation (maybe too low) despite QE, GDP plugging along starting to look like 3% ish (most economies that come out a financial crisis have a baseline GDP 1-2% lower than pre-crisis norm for a decade or so), improving job market (alos slow to recover after a financial crisis), Washington politics showing a hint of bipartisanship on fiscal issues, and the Fed beginning to move toward normalized monetary policy. Is it time to sound the “all clear”?
there’s an idea of natural unemployment. I’d say not all clear till said number is normal. I think that was like 3 or 4 percent. That’s a hard one to figure out though. I think a lot of businesses learned they can perform the same or better with less people.-
I was listening to Bloomberg this morning. The guest was citing that economies coming out of financial crises see [i]structural[/i] unemployment reset to higher levels than in the pre-crisis, often persisting for many, mnay years ..even decades.
We may be in a post-crisis world in which “full meployment” is 6+% into the 2020s
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Quote from dergon
I was listening to Bloomberg this morning. The guest was citing that economies coming out of financial crises see [i]structural[/i] unemployment reset to higher levels than in the pre-crisis, often persisting for many, mnay years ..even decades.
We may be in a post-crisis world in which “full meployment” is 6+% into the 2020s
I guess my question would be is that an acceptable number? The 6+%. If so I think unemployment benefits need a major revamping. Make it a jobs training program instead of just sending out checks. Put more money into R&D, NASA, and anything else that might be making technology breakthroughs that create jobs. I know 3D printing is possibly a big manufacturing break through.-
Well there is certainly [i]some[/i] structural component to the current unemployment numbers. Some of those manufacturing jobs are simply not coming back. Guys in their 40s-50s with a high school education or less are pretty much SOL here in the US. They’ll be on the rolls until it runs out or they get to social security.
I’d like to see something similar to the German training system developed, with a public/private partnership to direct workers into fields/corporations that need specific skill sets. I don’t think our current politics would allow for anything that looked like a new federal jobs program.
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Speaking of 3-D printing — a bit of topic drift but – Mrs_Dergon’s most recent editiorial was on her experience with 3-D printing. Her company got a free demo unit and she spent all of last week playing around with files, 3-D photography etc. Super cool.
[link=http://www.history.com/photos/teddy-roosevelt/photo11][link=http://machinedesign.com/blog/how-i-3d-printed-my-face-sphinx-and-how-you-can-too]http://machinedesign.com/…nx-and-how-you-can-too[/link][/link]
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Just curious if anyone out there bought Netflix, Chipotle, or bestbuy a few years ago. If you did you would be a lot richer today. Netflix is up over 1300% in 5 years Chipotle is up over 700% in 5 years and Bestbuy is up almost 250% this year.
Wish these were in my portfolio-
Pipelines, Natural gas producers and banks
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Quote from dergon
Well there is certainly [i]some[/i] structural component to the current unemployment numbers. Some of those manufacturing jobs are simply not coming back. Guys in their 40s-50s with a high school education or less are pretty much SOL here in the US. They’ll be on the rolls until it runs out or they get to social security.
I’d like to see something similar to the German training system developed, with a public/private partnership to direct workers into fields/corporations that need specific skill sets. I don’t think our current politics would allow for anything that looked like a new federal jobs program.
I actually think some jobs that don’t require a college degree are coming back. I live near Steris and there’s always a sign for hiring welders and machinists. Probably to build OR booms or something like that.-
Quote from DICOM_Dan
Quote from dergon
Well there is certainly [i]some[/i] structural component to the current unemployment numbers. Some of those manufacturing jobs are simply not coming back. Guys in their 40s-50s with a high school education or less are pretty much SOL here in the US. They’ll be on the rolls until it runs out or they get to social security.
I’d like to see something similar to the German training system developed, with a public/private partnership to direct workers into fields/corporations that need specific skill sets. I don’t think our current politics would allow for anything that looked like a new federal jobs program.
I actually think some jobs that don’t require a college degree are coming back. I live near Steris and there’s always a sign for hiring welders and machinists. Probably to build OR booms or something like that.
Yeah – I guess I consider the people like machinists and welders as part of the “skilled trades”, higher end employees than people work in semi-skilled manufacturing jobs.
The point is, the days of being able to graduate from an American high school with no special training, walk down the street to whatever local factory is in the neighborhood, and take a job that will pay you middle classes wages for working an assembly line are over for most Americans.-
Quote from dergon
The point is, the days of being able to graduate from an American high school with no special training, walk down the street to whatever local factory is in the neighborhood, and take a job that will pay you middle classes wages for working an assembly line are over for most Americans.
And yet, college tuitions are outpacing inflation, making college increasingly out of reach. So… what are the majority supposed to do?
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[b]So… what are the majority supposed to do? [/b]
Work at Walmart
Be told unions are evil
Be told because you have that Walmart Job for 8 dollars an hour with no benefits and pay little in taxes because your income is tot low that you are supporting all the free loaders out there on welfare
Be told that Ronald Reagan was the greatest president ever because he began the onslaught of shipping jobs overseas and slashing funding for student loan programs………..so know you have the honor and privilege of working that low paying Walmart job with no benefits
[b]
[/b]-
Quote from kpack123
[b]So… what are the majority supposed to do? [/b]
Be told that Ronald Reagan was the greatest president ever because he began the onslaught of shipping jobs overseas………
A little unfair – it was Clinton who signed the trade agreement with China in 2000. It was a well intentioned and noble, but inherently misguided act.
Continuing the Nixon era policy of engagement – the intention was to open Chinese markets to American exporters.
With currency manipulation, absent environmental legislation, Chinese government subsidies, copyright infringments, use of slave and prison labour – it was US manufacturing industry that was exported wholesale from the midwest to the PR of C.
Tough to pin that one on Ronnie-
Yesterday’s sell off wipes out gains for 2014. Geopolitics and China beat good jobs and consumer data in the US.
Maybe a good time to pop in some $$…. unless you think Crimea is going to explode I suppose.-
Pipelines banks pharma
Buy buy buy
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always a good time to buy – useless attempting to time the market. Slow steady and consistent wins the race…………………………………
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I see some other irrational things like the price of Tesla stock and wonder what’s up. Seems like some things might be getting way over valued.
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Quote from kpack123
Pipelines banks pharma
Buy buy buyAbsolutely. An old, smelly, slimy dollar is worth exactly the same as a crisp, new, sterile dollar.
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Quote from DICOM_Dan
Quote from dergon
Well there is certainly [i]some[/i] structural component to the current unemployment numbers. Some of those manufacturing jobs are simply not coming back. Guys in their 40s-50s with a high school education or less are pretty much SOL here in the US. They’ll be on the rolls until it runs out or they get to social security.
I’d like to see something similar to the German training system developed, with a public/private partnership to direct workers into fields/corporations that need specific skill sets. I don’t think our current politics would allow for anything that looked like a new federal jobs program.
I actually think some jobs that don’t require a college degree are coming back. I live near Steris and there’s always a sign for hiring welders and machinists. Probably to build OR booms or something like that.
Many of our Hight Schools in Colorado are offering vocational type schooling as an added curriculum. i.e. Machine Shop, Welding, Construction basics / electrical plumbing, Minor Medical, Book keeping, [i][b]Joint Rolling and Dime bag packing[/b][/i]. We’z got an Alcopulco Gold mine going on here!
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Quote from CudaRad
Many of our Hight Schools in Colorado are offering vocational type schooling as an added curriculum. i.e. Machine Shop, Welding, Construction basics / electrical plumbing, Minor Medical, Book keeping, [i][b]Joint Rolling and Dime bag packing[/b][/i]. We’z got an Alcopulco Gold mine going on here!
Wouldn’t botany and learning how to GROW the gold be a lot more valuable? They’re probably all busy doing the growing, no one has time to do the teaching!
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Quote from dergon
I think the correction might be coming –
Still medium to long-term bulliish, but wouldn’t be surprised if we see a 10-15% dip in this first quarter
Getting close:
The [link=http://topics.bloomberg.com/s%26p-500/]S&P 500[/link] reached a record 1,848.38 on Jan. 15 and has since fallen 5.8 percent. The market last produced a loss of at least 5 percent in June, when the index dropped 5.8 percent from a May high. The seven months between declines of at least 5 percent was the [link=http://www.bloomberg.com/quote/SPX:IND]longest stretch[/link] since late 2006, according to Bespoke Investment Group LLC.
The benchmark for American equities sank 3.6 percent in January, its worst [link=http://www.bloomberg.com/quote/SPX:IND]opening month[/link]since 2010, as the gauge dropped in each of the months final three weeks, the longest streak since 2012. Stocks fell as the [link=http://topics.bloomberg.com/federal-reserve/]Federal Reserve[/link] trimmed its bond-buying program for the second time in as many months and emerging-market currencies tumbled amid signs growth was slowing in [link=http://topics.bloomberg.com/china/]China[/link]. The countrys official [link=http://topics.bloomberg.com/purchasing-managers/]Purchasing Managers[/link] Index decreased to a six-month low in January as output and orders slowed.
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Well. I am most of the way rebalanced for 2014.
2013 was a great run, but I suppose you have to say good bye to the good years.
Just strong single digit growth would make me quite pleased for the coming 2014.
Happy Investing & Happy New Year!-
I think the correction might be coming –
Still medium to long-term bulliish, but wouldn’t be surprised if we see a 10-15% dip in this first quarter
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We see the same principle at work on eBay every day. Some people climb over each other to spend so much more money on something used than what you could walk down to the local store and buy brand-new in the box. And they do it for no other reason than the feeding frenzy. In lean economic times, investors often gravitate to a few stocks that are not mainstream but have intangible promise that gets trumped up in order to inflate the price. And when the PE escalates to a certain nonsustainable level, the vultures take their profit and the whole thing resets. That even happened at Apple when it broke 700.
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Quote from adopted canuck
always a good time to buy – useless attempting to time the market. Slow steady and consistent wins the race…………………………………
Oh I agree. I personally don’t even bother trying to time the market. Just DCA every month rain or shine, bull or bear.
As for current prices — Yeah there are a few places of irrational exuberance , maybe TSLA. Overall though the S&P 500 looks to be pretty close to fair value. P/E overall is sitting aroung around 15. They’re not cheap, but that number iss not historically high really either. A lot depends on earnings going forward. I’d prefer the bull market to run on earnings/profits rather than multiple expansion, but I don’t think we’re in big bubble range atm.
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Does DCA really do any better than a broad mutual or exchange fund?
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Quote from Lux
Does DCA really do any better than a broad mutual or exchange fund?
DCA is a technigue of investing — “dollar cost averaging” – it just means that you invest a portion over regular intervals rahter than a lump sum. It is not an investment vehicle in and of itself. You can DCA into any type of investment.
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Thanks, yes, I know all about dollar cost averaging, but as far as I can tell, DCA math theory makes it virtually impossible to make significant gains over the DOW/NASDAQ/S&P basic curves because of how DCA investments are made periodically throughout the various economic cycles. I’ve seen many analyses showing that over the long haul, DCA doesn’t really make any difference than just playing huge, broad spectrum mutual funds. DCA is an extremely safe way to play the market, but it is true to the primary market rule: the safer the strategy the lower the gain.
I don’t run into very many people doing DCA these days, that’s why I asked.
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Quote from Lux
Thanks, yes, I know all about dollar cost averaging, but as far as I can tell, DCA math theory makes it virtually impossible to make significant gains over the DOW/NASDAQ/S&P basic curves because of how DCA investments are made periodically throughout the various economic cycles. I’ve seen many analyses showing that over the long haul, DCA doesn’t really make any difference than just playing huge, broad spectrum mutual funds. DCA is an extremely safe way to play the market, but it is true to the primary market rule: the safer the strategy the lower the gain.
I don’t run into very many people doing DCA these days, that’s why I asked.
Dollar cost averaging addresses only the timing of investment purchases. It is inpendent of asset allocation.
Dollar cost averaging doe not mean that you do not have a broad diversifed portfolio or that you are not using low-cost index funds. DCA can be done into a broad spectrum of funds. That is exactly what I do. Every month I take $$ and invest into a specific asset allocation that I have previously determined. It might be for example 50% US large Cap (like an S&P 500 Index Fund), 20% Small Cap, and 30% International.
The dollar cost averaging just means that you as an investor are not trying to time the market. Over the long run on a multi-decade time horizon you will do just as well investing your money on the first of every month than trying to wait until the market dips some arbitrary percentage before you invest a lump sum.
There is good data showing that most investors who attempt market timing fail and in doing so both buy and sell at poor times, decreasing their long-term return in comparison to the disciplined DCA investor.
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Quote from dergon
Over the long run on a multi-decade time horizon you will do just as well investing your money on the first of every month than trying to wait until the market dips some arbitrary percentage before you invest a lump sum.
There is good data showing that most investors who attempt market timing fail and in doing so both buy and sell at poor times, decreasing their long-term return in comparison to the disciplined DCA investor.
I’m confused. If attempting to time the market fails more often than not, and buying on the first of the month does ‘just as well’ as attempting to time the market, then it sounds like buying on the first of the month will fail more often than not, too, just maybe not as much. I must be misintrepreting your comment.
Your comment focuses on which strategy does [i]worse[/i] than the other, but what can you say about DCA [i]gains[/i]?
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Quote from Lux
Quote from dergon
Over the long run on a multi-decade time horizon you will do just as well investing your money on the first of every month than trying to wait until the market dips some arbitrary percentage before you invest a lump sum.
There is good data showing that most investors who attempt market timing fail and in doing so both buy and sell at poor times, decreasing their long-term return in comparison to the disciplined DCA investor.
I’m confused. If attempting to time the market fails more often than not, and buying on the first of the month does ‘just as well’ as attempting to time the market, then it sounds like buying on the first of the month will fail more often than not, too, just maybe not as much. I must be misintrepreting your comment.
Your comment focuses on which strategy does [i]worse[/i] than the other, but what can you say about DCA [i]gains[/i]?
DCA doesn’t “beat the market”. Your only goal is get equivalent returns. The “gains” are whatever the market does over time…. which is, over a 30+year time horizon, go up…. a lot.
True, there will be times when you are putting in money at exactly the wrong time. There are also times when you will be putting in money at exactly the right time.
It also has the added benefit of taking emotion out of your investment. If you have it all set on auto-pilot you can take out the urge to either panic or invest with irrational exuberance.
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[:)]everyone does DCA differently. i’m like Dergon, and as I DCA, I have that cash ‘reserve’, the ‘dry powder’ if you will, ready for a correction. you can consider that mini market timing. but going all in/all out like Alda is a risky way to play, unless you have some special keen macro insight and/or are lucky.
my plan to get rich is the Buffett plan. invest in excellent companies (with some ETFs as well) that are *fairly* priced. and live a long healthy life to let compounding do its thing.
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I have large part of my portfolio in dividend reinvestment
This is dollar cost averaging with free money………. Nothing is better than that
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If over time, the market always goes up…. (which it has done) …and everytime there is a major sell off you buy big…..i dont see how you lose.. as long as you arent picking individual stocks, but purchasing indexes.
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kpack,
to each their own. I DRIP too, some want to manage the div return actively. too much hassle for me. like you said, it’s just another dca move essentially.-
I realized a while ago that I wasn’t smart enough to time the market. I have done best with DRIP. Pretty much double money every 5-7 years in my boring utilities REITs and large cap drug stocks
When I play with money I other break even or get burned
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