The Stock Market Bubble

[Publius1787]

Do we have a Stock Market Bubble About to Pop??

 

[TheOldSchool]

I'm pretty sure the imaginary digital numbers in the stock market computer are doing fine.

 

[editec]

I'd say that I think ALL PRICING is a bubble about to pop if I didn't understand that:

The market can be wrong MUCH longer than I can remain solvent.​

I started thinking that real estate was becoming a BUBBLE back in the late 70s.

It WAS a bubble, too. The price of real estate was already out of line with the incomes people were making.

That BUBBLE lasted roughly 40 years!

To be perefectly honest, I think the RE price corrections we had around 2006 are STILL out of line with incomes.

Now as to the stock market?

What does the PE ratio tell us?

I haven't looked but I SUSPECT that the prices are too high given the potential earnings.

But it looks to me like for those with money to invest, its the only game in town.

Savings pay shit, bonds pay shit, gold and silver are tarnished and commodities are too damned scarey for most investors.

 

[KissMy]

Sell in May and Go Away!

China just blew up the worlds biggest property bubble. Chinese Government is imposing a new 20 percent tax on profits from housing sales of second home. Chinese people are rapidly selling homes ahead of the tax. Divorce filings shot up across China after rumors spread that one way to avoid the new 20 percent tax on profits from housing sales was to separate from a spouse, at least on paper.

NYT: In China, Checklist for a Home Seller: First, Get a Divorce

All the rush to sell second homes in China is crashing the housing market. This has crashed the commodities market globally. Government's can't print enough money to stop the deflationary spiral that is now taking hold. Commodities & Stocks are imploding.

 

[editec]

Sell in May and Go Away!

China just blew up the worlds biggest property bubble. Chinese Government is imposing a new 20 percent tax on profits from housing sales of second home. Chinese people are rapidly selling homes ahead of the tax. Divorce filings shot up across China after rumors spread that one way to avoid the new 20 percent tax on profits from housing sales was to separate from a spouse, at least on paper.

NYT: In China, Checklist for a Home Seller: First, Get a Divorce

All the rush to sell second homes in China is crashing the housing market. This has crashed the commodities market globally. Government's can't print enough money to stop the deflationary spiral that is now taking hold. Commodities & Stocks are imploding.

Interesting, KissMy...thanks for posting this.

I haven't been paying much attention to the goings on in China, but I can certainly see how what's happening in China is going to effect the world's economy.

But I wonder where the Chinese are going to stash those profits they've made on RE?

they don't really have the same kind of equity market we have, and the average Chinese investor cannot get their cash out of China like we here in the West can invest in other nations.

Or am I missing something important about the state of affairs in China as it related to the "average" Chinese investor?

Real questions above, mate, I am seeking to tap into your base of knowledge here.

 

[KissMy]

Sell in May and Go Away!

China just blew up the worlds biggest property bubble. Chinese Government is imposing a new 20 percent tax on profits from housing sales of second home. Chinese people are rapidly selling homes ahead of the tax. Divorce filings shot up across China after rumors spread that one way to avoid the new 20 percent tax on profits from housing sales was to separate from a spouse, at least on paper.

NYT: In China, Checklist for a Home Seller: First, Get a Divorce

All the rush to sell second homes in China is crashing the housing market. This has crashed the commodities market globally. Government's can't print enough money to stop the deflationary spiral that is now taking hold. Commodities & Stocks are imploding.

Interesting, KissMy...thanks for posting this.

I haven't been paying much attention to the goings on in China, but I can certainly see how what's happening in China is going to effect the world's economy.

But I wonder where the Chinese are going to stash those profits they've made on RE?

they don't really have the same kind of equity market we have, and the average Chinese investor cannot get their cash out of China like we here in the West can invest in other nations.

Or am I missing something important about the state of affairs in China as it related to the "average" Chinese investor?

Real questions above, mate, I am seeking to tap into your base of knowledge here.

I don't know enough about China to answer those questions. Toro may know something.

I assume they do like we did. People sell & put their money into bonds & bank savings accounts. Their currency velocity slows so currency value rises while bond yields & interest rates tank. Classic Deflation = Cash is King!

 

[william the wie]

When possible the Chinese get their money into the US, Canada or Australia for bug out boogie time.

 

[Mr. H.]

This morning I moved half my IRA holdings from mutuals to cash.
Last time I did this was in '07. Once the market bottomed, I got back in.
No telling what's going to happen but I feel a little more secure now.

 

[iamwhatiseem]

editec is right...identifying the bubble is obvious. Saying when it will pop is a whooooole other issue.
Are we currently in a bubble? Yes, the mother of all bubbles. Propped up by your tax dollars.
Is this bubble about to pop? No. I have little doubt we will see 16000 before it does.
Will there be hell to pay when it does pop? Yes, enough so that it will change this country for many years to come.

 

[B. Kidd]

I just cashed out the other day. Sell high, buy low my mantra. Needed a hefty down payment for a house I'm buying. It actually felt good. Market may go a lil' higher, but if it hits 15,500 or higher, I'll eat fatso Kim Kardishians' panties (not really).

 

[william the wie]

Well market cap is 202% of GDP, in order to have true reversion to the mean the DJIA would have to hit at least 3500 and establish a bottom. I'm sticking to LEAP index puts because I do not predict tops or bottoms.

 

[AmazonTania]

editec is right...identifying the bubble is obvious. Saying when it will pop is a whooooole other issue.

Wasn't that obvious to those in 2004 - 2007.

 

[iamwhatiseem]

editec is right...identifying the bubble is obvious. Saying when it will pop is a whooooole other issue.

Wasn't that obvious to those in 2004 - 2007.

Absolutely. Equally obvious that there was a bubble then as now, however just like then - Wall Street can maintain a farce for many months - even years as long as our government has no issue with propping it up with taxpayer money,
Take away the $85,000,000,000 a month the gubbmint is providing now - the market would collapse in a day.

 

[OohPooPahDoo]

. Sell high, buy low my mantra.

Wow. What an innovative investment strategy.

 

[william the wie]

I expect 1700 or higher for the S&P prior to the correction.

 

[AmazonTania]

Absolutely. Equally obvious that there was a bubble then as now, however just like then - Wall Street can maintain a farce for many months - even years as long as our government has no issue with propping it up with taxpayer money,
Take away the $85,000,000,000 a month the gubbmint is providing now - the market would collapse in a day.

Well I won't disagree that the financial community is rather clueless, but this is due to the mass optimism among the ranks. Most believe that the market wasn't going to crash, while others believed that the market could NEVER crash.

 

[iamwhatiseem]

Absolutely. Equally obvious that there was a bubble then as now, however just like then - Wall Street can maintain a farce for many months - even years as long as our government has no issue with propping it up with taxpayer money,
Take away the $85,000,000,000 a month the gubbmint is providing now - the market would collapse in a day.

Well I won't disagree that the financial community is rather clueless, but this is due to the mass optimism among the ranks. Most believe that the market wasn't going to crash, while others believed that the market could NEVER crash.

Which tells you everything. (bold text)
Same reason many people were banking on the mortgage bubble to rise and rise forever...because the government was using taxpayer dollars to subsidize the mortgage industry buy buying up losses. (Exact same thing they are doing today)
So you had a market based on false demand.
Today - we have a market based on false demand. As I have said here 1000 times, if Burnbanke announced today the FED was ceasing the $85 billion-a-month toxic buyouts and bond buying - this 140000+ market would drop 5000 in a week. Inarguable.

 

[editec]

I heard an extremely interesting lecture by the guy who controls YALES's portfolio.

He systematically went though the various strategies that large portfolios can use and highlighted under what circumstances each approach worked best under.

He did not believe in market timing or contrarianism but instead invested long range because YALES perspective IS as an investor with a long view.

He alos seemed to think that merely keeping up with inflation is a BIG WIN for a large institutional investor over a long period of time.

He also suggested that for different investors different approaches may work for a while.

I'm sorry I cannot offer a better explanation but the lecture was about an hour long.

Basically I walked away from the lecture knowing better what I intuited thought all along.

The best investment strategy depends entirely on the investor himself, and no approach works in every economic circumstance

He ALSO believed that for most small investors there WAS NO TRULY good way to invest in the market.

Yes, people do it, and some of them make money, true. If you are one of those good luck for you. Hope it lasts

But most small investors have about as much control over their investment fate as dust in the wind has control over its fate.

I'm inclined to think he's right about that.

I doubly inclined to think that he'd be right even if the markets were not manipulated by insiders (which I am convinced they are)

 

[KissMy]

Epoch Times: China Bubble Appears Close to Bursting

CBS Marketwatch: China manufacturing data show weaker growth.

Bloomberg: Leading Index’s Drop Points to Slower U.S. Growth

24/7 Wall St.: Sell in May and Go Away 2013, Earnings Season Scorecard - "Corporate revenues are coming in soft, to the point that the concerns cannot just be ignored. These soft revenue reports are even after many analysts had lowered sales expectations ahead of and during earnings season."

NYT: More Forceful Fed Stands by Stimulus

The Fed emphasized that it was ready to increase or decrease its efforts to spur growth and reduce unemployment as necessary, a more balanced position than it took earlier in the year, reflecting the reality that a strong winter has once again yielded to a disappointing spring.

It was the first time that the Fed had explicitly mentioned the possibility of doing more in a policy statement, although officials, including the Fed’s chairman, Ben S. Bernanke, have made the point repeatedly in public remarks.

Analysts disagreed about the central bank’s intent. Some saw it as a signal that the Fed’s next move could be an expansion of its stimulus...

It added, however, that federal spending cuts were “restraining economic growth,” an implicit critique of the rest of the government.

That language was stronger than the Fed had used in previous assessments of the economic impact of fiscal policy. Fed officials have repeatedly expressed frustration that fiscal policy is working at cross-purposes with their own monetary policy. The statement also noted that the pace of inflation had slackened, a potential sign of economic weakness.

 

[iamwhatiseem]

....He ALSO believed that for most small investors there WAS NO TRULY good way to invest in the market....
But most small investors have about as much control over their investment fate as dust in the wind has control over its fate.

(My edits)
Indeed. For retail investors the market is un-tradable. 401ks, even with diminishing company matches, is an ENORMOUS risk and an extremely poor retirement strategy considering the bubble mentality of the market manipulators. It is like playing Russian roulette with your retirement...if you retire on the upside - good for you - on a market correction - boy are you screwed. Of course no market adviser is going to tell you that, 401ks represent $trillions of "free money" entering the markets where the owner of that money is clueless in what it is invested in right or wrong...it is a windfall for the markets that would have serious-serious ramifications if everyone suddenly pulled out all at once.
So if a person is banking on 401k investments as their chief retirement plan - you might do great, or you might have to have a couple paper routes in order to eat.