Igy, you are willing to make the leap that becuase the market is overvalued, it must necessarily fall, and fall precipitously. Others may argue that we don't know when (and it could be years), and we don't know by how much (it could be a small correction or pause). You seem to gravitate to extremes. WHile that is entirely possible, the behavior of the market for quite a while now does not support that it is very likely in my opinion and in the opinion of many others.
Best of luck to you.
Seattle,
I agree that is the view of many. Although I would remind you those same people and entities said the same thing in 2000 and 2007. By the way in 2002 the NASDAQ was down -83% and S&P 500 -52% from 3/2000 while by 3/2009 the S&P 500 lost -59% from the both the 2000 and 2007 highs. The current economic expansion is the second longest in history, while government, corporate and personal debt has never been higher.
Choose your weapon.
Igy
Seattle,
This short video will bring you inner peace. You don’t even have to read.
https://m.youtube.com/watch?v=92i5m3tV5XY
Igy
i;ll pass.
Look at the Schiller PE Ratio chart in historical terms. Current PE levels are quite a bit less than what they were before previous downturns, like 2000 and the very high rise going into 1930 (percentage wise).
Seattle,
A here is my counter argument: 1) 1996-2000 CAPE 10 was driven by overvalued technology stocks. At that time around 30% of the S&P 500, today that sector is about 20% of the index. The NASDAQ Composite dropped -83% and did not get back to even until May 2016. 2) In 2000 the 10 Year Treasury was at 6% giving the Federal Reserve plenty room to cut, and the balance sheet at the Fed was under $900 Billion ($4.4 Trillion today). 3) Demographics in 2000 showed a population at peak earnings for years ahead, while today with those same individuals are entering retirement at an alarming rate, driving Social Security and Medicare programs to insolvency. 4) Politically our country is unable to tackle even simple problems. The population (no savings but nice cars and fancy trips) as well as politicians (indepted to lobbyists and special interest) live in a fantasy world unable to meet the challenges of the year ahead let alone the future.
Oh, and if you adjust CAPE 10 to margins it has never been higher.
Igy
One can see by this research by Russell Jackson that the valuation of stocks during was driven by the top decile of stocks. Interesting to note today’s broad overvaluation of market components.
Seattle,
I addressed all points.
Good night.
Igy
Good night. Nasdaq recovered by May 2015, not 2016 according to my chart, but not much of a difference.
I would need to dig a bit deeper to see if there's any validity in that matrix (CAPE 10). It's not something on my radar up to now.
Ghost of Igloi wrote:
One can see by this research by Russell Jackson that the valuation of stocks during was driven by the top decile of stocks. Interesting to note today’s broad overvaluation of market components.
No one should be surprised by this. That’s just basic statistics. It’s completely natural and expected.
Statman Caruthers wrote:
Ghost of Igloi wrote:
One can see by this research by Russell Jackson that the valuation of stocks during was driven by the top decile of stocks. Interesting to note today’s broad overvaluation of market components.
No one should be surprised by this. That’s just basic statistics. It’s completely natural and expected.
Cat,
Review the previous exchange with Seattle and the question of 2000 CAPE 10. If you are trolling, don’t bother just get lost.
Igy
Ghost of Igloi wrote:
Statman Caruthers wrote:
No one should be surprised by this. That’s just basic statistics. It’s completely natural and expected.
Cat,
Review the previous exchange with Seattle and the question of 2000 CAPE 10. If you are trolling, don’t bother just get lost.
Igy
Just stating the obvious. No need to get pissy.
agip wrote:
Maserati wrote:
"but the thing is...earnings are superb, the economy is roaring"
Oh, boy. You know, agip, I have a soft spot for you. You seem like a really nice guy, honest and trusting.
Oh, boy. you know, maser, I have a soft spot for you. You seem like a paranoid guy, never believing what is in front of your face. So amusing.
So sensitive!
What is it that is right in front of our face that we are supposed to believe?
Still waiting wrote:
What is it that is right in front of our face that we are supposed to believe?
Read the thread. He answered that question.
Statman Caruthers wrote:
Ghost of Igloi wrote:
One can see by this research by Russell Jackson that the valuation of stocks during was driven by the top decile of stocks. Interesting to note today’s broad overvaluation of market components.
No one should be surprised by this. That’s just basic statistics. It’s completely natural and expected.
While it makes perfect sense to anyone who understands basic high school mathematics, it is a revelation to Igy.
Ghost of Igloi wrote:
One can see by this research by Russell Jackson that the valuation of stocks during was driven by the top decile of stocks. Interesting to note today’s broad overvaluation of market components.
https://www.hussmanfunds.com/wmc/wmc161003d.png
But does it show a broad overvaluation? The top decile (decile 8) is clearly just a bit higher than most other years, but not terribly so. Not anything like 2000 crash. And consider that the tech sell off of the last week will serve to correct for exactly that imbalance, right?
Now, we can argue whether the likes of Amazon, Google, Netflix, and Apple should be trading at higher valuations. But let the market decide. Clearly, up to now they have felt that their business model has warranted it. And if that is being reconsidered, as we would believe, a modest correction may be in order. But i simply do not see that the overall market looks that different now from other years, at least not from this graph.
You see doom. I'm not convinced.
Seattle,
OK, eye of the beholder I guess. There is no purpose to dissuade you or others in your beliefs. I think your rationale is the same as others at a market top. In my profession compensation is directly correlated with the S&P 500 performance, so wishing for something that goes against my personal well being does not make sense. Likewise believing in what is historically inaccurate is rather foolish in my view. That is what makes a market, buyers and sellers. As simple as that.
Igy
Earnings Scorecard: For Q1 2018 (with 19 companies in the S&P 500 reporting actual results for the quarter), 16 S&P 500 companies have reported a positive EPS surprise and 15 have reported a positive sales surprise.
Ghost of Igloi wrote:
How come the bulls weren’t posting earlier in the week? Gosh it was awfully lonely.
And where have the bears been later in the week. Crickets chirping.
I have been here all along. You guys disapppear on bad days. What you gonna do when it gets scary bad?
