patrick.net

smaulgld says

Blurtman says

Current P/E ratios are not high.

P/E are at the high end but not exorbitant but as mentioned above much of that is due not to revenue growth but rather the relatively high PE's are a result of share buy backs bough with QE low interest money to window dress and by cutting expenses and not paying raises.
Profits are set to fall.

I would wager that most on Wall Street believe the current market would not be nearly as high without the Fed injection. Do you really think this is fueled by organic earnings and revenue growth?

Analyzer says

Do you really think this is fueled by organic earnings and revenue growth?

not much revenue growth, earnings growth is partially a function of companies buying back their own shares with their cash as they have not use for it to grow their business because the demand is not there. Some companies go one step further and borrow at low rates to buy back their shares to boost earnings per share by reducing the number of shares they have outstanding.

So no there is no revenue growth to justify the current high level of the stock market -pull QE, rates rise and we'll see the real economy a negative growth deflationary one. But the fed won't let that happen they will come up with some other reason to continue money printing even if they don't call it QE

smaulgld says

There are plenty of distortions in the market now as their were in 2000. A large number of companies with no earning and multi billion dollar market caps.

Also the PE's are skewed because many companies have engaged in share buybacks lowering their share floats making the earnings per share look better.

Finally, earnings growth is face out pacing revenue growth which means companies are getting earnings growth from share buybacks, and operational efficiencies like firing workings or moving them to part time.

I agree about the buyback, which means less outstanding shares and therefore there are more earnings per share.
source: http://www.businessinsider.com/sp-500-stock-buyback-history-2014-4

You could compare earnings growth to sales or revenues growth.

http://www.multpl.com/s-p-500-sales-growth

or

http://www.multpl.com/s-p-500-real-sales-growth

Another factor to consider are that interest rates are a lot lower now then they were before the stock market run ups in the late 1990's and in the mid 2000's. The Federal Reserve monetary policies lower the interest payments on corporate debts, and thereby increase their earnings.

I heard about 6 months ago on CNBC that many experts believe that 50% of the stock market gains were due to Federal Reserve policies.

We need to see revenue growth, which means more jobs growth. From what I've read, there has been an uptick in income growth. Some or a lot of that of course is due to capital gains and dividends.

adarmiento says

Another factor to consider are that interest rates are a lot lower now then they were before the stock market run ups in the late 1990's and in the mid 2000's. The Federal Reserve monetary policies lower the interest payments on corporate debts, and thereby increase their earnings.

Good points all which highlight that the Fed helped orchestrate an environment to boost stock prices not the economy

adarmiento says

I heard about 6 months ago on CNBC that many experts believe that 50% of the stock market gains were due to Federal Reserve policies.

We need to see revenue growth, which means more jobs growth. From what I've read, there has been an uptick in income growth. Some or a lot of that of course is due to capital gains and dividends.

Correct />
Jobs dont come from rising stock prices or rising home prices

smaulgld says

Correcf

Jobs dont come from rising stock prices or rising home prices

Sustainable jobs do not come from stock market gains or rising home prices. Short term jobs do. I have seen a major uptick of contractor home repair contracts about 10 years ago due to people using borrowed money from home equity loans.

adarmiento says

Sustainable jobs do not come from stock market gains or rising home prices. Short term jobs do. I have seen a major uptick of contractor home repair contracts about 10 years ago due to people using borrowed money from home equity loans.

Great point. QE provides temporary stimulus

smaulgld says

Great point. QE provides temporary stimulus

I think because of globalization and automation that the nature of our economy's survival is based on a speculative bubble cycle spurred by Federal Reserve policies.

smaulgld says

Good points all which highlight that the Fed helped orchestrate an environment to boost stock prices not the economy

Well it's just trickle down. It only stands to reason if you make rich people richer, that they will hire and pay their people better, that the money will flow into the economy and help everyone. Bottomless tax cuts, subsidies to corporations, or ZIRP from the Fed are all pretty much resulting in the same thing. If you don't like trickle down you must be a Socialist.

Crash? No. Correction of 10% to 15% is long overdue. Too many are waiting for the correction, so it can only happen when the early birds jump back in. Like what Isaac Newton did.

Vicente says

smaulgld says

Good points all which highlight that the Fed helped orchestrate an environment to boost stock prices not the economy

Well it's just trickle down. It only stands to reason if you make rich people richer, that they will hire and pay their people better, that the money will flow into the economy and help everyone. Bottomless tax cuts, subsidies to corporations, or ZIRP from the Fed are all pretty much resulting in the same thing. If you don't like trickle down you must be a Socialist.

Seems to be a contradiction- In general Democrats dislike trickle down policies and Republicans favor them. Yet when it comes to the Fed Democrats support Fed policies and Republicans oppose them. Perhaps it's because Democrats get more of their campaign money from the big banks?

jvolstad says

Laugh. I'm pretty much out of the market. And I'm debt free and have money in the bank.

Video on depositor bailins

http://youtu.be/XSb9VzNjQgE

smaulgld says

Yet when it comes to the Fed Democrats support Fed policies and Republicans oppose them.

Remind me how Republicans voted as a block against bailout? Oh right, they didn't. Because when the SHTF, they are country club socialists with a bunch of empty rhetoric and hot air to try and convince their moronic followers otherwise. GOP takes trickle down as axiomatic despite facts, it is just INCONVENIENT for them that this instance of trickle down is implemented via Fed instead of their usual special favors to Richie Rich. Perhaps a little bit of it is territorial jealousy, oh it's OUR job to make FIRE wealthier, if we aren't doing the handouts directly we don't get enough credit.

Vicente says

Remind me how Republicans voted as a block against bailout? Oh right, they didn't. Because when the SHTF, they are country club socialists with a bunch of empty rhetoric and hot air to try and convince their moronic followers otherwise. GOP takes trickle down as axiomatic despite facts, it is just INCONVENIENT for them that this instance of trickle down is implemented via Fed instead of their usual special favors to Richie Rich. Perhaps a little bit of it is territorial jealousy, oh it's OUR job to make FIRE wealthier, if we aren't doing the handouts directly we don't get enough credit.

Exactly they talk a big game but do nothing. Both parties are serving wealthy interests, the only difference is Democrats pay some attention to the less fortunate (while screwing them too!)

Historical P/E: http://www.multpl.com

Mean: 15.51
Median: 14.54
Min: 5.31 (Dec 1917)
Max: 123.79 (May 2009)

Currently 18.61, 20% above the mean.

Blurtman says

Currently 18.61, 20% above the mean.

Right! relatively high- would not be a problem IF the earnings were really growing at the pace of revenues But they are not. Thanks for that.

Vicente says

smaulgld says

Yet when it comes to the Fed Democrats support Fed policies and Republicans oppose them.

Remind me how Republicans voted as a block against bailout? Oh right, they didn't. Because when the SHTF, they are country club socialists with a bunch of empty rhetoric and hot air to try and convince their moronic followers otherwise. GOP takes trickle down as axiomatic despite facts, it is just INCONVENIENT for them that this instance of trickle down is implemented via Fed instead of their usual special favors to Richie Rich. Perhaps a little bit of it is territorial jealousy, oh it's OUR job to make FIRE wealthier, if we aren't doing the handouts directly we don't get enough credit.

In the house, more Republicans voted against TARP than for TARP, and compared to the Democrats the statement that Republicans were overall at least split if not opposed to TARP holds true, just the facts.

Buy more of whatever is underpriced.

Mr fiscal conservative Paul Ryan voted for the bailout

https://www.youtube.com/watch?v=eQUi5GhLoR4

smaulgld says

Good points all which highlight that the Fed helped orchestrate an environment to boost stock prices not the economy

it wasnt the FED that could fix the problem.. we need to get the bread and butter jobs ... mfg back onto our shores... this is where Congress failed to act. Overall lack of vision and leadership. Having a community organizer isnt going to turn the economy around.... we need industry people getting
jobs back in the USA and people employed.

All the fed did was bailout and enrich their shareholders- the too big to fail banks
They actually made it harder for the economy to create jobs by entrenching generational losers
http://smaulgld.com/millennials-not-part-of-the-club-yet/

In reference to the original point.

What Mell said the other day sounds like one of the few options, shorting, as it is a guarantee the stock market is going to correct most likely big time.

smaulgld says

All the fed did was bailout and enrich their shareholders- the too big to fail banks
They actually made it harder for the economy to create jobs by entrenching generational losers
http://smaulgld.com/millennials-not-part-of-the-club-yet/

In the long run they may have made things worse overall by their intervention. Corporate quarterly earnings and stock market records do not define an economic recovery, as we may be led to believe.

Analyzer says

In the long run they may have made things worse

I disagree there is no maybe about it.

Analyzer says

smaulgld says

All the fed did was bailout and enrich their shareholders- the too big to fail banks

They actually made it harder for the economy to create jobs by entrenching generational losers

http://smaulgld.com/millennials-not-part-of-the-club-yet/

In the long run they may have made things worse overall by their intervention. Corporate quarterly earnings and stock market records do not define an economic recovery, as we may be led to believe.

You are correct!

" Want a thriving labor market? Blow a bubble.

That’s one implication of a theory about the contemporary American economy developed by Lawrence H. Summers, the former Treasury secretary and prominent public intellectual.

The theory is a frightening one, implying deep dysfunction in the way the American government treats the economy. It is a trendy one, all the talk among policy makers and those at think tanks. And Mr. Summers expanded on it at a forum on full employment hosted on Wednesday by the Center on Budget and Policy Priorities.

The big idea is that — absent extraordinary intervention in the economy through fiscal policy, monetary policy or both — growth and employment will prove lackluster.
…
What’s a government to do? Well, the Fed could keep its easy monetary policy indefinitely and watch the bubbles form, like the dot-com bubble of the late 1990s or the housing bubble of the mid-2000s. But, Mr. Summers pointed out, bubbles burst, with hugely destructive consequences.

“A strategy that relies on interest rates significantly below growth rates for long periods of time virtually guarantees the emergence of substantial bubbles and dangerous build-ups in leverage,” Mr. Summers wrote recently. “The idea that regulation can allow the growth benefits of easy credit to come without the costs is a chimera.”."

source: http://timiacono.com/index.php/2014/04/03/on-deep-dysfunction-and-the-u-s-economy/?utm_source=twitterfeed&utm_medium=twitter

adarmiento says

The idea that regulation can allow the growth benefits of easy credit to come without the costs is a chimera.

Which is no doubt why he is not now the chairman, that quote is way too honest.

adarmiento says

" Want a thriving labor market? Blow a bubble.

That’s one implication of a theory about the contemporary American economy developed by Lawrence H. Summers, the former Treasury secretary and prominent public intellectual.

I remember that -he was basically saying we can't ever have a real thriving economy so we need to engineer bubbles-that guy almost become Fed Chair- instead we got just as bad with Yellen

adarmiento says

The big idea is that — absent extraordinary intervention in the economy through fiscal policy, monetary policy or both — growth and employment will prove lackluster.

Yes, from bubble to bubble. The smart ones and lucky ones get to keep the gains. The bag holders get to hold the bag; there's no hope for them anyway. The wealthy and connected get bailed out. And the toxic crap gets hoovered up by the Fed. Anyone got a problem with that besides the bag holders?

Latest Poll Results

What will you do if the stock market crashes?

invest in the stock market 25.87% (97 votes)

remain in cash 12.8% (48 votes)

buy gold or silver 40% (150 votes)

buy real estate 12.8% (48 votes)

buy treasury bonds 0.8% (3 votes)

buy foreign currencies 1.87% (7 votes)

buy crypto currencies like bitcoin or litecoin 6% (22 votes)

Total Votes: 375
http://smaulgld.com/what-happens-after-the-next-stock-market-crash-poll/

It would seem that gold is a poor choice.

No vote for shorting?

Buying stock at bargain prices would be a good idea.

indigenous says

It would seem that gold is a poor choice.

No vote for shorting?

Buying stock at bargain prices would be a good idea.

It would depend why the market crashed. Buying stocks might be a bad thing if they crash because of the end of QE- unless you think the Fed might in reaction to the crash pump up the presses again.

I think in that case gold or silver might be better bets as the dollar would tank on that move.

Who really knows what will happen or what they will do. We'll have to see when it happens!

smaulgld says

It would depend why the market crashed. Buying stocks might be a bad thing if they crash because of the end of QE- unless you think the Fed might in reaction to the crash pump up the presses again.

Do they ever not? If they stopped QE would that allow the market to clear? Part of it would depend on if the next president continues the FDR like meddling.

smaulgld says

I think in that case gold or silver might be better bets as the dollar would tank on that move.

I don't think so because we are in a deflationary period like Japan. 20 yr of abenomics have not lead to inflation there.

No shorting?

indigenous says

I don't think so because we are in a deflationary period like Japan. 20 yr of abenomics have not lead to inflation there.

We would be like Japan if the Fed does little But if the Fed institutes Abenomics right away and doubles down on the QE gold and silver would be a good bet. If they don't you are right deflation occurs which might not be the best for most asset classes including gold.

I didn't put short but it might be a good option because instead of a rebound like after the past few crashes, this crash might lead to a multi year decline where money could be made shorting.

indigenous says

Do they ever not? If they stopped QE would that allow the market to clear? Part of it would depend on if the next president continues the FDR like meddling.

They may have to now that they have a $4 trillion balance sheet-I think they want to put the burden on the citizens in the form of bailins and retirement fund confiscation/conversion.
"here are some Tbills for your retirement account that you must own-they are guaranteed and safe!

smaulgld says

Mr fiscal conservative Paul Ryan voted for the bailout

https://www.youtube.com/watch?v=eQUi5GhLoR4

When it comes to money, there are no "fiscal conservatives".

smaulgld says

They may have to now that they have a $4 trillion balance sheet-I think they want to put the burden on the citizens in the form of bailins and retirement fund confiscation/conversion.

Typically they do it through inflation, since that seems to be hard to produce maybe you are right. Reminds me of the Argentina story.

FortWayne says

When it comes to money, there are no "fiscal conservatives".

I think it has to do with group thinking. I remember I wrote my congressman back then, not to vote for it. He wrote back saying that he had to or the sky would fall. The truth is Hank Paulson sold the sky is falling bullshit which got them into a panic. I might add the catalyst was Jeff Imelt telling Paulson he had to cover short term commercial paper insolvency. Because of the derivative shenanigans.

Group thinking pure and simple instigated by some ass holes trying save their own irresponsible skin. If they just would have been allowed to fail the economy would have cleared and would have been better shape and only a foot note in history.

indigenous says

FortWayne says

When it comes to money, there are no "fiscal conservatives".

http://www.theguardian.com/business/economics-blog/2014/apr/06/global-economic-recovery-warning-signs-imf?CMP=twt_gu

I think it has to do with group thinking. I remember I wrote my congressman back then, not to vote for it. He wrote back saying that he had to or the sky would fall. The truth is Hank Paulson sold the sky is falling bullshit which got them into a panic. I might add the catalyst was Jeff Imelt telling Paulson he had to cover short term commercial paper insolvency. Because of the derivative shenanigans.

Group thinking pure and simple instigated by some ass holes trying save their own irresponsible skin. If they just would have been allowed to fail the economy would have cleared and would have been better shape and only a foot note in history.