US mainstreet economy can tolerate a certain degree of China correction. For financial markets, we will affect each other. You seem to have a Cold War glee. China doing poorly is not good for US economy.
US mainstreet economy can tolerate a certain degree of China correction. For financial markets, we will affect each other. You seem to have a Cold War glee. China doing poorly is not good for US economy.
ironside wrote:
US mainstreet economy can tolerate a certain degree of China correction. For financial markets, we will affect each other. You seem to have a Cold War glee. China doing poorly is not good for US economy.
no, it's not - business requires predictability - this craziness is not helpful.
I'll add that when oil gets cheap, many oil-dependent countries go nutzoid - their budget gets blown wide open and all kinds of carp flies around.
Probably the USSR was ended by low oil.
So as long as oil stays below $50 or $60, we have to be ready for bad stuff.
The corollary to that is sovereign wealth funds in those countries selling like mad to help plug budget deficits. I have no doubt much of the selling we see now is from oil dependent countries needing cash NOW.
Which is bullish - it's temporary and will fade. Those people all do the same thing at the same time.
Agip: You're stating nonsense! Oil prices increased before and during time of collapse of Soviet Union. They were over extended militarily. An over extended military is why nearly every empire collapses. {See Roman/Ottoman/British empires.} Price per barrel, light sweet crude, 12/1989, app. $21/barrel; 12/1990, app. $27.3/ barrel.
ironside wrote:
Agip: You're stating nonsense! Oil prices increased before and during time of collapse of Soviet Union. They were over extended militarily. An over extended military is why nearly every empire collapses. {See Roman/Ottoman/British empires.} Price per barrel, light sweet crude, 12/1989, app. $21/barrel; 12/1990, app. $27.3/ barrel.
Well ok maybe for one year the price of oil rose. But by 1990 it was too late.
this graph shows that inflation adjusted oil in the late late 1980s was lower than at any time since the early 1970s. Are you arguing that this price drop was not a key factor in the fall of the USSR?
I'm not denying that overspending on the military was also a key factor - but I will say that had the price of oil been higher in the mid to late 1980s, the USSR would have lasted longer.
agip,
There has never been a large cap stock that held a PE of over 100 thru a market cycle. NEVER.
Igy
Ghost of Igloi wrote:
agip,
There has never been a large cap stock that held a PE of over 100 thru a market cycle. NEVER.
Igy
that's not the point. A stock can still be winner with a falling PE. The point is to make money in stocks, not be ideologically pure.
agip,
Of course one can be ideologically foolish by investing in companies that will never deliver a positive return over the next ten years. You will not make money holding FANG over the next ten years. Feel free to remind me if I erred in 2026.
Igy
Ghost of Igloi wrote:
agip,
Of course one can be ideologically foolish by investing in companies that will never deliver a positive return over the next ten years. You will not make money holding FANG over the next ten years. Feel free to remind me if I erred in 2026.
Igy
it's now in my calendar
Ghost of Igloi wrote:
agip,
Of course one can be ideologically foolish by investing in companies that will never deliver a positive return over the next ten years. You will not make money holding FANG over the next ten years. Feel free to remind me if I erred in 2026.
Igy
I suspect that in 10 years all four will be part of other companies and teasing out how investments would have done will be impossible.
I'm sure Apple is thinking about buying NFLX, for ex
Ghost of Igloi wrote:
...big dog sell-off comes later....
Igy
For the record, I'm buying, not selling.
agip wrote:
Ghost of Igloi wrote:agip,
Of course one can be ideologically foolish by investing in companies that will never deliver a positive return over the next ten years. You will not make money holding FANG over the next ten years. Feel free to remind me if I erred in 2026.
Igy
I suspect that in 10 years all four will be part of other companies and teasing out how investments would have done will be impossible.
I'm sure Apple is thinking about buying NFLX, for ex
This whole discussion gets into why I have a VERY low opinion of the people teaching financial/investment analysis and those applying their (ahem) knowledge in mutual fund companies, which has resulted in a situation exposed by Fortune and Morningstar in 2015 that people making less than $150K and investing in mutual funds through 401ks are more than 3 times LESS likely to result in $1 million in their 401k than being struck by lightning.
http://finance.yahoo.com/news/401-k-millionaire-ridiculous-idea-050000111.htmlIn the particular case of PE ratios and future returns, earlier this year, Business Insider posted a more sensitive analysis of 12 month following returns by Jonathan Glionna of Barclays:
http://www.businessinsider.com/pe-ratio-frequency-and-12m-returns-2015-4Notice what happens on the right side of the graph: 1 year return goes UP as PE becomes HIGHER than 22. If I use Shiller's Irrational Exuberance data for 12 month trailing return for when the data first crosses higher PEs:
PE pivot point........12 month trailing return
25.0 (12/1995).......20.9% (9/2003)........9.6%
27.0 (11/1996).......27.6% (12/2004)......4.3%
30.0 (7/1997).........26.4%
40.0 (1/1999).........14.1%
ALL of the pivot points above 25 in Shiller's data had positive returns.
You won't get this from the so-called experts (who are really the direct opposite of that) because it's not PC, but what I'm arguing is that you do exactly what Igy is arguing against: You recognize that you are in late cycle behavior, and you move from strategic trading to tactical trading and you follow growth. You don't worry AT ALL about PEs because you know you won't be holding the high growth/high PE stocks very long. This assumes that you are an experienced investor and you know more than just how to buy mutual funds.
In other words you party hard but head for the exits just before the police raid the party.
Big Dog Investments wrote:
Ghost of Igloi wrote:...big dog sell-off comes later....
Igy
For the record, I'm buying, not selling.
I'm sure this won't surprise you, but I'm planning on doing the same. I'm just not too thrilled about catching a falling knife, so I think we have to wait for the Chinese to get this out of their system. At 4PM Pacific time, Shanghai is open and down 7%, but the US futures aren't following this time. At some point, Wall Street isn't going to look at the Chinese any more or perhaps view it as a positive (money flow into US market).
coach d,
Those statistics mean nothing because PEs are highest at market tops and lowest at the low. All you are stating is you think you know when to ditch the car before it goes off the cliff
Party on, I will short the punch bowl.
Igy
I chuckled at the Bloomberg article on PEs "history since 1989"....
coach d,
I think you are looking at yesterday's data Shanghai doesn't open until I believe 6:30 pm your time.
Igy
I find it interesting the macho challenge of buying stocks in a declining market. My experience has been that machismo turns to disinterest and then panic. Macho, macho, man.
Igy
Ghost of Igloi wrote:
coach d,
I think you are looking at yesterday's data Shanghai doesn't open until I believe 6:30 pm your time.
Igy
I have to chuckle when somebody like that (coachd) speaks with such supposed authority, and cites something as being significant (like China being down again, but the US not following this time), yet they don't even have the basic level of understanding to realize that it was showing yesterday's information.
Amazing that people like that are trading frequently on such faulty conclusions.
My,
Success in any endeavor breeds a certain arrogance that in it's own right can be destructive.
Of course I realize that investing and the financial markets are not ruled by science. But I do believe that there are models and a market history that is more instructive than momentum indicators and other supposed tools.
I don't have all the answers but to say the market is not overvalued is not supported by evidence. That data is scholarly and has a real history to support that conclusion. It is a simple concept that any investment should be supported by cash flow. To do otherwise is speculation.
Igy
Macho? WTF?