Down goes the Dow

Hi, K5/Igy! I see you have added a new word to your vocabulary. Good for you! Will "projection" now replace "butthurt" as your favorite word?

K5 detector wrote:

Hi, K5/Igy! I see you have added a new word to your vocabulary. Good for you! Will "projection" now replace "butthurt" as your favorite word?

More of that "constructive" criticism that I am so incapable of benefiting from?

Stay in the shallow end.

"No chance the Dow will drop below 13,000? Can you provide the math and the assumptions that match is based on to reach this conclusion?"

Last reported twelve months EPS for the S&P 500 was 2nd Quarter 2016 at $86.92. The historic average PE multiple of the S&P 500 is 15.9. Here is the math: 86.92 x 15.9 = 1,382.03. The last S&P 500 Index monthly close near this level was July 2012 at 1,379.12. The close on the Dow Jones Industrial Average that month was 13,008.68. Any reversion to the mean in terms of valuation is likely to be considerably lower. Currently business margins continue to collapse along with earning. I see 13,000 as an easy downside target for the business cycle.

Igy

goi,

Remember. The big problem with Europe is that there are many different sovereign countries tethered together by one currency. That is not an issue with the U.S.

I agree with you that it seems monetary policy has about run its course for both the U.S. and Japan. But that still leaves fiscal policy. If Hillary wins and Democrats take control of congress then its a good bet that government spending and tax cuts will increase. All things being equal, it should create inflation. At the same time monetary policy would still stay relatively loose.

Again, I'm saying IF it happens that Dems win control of Congress. Its probably still doubtful that happens. And I'm not saying it overcomes all the headwinds that I think we agree exist. I'm just saying that all things being equal, Democrats winning control of Congress would be a bullish force in the stock market. Its not just democrats winning seats. Its tea party republicans losing seats and not being able to obstruct.

Huh?? wrote:

Ghost of Igloi wrote:

Economic growth has alluded the global central planners, i mean bankers.

Huh?

Nice try, but you're wasting your time. He doesn't get it. It went right over his head.

K5 detector wrote:

Hi, K5/Igy! I see you have added a new word to your vocabulary. Good for you! Will "projection" now replace "butthurt" as your favorite word?

Why would you think projection is a new word to my vocabulary? Oh, I get it. You know it isn't but this allows you to avoid the points I made and pretend I am as illiterate as you.

I would never use such a nancyboy term as butthurt. That is your go to term.

Ryan,

I agree on the assumptions and narrative. Perhaps I am just hoping we don't head down that road, since it would only postpone the day of reckoning.

What I find interesting, is the cross currents within asset classes and central banks trying to massage conflicting asset moves. It appears there is some breakdown in central bankers' ability to influence markets.

Igy

Hi, K5/Igy! Posting 9 minutes apart using your different names is better than your usual 5', but you really should make it longer if you want to fool the few left here who actually think you're different posters.

K5 detector wrote:

Hi, K5/Igy! Posting 9 minutes apart using your different names is better than your usual 5', but you really should make it longer if you want to fool the few left here who actually think you're different posters.

Just when I think you could not prove further how stupid you are, you top yourself.

Hi, K5/Igy! At least I didn't predict Dow 13,000 three years ago! Hahahahahahahahahahaha.

I noticed he had no answer to this, instead he focuses on his insanity plea:

Ghost of Igloi wrote:

"No chance the Dow will drop below 13,000? Can you provide the math and the assumptions that match is based on to reach this conclusion?"

Last reported twelve months EPS for the S&P 500 was 2nd Quarter 2016 at $86.92. The historic average PE multiple of the S&P 500 is 15.9. Here is the math: 86.92 x 15.9 = 1,382.03. The last S&P 500 Index monthly close near this level was July 2012 at 1,379.12. The close on the Dow Jones Industrial Average that month was 13,008.68. Any reversion to the mean in terms of valuation is likely to be considerably lower. Currently business margins continue to collapse along with earning. I see 13,000 as an easy downside target for the business cycle.

Igy

Hey, K5/Igy, that was only 4 minutes. You're not fooling anyone now.

Ghost of Igloi wrote:

I noticed he had no answer to this, instead he focuses on his insanity plea:

Ghost of Igloi wrote:

"No chance the Dow will drop below 13,000? Can you provide the math and the assumptions that match is based on to reach this conclusion?"

Last reported twelve months EPS for the S&P 500 was 2nd Quarter 2016 at $86.92. The historic average PE multiple of the S&P 500 is 15.9. Here is the math: 86.92 x 15.9 = 1,382.03. The last S&P 500 Index monthly close near this level was July 2012 at 1,379.12. The close on the Dow Jones Industrial Average that month was 13,008.68. Any reversion to the mean in terms of valuation is likely to be considerably lower. Currently business margins continue to collapse along with earning. I see 13,000 as an easy downside target for the business cycle.

Igy

Why would he answer it. You didn't direct the question to him.

Jeffy Tull wrote:

Marty B. wrote:

You are an epic retard.

How's that? No chance the Dow will drop below 13,000? Can you provide the math and the assumptions that match is based on to reach this conclusion?

Or are you just lashing out in your frustration at your inability to verbalize these feelings you have when you read comments that do not adhere to your "worldview" that the hucksters have sold you on?

Given the shape of the curve modeling the DJIA over the last several decades, it makes sense to use an exponential growth model for predictive purposes. Plug the year in for x to get the DJIA value.

y = (2 × 10^(-101))e^(0.1206x)

How about modeling growth based on the Dow peak of 3/2000 thru the most recent peak of 8/2016?

Predictive results are less optimal when modeled on a smaller time frame. Probability & Statistics.

Modeling is a poor predictor when the time period includes one of the greatest Bull markets in history, unlikely to repeated in the same sequence from here. You are starting the data set at near record low valuations and ending at record high valuations.

K5 detector wrote:

Hi, K5/Igy! At least I didn't predict Dow 13,000 three years ago! Hahahahahahahahahahaha.

What do you put the odds at that we will dip to 13,000 at some point?

Zero?

I think we all know who the moron is. (hint, the guy who puts hahah...haha at the end of his comments).

"Given the shape of the curve modeling the DJIA over the last several decades, it makes sense to use an exponential growth model for predictive purposes. Plug the year in for x to get the DJIA value.

y = (2 × 10^(-101))e^(0.1206x)"

I'll go with "John Hussman view that valuation must be included for proper modeling. See below:

Igy

"it should be clear that the defining feature of a secular bear market low (and the beginning of a long secular bull market) is deep undervaluation. Indeed, the 1949 and 1982 market troughs each brought the ratio of market capitalization to nominal GDP below 0.33. By contrast, the defining feature of a secular bull market peak (and the beginning of a long secular bear market) is extreme overvaluation. Indeed, the 1929 and 2000 market peaks each brought the ratio of market capitalization to nominal GDP to levels similar to what we observe today (the 2015 peak slightly exceeded 1.30)."

"Let’s do some quick arithmetic. Suppose that real GDP growth accelerates to 2% and inflation picks up to 2%, producing 4% annual nominal GDP growth for the next 25 years. Now allow for the possibility that the stock market hits a secular bear market low similar to 1949 and 1982, not two or three years from now, but fully 25 years from now. On those assumptions, what would happen to the S&P 500 Index over the coming 25 years?"

"The answer is simple. The ratio of the future S&P 500 Index to the current S&P 500 Index would be:

(1.04)^25 * (0.33/1.30) = 0.677. Put differently, the S&P 500 Index would be 32.3% lower, 25 years from today, than it is at present. Even including the income from a growing stream of dividends, we estimate that in the event of a secular low 25 years from today, the average annual total return of the S&P 500 between now and then would come to less than 3% annually. It’s not a theory, it’s just arithmetic."

John Hussman, Weekly Commentary