Of course, low interest rates justify the valuations. And that is why we need $1.9 Trillion in frivolous stimulus.
Of course, low interest rates justify the valuations. And that is why we need $1.9 Trillion in frivolous stimulus.
Ghost of Igloi wrote:
https://twitter.com/jessefelder/status/1366525590027829248Of course, low interest rates justify the valuations. And that is why we need $1.9 Trillion in frivolous stimulus.
Clearly the market is betting that the sales from covid hit businesses will flood back in, starting March and April.
COVID has made all these valuation metrics and economic charts funky...will be fascinating to see how they play out. To see if sales and earnings do flood back into the economy, lowering these valuation numbers.
In theory the markets are looking at earnings and sales 6-12 months from now and putting a multiple on that, not the current artificially depressed levels of earnings and sales.
Ghost of Igloi wrote:
https://twitter.com/jessefelder/status/1366525590027829248Of course, low interest rates justify the valuations. And that is why we need $1.9 Trillion in frivolous stimulus.
Sales are low because of the rising prices.
agip wrote:
Ghost of Igloi wrote:
https://twitter.com/jessefelder/status/1366525590027829248Of course, low interest rates justify the valuations. And that is why we need $1.9 Trillion in frivolous stimulus.
Clearly the market is betting that the sales from covid hit businesses will flood back in, starting March and April.
COVID has made all these valuation metrics and economic charts funky...will be fascinating to see how they play out. To see if sales and earnings do flood back into the economy, lowering these valuation numbers.
In theory the markets are looking at earnings and sales 6-12 months from now and putting a multiple on that, not the current artificially depressed levels of earnings and sales.
Couple of points the market is ignoring, 1) missed meals, trips, are not replaced, nor do people eat twice as many meals or take twice as many trips once the economy opens, 2) spending deferred on point one, will lessen expenditures on stay at home businesses (home improvement, technology, Netflix subscription), 3) 20 million people are unemployed or under employed, many in businesses that will never come back or will be challenged for years into the future, and 4) very little in the $1.9 Trillion stimulus bill, is actually that, basically filling holes, or pork like the Schumer bridge and Pelosi tunnel, 5) both parties still won’t work together to solve real problems, same dysfunctional government with the same type Washington bureaucrats in charge.
So I don’t buy the same market is forward looking baloney. The market remains the most overvalued ever, for both stocks and bonds. The insanity from Bitcoin to SPACs are indicative of unhinged markets divorced from anything resembling a fundamental investment thesis. As you say, caveat emptor.
The market has literally never cared about points 4 and 5, ever - and that's even if it were true. Points 1 through 3 are either conjectural or just wrong (not to mention the fact that incomes rose 10% in January). Sure, people won't eat twice as much, but they'll find something else to spend that money on.
Discretionary income shall be spent and leveraged to the absolute maximum - this what Americans do.
You statement is conjectural or just as wrong as mine. For example: 1) If people took their discretionary income during Covid to improve their home rather than take a vacation, that spending goes to the vacation in the reopening. There is no increase in spending here. 2) The government makes transfer payments to the underemployed and unemployed. In this case, there is some marginal increase in discretionary spending by those that make more by not working, or thru mortgage or rent payment forbearance. Of course the full mortgage and or future rent will be due at some point. Secondarily, is the damage to the asset holder that is not being paid, but I digress.
How can incomes really rise, when 20 million people are underemployed or unemployed? I suppose just zeroing on those that are employed, but ignoring the larger problem. As always creating a narrative to justify a current market PE of 40.
The market may have never cared about points 4 and 5 in my original post, but markets have always cared about valuations. You and most of the posters here believe there is no connection between cash flow, and stock valuations. Fine, that is exactly what the Fed and Wall Street wants you to believe.
I just don’t buy it.
Ghost of Igloi wrote:
Seattle,
Bought a Graco X7 paint sprayer for my project. Renting would have been $100/day; this was $294.
Igy
Don't have to paint limestone.
Ghost of Igloi wrote:
You and most of the posters here believe there is no connection between cash flow, and stock valuations.
.
come on Igy hyperbole has no place at LRC!
but seriously, we're all on a spectrum here - from 'valuations are unchangable laws of nature' to 'valuations don't matter much.'
No one should say cash flow and stock valuations are meaningless.
We all should acknowledge valuations matter. The questions are
1) how much weight to put on them as economic conditions change. Sell everything when the market PE goes over 20 and stay out? Or 25? 30? 35?
2) Should valuation measures of the 1950s or 1970s still mean the same today? Or have accounting changes, tech and globalism changed the meaning of a PE of 20?
3) Does the market wisely choose to overlook short term problems and set valuations for stock prices down the road rather than today and yesterday?
agip wrote:
Ghost of Igloi wrote:
You and most of the posters here believe there is no connection between cash flow, and stock valuations.
.
come on Igy hyperbole has no place at LRC!
but seriously, we're all on a spectrum here - from 'valuations are unchangable laws of nature' to 'valuations don't matter much.'
No one should say cash flow and stock valuations are meaningless.
We all should acknowledge valuations matter. The questions are
1) how much weight to put on them as economic conditions change. Sell everything when the market PE goes over 20 and stay out? Or 25? 30? 35?
2) Should valuation measures of the 1950s or 1970s still mean the same today? Or have accounting changes, tech and globalism changed the meaning of a PE of 20?
3) Does the market wisely choose to overlook short term problems and set valuations for stock prices down the road rather than today and yesterday?
1 = OK, but I have never advocated sell everything
2 = revisionist history, clearly not true in 2000 or 2008; accounting changes?
3 = never was true, market has zero predictive ability
la gente esta muy loca wrote:
Ghost of Igloi wrote:
Seattle,
Bought a Graco X7 paint sprayer for my project. Renting would have been $100/day; this was $294.
Igy
Don't have to paint limestone.
Gente,
Nice. I do recall some beautiful limestone houses in the Georgetown area. We have a neighbor with a 2000 era house of limestone, built in a 1900 style. Beautiful look. I am not a fan of the 1950s minimalist Scandinavian or Frank Lloyd Wright copies that seem to be in vogue here.
Igy
truly amazing how much money the feds handed out. Cash out of helicopters seems to work.
Until it doesn't.
State revenue is pretty much unch from before the pandemic, because Feds have handed out so much cash which ends up paying sales taxes.
Which suggests another $2 trillion will create some truly wild economic conditions.
"As it turns out, new data shows that a year after the pandemic wrought economic devastation around the country, forcing states to revise their revenue forecasts and prepare for the worst, for many the worst didn’t come. One big reason: $600-a-week federal supplements that allowed people to keep spending — and states to keep collecting sales tax revenue — even when they were jobless, along with the usual state unemployment benefits.
By some measures, the states ended up collecting nearly as much revenue in 2020 as they did in 2019. A J.P. Morgan survey called 2020 “virtually flat” with 2019, based on the 47 states that report their tax revenues every month, or all except Alaska, Oregon and Wyoming."
I suppose it works if Joe Blow buys a house for $600k (see other post on the subject), and the values in the future move with the rate of inflation. Or, the prices keep accelerating (like the stock market), where one of two things happen: A) a dollar ain’t what it use to be, or B) valuations reset, and that house sells in a couple years back at $300k. My belief is we will see A or B, which both are bad. Unlikely we have a benign future with this nonsense. And it is nonsense. A truth few dares admit.
spend spend spend
incomes up, spending up
Target, today, on January comps:
Comparable sales, a key metric that tracks sales at stores open at least 13 months and online, rose 20.5% compared with a year earlier, as digital comparable sales rose by 118% year over year.
OK, I’m convinced. We are at a permanently high plateau in stocks.
Ghost of Igloi wrote:
I suppose it works if Joe Blow buys a house for $600k (see other post on the subject), and the values in the future move with the rate of inflation. Or, the prices keep accelerating (like the stock market), where one of two things happen: A) a dollar ain’t what it use to be, or B) valuations reset, and that house sells in a couple years back at $300k. My belief is we will see A or B, which both are bad. Unlikely we have a benign future with this nonsense. And it is nonsense. A truth few dares admit.
Inflation isn't necessarily bad
Ghost of Igloi wrote:OK, I’m convinced. We are at a permanently high plateau in stocks.
Ha ha. Good one!
Dr. Racket wrote:
Ghost of Igloi wrote:
I suppose it works if Joe Blow buys a house for $600k (see other post on the subject), and the values in the future move with the rate of inflation. Or, the prices keep accelerating (like the stock market), where one of two things happen: A) a dollar ain’t what it use to be, or B) valuations reset, and that house sells in a couple years back at $300k. My belief is we will see A or B, which both are bad. Unlikely we have a benign future with this nonsense. And it is nonsense. A truth few dares admit.
Inflation isn't necessarily bad
there's a real generational break on inflation. Those of us who lived economic lives in the 70s in high inflation times, and especially Europeans who remember the giant inflations of the prewar time, fear inflation. Younger people don't have that instinctual fear. But man, racketomatic, inflation stinks. When you go and try to buy things and they are always more expensive, it drives you a little crazy. Think about something you buy regularly now - a burrito for $9. Or running shoes. THen imagine them being more expensive every time you try to buy them. You feel you can't keep up and you are sliding backwards. Very demoralizing. Esp for those on fixed incomes.
A note on inflation: TIPS pay a 'coupon' based on CPI. CPI's largest factor is rent.
Rents are falling in many place - all coastal cities, probably.
So the fall in rents may blunt any apparent rise in inflation in goods we may see this summer and fall.
Which makes TIPS less interesting.
The Fed uses a different measure of inflation.
I said it's not necessarily bad. It's usually supposed to mean wages increase across the board as well
right, again an age thing. Older, retired people on fixed incomes suffer much more than young people who can change jobs, ask for raises.
and while prices always rise in inflationary times, you only get a raise every year or three. If you do get one.
agip wrote:...imagine them being more expensive every time you try to buy them. You feel you can't keep up and you are sliding backwards.
I experienced hyperinflation while serving overseas in the former Yugoslavia back in 92-93. The Croatian dinar was losing value relative to the deutsche mark at breakneck speed. You could use either currency, but everyone preferred to use marks, since a pizza would cost twice as much money, one week to the next. What a weird (and scary, if your life savings is in dinars) phenomenon... Wikipedia tells me the dinar declined by a factor of 70 over its short existence as a transitional currency between 1991 and 1994. I still have a few banknotes somewhere.
Is there a rule against attaching a helium balloon to yourself while running a road race?
Am I living in the twilight zone? The Boston Marathon weather was terrible!
How rare is it to run a sub 5 minute mile AND bench press 225?
Move over Mark Coogan, Rojo and John Kellogg share their 3 favorite mile workouts
Mark Coogan says that if you could only do 3 workouts as a 1500m runner you should do these
Red Bull (who sponsors Mondo) calls Mondo the pole vaulting Usain Bolt. Is that a fair comparison?