Down goes the Dow

Armchair Econ wrote:

Just showing up to this thread as I've been following the market a bit the last year. Are we in agreement that a significant correction (20+ percent) is going to happen in the next year? I don't consider myself an expert by any means, but with the PE ratio this high, margin debt high, political uncertainty, 8 straight years of bull markets, housing bubbles in Canada and elsewhere, crazy over-valued tech stocks, and almost universal agreement stocks in general are overvalued at present, a large dip is inevitable, right? I don't think we'll see the 50+ percent drop that some people are touting, but 20-40% is very reasonable. Am I missing something?

yes you are missing something

“The market can stay irrational longer than you can stay solvent.” - Keynes. Maybe. Possibly someone else said it. But it is very true.

Overvaluation is a very imprecise way to time markets. This could go on for another ten years. Were you around in the 90s? The market was overvalued for years and years and years.

“Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits—a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.”

agip wrote:

Overvaluation is a very imprecise way to time markets. This could go on for another ten years.

And he will be tooting his doomsday horn the whole way.

Armchair Econ wrote:

Just showing up to this thread as I've been following the market a bit the last year. Are we in agreement that a significant correction (20+ percent) is going to happen in the next year? I don't consider myself an expert by any means, but with the PE ratio this high, margin debt high, political uncertainty, 8 straight years of bull markets, housing bubbles in Canada and elsewhere, crazy over-valued tech stocks, and almost universal agreement stocks in general are overvalued at present, a large dip is inevitable, right? I don't think we'll see the 50+ percent drop that some people are touting, but 20-40% is very reasonable. Am I missing something?

Read the article I referenced in the post before yours.

"Moreover, to reiterate, if you take out the aberrationally low PEs of the 1970s/1980s that were driven by double-digit inflation/interest rates, and tally the average PE from the beginning of each year starting with 1990 through January of 2017, the average PE for the SPX has been 23.85."

The author fails to mention the aberrationally high PEs of the late1990s that were driven by Technology Bubble. So you can't take out one without the other. More of "this time is different."

Jeffrey Taut wrote:

"Moreover, to reiterate, if you take out the aberrationally low PEs of the 1970s/1980s that were driven by double-digit inflation/interest rates, and tally the average PE from the beginning of each year starting with 1990 through January of 2017, the average PE for the SPX has been 23.85."

The author fails to mention the aberrationally high PEs of the late1990s that were driven by Technology Bubble. So you can't take out one without the other. More of "this time is different."

Fair enough, but that example was clearly an afterthought to his main points. However, the overall message is clearly that this time is different. He makes a good case.

Go, Pats!

Igy didn't read the article. He never does. Even the ones he links.

The Russians did it!

I have yet to meet anyone who actually fell for that propaganda.

You mean other than the US intelligence community?

Sure. It is different this time. Both stocks and bonds are overvalued.

Stanley Morgan wrote:

Jeffrey Taut wrote:

"Moreover, to reiterate, if you take out the aberrationally low PEs of the 1970s/1980s that were driven by double-digit inflation/interest rates, and tally the average PE from the beginning of each year starting with 1990 through January of 2017, the average PE for the SPX has been 23.85."

The author fails to mention the aberrationally high PEs of the late1990s that were driven by Technology Bubble. So you can't take out one without the other. More of "this time is different."

Fair enough, but that example was clearly an afterthought to his main points. However, the overall message is clearly that this time is different. He makes a good case.

Go, Pats!

I forgot...

Go Fats!

Yes they're overvalued using traditional metrics. The question is are they still applicable given the recent changes outlined above? Given that the economy and markets continue to soar, they may not be.

Fats?

I get the point but disagree with the conclusion. Take GOOG and FB, businesses the trade at an above market multiple. These companies are very cyclical with their dependence on advertising revenue, yet still subject to the same business cycle as GM and JNJ. In my view their higher multiple is a function of investor expectations. DELL and INTC experienced the same multiple expansion in the late 1990s; never to achieve that multiple again. The distortions are even greater for TSLA, AMZN and NFLX. Stock buy backs, non-GAAP accounting and rising corporate debt speaks more to a lack of demand and a stagnant economy.

SCREAMING ABOUT STOCKS INTO A WELL: A TEXT ADVENTURE

You are standing alone in an open field. FANG stocks are up, and you’ve come here to scream. There is a path heading east.

>scream

About what?

>scream about FANG stocks pushing higher.

Your screams are lost in the vast expanse of tall grass and sky around you. It is unsatisfying.

>walk east

You are in a forest. It is unseasonably warm for winter. Musk once tweeted about stormy weather in Shortville. The path turns north.

>walk north

You cannot walk. You are too mad about Musk taunting the shorts.

>scream about Musk hiring his divorce attorney as TSLA’s General Counsel.

Your screams are muffled by the forest, but you do feel a little less angry.

>walk north

You come to a clearing. There is a well. The path leads north.

>inspect well

It is a humble well. Its stone walls are three feet high and five feet in diameter. Peering over the ledge, the well looks to be very deep. The cool air inside is refreshing.

>scream into well

What do you scream?

>TESLA IS A ZERO

Leaning over the well, the cool, wet stones feel good on your hands.

You scream:

TESLA IS A ZERO

The well echoes:

TESLA IS A ZERO

TESLAS IS A zero

zero

ro

That was a good scream! And the echo makes you feel less alone. You’re feeling better already.

Your phone buzzes.

>inspect phone

It’s a Twitter alert:

HASTINGS CLAIMS NETFLIX HAS LOW DEBT BECAUSE HE’S COMPARING IT TO MARKET CAP

>scream into the well about Hastings’ ridiculous, financially ignorant claim

You have a good 30 second scream, and the well echoes your sentiments on the completely misleading nature of his claim. This feels amazing. The well totally gets you.

>walk north

Why leave when screaming into the well about Hastings feels so good?

>scream into the well about Bezos

Pick something specific to scream out. There’s certainly enough to choose from.

>scream into the well about Bezos moving AMZN into bricks & mortar with Whole Foods

You scream. The well echoes back that the Whole Foods acquisition is just like AOL-Time Warner and wonders why investors are so willing to pay 154x 2017 earnings right now.

Yes, this is the best you’ve felt since 2008! The well is your friend.

Unfortunately all this screaming is making your head flush and hot. If you want to continue screaming, you’ll have to find a way to cool off.

The air inside the well feels nice.

>lean further into the well

Leaning deeper into the well, the cold, damp air refreshes you, and the smell reminds you of a family vacation “out East”. A real vacation spot! Zuckerberg spends his vacation condescendingly talking to “real Americans.” Zuck is distracted from running Facebook.

Your anger rises.

>scream into the well that Zuckerberg has political ambitions and is unfit to run a public company

You scream and the well adds that it doesn’t matter because Facebook is just like Myspace and is destined to fail. You couldn’t have said it better yourself.

Unfortunately you’ve reached an equilibrium where the relief gained by screaming about Zuckerberg is entirely lost by the heat generated from screaming about Zuckerberg. To continue screaming, you’ll have to find a way to cool off more.

Sweat from your feverish brow begins dripping into your eyes. It stings like shorting CAT.

>wipe eyes

What a cool reprieve! Your hands have been kept cold by well’s stones. The well has everything you need. At this point, you’ve leaned so far into the well that you could easily press your face against its cool interior wall.

>press face against inside of the well

The wall’s coolness feels wonderful against your face. Normally the stone’s thin coating of slime would bother you, but this is not normal. Nothing about FANG stocks is normal.

>scream into the well IT’S NOT DIFFERENT THIS TIME and CAPE still matters

“THIS IS NOT NORMAL!” you scream into the wall of the well you’re folded over.

It is a good scream but something is missing. There is no echo! Yelling this close to the wall must be bad for acoustics. Facing outward would fix the problem.

>turn head outward

You cannot turn your head far enough. If only you could speak out of both sides of your mouth like that sleazy Elon Musk does on Twitter. You’ll have to turn more than your head.

>turn body

You rotate your body ever so carefully. As you spin, your forward bow slowly becomes a backbend, until you… oops.

Y

O

U

F

A

L

L

I

N

The tumble lasts just long enough for you to realize that 2008 wasn’t so bad. You’d give anything to go back to 2008.

SPLASH!

The water at the bottom of the well is very cold. And seemingly bottomless.

You begin to sink.

>grab the well’s wall

The wall is too smooth and slippery to hold on to. Like Hastings’ misleading corporate finance comments.

You are still sinking.

>tread water

You stop sinking. But you will get tired sooner or later.

Perhaps you should have covered your shorts instead of screaming into a well?

>opens InteractiveBrokers app

What should you do?

>place more hedging trades

Are you sure you don’t want to cover some shorts?

>place more hedging trades

Good point. You must get out of the well in order to short more FANG.

Unfortunately water damage has broken your phone.

>scream for help

No one comes.

You are sinking again.

>tread water

What’s the point with central banks propping everything up?

>scream about the Bank of Japan

The well echoes along, giving your resistance a second wind.

You are still sinking.

>tread water

You stop sinking. For now.

>scream for help

Your screams attract a curious new fintwit follower.

>scream for the new follower to get help

The new follower no more understands what you are asking for than it understands that FANG stocks are actually good businesses. The follower just looks at you with the impassive serenity of Tim Cook.

>scream that Cook destroyed a once-great company and that iPhones won’t generate returns above the cost of capital forever

The well agrees, but the new follower quickly unfollows.

You are sinking again.

>tread water

You stop sinking but this is getting harder.

>scream for help

The well also screams for help. It feels patronizing.

>scream for the well to knock it off

The well tells you to knock it off. Why is the well doing this to you?

>scream for help

You can’t. All breathe must be conserved for treading water.

You are sinking again.

>tread water

Your legs ache and you long for Netflix and Chill. But it’s a zero!

You are sinking again.

>tread water

You can’t. You are too tired. As you slip beneath the water, at least you did all you could to scream about FANG stocks into a well.

CONGRATULATIONS, you have won Screaming About Stocks Into a Well!

******

This is a spoof of a spoof. The original is here:

https://www.mcsweeneys.net/articles/screaming-about-trump-into-a-well-a-text-adventure

Tesla

Go to the profile of Noon Six Capital

Noon Six Capital

L/S Equity | CO

Here is another post from Noon Six Capital, some good advice for traders.

https://medium.com/@NoonSixCap/what-i-think-i-know-about-investing-april-2016-update-c3e5014dedd8

LOL. Unfortunately it's too long for Igy to read.

Igy wrote:

In my view their higher multiple is a function of investor expectations.

Duh. That's how the markets work.

You and your clones miss the simple concept that the foundation of an investment is cash flow. You will learn soon enough how foolish that belief is.

LOL.