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Asset prices are high across the board

economist.com

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Re: Asset prices are high across the board

#41

Post by EliRivers »

dirtyaura wrote: post #34
jonlarson wrote: post #30

Earlier quoted context omitted.

If I understand right, this is basically merging s&p 500 [1] and dollar value index [2]. The value of the dollar has been dropping all year, at a higher rate than the value of the s&p 500 has been going up. Basically, the market's dollar denominated value is going up, but dollars are becoming less valuable. This combines to mean that market value has actually down this year, not up. Perhaps op can correct me on anyth…

Yes, and as a European, this is very visible in my portfolio. S&P 500 ETF is the worst performing part of my savings portfolio, when nominated in euros. China, Nordics, rest of the Europe & emerging markets are all doing fine. Of course, the falling dollar price benefits US exports in the future, so it could be a good time to invest in US, now that it has been performing less stellar compared to the rest of the world…

Being in the UK, witnessing the pound devalue massively, my S&P investments have done stupidly well. As have my Japanese index investments. And my European index investments. Global index investments. If I thought the UK was going to sort itself out, I might sell off some of those and put them back into pounds.

That I blew most of last month's pay on European indices suggests I think the Maybot and chums are not done wrecking the UK yet :)

Re: Asset prices are high across the board

#43

Post by Boothroid »

EliRivers wrote: post #41
dirtyaura wrote: post #34

Earlier quoted context omitted.

Yes, and as a European, this is very visible in my portfolio. S&P 500 ETF is the worst performing part of my savings portfolio, when nominated in euros. China, Nordics, rest of the Europe & emerging markets are all doing fine. Of course, the falling dollar price benefits US exports in the future, so it could be a good time to invest in US, now that it has been performing less stellar compared to the rest of the world…

Being in the UK, witnessing the pound devalue massively, my S&P investments have done stupidly well. As have my Japanese index investments. And my European index investments. Global index investments. If I thought the UK was going to sort itself out, I might sell off some of those and put them back into pounds. That I blew most of last month's pay on European indices suggests I think the Maybot and chums are not done…

Interest rates likely to rise soon, so pound will likely strengthen.

Re: Asset prices are high across the board

#44

Post by dirtyaura »

UweSchmidt wrote: post #39
dirtyaura wrote: post #34

Earlier quoted context omitted.

Yes, and as a European, this is very visible in my portfolio. S&P 500 ETF is the worst performing part of my savings portfolio, when nominated in euros. China, Nordics, rest of the Europe & emerging markets are all doing fine. Of course, the falling dollar price benefits US exports in the future, so it could be a good time to invest in US, now that it has been performing less stellar compared to the rest of the world…

But you would certainly like to have some kind of explanation on why the dollar is so weak before calling this a good time to invest? Like - what exactly is going on over there? The US economy seems to be less dependent on exports as other countries, and the fortunes of US (tech) companies seem to hinge on other things than exchange rates.

That is very true. And in general, contrary to what Wall Street at least used to think, I think Trump administration will cause damage in the long run for the US economy, especially if he is re-elected.

Re: Asset prices are high across the board

#45

Post by SomeStupidPoint »

swandog46 wrote: post #36
pg314 wrote: post #28

Earlier quoted context omitted.

...beats trying to time the market... If you can time the market correctly, that is obviously the optimal strategy.

Only barely (see "What if we could perfectly time the market?" in [0] which cites [1]), and it is the height of self-delusion for anyone to think he or she will time it correctly, when professionals fail to do so. Don't try! [0] https://www.bogleheads.org/blog/bogleheads-principles-never-... [1] https://www.schwab.com/resource-center/insights/content/does...

From [1]:

> Rather than putting it immediately into the market, he waited and invested after month-end January 1993—that year's monthly low point for the S&P 500. At the beginning of 1994, Peter received another $2,000. He waited and invested the money after March 1994, the monthly low point for the market for that year. He continued to time his investments perfectly every year through 2012.

That's hardly "perfectly timing the market" in the usual sense. I'd consider "perfectly timing" to be sell at every peak and buy at every trough, so you're always holding stocks when they're gaining versus the dollar and holding dollars when stocks are losing versus the dollar.

It's impractical, but it's a much better result -- the theoretical limit to how much you could have made with perfect knowledge of all the pricing ahead of time.

That analysis, by contrast, only looks at what happens if you have a little perfect information -- and the answer is "not much".

Re: Asset prices are high across the board

#46

Post by danmaz74 »

hellofunk wrote: post #5
Bucephalus355 wrote: post #4

Joe Kennedy supposedly said he avoided the stock crash of 1929 by getting out of the market when his shoeshiner started giving him stock tips. Multiple times recently I’ve been at restaurants recently overhearing people talk about how much money they’re going to make in Bitcoin. It’s hard to convey here, but the make-money-who-cares-how-it’s-magic came across every time in such a wow-this-is-definitely-a-bubble way.…

As far as the stock market goes, sentiment has not yet reached a peak. There are still a lot of what I call the "wise naysayer" on CNBC and elsewhere, claiming that we are due for a big decline, or even a crash. Until there are no naysayers left, the chances of further climbs is supported by sentiment analysis.

In every single crash I know of there were lots of naysayers up until the actual crash. As a matter of fact, right after each crash I personally remember, there were some of those naysayers who got elevated to oracle-status by the press for a time, "the one who had foreseen this all". But they always failed to predict the timing of the next crash, so oracle-status didn't last.

Bottom line: still having naysayers isn't a relevant signal. Predicting that there will be a crash is easy (you are almost guaranteed to be eventually right). Predicting WHEN the crash will be is (almost?) impossible.

Re: Asset prices are high across the board

#47

Post by danmaz74 »

UweSchmidt wrote: post #39
dirtyaura wrote: post #34

Earlier quoted context omitted.

Yes, and as a European, this is very visible in my portfolio. S&P 500 ETF is the worst performing part of my savings portfolio, when nominated in euros. China, Nordics, rest of the Europe & emerging markets are all doing fine. Of course, the falling dollar price benefits US exports in the future, so it could be a good time to invest in US, now that it has been performing less stellar compared to the rest of the world…

But you would certainly like to have some kind of explanation on why the dollar is so weak before calling this a good time to invest? Like - what exactly is going on over there? The US economy seems to be less dependent on exports as other countries, and the fortunes of US (tech) companies seem to hinge on other things than exchange rates.

OTOH, the US economy is very dependent on one special "export": dollars, which for now the rest of the world accepts to sell goods on credit (see negative trade balance). If the dollar continues to devalue, this mechanism could break at some point.

Re: Asset prices are high across the board

#48

Post by danmaz74 »

hkmurakami wrote: post #33
saimiam wrote: post #17

Earlier quoted context omitted.

Can you explain this a little more? I don't quite know what dollar adjusted means.

Perhaps easier to conceptualize in Europe indices. Imagine European stocks go up but so does the strength of the euro vs the dollar. You, as a US resident (ok presumably) wouldn't be realizing those stock gains on the top line numbers because when you sell the position and convert back to dollars, the worse FX rate erodes your returns. When OP talks about dollar adjusted returns of S&P, an analogous mechanism is at w…

I think you meant that European stocks go up, but the euro goes down.

Re: Asset prices are high across the board

#49

Post by danmaz74 »

lurcio wrote: post #35
saimiam wrote: post #17

Earlier quoted context omitted.

Can you explain this a little more? I don't quite know what dollar adjusted means.

The real value is the nominal value adjusted for the rate of inflation (using an agreed definition of inflation and against some agreed monetary base - see M0, M1... and other types of monies) Inflation means the purchasing power of the unit of currency is reduced. iirc it was Keynes who noted that government financing can utilise the margin between real and nominal values, with the benefit of also maintaining animal…

Very interesting. I watched the video; the flaw there is that, to simplify things, it doesn't consider international trade and capital movements, which make the "simple matter of mathematics" not such a simple matter at all...

Re: Asset prices are high across the board

#50

Post by EliRivers »

Boothroid wrote: post #43
EliRivers wrote: post #41

Earlier quoted context omitted.

Being in the UK, witnessing the pound devalue massively, my S&P investments have done stupidly well. As have my Japanese index investments. And my European index investments. Global index investments. If I thought the UK was going to sort itself out, I might sell off some of those and put them back into pounds. That I blew most of last month's pay on European indices suggests I think the Maybot and chums are not done…

Interest rates likely to rise soon, so pound will likely strengthen.

Interest rates likely to rise soon

I keep hearing that, over and over, for years and years. Eventually it'll be true.

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