Posted on 12/04/2009 8:47:41 PM PST by Kartographer
Yes I believe the chicken have yet to come home and roost
John Hussman is pretty sharp and his been around for a while. I remember his research back in the late 1980s.
Most people won’t believe this until they see it. Most people won’t even hear of this because they only watch the fringe media and they believe what they are spoon-fed from the propaganda shills who want them to spend themselves deeper into debt.
80%? Aw, cmon Mr Hussman, don’t be a wimp. Why not just say 90%? 99%?
Way too much perma-bear commentary on here guys, lighten up.
Sometimes I wonder how many students will default on their Stafford (i.e. Federal) loans due to unemployment. When even chemists and engineers are having trouble getting a job, we’re in trouble.
Kick Obama out NOW while we still have a country!
Try, all time record high. It is easy to dismiss people as permabears when you don't do your homework.
Sorry, link to chart was here...
http://www.lesjones.com/2009/08/18/sp-500-pe-ratio-hits-fresh-record-high/
Similar analysis here...
http://www.investorsfriend.com/S%20and%20P%20500%20index%20valuation.htm
Also here...
http://www.businessinsider.com/sorry-stocks-still-arent-cheap-2009-7
More here...
http://www.kangarootail.com/uncategorized/sp-500-price-earnings-and-pe-ratio-charts/
It is all out there for you to find, read and study if you want to bother with the effort. Just remember the old saying “the market can stay irrational longer than you can stay solvent.” That is my way of saying, the author can’t know when the crash will come but he will eventually be right based on his analysis confirmed by many others. The government has rates at 0% and that is hard to fight. No wonder so many people are gambling their money in the market. But the market will crash, and sooner than later.
The trouble is the earnings just aren’t there to support these high stock prices. Yes, companies have cut costs in the short term, but even if you fire everybody and turn out all the lights, you eventually need customers or you don’t turn a profit.
I think the S&P belongs around 750 but without doubt it will re-test the previous 670 lows before it stabilizes around 800. Just my “permabear” opinion after looking at shipping, trucking, durable goods orders, housing starts, duration of unemployement, and whatever other LEADING indicators I can.
Speaking of permabears, I just read this post on a financial forum.
Quote below:
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Anecdotal Info-ma-tion
Spoke to my buddy who drives a “big rig” for UPS....and has 25 years with UPS
Most of the stuff he moves is inventory for large big box stores, retailers, etc.
He said they are friggin dead, like he has never seen before in his tenure with the company
His buddies that roll FredEx ® trucks are sayin’ the same thing
Temp hiring which usually soars for Xmas season to keep things “a movin’”....not so much this year....almost non-existant, just don’t need the bodies
Front line, boots on the ground type of stuff
*********************************************************************************************
That quote above is a scary quote. When trucks stop being needed, commerce isn’t moving. We may be slipping into a deflationary depression. I just don’t know. Maybe not, but we may be. The economic contraction is worsening steadily. I see nothing that supports a sustained rebound in stock values to pre-crash levels. Nothing.
The Henny Pennys of the world make me crazy. But this is different. I suspect that he is right.
Options markets say bull-shiite. I say I'll cover any bet anyone cares to make claiming this...
Any views on this? Finance on a national level isn't my real forte.
When you were little, how much was a coke? A burger? A loaf of bread? A car?
I bought a Toyota Land Cruiser for $3300.00. Brand new. That’s something to think about.
Or, the 12 loaves of bread for $1.00. Gas under 50 cents per gallon.
And I am not retired. Far from it.
I got out of the stock market in Dec 2006 and missed the entire crash. Most people with 2 brain cells like you, rode out the entire crash. I’ve slept better at night, have more to show for it. In fact, too many people panicked and sold near the bottom of the crash, and are only now thinking of getting back into stocks — the classic sell-low and buy-high emotion-driven investing.
The mutual funds I was in are still 20% off from the time I got out. I’ll take my instincts over your brain cells any day.
The fundamentals stink and you can’t prove otherwise because you can’t change the facts. It looks like you will be caught off-guard by the next leg down just as badly as you were caught by the prior crash.
I am currently sitting in the spiffy new house I got out of this cycle. Some “off guard”, huh?
I am happy for you, as I always am for those who work hard and prosper from their intelligent decisions.
That said, how much of your current gain was offset by your losses, riding the prior market collapse to the bottom? IIRC, you were buying equities all through the crash and thought the bottom came too soon, or do I recall incorrectly?
I’m not saying you are a permabull, but I recall you pulled the trigger on equities much too early while steep losses were still ahead. Glad you ended up profiting, but be honest enough to admit you took some stout losses in the crash. Your post implies you only profited from the cycle and didn’t lose a thing in the prior crash you rode down, or do I have that wrong?
I will also admit to being early getting back in during the present smash. My normal allocation is 80-20 stock heavy as a long term net buyer; at bottom I rely on cost averaging not timing for protection. But I will shift weights in response to prices and risk, and after Bear I went to 60-40. I starting (slowly) shifting back in when prices broke, when Buffett did his preferred deals basically. And the rest of the way back after the election with bearishness rampant. In November I decided it was time to buy real property, and it took me until the end of January to close. You might argue even that was a bit early, since the local market here bottomed in May, pretty much. Not a big concern to me.
I was skeptical of the real estate bubble throughout, and deliberately avoided buying in the northeast during it (after a move from Chicago near the start of the decade). I predicted the blow up specifically in asset backed securitizations of all kinds as early as 2003 (to hedge fund friends), and named New Plan Realty as a bubble company in the classic Graham sense that would not survive the cycle. I called oil overpriced at $80 on the way up, and a bubble from $100 on, citing continually building stockpiles and the break in US gas demand high prices would cause, and the absence of M1 money growth refuting the inflation-endgame thesis.
But I don't short bubbles even when I see them. I just stay out and see what can be picked up in the ensuing smash. I briefly tried my hand at shorting in the early 1990s, Japanese stocks, and I decided that it was like going to Vegas as a customer instead of being the house. Meaning, you had to be right against a headwind instead of with corporate earnings as a wind at your back, and on time scales so short and moves violent enough it had definite aspects of straight gambling. I also think doing it correctly requires bank-level resources (for credit and transactions costs, information support, execution etc), not a retail speculator with just a broker. I decided that wasn't for me, and I happily leave it to those with something to prove through trading.
My present beef, though, is with those who confuse finance and politics, pretending the everything in markets is governed by ideology - which to me is as silly as Rush's enviromentalist football picks. Finance follows its own logic and its own forces. So does economics - they are interrelated but not the same, and economics is decidedly easier and more predictable than finance. But again, it is necessary to give the subject its own independence instead of distorting it with political ideology.
Another thing I am exercised about right now is the way doom mongering on the right has baited populists into finance-hating attitudes that I consider deeply unjust, and deeply bad politics. A Republican party that hates business and the rich has no future whatsoever; it would not be able to govern and wouldn't deserve to. If the people want class hatred they will go to the socialist left every time. I see this as the same error as Perot and Buchanan, and it is a policy and political death-trap for the GOP.
There is a higher theoretical debate I'd love to have about some of this stuff, about Austrian theory, its successes and its limitations, and its recent ideological distortion. But I can't; the subject is overrun by mere finance hatred and mere doom mongering. These are frankly medieval superstitions, and they must be cleared away before anybody can rationally discuss managing the business cycle intelligently (as a matter of practice) or the actual causal forces involved, free of ideological presciption or moralizing smears.
I think I understand Mises and others on the subject well enough to spot his errors; but it would seem everyone influenced by him these days is incapable of independent thought, if it involves questioning his ideas. I consider this a travesty toward his own scientific attitude. But if anyone feels up to it, consider this a standing invitation to discuss the limitations of his understanding of the cycle.
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