CAPE (Cyclically Adjusted Price/Earnings ratio) is the second highest IN HISTORY at 35.75.
It was ~30 before the Great Depression crash of ‘29.
Median CAPE 10 is 15.89. It’d take a ~55% drop in the market to get us back to those levels from where we are today.
Stocks are going up because of “TINA” - There Is No Alternative. Bonds are yielding less than inflation. Cash even less.
The problem with holding lots of cash is inflation, where you’re “guaranteed” to lose 2-3% (today..probably 4-6%/yr soon) in purchasing power every single year. And we’re likely to see a LOT of inflation (like, 70s level) in the next 2-3 years as Biden and the radical left pump TRILLIONS of dollars into the market to levels never seen before.
It’s taken us 244 years to get to ~$28T in debt. Biden and the far left want to spend nearly a quarter of that between the $1.9T “stimulus” bill and the $2-3T “infrastructure” bill. And God help us if “Reparations” ever come. I read one estimate of TWELVE trillion (!!!!) for that yesterday. WE’VE NEVER, EVER HAD DEFICIT SPENDING TO THESE LEVELS. Inflation is going to go absolutely bonkers, which will destroy the value of cash and bonds. So, “TINA” - the ONLY place to put $$ right now is in hard assets (physical real estate, precious metals, etc) or equities.
That said, I do think equities are going to crash - and crash hard. I wouldn’t be surprised to see a 30-50% (or, God help us..even worse) crash this year or next. “1929, 2.0” is not out of the question IMHO. So, yeah..hang out in cash &/or bonds and lose 2-3% guaranteed per year. Or, roll the dice with equities and HOPE you get out before the stampede starts and you lose 10X (or more) that.
Very, very challenging and abnormally risky times indeed - especially for those in retirement that likely wouldn’t have the potentially decades long period needed for recovery..
Just riding the wave with my “play” money. Going to ride the wave for a little bit with my oil company stocks. Good couple of days.
I remember reading about a week or two ago that Japan’s stock market finally reached the point where it was 30 years ago. That means, other than dividends, they haven’t made anything for 30 years.
You make the mistake in thinking that “fundamentals” matter. They don’t - or at least certainly not in the short-medium term when we have a completely fiat, printed currency, that is created at will be the Federal Reserve or fractional reserve banking and a government running up debt at $1 trillion+ per year.
Simple. The system is flush with cash given all thats been printed. Interest rates are near zero, so stocks are the only place to go.
Corporatism + Socialism = Fascism
That is our current form of government.
Fascism is economically successful for corporations. The current Chinese economy and the 1930s German economy are examples.
Federal Reserve pumping helicopter money into the economy
Pumping it up to say it wasn’t Trump and his policies making america great. It will not last but i’m long on it until it goes south.
1: The DJIA is a very (IMO) imperfect means of measuring the market. Far superior is the SP500 index. Generally they move sort of together, an SP500 point is worth 7-10 DJIA points. A minor point.
2: Yuge stimulus money is already injected, about to be injected, and anticipated as coming down the road.
3: But IMO the most TANGIBLE cause is the utter collapse of the bond market = int rates RISING. The drop in bonds since Feb 01 has been just STUNNING. Yes, int rates rising is generally/historically thought of as hurting the market but ehhh, maybe not so much going from .5% to 1.45% or so. This has been a once in ~3 year move. But the money scurrying out of bonds is massive; and it has to go somewhere.
4: If this bond move persists and continues, to me, this is screaming out that the market is expecting vicious inflation coming. Big. Like 70’s big. And IMHO, the perception is that one of only ways; but the MAIN, easiest-to-get-into way to keep up with inflation is stocks offering growth.
5: The banks LOOOVE higher rates because it boosts their lending profits. Couple that with the rise in oil which *ALSO* seem semi-relentless (and supportive of the price-inflation story) So even as tech (which has been uncharacteristically weak) goes a tad sideways, banks and oils are just screaming higher. Since Feb 01, the XLF, the bank etf is up a clean 15%. Since Feb 01, the XLE energy is up a stunning 30%.
All this could change in a hurry, I suppose.
Pay $20,000 to get $1,600 and be happy. And they think we’re dumb...
Really that difficult? When the federal reserve and federal government have each pumped more than $5 trillion into the system in the last year beyond the normal and continue to do or threaten the bazooka, the result is asset prices go up.
Where else can you put your money? Interest rates on bonds are non existent and the govt. is spending money like water. Plenty of dollars looking to be spent and businesses benefit in the short term.
Rational irrationality comes to mind.
I made several thousand scalping the SQQQ (QQQ 3x short ETF) on Friday through Tuesday. The Nasdaq dropped hard before reversing mid-morning Tuesday. It was just a preview of the mayhem that lies ahead. Take some cream off the top when it’s frothy, folks. I didn’t know this in 2000 and got burned.
On this occasion, I am changing my tag line. Hope you like it.
Cheers,
Barnacle
Printing money. It is nearly worthless. You would need a wheelbarrow to go to the grocery store if not for debit, credit and ebt cards.
Interest rates are in the doldrums. They need to be higher by a few points. Spending is run amok. Not only are they too low we may be headed where Europe is already, negative interest rates.
Trump’s economy was stimulated by tax and trade relief and prices went up no doubt. Biden’s is stimulated by printing money and giving it away.
Some say two years before inflation hits like a tidal wave. Time for Europe to catch up. I doubt this. The price of everything is rising now and just like the 70s and 80s, everybody is in on the grab not wanting to be left behind or look like a chump. 20% of cost goes up 10%? Raise prices 10% instead of covering costs at an increase of 2%, get all you can when the gettin’ is good. Pretty soon it turns into a snowball because it can until it burns out like a virus after it has consumed the host, the consumer. Nobody wins.
Five years of it then? 1987 marked the end of inflation and a crash in the market. The clintoon years were OK until the dot com crash and the peace dividend was squandered.
Equities are the only way you can hope to keep whole but it is always a wild ride.
Modern Monetary Theory. Money printer go BRRRRRR.
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.