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NutAgain!
Trad climber
South Pasadena, CA
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Jul 20, 2016 - 12:20pm PT
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https://www.netflix.com/search/the%20big%20short
Hmmm... news of failing mortgages and still CDOs based on those were priced high... until the crash. Today, major macro-economic uncertainty and prices are at all time highs?
I probably have no idea what I'm talking about, but it seems rational logic related to underlying asset valuation and market risk factors are disconnected from pricing. Perhaps the layers of derivatives based on underlying assets, and people's greed mixed with underestimating risk have more of an impact on market prices.
Different groups with fancy models trying to predict how other people will react, and those models interacting with each other, lead to a seeming chaos that only a few people are really in a position to understand.
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Reilly
Mountain climber
The Other Monrovia- CA
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Jul 20, 2016 - 01:58pm PT
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it seems rational logic related to underlying asset valuation and market risk factors are disconnected from pricing
Don't be a nutter, the market is always right! ;-) People with a lot more
time and data than you and I have available are still buying these 'overpriced'
equities so by definition they're not overpriced, right? If you read the
paper I referenced above regarding Tobin Q ratios you might also come to
the conclusion that this is the new norm, especially if people can't get
a break on bonds. "My country for a dividend paying security!"
Different groups with fancy models trying to predict how other people will react, and those models interacting with each other, lead to a seeming chaos that only a few people are really in a position to understand.
While I have a healthy disdain for econometric models, the Smets Wouters
in particular, they do give a reasonable overall picture of life as we
know it, economically anyway. My beef with the SW, and others, is that
their shock parameters are pretty arbitrary and unrealistic. In fairness
gauging the likelihood and effect of Italian banks going belly up is pretty
damn hard to write into a model. That said the IMF said yesterday they
expect the world's GDP to rise 3.1% this year, down a tenth due to Brexit.
Oooooh, a whole tenth? They expect the US to go up 2.2%, not bad but a
lot better than those Euro socialists. Unless yer planning on croaking
within 5 years buy and hold - capitalism works!
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Fritz
Social climber
Choss Creek, ID
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Topic Author's Reply - Dec 14, 2017 - 10:09pm PT
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This is soemewhat scary, or not.
(Hint. J.P. Morgan takes care of J.P. Morgan.)
JPMorgan Sees S&P 500 Hitting 3,000, Warns on Tech Stocks
JPMorgan Chase & Co. became the third major bank to predict the S&P 500 Index will rise to 3,000 at the end of 2018, joining Oppenheimer and Evercore ISI. If the benchmark for American equity hits that target, it will have rallied 13 percent from Thursday’s close.
“Expansionary phase of the business cycle, synchronized global earnings momentum, U.S. tax reform should remain supportive of further rotation into value, while continuing to pose risk for low vol and growth stocks,” Dubravko Lakos-Bujas wrote in a note to clients Thursday.
The strategist sees large-cap tech, the group that’s done the heavy lifting in a 2017 rally that’s added 18 percent to the S&P 500, turning into a laggard next year. Tech stocks in the index have surged 37 percent so far this year, pushing valuations to the highest level in eight years. They account for almost one-quarter of the measure by weighting.
http://www.msn.com/en-us/money/markets/jpmorgan-sees-sandp-500-hitting-3000-warns-on-tech-stocks/ar-BBGKHfd
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briham89
Big Wall climber
santa cruz, ca
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Dec 14, 2017 - 10:30pm PT
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Expansionary phase of the business cycle
It's been how many years since 2009???? Hmmmmmmm
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Reilly
Mountain climber
The Other Monrovia- CA
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Dec 14, 2017 - 10:44pm PT
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Some tidbits from Janet Yellen's speech yesterday:
“Look, at the moment, the U.S. economy is performing well,” Yellen
said. “The growth that we are seeing, it’s not based on, for example, a
unsustainable buildup of debt, as we had in the run-up to the financial
crisis.”
Not just the U.S. — the global economy also is doing well. “We are in a
synchronized expansion. This is the first time in many years that we have
seen this,” Yellen said.
The job market? “I feel, you know, good that the labor market is in a very
much stronger place than it was eight years ago,” moving her marker back
to the era when she was vice chairwoman for Ben Bernanke.
The financial system is in a better place — less crisis prone, Yellen says
— with the increased capital and liquidity banks need to possess.
The Fed is also keeping a close eye on easy financial conditions that they
worry could lead to a bubble. Stocks keep hitting record highs, for
instance, and interest rates remain quite low despite the five Fed rate
hikes since late 2015.
Yellen noted that stock prices are high by historical levels, but she
didn’t see anything “flashing red.”
“Economists are not great at knowing what appropriate valuations are. We
don’t have a terrific record,” she said.
“And the fact that those valuations are high doesn’t mean that they are necessarily overvalued.”
High inflation is less of a worry. Although a majority of officials think
inflation will move up in 2018, they still see it ending the year just
under 2%. That’s a remarkably low level with unemployment likely to dip
below 4% next year. The Fed predicts unemployment will average about 3.9%
in the next two years, compared to the current rate of 4.1%.
I'm moving cash back into equities. Nothing crazy mind you but let's just
say 2018 is looking gud!
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Mungeclimber
Trad climber
Nothing creative to say
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Dec 14, 2017 - 11:31pm PT
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are stock buy backs still at a record high?
Open question whether this is a hallmark of irrational markets pushing a bubble.
Janet Yellen's comments... did they address the 'edu' student loan concern in the market?
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Gary
Social climber
Desolation Basin, Calif.
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Dec 15, 2017 - 05:41am PT
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...capitalism works!
For a few. The vast majority of the world is mired in dire poverty, some within 20 miles of Monrovia.
So it goes.
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couchmaster
climber
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Dec 15, 2017 - 07:52am PT
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I thought Donini's comment in 2015 may have surpassed Yellen's. He said: "Aug 29, 2015
There are only two economists who truly know where the stock market is headed and they disagree."
LOL.
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Reilly
Mountain climber
The Other Monrovia- CA
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Dec 15, 2017 - 08:34am PT
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Gary, billions have seen their lives improved in the last 50 years. The data is irrefutable. What doesn’t work is corruption and incompetence along the lines of the crankloons like Cristina Fernandez of Argentina and Maduro of Venezuela. Since Fernandez got the boot things have greatly improved there. If you had visited Singapore 50 years ago you would never have believed what it would become today. If you want to see what Singapore looked like 50 years ago you could go to Myanmar today.
As for getting two economists to agree on where to lunch then, indeed, good luck. If you want to see how they agree on less mundane issues you can look at the weekly compendium of predictions published on the next to last page of The Economist. You can see the range of predictions and the averages, or you can continue to make snide witticisms.
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Lituya
Mountain climber
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Dec 15, 2017 - 05:02pm PT
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The vast majority of the world is mired in dire poverty, some within 20 miles of Monrovia.
So it goes.
Sorry, Gary, but this just isn't true. You're going to have to find some other way to sell your tired old scheme. Capitalism works.
http://www.newsweek.com/now-good-news-poor-are-getting-richer-696286
The speed of poverty alleviation in the last 25 years has been historically unprecedented. Not only is the proportion of people in poverty at a record low, but, in spite of adding 2 billion to the planet’s population, the overall number of people living in extreme poverty has fallen too.
in 1820, 94 percent of the world’s population lived in extreme poverty (less than $1.90 per day adjusted for purchasing power). In 1990 this figure was 34.8 percent, and in 2015, just 9.6 percent.
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Dave
Mountain climber
the ANTI-fresno
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Dec 16, 2017 - 06:27am PT
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"I'm moving cash back into equities. Nothing crazy mind you but let's just
say 2018 is looking gud!"
And that is why I am 30% cash and selling to keep that balance.
This is classic late cycle behavior. The late comers are piling in driving the market higher. Commodities and commodity stocks are finally rallying, which will trigger inflation. The labor market is tight and getting tighter, which will trigger further inflation (2% unemployment, offers of $18/hour to work in Arby's in Colorado!)
A recession is only a matter of time.
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Reilly
Mountain climber
The Other Monrovia- CA
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Dec 16, 2017 - 08:56am PT
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Dave, 3.9% UE and maybe 2% inflation next year. Not grounds for a recession. Of more concern was the flattening of the yield curve in the last two weeks after showing a bit of an uptick previously.
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Dave
Mountain climber
the ANTI-fresno
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Dec 16, 2017 - 09:11am PT
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Low UE and high(er) interest rates lead recessions historically.
Who knows when the next one will start, or why. 6 months, a year, 2 years...
All I'm saying is I'm diversifying and increasing cash to prepare. I sleep soundly at night.
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Reilly
Mountain climber
The Other Monrovia- CA
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Dec 16, 2017 - 09:39am PT
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I hear ya, good to diversify. It's just that so many indicators are in the
green which, of course, the healthy contrarian can construe as a sell sign.
I'm just saying it's too early, NOT that I'm a market timer, mind you.
I put my cash in bonds cause to paraphrase Yogi Berra, "It's just as good
as money." ;-)
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Reilly
Mountain climber
The Other Monrovia- CA
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Dec 16, 2017 - 10:09am PT
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I got this today:
Vanguard economic and market outlook for 2018: Rising risks to the status quo
synopsis:
Strong market returns and low financial volatility underscore investors’
conviction that the current global environment of modest growth and tepid
inflation is here to stay. We agree with this long-term economic prognosis
but argue that the chances of a short-term cyclical rebound are
underappreciated. So the risks lie in mistaking persistent trends for the
2018 cycle.
The most pronounced risk to the status quo resides in the United States,
where an already tight labor market will grow tighter, driving the
unemployment rate well below 4%. This, followed by a cyclical uptick in
wages and inflation, should justify the Federal Reserve’s raising rates to
at least 2% by the end of 2018. Expectations of additional rate hikes
would inevitably follow, ending an era of extraordinary monetary support
in the United States and possibly leading markets to price in more
aggressive normalization plans elsewhere. None of this is status quo
For 2018 and beyond, our investment outlook is one of higher risks and
lower returns. Elevated valuations, low volatility, and secularly low bond
yields are unlikely to be allies for robust financial market returns over
the next five years. Downside risks are more elevated in the equity market
than in the bond market, even with higher-than-expected inflation.
In our view, the solution to this challenge is not shiny new objects or
aggressive tactical shifts. Rather, our market outlook underscores the
need for investors to remain disciplined and globally diversified, armed
with realistic return expectations and low-cost strategies.
The whole paper:
https://personal.vanguard.com/pdf/ISGVEMO.pdf
Yer welcome!
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Lituya
Mountain climber
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Dec 16, 2017 - 11:57am PT
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FWIW. We’ve done well with Buy and hold. Especially good dividend stocks. Pay someone who knows more than we do. But make sure they stay in touch. Sold our SBUX a couple months ago; first time we've ditched a stock in at least fifteen years.
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Reilly
Mountain climber
The Other Monrovia- CA
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Dec 16, 2017 - 12:04pm PT
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If Vanguard had something meaningful to say - who is the person writing their marketing gibber? What qualifies their supposed insight?
BwaHaHaHaHa! If you had put down yer Daily Worker and actually read the
paper, assuming you could understand any of it, you could see the authors
and their bona fides.
Why do bitter people condescendingly criticize that which they don't understand?
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briham89
Big Wall climber
santa cruz, ca
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Dec 16, 2017 - 04:27pm PT
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TFPU Reilly
In our view, the solution to this challenge is not shiny new objects or
aggressive tactical shifts.
AKA don't buy crypto hahaha
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Lituya
Mountain climber
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Dec 16, 2017 - 07:45pm PT
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I wish to fair-warn those, who today's investors hope, will get involved in all this markets-crap so that they can be on-sold stakes in this BS for a profit.
Market crap? Is this what they're teaching you in that mail-order degree program? Terrifying. In any event, Vanguard beeen berry berry goood to me. I doubt you could have done as well. I know I couldn’t have on my own.
For those of us without defined government pensions to fall back on, good financial advice is priceless. Doesn’t require any more faith than, say, holding a dollar bill up to a lamp.
BTW, it's not only the fat cats you loathe playing the market. Pretty much everyone with a self-funded retirement plan is in. Come to think of it, even those government pensions. But you get your money no matter what. Maybe. ;)
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