patrick.net

Bill, is your point that the S&P is too far ahead of corporate profits?

rando says

Bill, is your point that the S&P is too far ahead of corporate profits?

yes and no, one can't compare P/E ratios of now to 1980s or 90s since inflation expectations and expected yields are so much lower now, so I can't say that the S&P 500 is too high just from this chart.

But it is interesting to me that before QE happened there was a pretty good correlation between the index and corporate profits.

having said that, corporate profits are flat now, and if they start going down then I do expect money to leave the market, since we're in such a volatile trading environment vs. the 80s or 90s.

Oddly, corporate profits were quite flat 1995-2002 and that didn't stop the dotcom bubble.

https://fred.stlouisfed.org/graph/?g=dY8N

shows the late 90s saw +6% GDP growth year after year so I guess that encouraged people to get into the market, kinda like Amazon stock today (great growth but no profits).

https://fred.stlouisfed.org/graph/?g=dY8W

shows we're not going to have demographic-driven growth, and this is compounded by the anti-immigrant party line now coming out of people currently ensconced in the White House. (the spike in 2000 is all the 1990s immigrants getting counted in the 2000 census)

And that's just it, the current Trump brain trust makes 43's crew look like MENSA members.

If they're not careful, they could really fuck things up, just like the Bush crew did 2003-2005. They weren't expecting their handiwork -- giveaway "supply side" tax cuts to the rich, two major wars/occupations, deregulation -- to fall apart so quickly, but man it sure did.

Current admin makes the Coolidge Republican era look competent.

tr6 says

If Fed raises in June and 10 years at 1.4 then there is something wrong.

If history is anything to go by, the Fed's main job now is to get us into another recession by 2020.

blue is YOY % job growth, red is Fed pain index (Fed funds rate - CPI %)

Bellingham Bill says

If history is anything to go by, the Fed's main job now is to get into another recession by 2020

We are 4 hikes away from inverted yield curve. I guess we are not that far from 2020. Oh wait, Trump can nominate Gary Cohn to be the Fed chairman and he can start QE to buy up all the treasuries to pay for Trump's tax cuts.

In tech it's still all about Apple profits and revenues (since it's bigger than Google, Facebook, and Netflix combined) Just bought LG G6 for $280 at BestBuy. Bought an iPhone 7 for a family member for $350 ($300 off via target gift card) at Target at the end of March. It's only a matter of time before cheaper and better Android phones eat into Apple's profit margins. I know I made the argument a couple of years ago. Apple might have bought itself a bit of time with Samsung's exploding batteries last year.

Personally, I moved in the other direction, buying an iPhone when my Nexus Android phone died.

The extra cost is not significant to me compared to the increased ease of use.

One thing that's still driving me crazy is that there is no way to dismiss texts from the lock screen of an iPhone. You have to unlock the text and read the stupid text again even though you saw it on the lock screen.

Aside from that, I'm much happier with the iPhone.

rando says

Personally, I moved in the other direction, buying an iPhone when my Nexus Android phone died.

Patrick, for you Apple is a better company from the privacy perspective because that's their business model. I don't trust Google's privacy model and it maybe the reason to switch to Apple at some point. I would use all the same apps on iPhone that I do on Android. Google is better at maps, AI, and other things that you can install on iPhone and then lose your privacy again.

rando says

The extra cost is not significant to me compared to the increased ease of use.

It's not significant at all when Apple seems to have a major sale at the end of each quarter to meet their numbers. Watch for a sale at the end of June. The end of March sale was in Target. $300 off is a lot for an iPhone. I guess Apples thinks it's ok as long as corporate and government customers keep paying full price.

Yes, privacy was a huge issue.

Google makes money by selling your personal information to the highest bidder. If you have privacy, they don't make money.

I prefer to buy the device at full price and be somewhat more certain that my information is not being sold.

Apple maps seems pretty good to me. Haven't had a problem with it.

But I am annoyed that the Swiftkey app that makes it so easy to type on the phone refuses to work if I cut off its network access in settings. It feels it must report back everything I type. To whom and why, it doesn't say.

During times like these, a little bit of Jack Bogle wisdom will help.

I think people underestimate how much funds inflow, mostly automatic are flowing into us equity and that won't change anyone soon.

SFace says

I think people underestimate how much funds inflow, mostly automatic are flowing into us equity and that won't change anyone soon.

agreed, I was fearful of the boomers cashing out, then I realized Gen Y was bigger . . .

(plus of course the great monetary expansion since the mid 90s has to go somewhere)

https://fred.stlouisfed.org/series/MABMM301USQ189S

Long term, weighting machine.
Short term, voting machine.
Long term, wealth creation.
Short term, wealth transfer.
Long term, valuation.
Short term, technical speculation.

Stock market has two faces. Valuation is just one. You can NOT ignore the other one.

If you weight 10 years, over 95% probability that S&P will be lower than today's level.

Within 3 years? There is a good chance (>30%) that S&P could double if the 1% tries to fleece the 99% by luring their cash into the final gasp of the bull.

Of course the other 70% probability within the next 3 years short term would be to drop by half. After all,FED is tightening and you do NOT want to fight them.