OT: Stock and Investment Talk
- Thread starter RU-05
- Start date
But it kills their credibility and tells the market they have no control.
I don't think they have any control anyway, but most people do. In a FIAT world, credibility is the only thing that matters.
It’s not about hysteria. It’s about valuation. It was entirely too high. Now it’s getting more reasonable.
Mike Wilson has been way overly bearish and in conflict with many other Morgan Stanley analysts. However, if we get a run to the lows, I will convert VOO to SSO (likely around the 3400/3450 level). With inflation crashing, not sure if we will get there.
After peaking at 9.1%, everyone will be thrilled with 3%'ish well into 2025 when Powell's term is over anyway. He will not be reappointed.
He was early last September but hes been pretty much on the money otherwise.
I imagine he’s right about an early year selloff as well. Though maybe not on 3300 or 3000
He is bullish on the 2nd half of 2023.
Interesting day today.
Europe finally admits they have an inflation problem.
Crypto performing better than equities
US equities performing better than Euro equities.
US yields heading lower, Euro yields heading higher.
Maybe the Era of Magical Thinking is coming to an end in the Eurozone.
Europe finally admits they have an inflation problem.
Crypto performing better than equities
US equities performing better than Euro equities.
US yields heading lower, Euro yields heading higher.
Maybe the Era of Magical Thinking is coming to an end in the Eurozone.
No control? Do we not think them being late to raise rates did not contribute to inflation? Or on the backside raising rates so heavily, have they not helped tame inflation?
Yields going lower is a middle finger to the Fed. The bond market doesn't believe their hawk'iness.
CAPE = CRAP
P/E valuations are at historic norms for large caps and well below norms for mid and small caps.
No, I don't think it matters that much in reality its more of a perception issue.
IMO, US gov't spending, money supply and structural issues due to covid closing/reopening were the real causes of inflation.
Agree the market doesn't believe the Fed will go through with what they say. That's why getting their credibility back is so important to Powell.
The craziest thing in the markets today to me is how low European gov't bonds yields continue to trade. Yields should be way higher in Europe than the US.
Agree, should have added the war and leverage in the offshore dollar market although inflation started long before the war did. The war made it worse.
Ive never seen such a crap metric get so much respect and attention as CAPE
Investing: Goldman Sachs destroys one of the most persistent myths about stocks
Many market watchers use above-average CAPE readings as a signal that stocks should underperform or even fall as it reverts back to its long-term mean. But CAPE’s mean doesn’t actually have much pull.
Thanks for posting! CAPE is officially CRAP.Ive never seen such a crap metric get so much respect and attention as CAPE
Investing: Goldman Sachs destroys one of the most persistent myths about stocks
Many market watchers use above-average CAPE readings as a signal that stocks should underperform or even fall as it reverts back to its long-term mean. But CAPE’s mean doesn’t actually have much pull.finance.yahoo.com
LOL. Article is from January 15, 2022. How did the S&P do in '22? Goldman's forecast for the S&P for '22 was something like 5100. Ooops....
Excessive valuations are a pretty solid indication that things are out of whack. Ignore valuations at your peril. The Shiller PE or CAPE is a more accurate assessment of such valuation. Not perfect. But....
9.1% inflation and Fed action. That's why the S&P is down, not some stupid CRAP metric. LOL! A broken clock is right twice a day.
Can't argue with that logic.... On the other hand, an over-abundance of free money for years led to carelessness and excess, and over valuations of equities. Maybe now it's time to pay the piper?
In all seriousness, '23 will see new lows. And new opportunities for new investment.
Excess money in many forms was a problem, but regardless, investors over the past 10 years are still way, way, way ahead even after 2022. I doubt we will get new lows since inflation is coming down so quickly. I never root for the market to go down, but if it does, I'm ready (with my plan and the money to make it happen). Very exciting times for the market!
It all plays into it, and when you stack them onto each you get 8% inflation.
But the fed rate at zero definitely played into inflation, just as the quick rise in rates(as well as supply chains straightening out, and the initial rush for oil and LNG easing) has helped bring it down.
And yeah perception plays into it as well, Fed continuing their hawkish stance is probably jawboning imo, at least to some extent, but the idea the Fed has no control? I think that's just a extreme mindset that wants to take the fact that the Fed doesn't have total control, and make it, they have no control.
inflation is down yes, but now we need to avoid a recession. Market will be justified in going higher when earnings begin to go higher.
But I agree on CAPE, what effect does earnings from 10 years ago have on todays market? Doesn't make sense.
Another interesting tidbit/trivia I learned today. Oil was first discovered in the US in Pennsylvania in the early 1800's. It was valuable for lighting lanterns instead of whale blubber. What's most interesting is that the cost of a barrel at that time was the equivalent of $20/barrel today. Oil has really not gotten much more expensive in almost 200 years.
Remember the history about earnings. Price and earnings don't always correlate. As Tom Lee likes to point out, after the Volker bear market ended, the market grew about 230% thru the rest of the 80s. During this time, earnings were up only 8%.
Also, check this out.....watch the 1 to 2 min mark regarding earnings after a down stock year:
See "Sea Change." The latest memo by Howard Marks:
https://www.oaktreecapital.com/insights/memo/sea-change
https://www.oaktreecapital.com/insights/memo/sea-change
Last edited:
If you look back at history that is true of energy in general and most commodities. Mankind keeps find a better more efficient way which drives the Malthusians crazy.
No one knows what 2023 will bring. Forward PE on SP500 is something around 18-22 depending on your estimate. Not cheap but not ridiculous either. My issue with. Cape is that it looks backward wayyyyy too far on the denominator.
True, at least for specific numbers. But in general things are about to change. Perhaps significantly. Marks' memo offers a solid perspective, as always.
S&P 500 forward PE = 17.3 (very reasonable, below the 40-year median)
S&P 400 (mid-caps) forward PE = 13.2 (lowest since 08/09, except the quick COVID dip)
S&P 600 (small-caps) forward PE = 12.8 (tied with 08/09 for a 25-year low)
Things always change. Marks essentially admits that nobody knows nuthin regarding where we go next. One thing seems clear to me, that the higher discount rate in equities valuation means that visible earnings in the near term will carry mOre weight than a future potential of earnings (flight to value).
The forward PE of SP500 is probably closer to 20 due to 2023 probably being a flat to down year for earnings, but not a crazy high level. Small caps are indeed cheap. Could be a sideways market for large caps for next 1-2 years.
I'm being patient with large caps, but I already converted VB in two of our accounts to UWM (Proshares 2x Russell 2k). Gotta get positioned to maximize the rally, whether it begins in 1H or 2H next year.
so everything I said a few months ago. lol
sticky inflation is the issue, tired of saying it
again, kill the limits on revolving credit and you self correct
but this presents currency issues and budget problems for us
again, kill the revolving credit thresholds and we self correct. People living hand to mouth via cc is absurd and greater than 40% are doing this!
Truth about Powell, the Fed, and the 2% rule of thumb:
thehill.com
Economist Joseph Stiglitz said he perceived feelings of guilt in the Fed’s steadfast interest rate hike over beginning its quantitative tightening program too late.
“The central bankers have said, ‘Oh, we got behind the ball in not addressing inflation’ when in fact it wasn’t their fault. It was a supply-side inflation, not a demand-side inflation,” Stiglitz said during an event hosted by the Roosevelt Institute on Thursday. “I don’t want to put it as a psychiatrist but they’re feeling guilty and they’re feeling that they have to show their resolve, show their masculinity and act strongly.”
Stiglitz said that 2 percent as an acceptable inflation level has no basis in economic theory but has simply become a conventional standard.
“Not only is there no magic in 2 percent, there’s no magic in the timespan to get back to 2 percent. So even if you believe in 2 percent as a magic formula, there is nothing to say we have to get back to 2 percent in one year or four years.”
Fed’s 2 percent inflation target comes under fire from lawmakers, Wall Street
The Federal Reserve’s 2 percent target rate for consumer inflation is coming under scrutiny from economists, lawmakers and investors, who are all expressing doubts not only about whether 2 percent …
thehill.com
Economist Joseph Stiglitz said he perceived feelings of guilt in the Fed’s steadfast interest rate hike over beginning its quantitative tightening program too late.
“The central bankers have said, ‘Oh, we got behind the ball in not addressing inflation’ when in fact it wasn’t their fault. It was a supply-side inflation, not a demand-side inflation,” Stiglitz said during an event hosted by the Roosevelt Institute on Thursday. “I don’t want to put it as a psychiatrist but they’re feeling guilty and they’re feeling that they have to show their resolve, show their masculinity and act strongly.”
Stiglitz said that 2 percent as an acceptable inflation level has no basis in economic theory but has simply become a conventional standard.
“Not only is there no magic in 2 percent, there’s no magic in the timespan to get back to 2 percent. So even if you believe in 2 percent as a magic formula, there is nothing to say we have to get back to 2 percent in one year or four years.”
