Down goes the Dow

Earnie wrote:

Ghost of Igloi wrote:

Personally I think the trigger for imminent market collapse is Megan Kelley leaving NBC with $Millions in her purse, and of course extremely overvalued equities along with shrinking liquidity. But select your reason of choice.

Valuation: The forward 12-month P/E ratio for the S&P 500 is 15.1. This P/E ratio is below the 5-year average (16.4) but above the 10-year average (14.6).

Forward PE is a non-GAAP EPS number and consistently too high, use it if you like.

agip wrote:

Earnie wrote:

Valuation: The forward 12-month P/E ratio for the S&P 500 is 15.1. This P/E ratio is below the 5-year average (16.4) but above the 10-year average (14.6).

PEs are clearly not high, despite what many will say

to get to high valuations you have to use CAPE, which has been proven to be nonsense.

or

you 'normalize' the profit margins of companies. You say 'margins will revert to a lower number, crushing earnings even if sales stay decent.'

Will that happen? If it hasn't happened yet, why will it happen?

Most margin components have changed directions, most important higher cost of capital and labor. If things are so rosy why are almost all equity markets negative year over year.

Ghost of Igloi wrote:

Earnie wrote:

Valuation: The forward 12-month P/E ratio for the S&P 500 is 15.1. This P/E ratio is below the 5-year average (16.4) but above the 10-year average (14.6).

Forward PE is a non-GAAP EPS number and consistently too high, use it if you like.

Opps too low....

Ghost of Igloi wrote:

agip wrote:

PEs are clearly not high, despite what many will say

to get to high valuations you have to use CAPE, which has been proven to be nonsense.

or

you 'normalize' the profit margins of companies. You say 'margins will revert to a lower number, crushing earnings even if sales stay decent.'

Will that happen? If it hasn't happened yet, why will it happen?

Most margin components have changed directions, most important higher cost of capital and labor. If things are so rosy why are almost all equity markets negative year over year.

by that logic you, Igy, would have looked that the strong market over the summer of 18 and said 'if things are as bad as I think, why is the market up so much?'

agreed that companies have some winds in their faces now. But it's rarely clear winds and following seas. People who run companies aren't morons - they know what to do.

agip wrote:

Ghost of Igloi wrote:

Most margin components have changed directions, most important higher cost of capital and labor. If things are so rosy why are almost all equity markets negative year over year.

by that logic you, Igy, would have looked that the strong market over the summer of 18 and said 'if things are as bad as I think, why is the market up so much?'

agreed that companies have some winds in their faces now. But it's rarely clear winds and following seas. People who run companies aren't morons - they know what to do.

OK fair enough, but I disagree with the last statement. I think it is moronic to quadruple a company’s long term debt while buying back stock a record valuations and dollars. McDonalds and Microsoft for example, but most investors never read an annual statement anymore, they would rather look at the tea leaves of stock charts. Of course the companies mentioned do the same thing; just take a look at their annual reports. Examine the profits of the company on the other hand and a reasonable person would question why the stock is going up. That is all to common in this cycle. My opinion of course.

well, fact is, corporate profits have been rising at double digit percentages for a year or so and are at all time highs - that's pretty good reasoning for investors to own the companies' equity. Maybe companies have done a good job with debt, to get those profits. And buying your shares when profits are surging should be a good idea, right? Isn't that how this works?

agreed on balance sheets - there is way too much debt out there. Deleveraging can be painful if it doesn't work out.

Corporate tax cuts will be reversed. Stupid idea to begin with. I can’t see with rising deficits and liabilities that lasting for much longer, regardless of who is in control. I remain skeptical as always, a byproduct of age and experience.

Ghost of Igloi wrote:

agip wrote:

well, fact is, corporate profits have been rising at double digit percentages for a year or so and are at all time highs - that's pretty good reasoning for investors to own the companies' equity. Maybe companies have done a good job with debt, to get those profits. And buying your shares when profits are surging should be a good idea, right? Isn't that how this works?

agreed on balance sheets - there is way too much debt out there. Deleveraging can be painful if it doesn't work out.

Corporate tax cuts will be reversed. Stupid idea to begin with. I can’t see with rising deficits and liabilities that lasting for much longer, regardless of who is in control. I remain skeptical as always, a byproduct of age and experience.

I’d say corporate tax cuts are one of the few things that the GOP has gotten right recently. They’re not going anywhere soon. The personal income tax cut, on the other hand, was a really dumb idea.

My biggest beef with the corporate tax cuts is how its adding to the national deficit. It seems that making people feel flush with cash today is pushing the burden for paying for it to future generations.

Sad.

seattle prattle wrote:

My biggest beef with the corporate tax cuts is how its adding to the national deficit. It seems that making people feel flush with cash today is pushing the burden for paying for it to future generations.

Sad.

Agreed in my view. I guess if you think deficits can grow to the sky (already getting close) the corporate tax cuts will remain. On the other hand I doubt there is any validity that it adds to the productivity of the nation.

seattle prattle wrote:

My biggest beef with the corporate tax cuts is how its adding to the national deficit. It seems that making people feel flush with cash today is pushing the burden for paying for it to future generations.

Sad.

It’s the personal income tax cut that is making people feel flush with cash.

strictly a short term benefit at the expense of long term financial solvency, imo. It is buying votes, nothing more.

And done at exactly the WRONG time. We didn't need that kind of boost, the markets were already pumped. Very bad management, only made worse by the fact that future generations will have to pay for it, not us.

J. Hardy wrote:

seattle prattle wrote:

My biggest beef with the corporate tax cuts is how its adding to the national deficit. It seems that making people feel flush with cash today is pushing the burden for paying for it to future generations.

Sad.

It’s the personal income tax cut that is making people feel flush with cash.

I'd argue both are.

seattle prattle wrote:

J. Hardy wrote:

It’s the personal income tax cut that is making people feel flush with cash.

I'd argue both are.

The corporate cut is causing money to be repatriated. So a lower tax rate on a higher base...maybe they cancel each other out. I don’t know. But there’s no way to paint the personal cut as anything other than a drain on the national debt.

J. Hardy wrote:

seattle prattle wrote:

I'd argue both are.

The corporate cut is causing money to be repatriated. So a lower tax rate on a higher base...maybe they cancel each other out. I don’t know. But there’s no way to paint the personal cut as anything other than a drain on the national debt.

Fair point. I got the sense, though, that the personal tax cut, which came after the corporate, was just to appease the base and lower/middle class that he wasn't just pandering to the wealthy.

And even if the corporate cut achieved bringing the funds back, a lot of that just gets dumped into increased buybacks, not helping those that need it most (creating jobs, for example). Buybacks help shareholders, read: the wealthy.

The national debt should be a major challenge our leaders are taking on, and everything seems to be only making it worse. Shortsighted.

Ghost of Igloi wrote:

Of course the shutdown matters but it will end. The larger issue that has changed is the character of the market and this will determine where we are headed. Fasanara Capital does as good as job of any analysis of where we were and where we are headed. Of course the financial media always dishes out the same Bullish refrain, always the same, but unable to see the inevitable fail of this thinking.

Actually there’s plenty of Bearish sentiment in the media. For example, Fasanara Capital has been all over CNBC and others for months. (Good for them since they’re not known for much else.)

There was a good interview with Mitch Daniels former Indiana Governor (R) on CNBC. Daniels talked about how a shutdown would be justified if forcing rationalization of deficit/budgetary issues but not for a border wall. Unfortunately the voices of rational policy gets drowned out by extremists or vote pandering, which in my view both sides are guilty of.

Freaking out wrote:

Ghost of Igloi wrote:

Of course the shutdown matters but it will end. The larger issue that has changed is the character of the market and this will determine where we are headed. Fasanara Capital does as good as job of any analysis of where we were and where we are headed. Of course the financial media always dishes out the same Bullish refrain, always the same, but unable to see the inevitable fail of this thinking.

Actually there’s plenty of Bearish sentiment in the media. For example, Fasanara Capital has been all over CNBC and others for months. (Good for them since they’re not known for much else.)

You cite one, while the crying of the Bulls in December was deafening. “Please Powell throw us a bone.” Truth is the market cannot advance without cheap and plentiful money. Maybe even that has reached it’s limits. Of course you can believe things haven’t changed. We’ll see, Market seems toppy again to me.

Ghost of Igloi wrote:

Freaking out wrote:

Actually there’s plenty of Bearish sentiment in the media. For example, Fasanara Capital has been all over CNBC and others for months. (Good for them since they’re not known for much else.)

You cite one, while the crying of the Bulls in December was deafening. “Please Powell throw us a bone.” Truth is the market cannot advance without cheap and plentiful money. Maybe even that has reached it’s limits. Of course you can believe things haven’t changed. We’ll see, Market seems toppy again to me.

One is enough to prove that “always” (your word) is incorrect. Of course, they’ve been on repeatedly, as I already pointed out. And they’re not alone in that.