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The stock market and economy have parted ways

washingtonpost.com

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Re: The stock market and economy have parted ways

#21

Post by rnai »

FreeHugs wrote: post #11

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…

Normally this is 12 month trailing PE.

"The PE ratio of the S&P 500 divides the index (current market price) by the reported earnings of the trailing twelve months."

So it's current total market value (add the market cap of all 500 companies in the index),

And divide by the total past 12 months earnings of the same 500 companies.

If that doesn't answer your question, please let me know.

Re: The stock market and economy have parted ways

#22

Post by ISL »

Loughla wrote: post #9
ideals wrote: post #6

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.

Bitcoin is, including its geographic scale, a once-in-a-century event. One may expect to find similar returns in small investments in one's life, but probably not in broader global markets. It was a fad that happened to have just-enough technological innovation baked in to yield (at least for now) spectacular success.

For me, the real value in Bitcoin wasn't the small-dollars money I made in trading it for lunch money, but rather the exposure to the psychology of day-trading in a volatile market.

Unless your friends are playing the game with leverage, a short-term speculative play will only yield spectacular financial success if the government decides to print a spectacular amount of money.

If you can impart one idea to friends buying into this, or any, market, it might be this: "Don't play for more than you can afford to lose."

Re: The stock market and economy have parted ways

#23

Post by JumpCrisscross »

hitpointdrew wrote: post #20

> “I’m not sure what will trigger a sustained sell-off in stocks, but surging [virus] infections and another round of more business closures will be difficult for investors to ignore much longer.” 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…

Given the retail drive of this rally, bills coming due could have a similar effect.

Re: The stock market and economy have parted ways

#24

Post by ISL »

FreeHugs wrote: post #11

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…

In this context, one can probably use either trailing or forward PE. Companies do make forward earnings projections. Neither one is likely to bring P/E even close to 15.

Re: The stock market and economy have parted ways

#25

Post by secondcoming »

hitpointdrew wrote: post #20

> “I’m not sure what will trigger a sustained sell-off in stocks, but surging [virus] infections and another round of more business closures will be difficult for investors to ignore much longer.” 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…

I'm no gold bug, but turn some of your cash into gold.

Re: The stock market and economy have parted ways

#26

Post by DeonPenny »

Theres literally no where to put you money now.

The stock market would be down if you could put money in any government bonds that you thought would immediately start increasing spending or any stock or bond market that would do any better. Emerging markets are shaky with China destroying HK and corona running through cities everywhere in the world.

If you could even remotely tell me a safer place to get returns then I concede the point but I doubt you could

Re: The stock market and economy have parted ways

#27

Post by benmanns »

currymj wrote: post #18

concretely, how much does the sentiment of retail investors actually matter to prices -- in general for the whole market, and for specific stocks that dumb retail investors get excited about (Tesla, Hertz, or whatever)? 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…

I don't know how useful these are, but I found

428k+ Robinhood users hold some position in TSLA: https://robintrack.net/symbol/TSLA

50%+ is held by institutions: https://www.nasdaq.com/market-activity/stocks/tsla/instituti...

Re: The stock market and economy have parted ways

#29

Post by marktangotango »

3pt14159 wrote: post #13
Loughla wrote: post #9

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.

I echo this sentiment, but when all major central banks are printing? And the Fed is buying equities? There's some sort of brinksmanship going on that I find highly disturbing. Also seems like there's a large amount of will to keeping the party going indefinitely.

Re: The stock market and economy have parted ways

#30

Post by danhak »

SpicyLemonZest wrote: post #12

"FOMO" makes an entirely natural market process sound problematic. If an investor is confident that the economy will fully recover in 2022, they should be willing to buy stock at a very slight discount from fully recovered today, even if current economic conditions aren't great. That's not a psychological trap, just an efficient market.

A very slight discount? As of writing, the Nasdaq is at all time high and the S&P only 5% below. All this with depression-level unemployment.
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