When will the stock bubble burst?

[Two Thumbs]

not until after the election

the fed will spend our money to keep it going at least until then

if a rep wins, it will fall apart the next Q
if a dem wins the debt will skyrocket to keep it afloat

What are you talking about? The Federal Reserve? Or the federal government?

the government

like how we give millions to franny and freddie

 

[CultureCitizen]

It seems to be a bit inflated, and now that the fed has risen rates, it has set the conditions for it to burst.

You're only NOW figuring this out?

No.
I've been saying this since one year ago.

 

[Toro]

We're badly, badly overdue for a nice, big correction.

I'd love to see 18% to 20%, but don't be surprised to see 25% to 28%. This has taken too long.

The Fed's actions were irrelevant. Yields are down, and there are at LEAST as many deflationary pressures at this moment than inflationary pressures.
.

I think your 25 to 28 is a lot closer to truth. And you are right about the Fed. I think it will be 16/q4 and 17/q1 where we finally see it. Because that is where our interest on loans FROM China go up.

No they don't.

Almost all the Treasury securities owned by China - and everyone - are fixed interest rate securities.

 

[Mac1958]

We're badly, badly overdue for a nice, big correction.

I'd love to see 18% to 20%, but don't be surprised to see 25% to 28%. This has taken too long.

The Fed's actions were irrelevant. Yields are down, and there are at LEAST as many deflationary pressures at this moment than inflationary pressures.
.

I think your 25 to 28 is a lot closer to truth. And you are right about the Fed. I think it will be 16/q4 and 17/q1 where we finally see it. Because that is where our interest on loans FROM China go up.

No they don't.

Almost all the Treasury securities owned by China - and everyone - are fixed interest rate securities.

Yup, although he may be talking about NEW bond purchases at higher rates.

That one concerns me quite a bit.
.

 

[Toro]

Stocks aren't in a bubble today but they are certainly expensive, more expensive by some measures than at any time other than during the Tech Bubble.

 

[Toro]

We're badly, badly overdue for a nice, big correction.

I'd love to see 18% to 20%, but don't be surprised to see 25% to 28%. This has taken too long.

The Fed's actions were irrelevant. Yields are down, and there are at LEAST as many deflationary pressures at this moment than inflationary pressures.
.

I think your 25 to 28 is a lot closer to truth. And you are right about the Fed. I think it will be 16/q4 and 17/q1 where we finally see it. Because that is where our interest on loans FROM China go up.

No they don't.

Almost all the Treasury securities owned by China - and everyone - are fixed interest rate securities.

Yup, although he may be talking about NEW bond purchases at higher rates.

That one concerns me quite a bit.
.

China has been selling our Treasuries. They're not buying. That's one reason why they are in trouble.

The stock market is going down for two reasons - the coming depression in the energy industry and the problems in China.

 

[Toro]

We're badly, badly overdue for a nice, big correction.

I'd love to see 18% to 20%, but don't be surprised to see 25% to 28%. This has taken too long.

The Fed's actions were irrelevant. Yields are down, and there are at LEAST as many deflationary pressures at this moment than inflationary pressures.
.

Indeed...........

Canadians Panic As Food Prices Soar On Collapsing Currency | Zero Hedge

ZeroHedge is so wrong so often, it's laughable.

They should change the name of that site to ZeroMoney, because that's what you'd have if you listened to them over the past five years.

 

[Mac1958]

The stock market is going down for two reasons - the coming depression in the energy industry and the problems in China.

Yeah, true. The question on China is whether this is just temporary as it makes its transition or a more permanent environment.

There could be some bankruptcies in energy, and we're staying out until the dust settles.
.

 

[Toro]

For example, the PE ratio of the S&P 500 is estimated to be around 19x. That's currently its long-term average. In 2000, PE for large cap growth stocks was 32x and the NASDAQ was around 100x. That's a bubble. What is going on in the stock market isn't anywhere similiar (unless you're looking at biotech or fixed income).

A 19x PE is the average of the last 20-25 years. The average PE for the last century has been ~16x.

BTW, since you seem to know something, the Street distorts the perception of market valuation by focusing on forward operating earnings. By that measure, the market is trading at 15x-16x "imaginary" earnings.

But that's an illusion.

 

[Toro]

The stock market is going down for two reasons - the coming depression in the energy industry and the problems in China.

Yeah, true. The question on China is whether this is just temporary as it makes its transition or a more permanent environment.

There could be some bankruptcies in energy, and we're staying out until the dust settles.
.

There are going to be a LOT of bankruptcies in energy. Oil at $40 for three years pretty much wipes out all the equity in the domestic energy industry. Banks who make senior, secured loans to energy companies - the first in the capital stack - are going to have impairments for the first time since the 1980s.

I was shorting the market pretty aggressively at the end of the year after being in cash for most of last year. I've covered most of my positions because we are extremely oversold in the near-term.

 

[Hedgology]

For example, the PE ratio of the S&P 500 is estimated to be around 19x. That's currently its long-term average. In 2000, PE for large cap growth stocks was 32x and the NASDAQ was around 100x. That's a bubble. What is going on in the stock market isn't anywhere similiar (unless you're looking at biotech or fixed income).

A 19x PE is the average of the last 20-25 years. The average PE for the last century has been ~16x.

BTW, since you seem to know something, the Street distorts the perception of market valuation by focusing on forward operating earnings. By that measure, the market is trading at 15x-16x "imaginary" earnings.

But that's an illusion.

One can argue, however, that using forward operating earnings has the benefit of reviewing the future earnings most financial analyst are most interested in because reported earnings may be depressed or even inflated by one-time accounting gains, such as litigation or whatever.

 

[Hedgology]

We're badly, badly overdue for a nice, big correction.

I'd love to see 18% to 20%, but don't be surprised to see 25% to 28%. This has taken too long.

The Fed's actions were irrelevant. Yields are down, and there are at LEAST as many deflationary pressures at this moment than inflationary pressures.
.

Indeed...........

Canadians Panic As Food Prices Soar On Collapsing Currency | Zero Hedge

ZeroHedge is so wrong so often, it's laughable.

They should change the name of that site to ZeroMoney, because that's what you'd have if you listened to them over the past five years.

The website rose to prominence for writing a story regarding Goldman Sachs involvement in flash order information to obtain profits. At first, it legitimately was intended to be a website aimed at the financial community, but with it's anti-establishment bias, it's mostly been a bastion for libertarian types.

Despite this, it still occasionally post some good information, mostly for entertainment value (their Twitter is hysterical), but I don't know anyone who seriously invest, full-time or part-time, who gets their investment advice from ZeroHedge.

 

[CultureCitizen]

This tells me nothing. Stock valuations aren't anywhere near the levels they were during the NASDAQ bubble. You're reaching.

No , but they are higher than the two previous bubbles: 1973 and 2008.

There was no stock market bubble in 2008. That was a housing bubble. There definitely wasn't any stock market bubble I recall in the 1970s.

You are probably too young :

1973–74 stock market crash - Wikipedia, the free encyclopedia

At this point, I'm certain you'll never understand what a stock market bubble is…

Show me one single link which considers a PE above 22 to be fair value and I'll eat my words.
Else, go on and buy some stocks.

S&P 500 Q3 Earnings Results: Market Overvalued

 

[CultureCitizen]

Stocks aren't in a bubble today but they are certainly expensive, more expensive by some measures than at any time other than during the Tech Bubble.

In general a PE above 20 is considered overvalue. The last I heard is S&P 500 index has already reached 22.
Within that set it is possible that some shares are at fair value or undervalued, but they must be cherry picked. Something which pension fund managers don't usually do.

 

[sjay]

For example, the PE ratio of the S&P 500 is estimated to be around 19x. That's currently its long-term average. In 2000, PE for large cap growth stocks was 32x and the NASDAQ was around 100x. That's a bubble. What is going on in the stock market isn't anywhere similiar (unless you're looking at biotech or fixed income).

A 19x PE is the average of the last 20-25 years. The average PE for the last century has been ~16x.

BTW, since you seem to know something, the Street distorts the perception of market valuation by focusing on forward operating earnings. By that measure, the market is trading at 15x-16x "imaginary" earnings.

But that's an illusion.

Finally a thread about economics with guys that actually know economics(Toro,Mac,and new member Hedgology) instead of the childish dick measuring contests ,as in my republicans are going to make things so much better than your democrats and vice versa that fill this ECONOMICS forum with useless garbage.

 

[CrusaderFrank]

It seems to be a bit inflated, and now that the fed has risen rates, it has set the conditions for it to burst.

^ Racist. You never talked about that when a white man was POTUS

 

[EdwardBaiamonte]

instead of the childish dick measuring contests ,as in my republicans are going to make things so much better than your democrats and vice versa that fill this ECONOMICS forum with useless garbage.

dear, Democrats like Barry and Bernie hate business and are not likely to encourage profits, employment, GDP, or innovation. Do you understand?

 

[EdwardBaiamonte]

instead of the childish dick measuring contests ,as in my republicans are going to make things so much better than your democrats and vice versa that fill this ECONOMICS forum with useless garbage.

dear, Democrats like Barry and Bernie hate business and are not likely to encourage profits, employment, GDP, or innovation. Do you understand?

and how stupid is it for culture creep to tell us the market is overvalued when there are millions buying each day who say its not and millions selling each day saying it is?

 

[Hedgology]

This tells me nothing. Stock valuations aren't anywhere near the levels they were during the NASDAQ bubble. You're reaching.

No , but they are higher than the two previous bubbles: 1973 and 2008.

There was no stock market bubble in 2008. That was a housing bubble. There definitely wasn't any stock market bubble I recall in the 1970s.

You are probably too young :

1973–74 stock market crash - Wikipedia, the free encyclopedia

At this point, I'm certain you'll never understand what a stock market bubble is…

Show me one single link which considers a PE above 22 to be fair value and I'll eat my words.
Else, go on and buy some stocks.

S&P 500 Q3 Earnings Results: Market Overvalued

I never said stocks were fairly priced. If anything, I implied that stocks were overbought/priced. I did, however, repeatedly say that an overpriced stock market is not the same as a bubble stock market. Overpriced involves equities with current stock prices that fail to justify their earnings outlook, which means you're overpaying for the stock. Stock prices are merely a reflection of earnings, and they increase when investors expect earnings to grow. If earnings aren't growing consistently to match the rapid increase in the stock price, that is a bubble. As I've stated previously, you've had plenty of stocks in the late 90s with IPOs that didn't make a single profit, but their prices grew rapidly. These stocks dramatically grew in price only because people were buying into their ideas.

There is something you should probably know (if you haven't already made a decision to get inside the market).

1) There is no way actually to time the crash or to known if a crash is on the horizon, whether you're implementing a buy-and-hold strategy (which means being invested in the market at all times) or whether you're using a market timing approach. Fundamental investors often attempt to time the market -- by leaving during a downturn and entering again when stocks pick back up -- if they believe the market is overvalued on a fundamental basis. However, stocks can't be predicted with precision to make such moves, at least, not without different return outcomes and tax consequences.

2) Market risk (rise and fall based on the value of an investment) is the risk you face simply by being invested in stocks. These risk can be mitigated simply by holding for longer periods of time, as the growth benefits of the stock start to kick in.Even if you think stocks are going to crash, being well diversify can mitigate these problems.

3) Even if you believe stocks are overpriced, what do you do? If your time horizon is very long (10 years or more), this is irrelevant to you. If you're a short-term investor, what else can you possibly invest in. Everything else is priced fairly high as well. There are no other asset classes where you are going to get a deal on. Besides, selling short-term makes you more vulnerable to tax consequences.

 

[EdwardBaiamonte]

Stock prices are merely a reflection of earnings,.

not really they can reflect dividends, general optimism and pessimism, or economic conditions.