Down goes the Dow

SOS wrote:

http://online.wsj.com/mdc/public/page/2_3021-peyield.html

^this.

Where in the world did you get your numbers? lol.

wait a second... wrote:

We invest our clients' money based on our seven-year prediction. And over the next seven years, we think the market will have negative returns. The next bust will be unlike any other, because the Fed and other centrals banks around the world have taken on all this leverage that was out there and put it on their balance sheets. We have never had this before. Assets are overpriced generally. They will be cheap again. That's how we will pay for this. It's going to be very painful for investors."

S&P500 Price to Sales ratio is now at 1.67.

The last time it was this high was in the year 2000.

my oh my wrote:

SOS wrote:http://online.wsj.com/mdc/public/page/2_3021-peyield.html

^this.

Where in the world did you get your numbers? lol.

Hmmm

I've sometimes seen that kind of wild PE for the small caps but dismissed it as some weird accounting issue. I mean, even by that chart the forward PE for the r2k is only 19. 74 looking back and 19 looking forward? That should trigger your BS filter.

Are earnings going to almost quadruple? No - probably some non cash write down issues elevating the backward pe. And the backward PE was only 35 last year. why the massive jump?

I think a more realistic number would be from an index fund that tracks small caps. VB from Vanguard has the PE at 28...although they don't specify whether that is forward or backward. And it tracks a different index. But from what I've seen, the 28-30 number is more meaningful than 74.

And 28 is plenty expensive - I am dialing back my small cap exposure very quickly.

"I think today's reasons to not own stocks are pretty weak."

I would agree with you for the long term if and only if fundamental structural factors in our society were not at the critical point of degradation and needing replacement, or if there was some sort of reasonably phased replacement plan and schedule articulated by any US government administration.

But that's not the case.

However, as I said I do hold out hope for the very short term--a couple of months--because traders have become more arrogant than they were years ago. What I mean by that is that there seems to be a broad perception among the large trading institutions that it is NOT economic, monetary, and social factors that drive the markets, but rather the markets that drive everything else. The big players really feel like they are in control--and to a significant extent, I believe that to be true as far as the equity markets are concerned.

That kind of bubble life is fine, as long as you never have to leave the bubble. Look what's happening now with Russia's responses to US sanctions...they are looking for, and will eventually find, a way to conduct their international trade in oil and arms without using the USD, especially with places like China. Yes, countries have been trying to find a way to do this for a while, but this is just another form of incentive, and a good one at that, especially for discrete sales, or merely bilateral agreements.

So I disagree that these are fundamentally normal times. We are at the end of an era in many ways, and will suffer growing pains entering the next. Within that renewal will be opportunities, but not like during the industrial revolution, with the possible--POSSIBLE--exception of Africa, if they can ever stop killing each other (unlikely).

But ultimately, I think there will be market problems this year, and that the Dow will show no gains at all. So far now, 3 months into the year, the DJIA is down .82%, even with the 115-point rally early this morning. As far as the DJIA goes, I have missed out on nothing except possibly some dividends.

As far as the next 3 or 6 months go, I think there will be some good trading opportunities, but as far as investment goes, I see no particular reason to buy within that period.

Maserati wrote:

"I think today's reasons to not own stocks are pretty weak."

I would agree with you for the long term if and only if fundamental structural factors in our society were not at the critical point of degradation and needing replacement, or if there was some sort of reasonably phased replacement plan and schedule articulated by any US government administration.

What doubt mean by "fundamental structural factors in our society?" Thanks.

Edit:

What DO YOU mean by "fundamental structural factors in our society?" Thanks.

a long thread with maserati answering your question

Thanks, agip.

Well I've been hearing talk about how the game is rigged by the big money boys for...i dunno...forever. And yet we are at all time highs in most non sector indices.

Seems to me the markets have democratized over time as $8 trades made investing cheaper, international investing is much easier, insider trading is far far far less common...I am pretty sure that we would all be shocked at the crookedness of the markets of the 1950s and 1960s were we to take a look at them.

That 74.8 definitely triggered my "need more information before I know what to make of this" filter.

March 31 update

March was a flat month for stocks - globally almost nothing happened.

Here are the numbers since the OP started the thread on 8/27. I use ticker VT as a proxy for global stocks and DIA as a proxy for the Dow. I include dividends.

Since 8/27:

global stocks +14.4%

Dow: +12.8%

That's a pretty good 7 months by any measure, although virtually all of the movement happened in 2013, not 2014.

So the OP continues to be wrong, although it hasn't cost him anything material for three months or so.

Interesting that since inflation has fallen so low ,those are virtually real returns.

Onward

noted: agip gloating via updates. Time for a short-term sell. (thanks buddy!)

someting missing here wrote:

noted: agip gloating via updates. Time for a short-term sell. (thanks buddy!)

Hey Sally. How goes?

someting missing here wrote:

noted: agip gloating via updates. Time for a short-term sell. (thanks buddy!)

well maybe a little gloating.

But I have been updating performance at the end of each month for a while now.

new all time high on the sp500 today. But not gloating.

A 30% fall in the Dow is nothing in terms of the long-term.

Wonder where the DJIA would be now if they had not made the component change on 9/20/2013? The new: V +8.57%, NKE +6.47%, GS -3.48%. The old: BAC +19%, HPQ +52.5%, AA +55.25%.

la gente está muy loca wrote:

Wonder where the DJIA would be now if they had not made the component change on 9/20/2013? The new: V +8.57%, NKE +6.47%, GS -3.48%. The old: BAC +19%, HPQ +52.5%, AA +55.25%.

yeah - remember when they added microsoft and intel...in 1999? You just have to laugh.