Down goes the Dow

52 week highs, probably all-time highs

SP500
Dow
Nasdaq

not small caps
these are the good old days, gentlemen.

“As of January 19th, NVIDIA $NVDA and Microsoft $MSFT had accounted for about 75% of the S&P 500's gain this year, while the 20 largest stocks in the index accounted for 110% of the index's upside move. The remaining ~480 stocks were acting as a drag.”

—Bespoke

And did you buy them like we were telling you to?

No, I would never buy those stocks at their current valuations.

That ^^^ was from January 12, 2019.

Verdict: Good call Agip. Very good.

Microsoft up a cool 259% since then.

Hey, for you iBond holders, they posted their 1099 forms today. Remember, cashing any in last year is a taxable event.

FWIW, they are currently paying 5.27%, which I guess isn't too bad and worth sitting on at that rate.

The PE ratio is a simple way to assess whether a stock is over or under valued and is the most widely used valuation measure. Microsoft PE ratio as of January 19, 2024 is 38.15.

“Reposting my Jan comment - nothing has changed. Both the SPX and NDX have lagged T-bills since I posted "Motherlode" in Nov 2021, internals remain unfavorable, valuations beyond any extreme prior to Feb 2021 - aside from 7 weeks surrounding the 1929 peak.
hussmanfunds.com/comment/mc2401…”

—John Hussman, X 1/22/2024

Igy, got that. But it was a lot less when you posted in January 2019 about its annual profits justifying its valuation. I am referring to the P/E back then when you said it was overvalued, and it went up 259% regardless.

MSFT could be had for about $16 around 2010. Now it is up around $400. NVDA was about 55 cents in 2000. Now it is up around $600. Maybe you should have been loading up on them back then.

In 6 years (2030) MSFT might be around 1,500 and NDVA might be around 3,000 and you are going to be sitting on the sidelines talking about their "valuations."

The purchase price vs. the current price is a simple way to assess whether a stock is profitable and is the most widely used profit/loss measure.

Fun one here. From a year ago.

Two predictions: one from Zillow, presumably based on market action. The other based on brain power.

Zillow, presumably based on market action, predicted housing prices would rise.

Moody's, presumably based on MBA brain power, predicted housing prices would fall.

We now know that housing prices rose 7-9% nationally. Market wins.

Candidate for worst short-term prediction in recent memory. The market has risen 15% in the 3 months since this one. Risk on was exactly where to be at that time.

@GameofTrades_
Market situation:
USD moving sideways
Gold rallying
Equities declining
This is not the time to be risk-on

Oct 23, 2023
·
69.6K
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PE ratios correlate only very weakly with stock price returns, and different values tend to be "more typical" for different market sectors (e.g., financial stocks tend to have lower than average PE ratios without a corresponding higher than average price performance) and other considerations (e.g., dividend paying or not). Using PE ratio, and in particular a singular value of PE ratio, as a measure of value to support investment decisions, isn't necessarily likely to produce optimum portfolio performance. IMHO anyway

yeah this isn't talked about enough...

the market PE used to be 15ish and people still think of that as 'fairly valued.'

that was when financials and industrials made up the bulk of the market... and those industries typically have lower PEs

Now the market PE is 20-23ish. And many say 'don't buy it's too expensive.'

But a big reason for this 'expensiveness' is because tech and comms stocks now make up 30-40% of the index, and these industries tend to have high PEs for a lot of valid reasons.

If you want to have a portfolio of stocks with 15 PEs you can...they are out there...but the SP500 as a whole will have a higher PE because of all the tech. And it's not completely accurate to say the market is broadly overvalued because of this underlying change in the composition of the index.

True, but it does show that investors are increasingly willing to pay more for less MSFT earnings. That is true for the MAG Seven as well. You need unrealistic expectations to create one of the great equity bubbles. My humble opinion.

“Now the market PE is 20-23ish. And many say 'don't buy it's too expensive.'

But a big reason for this 'expensiveness' is because tech and comms stocks now make up 30-40% of the index, and these industries tend to have high PEs for a lot of valid reasons.”

I suppose a portion of that valid reason is the subsidization of EPS that comes from lower tax rates and in turn stock buybacks, and characterization of stock based compensation as not a business expense. Then again none of these things make any of these stocks cheap. It is more the same new era thinking that gets revisited at every bubble.