Imagined if it plowed that money into the market and stock prices fell during a period of high inflation.
What am I saying, that’s crazy talk. That would never happen.
I imagine the holdings are mostly concentrated in older generations’ portfolios
I’d agree, don’t have any data but it makes sense. Also, that chart falls in my bucket of things that just look like an exponential curve, which is how this works, no?
Having now read the post, this part falls quite flat to me:
On the other hand, they’ll have to explain why U.S. stocks are a compelling investment when they are more expensive – according to Yale professor Robert Shiller’s numbers – than they were in 2007 or even 1929.
“They’ll have to explain why stocks are a compelling investment when overall they’ve continuously increased in value for the past 95 years.”
In relative terms - say, price to revenue or price to earnings - stocks are more expensive now than they were in 2007 or 1929.
Which, it might be true in general - I’ve seen charts suggesting even when you look deeper in the market different deciles are more richly valued than 2007 or 2000 or 1929 - but I think is absolutely true for the high, high, high flyers of the market.
I’m no economist, but does that… really matter?
Like, if I have a gold bar and sell it for $100, and a year later you sell it for $105, then a year later it’s sold for $110…
If all the other gold bars are $100, that makes no sense. If people just want more gold than exists, then everybody will be paying $105 or $110 or the prevailing price. But it’s the same gold.
The concept of being overpriced/more expensive makes more sense looking at individual stocks or sectors, but I don’t see the issue in the aggregate market. Yesterday the market average was at this P/E ratio, now it’s at this higher P/E ratio.
But perhaps I’m missing why the value of stocks in aggregate going up is a problem. I’m ignoring the unlikely phenomenon of a spike akin to a reverse Flash Crash. Corrections are possible, but we’d expect a recovery following.
I think a lot of people think when the P/E is too high, it’s a sign there is a correction looming. Big question is whether you can time it. P/E kind of bottomed out in 1980 for example, then a long run-up but with quite a lot of volatility. I’ve felt like both the stock markets and the housing markets have felt over-valued for a while. But had I moved to cash in 2021 or tried to short the housing market… it would have gone poorly.
And of course P/E is just one metric, there are loads of reasons why the market moves up and down. And while I find it fun to speculate, if I thought I could time the market, I’d be doing that and making a hell of a lot more money than I make now.
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Ask people who bought stocks at prior market highs. Which, I’m not saying we’re at the top and a decline is imminent, but those people used that same mentality when justifying paying for stocks with a P/E of 50, 100, 200 or more.
I’m going to tie this back to my cash on the sidelines remark. If you sell a gold bar for $105, you get my cash and I get your gold bar. If I then sell the gold bar for $110, I get someone else’s cash and they get my gold bar. The total amount of cash in the system didn’t change; all that changed is who’s holding the cash and who’s holding the gold.
But to your point: as long as someone else is willing to pay more, the wealth of everyone who doesn’t sell goes up. Once there’s no other person willing to pay more, then wealth doesn’t climb and someone else deciding I want to sell and get my money introduces more supply, which will drive down the price as any potential buyer can now choose who to buy from and bid sellers against each other.
Without being pedantic or redundant, the market is the aggregation of the individual stocks. However, as fewer stocks comprise more of the market they exert more influence on the overall market’s metrics. Right now, MSFT + AAPL + NVDA are 21% of the market. The 10 largest stocks are 36.6%, the largest 26 are 50%. To the extent they’re overvalued, the market as a whole is overvalued.
Are they in fact overvalued? Not as long as there’s another buyer at a higher price.
This is correct depending on the reference point you’re starting from. This is also what people thought in March, 2000 and people who bought on both sides of the peak. Same for some stocks in 2007-2008. There’s stocks that have grown both revenues and expenses over the last ~25 years that have never come close to their ATHs from 1999-2000 - and that’s just on a nominal basis, not even on a real basis.
And to be clear here: I’m not saying we’re at a top. I’m simply saying there is no such thing as cash on the sidelines because cash in aggregate doesn’t increase or decrease when an asset is sold.
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Eight days later, will 5,600 hold up today?
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Why does Biden hate the stock market so much?
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I recently texted a friend of mine who is kind of into investing and is a republican, made some comment about the current bull market. And he immediately replied with ‘makes no sense with all the Biden bullshit going on.’
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Lol so he implicitly claims that the President can influence the stock market, admits that under Biden the stock market is doing very well, and struggles to bridge the gap connecting the two.
I’m not claiming all the credit for Biden for a surging stock market. Honestly, I haven’t done enough research to say if I give him a lot of credit or just a little bit. But that made me laugh.
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Thought your Republican friend would argue that the stock market surge is in anticipation of Trump victory in November?
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I’m not sure why he feels that way. I’m pretty sure the data from say the last 70 years shows that overall the Sock Market does better under Democratic Administrations than Republican. I mean I’m sure there is some variance too and what exact effect Presidents have is debatable but here is each President from Carter forward
Carter - 6.9% per year
Reagan - 10.2% per year
Bush 1 - 11.0% per year
Clinton - 15.0% per year
Bush 2 - (-5.6%) per year
Obama - 12.8% per year
Trump - 13.6% per year
Biden - 11.1% per year
Data pulled from this site Best and Worst Presidents (According to the Stock Market) | Kiplinger if it’s inaccurate my bad.
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I think he just gets all of his news and memes and what-not from conservative sources who put spin on everything. He sent me something about a doctor who specializes in Parkinson’s visiting the White House. I googled it and there’s no official word but Biden did just sign a bill to provide funding (I think, I didn’t read it in depth) for research into treatments for it. Which I figured might explain why a doctor might visit, to explain the bill to the WH and maybe lobby for Biden to sign it. But my friend immediately assumed that Biden must be funding Parkinson’s precisely because he has it. Which was a fun take.
The Parkinson’s guy was from watching Biden on TV and making a diagnosis from the couch at home. It’s not much different from the the doctors on TV who have said Trump is showing signs of dementia from what they have watched on TV. If you’re in camp Trump you probably believe the first guy while discounting the second, and if you’re in camp Biden you probably have that reversed.
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I saw a little bit of the WH Press Secretary saying, “President Biden does not have Parkinson’s. He is not being treated for Parkinson’s. He is not taking medicine for Parkinson’s”
and the reporters kept asking questions about “but maybe Biden has Parkinson’s?”
Of course I might’ve just caught 90 seconds that looked silly in isolation. Really felt like they were fishing for a juicy story hinting that the White House was lying and therefore Biden might have Parkinson’s.
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My friend texted me in February and said “I’m cashing out all my investments” (Retirement accounts and anything else he has).
My wife has an academic advisor who cashed out all his investments in Sept/Oct last year, and then missed out on like 8-10% of gains from then til February. I told my friend that. He said “Awesome sounds like we’re at the peak” (which was a jokey response but then he really did cash everything out).
lol
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[looks at Google Finance]
Wait, we’re almost -0.9% today? Something’s seriously wrong, this stuff isn’t supposed to happen, it’s up days only even if it’s by like 0.03 on the index.
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S&P now down 1%. Upcoming: CNBC with a red chryon, MARKETS IN CRISIS and Becky Quick doing a 1-on-1 interview with Tom Lee to assure everyone that things are fine in the markets.
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