71–80 of 542 posts
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…
> “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…
This trope gets repeated over and over but it just makes no sense. Volatility is risk. What rational investor says "interest rates are too low, I MUST deploy my capital into a market that is seeing wild 30% gyrations from month to month instead of parking it safely while this global crisis plays out."
Understate inflation so real rates are negative, then your savings either dwindle or you give in to the pressure to take more risk.
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This trope gets repeated over and over but it just makes no sense. Volatility is risk. What rational investor says "interest rates are too low, I MUST deploy my capital into a market that is seeing wild 30% gyrations from month to month instead of parking it safely while this global crisis plays out."
A very large percentage of the market is required to achieve a certain return. Think insurance companies. Giant pension plans. Etc. They have all been forced further and further out the risk curve over the past decade due to low interest rates.
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One of my unemployed friends just told me he's putting everything into bitcoin.
Has he heard of Tether? It might be worth telling him that the entire cryptocurrency market it being propped up by 10 billion “dollars” of what is essentially Monopoly money.
Tether would account for 7.8% of all Bitcoin.
Not sure if that would count as being propped up. It's significant but not entirely propped up, there is a ton of real money in there too.
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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.
The Fed isn't buying equities. You could maybe argue that the bond ETFs that the Fed bought are "equities", but they aren't really. They're just working to keep interest rates low across the board, from the federal funds rate up to corporate bonds.
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This trope gets repeated over and over but it just makes no sense. Volatility is risk. What rational investor says "interest rates are too low, I MUST deploy my capital into a market that is seeing wild 30% gyrations from month to month instead of parking it safely while this global crisis plays out."
> instead of parking it safely while this global crisis plays out Because interest rates will never go back up, or if they do, they will be counterbalanced by inflation. This is the view of Ray Dalio at Bridgewater and (presumably) many other very smart people. I'm not that smart, but I agree. Thus, cash and cash obligations are no longer stores of wealth. Equities are, unfortunately. High volatility is just the pric…
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But then why did the stock market perform so badly for so long during 2008?
My guess: the economic problem had an uncertain path to resolution. A pandemic is different. We are waiting for a vaccine; once that is available, it’s game on. I’m not saying this is the truth; however, it is a plausible way to think that investors are viewing the future.
> “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…
This trope gets repeated over and over but it just makes no sense. Volatility is risk. What rational investor says "interest rates are too low, I MUST deploy my capital into a market that is seeing wild 30% gyrations from month to month instead of parking it safely while this global crisis plays out."
Earlier quoted context omitted.
I go back and forth on gold a lot. I keep a very small amount of my money in gold, but I’m literally thinking “if things really get down to it, I can trade this for food” But that type of mental exercise does not work well for many people. Especially imagining a system where our fiat currency is effectively useless.
Expecting that you'll be able to trade gold for food is assuming that the state after the collapse will fall into a very narrow band of "collapsed enough that the financial system is gone" and "not so collapsed that the food supply is gone." You might even call it... the Goldilocks zone. ;)