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Show HN: Is the stock market going to crash?

isthestockmarketgoingtocrash.com

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Re: Show HN: Is the stock market going to crash?

#211

Post by Iv »

runako wrote: post #35

I've never seen market valuation expressed as market cap as % of GDP. I'm not an economist, so I'll leave the detailed arguments to them. But it would be at least useful to explain why you think this is a meaningful metric as compared to those typically used to measure market valuation (e.g. P/E ratios etc.). Your graph also ties your valuation metric to the 2000 peak and the 2008 peak. However, there were crashes in…

It makes some sense if you consider market caps to be expectation of returns. All other things being equal (like the percentage of the GDP made by publicly traded companies) it makes sense to expect the market to expand at about the same speed as the GDP.

That this ratio doubled in 8 years is worrisome.

The thing is that an alternative analysis is to look at the linear regression since 1980 and it seems clear that a background upward tendency does seem to exist, so we can see 2009 as an adjustment to the 2008 crisis and 2017 as only slightly above the expected trend.

Re: Show HN: Is the stock market going to crash?

#213

Post by JimboOmega »

JumpCrisscross wrote: post #80
runako wrote: post #35

I've never seen market valuation expressed as market cap as % of GDP. I'm not an economist, so I'll leave the detailed arguments to them. But it would be at least useful to explain why you think this is a meaningful metric as compared to those typically used to measure market valuation (e.g. P/E ratios etc.). Your graph also ties your valuation metric to the 2000 peak and the 2008 peak. However, there were crashes in…

> market valuation expressed as market cap as % of GDP This metric makes little sense for this use case. Consider two countries. They are identical in every way except in Country A 90% of the companies are publicly-traded while in Country B 10% are. Country A will have a market cap to GDP 9x Country B's. Does that mean Country A is 9 times overvalued relative to Country B? The objection works in-country, too. Saudi A…

So I've had a fundamental complaint about Market Cap to GDP at least since 2005, which I've never gotten a good answer to:

There's this expectation that the market returns 7-10%... a number much in excess of the actual rate of GDP growth (over any significantly long period, anyway)

That can't continue forever. Especially in aggregate across the world. At some point the public market has captured substantially all the economic activity - after that there's no way for it to grow in excess of GDP without things like PE increasing (and again, that can't go FOREVER, regardless of what the "true" PE should be).

This is assuming all numbers are inflation-adjusted "real" numbers, of course, because the money supply CAN grow forever.

Re: Show HN: Is the stock market going to crash?

#214

Post by matthewbauer »

aphextron wrote: post #203
pdog wrote: post #69

If you're looking for The Single Greatest Predictor of Future Stock Market Returns[1], here it is: http://www.philosophicaleconomics.com/2013/12/the-single-gre... This is a long read, but it's worth it. The metric can be calculated in FRED[2], and as a predictor of future returns, it outperforms all of the most common stock market valuation metrics, including cyclically-adjusted price-earnings (CAPE) ratio[3]. (Basic…

Pure astrology

Not nearly as bad as some of the "Technical Analysis" I've seen. From what I gather, "Technical Analysis" just amounts to this is what the stock has done in the past, maybe it will do that in the future?

Re: Show HN: Is the stock market going to crash?

#216

Post by stouset »

icedchai wrote: post #195
JumpCrisscross wrote: post #121

Earlier quoted context omitted.

> in 2008/09...most people in the world lost confidence in banking systems You mean when everyone sold securities, moved to cash, and bought Treasuries, CDs and bank deposits?

2008 was great. Everything was on sale, and I doubled down on my stock investments...

With money from where?

If your money wasn't in the market, you might have been lucky with timing but statistically if you replay that scenario, you're losing out on gains by not just parking your money in the market in the long run.

Re: Show HN: Is the stock market going to crash?

#217

Post by cloverich »

muninn_ wrote: post #33
knewter wrote: post #19

Earlier quoted context omitted.

> Seriously, though, this is a real problem and we need to do something the thing we have to do is not borrow money we can't repay. capitalism is a distributed system. borrowing money you can't repay is a broken local protocol. don't try to fix that with anything but fixing it locally.

And we also need to make the loans dischargable and place some of the burden on educational institutions. Aside from universities that can be very selective, all other schools have an incentive to bring in as many students as they can. They have no financial risk if the students drop out.

> They have no financial risk if the students drop out.

I like this and would love to see more commentary on it. Taking one step back, the system is broken because we removed the primary safeguard: Bankruptcy. If we could declare bankruptcy to discharge loans, it puts the burdens on banks to only make loans they evaluate as having a reasonable rate of repayment on. We've removed that check. In turn, we have a completely predictable outcome. So, as far as I know the only alternative is to provide another, equally robust counter (like your suggestions, or just "free" tuition) to balance.

Re: Show HN: Is the stock market going to crash?

#219

Post by AJRF »

"We can measure Market Overvaluation by looking how much the stock market costs vs how much it is providing." Isn't this the opposite of what the stock market is supposed to provide? I assumed valuations for the most part are guided by what a companies outlook is for the future, not the present.

Re: Show HN: Is the stock market going to crash?

#220

Post by icedchai »

stouset wrote: post #216
icedchai wrote: post #195

Earlier quoted context omitted.

2008 was great. Everything was on sale, and I doubled down on my stock investments...

With money from where? If your money wasn't in the market, you might have been lucky with timing but statistically if you replay that scenario, you're losing out on gains by not just parking your money in the market in the long run.

I did get lucky, to be honest. I had low 6 figures in a total stock market fund and a similar amount of cash sitting around.
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