Down goes the Dow

Ghost of Igloi wrote:

agip,

Respectfully, I did give you the evidence. CAPE 10 only higher in 1929 and 2000, Tobin's Q only higher in 2000, lastly Buffett Indicator only higher in 2000. S&P 500 was weighted at 35.9% technology stocks in 2000, therefore the median valuations would have to be lower.

I hear you

1) I pretty much reject the CAPE as a meaningful # -- it has shown massive overvaluation for 25 or so years...what's the use of that kind of #?

To prove your assertion you would have to show multiple types of valuation - PE/PB/CAPE/EV/EBITDA/PS/Q/ etc.....not just one.

2) This site has the sp500 in 1999 as 29% tech and in 2000 21%.

and in 2015, now, sp500 is 20% tech.

so 29% vs. 20%...meaningful but not an enormous difference. And how important is that fact anyway? We're talking median stocks here - how many insane dot coms were there? 100? 200? 300? out of around 8,000 stocks in the country? Does 900 bps of the SP500 mean a whole lot?

So I'm not believing your assertion. Could be true, but you've barely started to prove it.

Your source on Bespoke actually illustrates my point, that is: healthcare 9.3% of the index in 1999, and 12.9% today, consumer staples 7.2% 1999 and 11.7% today, and lastly energy 5.6% in 1999 and 11.5% today. Point being, these sectors are the focus of "safe dividends."

You have done nothing to disprove my point.

I would not find comfort in this statement:

"I pretty much reject the CAPE as a meaningful # -- it has shown massive overvaluation for 25 or so years...what's the use of that kind of #?"

Read more:

http://www.letsrun.com/forum/flat_read.php?thread=5369837&page=253#ixzz3dFieyW3

Currently domestic stocks are near all time highs and interest rates are near all time lows. Yet, in the last 15 years we have had two market corrections of over 50%, all while interest rates were falling. And still the average S&P 500 return including dividends was only 4%.

As Ricky Ricardo would say please "splain" how, with higher interest rates and a higher stock market valuations is the coming investment environment is going to be better?

Ghost of Igloi wrote:

I would not find comfort in this statement:

"I pretty much reject the CAPE as a meaningful # -- it has shown massive overvaluation for 25 or so years...what's the use of that kind of #?"

Read more:

http://www.letsrun.com/forum/flat_read.php?thread=5369837&page=253#ixzz3dFieyW3

Currently domestic stocks are near all time highs and interest rates are near all time lows. Yet, in the last 15 years we have had two market corrections of over 50%, all while interest rates were falling. And still the average S&P 500 return including dividends was only 4%.

As Ricky Ricardo would say please "splain" how, with higher interest rates and a higher stock market valuations is the coming investment environment is going to be better?

huh? rates were rising in 2000 and 2007, in the leadup to the 50% falls.

is your point that once recessions began...THEN rates fell and stocks fell with them? Please clarify that. If you can clarify what you are trying to say, I can respond better.

but generally, your logic is flawed - you pick two times when the market fell 50% and say that exactly two is the right sample size. When you should look at all the times rates have risen and then see the result. I believe the answer there is that when rates rise off a low base because of economic health...the market does well on average.

as for valuations...if you look at all the valuation techniques and take an average...valuations are a little high. Not crazy. So they don't mean a whole lot, I'd say.

agip,

You made my point again, thank you. The Fed was forced to raise rates to pop the dotcom and housing bubbles. And guess what they are beginning in the near future? Raising rates.

Ghost of Igloi wrote:

agip,

You made my point again, thank you. The Fed was forced to raise rates to pop the dotcom and housing bubbles. And guess what they are beginning in the near future? Raising rates.

not really - those rate hikes were to fight off inflation, not bubbles. Inflation in the late 90s and 2006 was 4% and climbing - that was the fear.

The fed does not have in its mandate a 'prick bubble' demand

on the other hand, the fed must fight inflation, and that is what it did.

Now...we have 2% inflation - that is why rates have remained so low for so long - managable, pretty much perfect inflation.

So if rates rise in a slow way in a low inflation rate environment...no one will be afraid that rates will rise quickly. Much less scary to business and investors. Most likely the fed will raise rates to 1 or 2% - not the 6% of the 1999 zone.

in other words, rasiing rates from 0 to 2% is not scary. Raising rates from 4% to 6% is quite scary.

so...slighly high valuations, low inflation, low interest rates, a globe growing in unison...whatcha scared of, igloi?

Federal Reserve "mandate" is meaningless, they do much that is outside of their "mandate." Where does inflation arise from? There is certainly inflation in stocks, bonds, and housing. If you belive otherwise, well sorry you are wrong and there is no hope arguing further. The higher cost to borrow money increases the inputs to all other areas. Your so called global growth story is flat wrong. Global demand is for goods and services is going down. Now global stock markets may be up on the year, but that is more reflective of other central banks jumping on the easy money band wagon. Don't be confused by cause and effect.

Ghost of Igloi wrote:

Federal Reserve "mandate" is meaningless, they do much that is outside of their "mandate." Where does inflation arise from? There is certainly inflation in stocks, bonds, and housing. If you belive otherwise, well sorry you are wrong and there is no hope arguing further. The higher cost to borrow money increases the inputs to all other areas. Your so called global growth story is flat wrong. Global demand is for goods and services is going down. Now global stock markets may be up on the year, but that is more reflective of other central banks jumping on the easy money band wagon. Don't be confused by cause and effect.

you might argue that the rate of economic growth is stalled, but no, global demand for goods and services is not literally falling. it is growing in virtually every country in the world.

You have a VERY annoying habit of claiming things that aren't true. That's probably the fourth or fifth false claim you've made just today. I won't even ask you to cite proof of this supposed global recession - I know you can't.

I'm looking at a chart in The Economist - everywhere is growing except Russia, Brazil, Venezuela. So sure, if you are in a petro dependent 3rd world fascist economy (or brazil), you are not happy but the good news is that leaves everywhere else.

I think we're done for today

cheers

Cherry picked the highest indicator of the several contained in the source you provided.

Cherry Guy wrote:

Cherry picked the highest indicator of the several contained in the source you provided.

1) who are you talking to

and

2) what indicator, what data series was cherry picked?

What do you mean, "we're done for today"?!? Keep him going. He is showing some potential to be just the kind of crazy this thread is dying for.

agip,

Respectfully, I have given you plenty of sources far superior to your own. Most of your data is taken from sources are backward looking or that have a profit motive. I apears you have an inability to face a challenge in your thinking. Most of the data and sources you quote are so conventional it is destined to be wrong, I am afraid. Specifically, to counter your argument against my claim that global demand is falling, so then explain these current trends?

All in yearly percentages, as of 6-15-2015:

Baltic Dry Index -25.45%

China GDP -6.66%

Crude Oil -40.88

Aluminum -5.67%

Copper -8.11%

Nickle -27.18%

Steel - 65.43%

Cotton -24.37%

Coffee -22.45%

Sugar -25.19%

Wheat -15.66%

Why is that? Demand is falling, debt levels are high, excess capacity, and finally the inability of central banks to push on a string any longer.

Who me or agip?

I can assure you I can argue this topic.

Perhaps I am a little eccentric but certainly not crazy, at least not in a clinical sense.

Ghost of Igloi wrote:

Who me or agip?

I can assure you I can argue this topic.

Perhaps I am a little eccentric but certainly not crazy, at least not in a clinical sense.

Awesome. That's what I thought.

You are our ticket out of the doldrums here.

Glad to be of service. I will fill in until the next downturn.

Igy

Greece is the word, is the word...

Apologies to Frankie Valli.

Igy

Ghost of Igloi wrote:

agip,

Respectfully, I have given you plenty of sources far superior to your own. Most of your data is taken from sources are backward looking or that have a profit motive. I apears you have an inability to face a challenge in your thinking. Most of the data and sources you quote are so conventional it is destined to be wrong, I am afraid. Specifically, to counter your argument against my claim that global demand is falling, so then explain these current trends?

All in yearly percentages, as of 6-15-2015:

Baltic Dry Index -25.45%

China GDP -6.66%

Crude Oil -40.88

Aluminum -5.67%

Copper -8.11%

Nickle -27.18%

Steel - 65.43%

Cotton -24.37%

Coffee -22.45%

Sugar -25.19%

Wheat -15.66%

Why is that? Demand is falling, debt levels are high, excess capacity, and finally the inability of central banks to push on a string any longer.

well commodity prices are one factor yes. but keep in mind that the dollar has surged what - 20%? - over a year? Of course many commodity prices will fall in dollar terms when that happens.

But sure, commodity prices are a factor. One of around 30 that should be watched. But there is no way you can look at commodity prices falling and say 'ok, that means demand for goods is falling' There are way more factors than this.

Greece is too small to be significant. All the whining about them is meaningless.

What about the $billons loaned to them? How would it affect the rest of the PIIGS, specifically Portugal, Spain and Italy? If it is insignificant why did our Treasury Secretary call the the Greek Prime Minister yesterday?

Think again.