What to Worry About in This Surreal Bull Market • Hacker News Board

Re: What to Worry About in This Surreal Bull Market

#71

Post by stonemetal » Tue, Nov 28, 2017, 1:27 PM UTC

mattmanser wrote: post #47

TheAdamAndChe wrote: post #35

Earlier quoted context omitted.

I wonder what makes them think the stock market is overvalued. Increasing inequality combined with market saturation and the current difficulty to start a competitive business means it makes perfect sense that stock prices are historically high. Combine with the fact that passive index investing has become the norm, and it seems like it will be a new normal.

It explains each of the indicators on the page. Click the "Market Overvaluation" button (albeit with a pretty poor UI and terrible URL support so I can't link it). It's basically the value of US companies on the stock market divided by the GDP, $27 trillion / $20 trillion = 135%. Although it makes you wonder about if all that stashed money overseas is having a significant impact on that.

Is the value of stock supposed to equal the GDP?

It is my understanding that the value of a stock should be equal to present value of future cash flows. If those future cash flows are growing faster than the discount rate then a value higher than 100% of GDP is to be expected.

Re: What to Worry About in This Surreal Bull Market

#72

Post by sharemywin » Tue, Nov 28, 2017, 1:27 PM UTC

sharemywin wrote: post #70

aedron wrote: post #12

A bubble in slow motion, someone called the present economic environment. I think it's an apt description. Extreme "quantitative easing" (I refuse to take fed speak seriously) has only taken effect very, very slowly. Why? Because all it really was was recapitalizing banks which had enormous gaping holes on their balance sheets after 2008. They have been able to fill the tanks now, getting money hot off the presses fo…

The problem is a lot of people are momentum investing, hold and forget. kind of a variations on greater fool theory. eventually if I wait long enough someone will come along and buy this for what I paid or maybe more.

I worry what if the entire market is made of fools that will buy their next slightly smaller share of the market at ever increasing prices.

It used to be that traders set pricing enough that if things got out of hand then traders would come in to sell/short. But what if most people just used buy and hold?

Re: What to Worry About in This Surreal Bull Market

#73

Post by sdljfslkjfdsj » Tue, Nov 28, 2017, 1:29 PM UTC

wz1000 wrote: post #57

jatsign wrote: post #26

Earlier quoted context omitted.

Of those indicators, which is most concerning to you? I think I'd lean towards public debt...

"Public Debt" is not an issue. It is probably one of the biggest economic advantages the US has. US dollars(which all US debt is denominated in) are issued by the US government. This means that it is impossible to "default", unless the government willingly chooses to default. The US doesn't owe anyone "real" resources. On the other hand, the US has acquired huge amounts of real resources(cars, services, electronics,…

Sort of, it's not an issue until becomes one. They way out historically is run away inflation, aggressive taxation, war, and/or violent societal reorg. These all really suck compared to just living within your means like most working households try to do.

Re: What to Worry About in This Surreal Bull Market

#74

Post by jbooth » Tue, Nov 28, 2017, 1:31 PM UTC

anon1253 wrote: post #27

KozmoNau7 wrote: post #19

Earlier quoted context omitted.

I'll admit it's my personal estimate, looking at last decade's constant up-up-up of US stocks, especially the tech sector, and (as mentioned in the article) the widening gap between the value of U.S. household assets and GDP growth. It's unsustainable growth, and I'm afraid the crash is going to happen sooner rather than later. Will it be as bad as in 2008? I don't know. But it's going to hurt (except if you're weal…

I'm not an economist. But here is my arm-chair philosophizing about what is happening. To combat the economic crisis we started printing a lot of money. This had two effects: the interest on savings went way down, and the loans became very cheap. Having money = bad, having debts = good, at least for those who can carry the burden. This was done in order to incentivize investing, thus growing the economy. Obviously, t…

You've got some causality backwards, there. Interest rates were at basement levels before QE. QE was an inflationary measure in part intended to keep rates from going even lower into the negative.

QE was a reaction and counterpressure to low rates, not the cause.

Re: What to Worry About in This Surreal Bull Market

#75

Post by KozmoNau7 » Tue, Nov 28, 2017, 1:33 PM UTC

matwood wrote: post #54

KozmoNau7 wrote: post #5

Earlier quoted context omitted.

It will happen before 2020, the question is when exactly it will hit. My money is on late 2018 or early 2019. What to do before then? Don't have any money in US stocks. Diversify both geographically and sector-wise, cash out, be ready to invest when stocks crash through the floor, to ride the wave when they inevitably rise again. The real trick is spotting who's going to rise again and who's going to be left behind.…

> It will happen before 2020, the question is when exactly it will hit. What will be the catalyst? Just because we haven't had a recession in awhile is not enough. Corporate profits are up, consumer spending is up, and even though everyone on here thinks the numbers are lies, wages are starting to go up. > My money is on late 2018 or early 2019. So you have already either shorted the market or bought put options out…

Market overvaluation and public debt are sky-high, it's an unsustainable situation, we either reign it in by controlled means (not gonna happen), or it's going to crash.

I'm not a huge investor, but I am preparing by reducing the proportion of US stocks in my portfolio.

Re: What to Worry About in This Surreal Bull Market

#76

Post by topmonk » Tue, Nov 28, 2017, 1:34 PM UTC

sheeshkebab wrote: post #30

topmonk wrote: post #15

Earlier quoted context omitted.

Raising taxes didn't do it. It was the horrendous hype generated by the dot com bubble. Having a net surplus was just a blip on the radar which quickly became unattainable as soon as the resulting crash.

Capital gains tax was raised in late 80’s and 90’s.

I'm not denying that. I just don't think the explanation for why the deficit was eliminated was because of that.

Re: What to Worry About in This Surreal Bull Market

#77

Post by Spooky23 » Tue, Nov 28, 2017, 1:35 PM UTC

sharemywin wrote: post #70

aedron wrote: post #12

A bubble in slow motion, someone called the present economic environment. I think it's an apt description. Extreme "quantitative easing" (I refuse to take fed speak seriously) has only taken effect very, very slowly. Why? Because all it really was was recapitalizing banks which had enormous gaping holes on their balance sheets after 2008. They have been able to fill the tanks now, getting money hot off the presses fo…

The problem is a lot of people are momentum investing, hold and forget. kind of a variations on greater fool theory. eventually if I wait long enough someone will come along and buy this for what I paid or maybe more.

People are doing that because of the ridulous interest rate situation. If rates go up, that balloon will spring a leak as people move away from equities.

Re: What to Worry About in This Surreal Bull Market

#78

Post by margorczynski » Tue, Nov 28, 2017, 1:35 PM UTC

ronnypostsstuff wrote: post #32

What is the best thing to do with my savings? I am thinking about investing, and read up on it. One thing I don't understand is where to put money to minimize the impact of a recession. Government bonds? But then Graham says, I think, bonds prices also rise in a bull market, and fall afterwards.

Cash (a strong, value holding currency like the USD, CHF, maybe Euro but it also depends where the spark will be of the crisis), wait it out and when the biggest panic goes buy the undervalued assets when they're near the bottom. Gold is also an option but physical, a paper guarantee is nothing

Re: What to Worry About in This Surreal Bull Market

#79

Post by sdljfslkjfdsj » Tue, Nov 28, 2017, 1:36 PM UTC

artur_makly wrote: post #29

Would BTC prices rise or fall after this hypothetical crash?

None of us can know since it would require seeing into the future & bitcoin has no historical precedence of trading during a recession.

My hunch is it gets absolutely slaughtered. It's a guage of risk seeking appetite IMO & historically when the "turn" occurs the assets folks are holding with the most gains are liquidated the most aggressively because they need to finance the losses.

.com stocks in the late 90's got smoked & it's where people had the most gains. housing in 07-09 got smoked & it's where people had the most gains. Safe haven trades even got smoked like low yield & gold because they could be used as a source of funds.

Another illustration was Bernie Madoff. He didn't close up shop because he got busted - he turned himself in because he had no money left. People were using him as an ATM during the crisis. He had very nice slow & steady returns that you'd think in a crisis would be great in a portfolio that's getting smashed. Nope. It's a source of funds. People withdrew from him like crazy cause they needed the money & it's only then that he turned himself in.

Re: What to Worry About in This Surreal Bull Market

#80

Post by brndnmtthws » Tue, Nov 28, 2017, 1:36 PM UTC

aquova wrote: post #64

brndnmtthws wrote: post #34

Earlier quoted context omitted.

Nobody knows, but if I were to guess I think they'd rise. If you're someone who loves Bitcoin (and it would make sense to think the people buying Bitcoin love it), then it's likely you think of it as a safe haven. I see Bitcoin (and ETH, and others to a lesser degree) as a safe haven. I personally have been selling off stock and moving into BTC, ETH, and others because I think the traditional stock and bond market is…

> If you're someone who loves Bitcoin (and it would make sense to think the people buying Bitcoin love it), then it's likely you think of it as a safe haven. The problem with this statement is that many people getting into Bitcoin don't understand the underlying concept behind it, nor do they really care. I've spoken to several people who are treating BTC as a new stock investment, and only care about the steadily in…

> The problem with this statement is that many people getting into Bitcoin don't understand the underlying concept behind it

A lot of the people proclaiming "Bubble! Stay away!" are in the same category. Or I'd go as far as to say they don't really understand market dynamics, and the fact that the value of anything is only the price someone else is willing to pay for it. And then there's the people who spread anti-Bitcoin FUD because they are either a) mad they missed out or b) threatened by what Bitcoin offers (maybe they're a rent-seeking middleman who would be rendered obsolete).