Posted on 02/24/2021 6:27:57 PM PST by Barnacle
The Dow hit 31,961 today, up 424 points. During the Trump era, I attributed this trend in part to his policies and recovery from the COVID economic impact. But, Biden's election and his undoing of Trump's policies don't appear to have a cooling effect. As Larry Kudlow said recently, the economy is "red hot". But, why is that, and what's driving the market even higher? The Current S&P 500 PE Ratio is 39.97, hardily a bargain.
One possibility is that it is a reflection of the real impact of the stimulus bills of trillions of dollars, whereby a tax payer is happy to get a check for $1,600 at the cost of about $20,000 per tax payer.
In any case, please share your thoughts on what is happening and ideas of how to best position ourselves in preparation for what might be a near term correction.
Easy I’ve been trading stocks for darn near ten years...when you have a zero interest rate environment even Biden can’t screw up the market but where Biden is going to cripple this economy is in energy and the job market..so if you got a little extra cash buy a growth stock or an oil stock but research carefully of course
> It’s a game. It’s no longer stocks based on real worth, it’s just a game. <
Out of curiosity, I looked it up. Yep, you’re right. The S&P 500’s price to earnings ratio is now around 40. The historical average is around 15. So now you’re paying MUCH more then normal for the same amount of company value.
But the market still might have quite away to go yet. The highest p/e the S&P 500 ever had was 123.73 ! That was in May, 2009.
It defies logic and math. The only way to justify it is looking at interest rates. Interest rates effect P/E ratios. That is baked into the price. Stimulus is baked in. So it still defies logic. If I assume it will go down, it will go up, up it will go down. I am the inverse function. I am out of the market so you all can assume it will continue to go up. I will notify everyone when I get back in, then it will go down.
I lost more than 30% in 2009 and since then have quadrupled my money if not more
With interest rates near 0%, an investor has a choice of physical assets (mainly land) or equities.
That's where I am at too.
There is a story. As I remember it, a shoe shiner gave his opinion of the stack market to Rockefeller in October 1929. Rockerfeller went and sold everything he held.
Last week, a fellow who is certainly not in a position to be speculating told me how his crypto currency was skyrocketing. That was the last straw.
I’m retiring March 11. The IRS segment rates used in pension lump sum calculations are at historic lows. They did tick up at the end of January.
Freshly printed money has to go somewhere.
By the trillions.
“He said stock market doesn’t care who is president.”
That’s what my guy at Morgan Stanley says, too. I can’t help but thinking electing an anti-business, anti-oil, communist HAS to be bad for stocks. But I’ve been proven wrong many times when the Dems take the presidency, or even worse, when we have had one-party rule for a couple of years.
LOL
Lots of analysis is pointing this way.. due to the probability of the next insane stimulus bill. Important voices are warning of hyperinflation and stock is a hedge against inflation. Cash positions become the dangerous ones.
But, this is also why the analysts are pushing this position even as the prospect of serious inflation looms. A stock position is a real asset position as long as the company won’t die in the inflationary spiral
Inflation.
Weimar level inflation from overprinting money.
Interesting. I will have to go look. With the fed and treasury wanting to party it might go on for 4 more years. When it crashes it will be very fast. Circuit breakers will fuel the fire.
Can you expand on that ? I am financially challenged. Would it be good or bad to take the lump sum ?
CAPE (Cyclically Adjusted Price/Earnings ratio) is the second highest IN HISTORY at 35.75.
It was ~30 before the Great Depression crash of ‘29.
Median CAPE 10 is 15.89. It’d take a ~55% drop in the market to get us back to those levels from where we are today.
Stocks are going up because of “TINA” - There Is No Alternative. Bonds are yielding less than inflation. Cash even less.
The problem with holding lots of cash is inflation, where you’re “guaranteed” to lose 2-3% (today..probably 4-6%/yr soon) in purchasing power every single year. And we’re likely to see a LOT of inflation (like, 70s level) in the next 2-3 years as Biden and the radical left pump TRILLIONS of dollars into the market to levels never seen before.
It’s taken us 244 years to get to ~$28T in debt. Biden and the far left want to spend nearly a quarter of that between the $1.9T “stimulus” bill and the $2-3T “infrastructure” bill. And God help us if “Reparations” ever come. I read one estimate of TWELVE trillion (!!!!) for that yesterday. WE’VE NEVER, EVER HAD DEFICIT SPENDING TO THESE LEVELS. Inflation is going to go absolutely bonkers, which will destroy the value of cash and bonds. So, “TINA” - the ONLY place to put $$ right now is in hard assets (physical real estate, precious metals, etc) or equities.
That said, I do think equities are going to crash - and crash hard. I wouldn’t be surprised to see a 30-50% (or, God help us..even worse) crash this year or next. “1929, 2.0” is not out of the question IMHO. So, yeah..hang out in cash &/or bonds and lose 2-3% guaranteed per year. Or, roll the dice with equities and HOPE you get out before the stampede starts and you lose 10X (or more) that.
Very, very challenging and abnormally risky times indeed - especially for those in retirement that likely wouldn’t have the potentially decades long period needed for recovery..
Just riding the wave with my “play” money. Going to ride the wave for a little bit with my oil company stocks. Good couple of days.
I remember reading about a week or two ago that Japan’s stock market finally reached the point where it was 30 years ago. That means, other than dividends, they haven’t made anything for 30 years.
It’s true. At one time I thought about sending companies my trading history to get them to pay me not to buy their stock. No joke. I figure with my track record CEO stock options might get me into an inverse retirement. 😎
“If/when they start losing their grip, dow will crater,”
Of the statements thus far, I think yours has the most worth.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.