Posted on 02/06/2018 11:40:51 AM PST by SeekAndFind
Whatever it is that’s bringing the stock market down sharply, it’s not the bursting of a bubble. That’s because the recent market — overheated and overvalued as it has been — doesn’t even come close to past market bubbles.
And the stock market’s plunge over the last week — more than 2,000 points on the Dow Jones Industrial Average DJIA, +0.07% on an intra-day basis — also doesn’t compare to the carnage of a bubble bursting.
That at least is what I conclude from academic research into the precursors of past market bubbles.
Consider first a study that was published in 2006 by Malcolm Baker, a finance professor at Harvard Business School, and Jeffrey Wurgler, a finance professor at NYU. They devised a number of objective indicators of irrational exuberance that, in backtesting, were highly correlated with bubbles such as the 1929 stock market crash and the bursting of the Internet bubble in early 2000.
Here are several of those indicators:
• Number of IPOs: One measure of irrational exuberance is lots of companies going public, and the current market is far colder. In 1999, for example, the last full year before the internet bubble burst, there were 477 IPOs, according to Jay Ritter, a finance professor at the University of Florida. In 2017, there were 108.
• IPOs’ first-day return: A related indicator is the average amount by which IPOs jump in their first day of trading. In 1999, according to Ritter, that average was 57%; in 2017, in contrast, it was 15%.
• Dividend premium: This is the valuation differential between speculative newer firms (as indicated by whether or not they pay a dividend) and the more established dividend payers. When exuberance is high,
(Excerpt) Read more at marketwatch.com ...
Buy Low sell high!!!!
Nice I like the adjustment... My 401K made 18% on the market last year. Thank You Trump.....
I did expect a correction..... Interest rates can not stay down for every...
Total Bubble. it will go down thousands of points . Interest rates are rising fast. If you can get 10% on you cd at an insured bank watch this balloon deflate and fly all over the room.
isn’t he married to a virulent leftist anti trump reporter?
Since 2009. I have made so much money. I do wish the stock market would fall 20 or 30 percent to correct itself. It needs to. Better now then
October 2018.
This is “last call, gentlemen” for high quality long bonds. Stronger GDP, a little (needed) inflation and better wages will create some interest rate increases by the market...for the first time in 35 years. Big money long bonds needed a “flight to safety” to push down yields and prop up market value long enough for them to get out. The fundamentals will now assert themselves and as a result so will the bull market.
It’s always been cyclical.
RE: If you can get 10% on you cd at an insured bank watch this balloon deflate and fly all over the room.
If that happens, HOUSING will collapse. Who can afford that kind of mortgage rate?
I am not an expert. Here is my common sense analysis. Interest rates cannot stay at 1% forever. People are putting money into the stock market instead of CD’s paying about 1%. When interest rates go up some investors will move money from stocks to bank saving accounts and CD’s. This is not the end of the world. Market has gone up so high it will come down a little before it starts going up again.
If anyone could lock in 10% on CDs they’d put all their money in that and keep it there for a couple of decades. I’d probably do it for 7% or 8% actually.
It was engineered. Trump’s successes were too much for the left, and they brought this about. I don’t know who, but I have no doubt that it was done by someone who hates Trump.
THE DEMOCRATS ARE CRASHING THE ****** ECONOMY TO UNDERMINE TRUMP! We know the FBI is working to destroy the president and import more foreigners, and the only way to ensure Trump stays out of their way is to destroy my economy. RATS!
I have a little in a S.A. bank...5.6% for a six month cd...I just let it ride. Safe for now but ya never know.
Rothchilds been on a Fire Sale. They have been selling all their assets. The official amount that they own is far less then the actual figures.
Dow soars 600 points, hitting new high of the day after crazy swings
CNBC ^ | 02/06/2018 | Fred Imbert | Alexandra Gibbs
Posted on 02/06/2018 12:55:56 PM PST by Red Badger
http://www.freerepublic.com/focus/news/3629876/posts
We are being played by the computer algos and High Frequency Traders.
How about insanely high PE ratios. Look at Netflix trading near 200 EPS. Forgive me if I don’t take Mark’s word for it.
I have to give credit to this market as it seems to be unstoppable, so I would never bet against it. By rights when the Fed raised rates it should have crashed the market. Americans are still living on low interest rates and still barely making mortgage payments. Rate rises should kill a bubble like this.
But then again we have the huge incentive of the corporate tax rates and a POTUS that actually likes business.
So I am not a bear, but really a bull either.
This bubble is really quite interesting.
Previous financial bubbles, like the dot-com bubble and the real-estate bubble, ended when the securities were found to be of little value. The shares of pets.com, or that subprime SIV, did not represent anything like the money people had paid for them.
But this is a bubble of the S&P 500, real companies that are the core of the American economy and make plenty of money. They really are of great value. You get a dividend, capital appreciation, and future growth. OK, maybe you paid too much. But they’re not worthless, and the market isn’t going to collapse.
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