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Historically, the PE for the entire
U.S. stock market is about 15. But
today’s market PE of roughly 23 is
about 50 percent higher than the
historic average
The price of the companies divided by their past revenue? If so, which past? Last month, last quarter, last year?
The price of the company divided by future revenue? Then future revenue guessed by whom and for which time frame?
The amount of friends I have that are out of work and posting screenshots of robinhood on ig and snap right now is wild. This feels like crypto 2017 all over again. I suppose the difference is there is a real market under it all and retail traders aren't entirely driving this, but they're the ones left holding the bag when the curtain drops.
That's where the FOMO comes in. I, and many, many of my friends, missed out on Bitcoin in college. Many of my friends are posting the same things you state on their social media, and are making it clear they won't be left behind this time. Not sure what all that means, but it's fascinating.
Money printer go brrr is funny, but it's not capable of propping up the entire market forever. There's a flight to safety that happens when countries really start printing.
The optimistic is that the Fed is prepared to unleash the runaway inflation (you can keep the stock market records if you want... it’s just the dollars that will buy much less) — and the markets are currently busy of pricing it in. That’s fine... more or less.
The pessimistic scenario is that the current administration is determined to keep the stock market alive and kicking at all costs, whatever means necessary, until this November — and then it wouldn’t matter this much anymore. They think they have the resources for buyouts before November... however, the UK and Japanese governments somewhat famously failed to uphold the market in very similar scenarios, which ultimately led to decades of stagnation.
I wonder what it will be this time.
Historically, the PE for the entire U.S. stock market is about 15. But today’s market PE of roughly 23 is about 50 percent higher than the historic average Every time I see statements about the PE of the market, I wonder which PE they mean? The price of the companies divided by their past revenue? If so, which past? Last month, last quarter, last year? The price of the company divided by future revenue? Then future r…
It's price divided by earnings.
For price, I believe it's the sum of the market capitalization of all the companies in the S&P 500. If you divide by shares outstanding for all the companies, then you get price of the S&P 500 (price).
For earnings, is the sum of all the companies earnings (Net Income) in the S&P 500. If you divide earnings by shares outstanding, then you get earnings per share (earnings).
The have parted ways because the Fed is buying lots more than just treasuries. There is so much money desperate for returns because interest rates are so low. That is why we have such inflated equities right now. It is a mental game: if people don't know the economy is awful, maybe they won't change their behavior and maybe it will actually get better before they realize it.
Earlier quoted context omitted.
That's where the FOMO comes in. I, and many, many of my friends, missed out on Bitcoin in college. Many of my friends are posting the same things you state on their social media, and are making it clear they won't be left behind this time. Not sure what all that means, but it's fascinating.
It means a massive crash is coming. Money printer go brrr is funny, but it's not capable of propping up the entire market forever. There's a flight to safety that happens when countries really start printing.
Great for making the economy appear solvent, terrible for everything else.
I have no idea what the answer to this question is or even how to formulate it in a clear, answerable way. But it seems very important!
It seems that stock prices move, newspapers publish a narrative to explain it, but in many cases there is no way to tell whether the narrative is correct or not. Right now there is a narrative about Robinhood and other no-fee brokers, but is it true?
The amount of friends I have that are out of work and posting screenshots of robinhood on ig and snap right now is wild. This feels like crypto 2017 all over again. I suppose the difference is there is a real market under it all and retail traders aren't entirely driving this, but they're the ones left holding the bag when the curtain drops.
Or real estate circa 2006. When your cab driver starts offering unsolicited stock tips, that's the time to get out.
An alternative place to put investments will trigger it. When your options are savings accounts paying 0.25% interest, and treasury notes paying nothing, and CD's being garbage, what are your alternatives for investing? If interest rates were 5%+ on savings/CDS's/Treasury notes then you would see a bunch of money move from stocks to these other safer more stable investments. But the safety/stability doesn't mean shit if the return is near 0.