Posted on 11/02/2014 10:06:49 AM PST by Kaslin
Stocks zoomed to new highs on reasonably good news for the U.S. economy and the Bank of Japan’s announcement of quantitative easing.
Just a few weeks ago markets were plunging, and analysts writing on the nation’s most prestigious financial pages cautioned that stocks were historically overvalued.
On October 15, I wrote in the Washington Times: Don’t Panic, Stocks Will Rebound
http://www.washingtontimes.com/news/2014/oct/15/morici-dont-panic-stocks-will-rebound/
The S&P, which accounts for about 80 percent of the publically traded shares in the United States with a price-earnings ratio at 18.68 is still trading below its 25 year average of about 18.90. And estimated earnings for the next 12 months indicate a P/E rato of only 16.65.
I have written that the fundamentals of capital formation and stock market valuations have changed, and indicate stocks are capable of maintaining a much higher P/E ratio than that historical average going forward.
http://www.thestreet.com/story/12771392/1/even-at-record-levels-stocks-have-more-room-to-run.html
http://www.thestreet.com/story/12855142/1/where-to-invest-with-stocks-trading-near-record-highs.html
Going forward, expect more volatility—but don’t panic!
Next time you read in the Wall Street Journal stocks are overvalued and your broker calls, indulge in an earthly pleasure, go to bed and call the professor in the morning.
Doesn’t take a genius to predict that QE will drive up stocks. It’s been going on for years. QE drives down interest rates to around zero (in fact one German bank just started charging interest on customer deposits), making stocks the only investment that makes money. At the same time the rich can borrow money on the cheap to invest in stocks. More money in the market means higher stock prices. The rich get richer, at least on paper.
Stocks zoom, GDP up, unemployment down.. WOW, EVERYTHING IS GOING GREAT.. MUST BE A MAJOR ELECTION COMING, EH? This only PROVES that the stock market is manipulated by the Feds and by no means a real indicator of economic stability.
Everybody, including me, have their own little prism through which they very things.
I believe that the market has been rebounding as it becomes abundantly clear that the democrat are more and more likely to be swept out of Washington in a big way.
The market has been force fed by quantitative easing. Once that stopped the market started to correct. Now the market is looking forward to the election.
Remember how GREAT “buying on margin” was before the Great Depression?
I’ve got a feeling all of this “good news” is going to come to a screeching halt on Wednesday.
Two ways markets rise. One is good self caring business practice. The other the celebrityblike status of the company and its ease in raising funds or borrowing. When the latter concurs with the former it is just, when it does not, we have whore of Babylon debauchery no differrent than Michael Jackson with fans but married with the drugs and government corruption.
That girl Yellen can pull the rug from under us any time.
When you debase your currency, sure the stock prices are higher, but so is everything else! Do you really gain anything?
Back in the dot comm days, I used to day trade before work every morning.
It was great. I would make $500 or so before getting dressed.
Then I didnt.
I lost $7k one morning when I went to the men’s room.
The same thing is going to happen this time. Probably in the next month or so.
There’s a third way which is what is happening now. More and more money is dumped into the market as a whole. More money chasing the same amount of stocks drives up the price of all of them. It’s fueled by cheap interest rates, much like the 1920s. That didn’t end well either.
There’s a third way which is what is happening now. More and more money is dumped into the market as a whole. More money chasing the same amount of stocks drives up the price of all of them. It’s fueled by cheap interest rates, much like the 1920s. That didn’t end well either.
The more I observe the stock market rising (in the present circumstances)...the more I believe the greatest crash in our history barrels down upon us.
“One measure of economic health is the circulation of money through the economy. It typically means the money is accomplishing something, going somewhere, doing something productive, like a car going from one destination to another. But sophisticated financial instruments have made it more easy to make it appear that currency is doing something when all you are doing is revving the engine. It is called the “velocity” of money. It is revving and spinning so hard you think something must be happening, but all that is happening is overheating the economic engine. Again, the rise of the stock market should roughly reflect the rising of annual Gross National Product. When it does not, prosperity is an illusion and crash is barreling inexorably down the tracks. In the run up to both the stock market crash a century ago and the bursting of the dotcom bubble a decade and a half ago, money was being traded madly through shell and paper companies that were not actually producing anything – creating an illusion of velocity while hollowing out the foundation of the financial markets. The housing crash had similarities in terms of the sub-prime equities flying around, but that was almost purely a government-forced distortion, so I don’t count it among actual market-created bubbles.”
“...the only real wealth is the goods and services produced by an economy. Ideally, the supply of currency should rise in a roughly parallel relationship to increasing productivity. Any time there is a prolonged distortion to that relationship, the economy is sick. If you have a prolonged period where the money supply is growing much faster than actual productivity, it is a serious cancer on the economy involved. If the underlying issues are not resolved, sudden catastrophic collapse will always come. Some of the more notable examples in the last 150 years have been Germany’s Weimar Republic, Pancho Villa’s Mexico, most recently Yugoslavia and, in American History, the Confederate dollar near the end of the Civil War. In each of these cases, officials were desperately trying to prop up a dying economy by creating more currency, which gave the illusion of health for a time, until a series of sudden jolts revealed the currency for the flimsy paper it was and all confidence in its value collapsed. Societies broke apart, wars erupted, rioting spread like wildfire as people would desperately try to trade a wheelbarrow full of currency for a loaf of bread. It’s very simple: there is NO real wealth except the goods and services people produce. If production continues to decline while currency supplies continue to rise, there will be a disaster unless it is stopped in time. This is an iron rule.” -—Charles Johnson
If they convert their paper profits to hard assets (e.g., rental properties) then they'll stay rich even if the market eventually crashes.
Stocks will continue to plunge and rebound so long as the Fed keeps pumping up the Banks with money they can’t lend.
The third way is the fed pouring money into the banks which can’t be lent profitably so it is shoveled into the stock market.
Someone is always saying it will go up and someone is always the contrarian. That way, when it happens, someone can claim to be a guru.
True. Up until about a year ago cash investors were scooping up underpriced California real estate like shoppers on Black Friday.
The fact is. What goes up must come down and vice versa
Indeed, the judge looks good supporting the whore and forcing tax payers to support her life style. This is the worst.
Meanwhile oil, silver, and gold prices keep dropping like a rock.
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