Posted on 02/24/2021 6:27:57 PM PST by Barnacle
The Dow hit 31,961 today, up 424 points. During the Trump era, I attributed this trend in part to his policies and recovery from the COVID economic impact. But, Biden's election and his undoing of Trump's policies don't appear to have a cooling effect. As Larry Kudlow said recently, the economy is "red hot". But, why is that, and what's driving the market even higher? The Current S&P 500 PE Ratio is 39.97, hardily a bargain.
One possibility is that it is a reflection of the real impact of the stimulus bills of trillions of dollars, whereby a tax payer is happy to get a check for $1,600 at the cost of about $20,000 per tax payer.
In any case, please share your thoughts on what is happening and ideas of how to best position ourselves in preparation for what might be a near term correction.
We’re trillions in debt. Wonder where all that money went?
Ping
bmp
The stonk market is not the economy. The economy is not red hot. What friggin planet does this guy live on? Biden hasnt really touched Trumps economic policies, at least not the ones that triggered the best economy in recent memory. Biden has killed jobs in his first few weeks- red hot economy getting hotter i see.
Totally agree. The markets have evolved from "investing" to "gambling" for the most part. Computerized trading makes that even moreso, cuz the machines will start selling (or buying) and will do so to any "news" (or rumor). And when the machines start selling - as they did last March/April, the bottom can and will fall out quickly..perhaps more quickly than any time in history. (Remember last Spring? Numerous days when the "circuit breakers" kicked in not one, not two, but several times per day. That's never happened before - but it's likely we'll see precisely that on the next big downturn).
The traditional 'school of thought' is to not watch the day to day but "invest" for years while not watching (just like you said). Unfortunately, the markets are by and large now completely detached from INVESTING and are quickly evolving more into gambling, where the value of a stock has little to do with underlying valuation and more to do with emotions and what the Wall Street computers have decided to do with it..add in Technical Analysis and it gets even worse, cuz that's pretty much 100% computerized buying and selling..
An old Wall Street adage seems to apply more than ever.."Stocks take the stairs up, and the elevator down"..I'm pretty sure we're gonna see quite the elevator ride in the near future with the way Biden and the far left are pumping trillions of $$ into the economy..that's gonna be a disaster for US equities, bonds and cash. So for that reason - check out International equities, which don't have crazy, far left radicals running the country and who's P/E values are much more in line with "normal" than we have here in the US.
Take a look at International equities - especially Emerging Markets like Asia. The P/E ratios of International stocks are in many cases much more reasonable than US. US "Value" stocks are also another potential option for the same reason. Lastly, look to inflation hedges. TIPS are awful at the moment because of negative yields, but there are funds out there that can buy a combo of foreign currency, gold, real estate, commodities and TIPS (when those make sense again) that might be an option. Also VERY short term (1-2 year max) bond funds..you really don't want to be holding bond funds with longer maturities in a rising rate environment (bond prices fall when interest rates increase).
It goes up before it goes down.
Where in the heck are you finding "guaranteed" 2.5% return in this market? I assume that's an Annuity of some kind? (Like a MYGA?)
Good question.
I’ve been arguing for years that the debt/deficit is NOT an important factor for many reasons.
1) Until just recently, the prices of commodities were stable. No inflation.
2) Even now, energy is only going up because of the sudden cold snap and demand and at the same time Biteme’s policies cutting supply. Are we on the cusp of new inflation? Maybe but I doubt it. I have a piece coming up in www.uncoverdc.com next week called “Is the Great Inflation Upon Us?”
3) Biggest issue: recent economists have studied GDP/GNP. What they are finding is that they have screwed up big time, and that they have UNDERestimated GDP for a century. The biggest failure was to value QUALITY of improvements as well as simply price (take the light bulb over kerosene—it was measured simply by price, but when you looked at lumins, it was VASTLY better. Then there was life span of a bulb vs a similar amount of kerosene. Then there was the reduction in fire hazard. And so on. This has led one economist, Gordon, to substantially re-estimate earlier ec growth (1880-1950). However, I think NO ONE has come close to properly valuing the impact of the computer/computing tech, which means that value/productivity has in real terms far exceeded what has been recorded. That would mean that we have been in DEFLATION for 30 years or more; and that as Steve Bannon says, China exports deflation in low wage labor, so that has only added to it.
Conclusion: It’s possible the stock market is STILL playing “catch up” to where we should have been years ago regardless of gubment policies.
Maybe. Biggest argument against this is that I’ve heard this for 40 years and with the exception of a blip in 1987 and the 2007-08, which were in historical terms very short, the Dow historically since 1900 has just gone up, up, up.
Look at the 1929 crash on a chart of the last 100 years.
You can barely find it.
Maybe. Biggest argument against this is that I’ve heard this for 40 years and with the exception of a blip in 1987 and the 2007-08, which were in historical terms very short, the Dow historically since 1900 has just gone up, up, up.
Look at the 1929 crash on a chart of the last 100 years.
You can barely find it.
Don’t think so Ken.
Look for my article next week in www.uncoverdc.com called “Is the Great Inflation Upon Us?”
QE 1-10 wouldn’t make a dimes worth of difference if we have, as I argue, been in a MASS deflation for 30 years.
Steve Bannon agrees that China has been “exporting deflation” over that time.
Look at a chart of the last 120 years.
It has NEVER been down for any length of time. You can’t even find the 1929 or 1987 crashes on a chart.
Here’s the interesting thing: I think economists have badly mis-estimated productivity & real values, undervaluing them for over 100 years. (New research bears this out). The computer revolution has been totally missed or dismissed by economists in terms of productivity.
Stairs up,elevator down.
I don’t believe an individual can realistically keep up with the software moves which are nothing more than someone’s opinion from some point in time moving at light speed over and over. If this then that.
What good is watching day to day going to do if you are not going to act on it? I am not. With so much volatility market timing just doesn’t work out very well for most things unless you can be high frequency.
Yes, I recall last spring and the time before and the time before that.
Decisions are worse with funds since they only trade on the day’s close. That is almost never good news in something that moves so fast in a herd mentality.
I am watching prices go up by the day now for things. A $328 microwave on February 9 is now $389. Just one example of course but I’m seeing the building supplies follow lumber and just about everything else is jumping on the bandwagon.
Don't leave home without them....
You may be right.
I would suggest that in previous bubbles we did not have a government in power that was so completely invested in the destruction of capitalism, Obama terms 1+2 notwithstanding.
Trump predicted a surge. It’s happening and the market is showing that.
MSM won’t provide details as they want the illusion of Biden / Harris = growth
“The Federal Government is buying securities of all kinds to prop up the market. I know for a fact that they’re buying corporate bonds.”
The Federal Reserve is now buying corporate bonds, as well as Treasury bonds as usual. Fannie Mae and Freddie Mac buy mortgages. The Federal Government is not buying bonds, to the best of my knowledge; it sells them.
This is true. But if what James Gordon shows is right, in fact gubment plays a pretty small role in anything.
Peter Zeihan, an expert on oil and world markets, has shown that there were major structural movements in a “MAGA” direction before Trump. China, for example, is rapidly aging and by 2030 will be OLDER per person than the US. They can’t begin to keep up with their energy demands. So as the US pulls back internationally-—which happens regardless of what Biteme & the DemoKKKrats do-—China will be in serious energy deficiency.
We put our 401k money in a money market fund when Obama got elected and paid dearly for it. After losing 10s of thousands sitting in the money market, we put it back into mutuals when Trump got elected. We have made back everything we lost and a lot more! What’s wrong with putting a reasonable stop loss order(say, 10%) and letting it ride until the fall comes?
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