oh, crap, missed the starting year.
Its also 20% higher now (5,700) vs 4,800 (12/31/2021). 3 years at 7-8% is not crazy?
It was at 500 in1995. A little over 8% pa from there.
If you are going to try and time the market to juice a return, sure, you will probably have an opportunity to buy it cheaper sometime in the next 12 months.
COVID forced a reallocation of a lot of capital in a pretty short time - its not clear that another year long business downturn is needed to change things like we saw after the dot-com boom and in 2008-9. AI seems a bit gimmicky so my guess is there has been a lot of overinvestment in tech companies on something that is not quite ready, but is that extensive enough to see a dot-com style bust? Meh. The large transfer of wealth that has started from boomers to the next generation and the investments needed to support their elderly years feels like a pretty big buffer - they arent going to stop spending money because they lost a job.
According to the site multpl.com the S&P: (some data are only quarterly points)
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Has a P/E of 29.94 which has only been exceeded in 140+ years during four periods of time after which it sharply dropped: 1999Q1 34.00 => 2000Q3 26.50; 2001Q4 46.17 => 2006Q2 16.61; 2009Q2 101.87 => 2011Q3 13.88; and 2020Q4 35.96 => 2022Q3 20.44)
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Has a Shiller P/E of 36.84 which has only been exceeded in 140+ years between 1998Q2-2001Q1 and 2021Q1-2021Q4.
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Has a Price/Sales Ratio of 3.03 which in the last 24 years was only 0.01 higher in 2021Q4.
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Has a Price/Book Ratio of 5.13 which is the highest in the last 24 years.
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Has a Dividend Yield of 1.26% which is the lowest 140+ years except Apr1999-Feb2001
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The Case-Shiller Home Price Index is 249.46, which is the highest in 130+ years except for May2004-Jan2008, dates which are two years equidistant from the housing peak (I sold in Jun2005)
I feel like it all needs to come crashing down at some point, and I’ll happily sell off everything, but in America we are masters at inflating the bubble as big as possible before popping it.
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A normal p/e range is 20-25? So we might see a 20% pullback and be back where we are in 30 months but at a more normal p/e ratio? I guess I’ll bet on that before betting we see another 20% up.
Sideways and 5% unemployment for the next 2-3 years maybe? Cut some AI costs once we recognize the value is mostly realized in maintaining a workforce with a higher base productivity through the elimination of administrative tasks and reduced hours?
This sounds about right.
I am expecting a correction (20-25%) and uneployment will go up. Profit margins then attenuate back to long-term averages even with cost cutting. You could then see a few stocks that were not massively over-valued.
Its no surprise Buffet has also done a good round of profit taking by pruning his equity positions.
Vanguard has S&P 600 (small cap) with a p/e of 15.8 compared to S&P 500 (large cap) of 27.2. Time for small cap?
IWM is the iShares Russell 2000 ETF. PE is sitting at around 13.9.
I didn’t know about IWM. I see it emulates 1001 to 3000 (whereas S&P 600 is 901 to 1500). Do you have a preference between the two? How has it performed historically?
If you’re just looking at PE just buy a sp500 value ETF. Avg PE is around 20 vs 30 if you opt for sp500 growth
Small cap has really fallen out of favor this past decade (mostly because they are all essentially scam/fake companies like FuelCell which has zero chance of ever taking off without insane subsidies)
Some interesting stats in this (gifted) article on how stock markets largely shrug off conflicts.
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Strong jobs report. Unemployment down.
We could be entering a long era of high employment with the boomers retiring.
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Depends. The Labour Participation rate is dropping.
I am not a big fan of how many countries look at unemployment because it hides the drop in LPR with high looking employment figures.
The US is growing because of higher levels of immigration, even in the face of a declining LPR due to the boomers
retiring.
Scale does matter in these scenarios, which is why the US has an advantage there. I don’t really see other countries catching up to them now economically speaking. You will see secular stagnation in the UK and other older countries in the EU and Asia.
Was that in response to The President?
I would think LPR declining would further help employment.
(Or did you think he said a long period of unemployment?)
2/3rds of the LPR decrease is due to boomers retiring.
1/3rd is because the native population is either deciding not to work (I am not counting the usual students etc in this number) or not “counted” when it comes to employment (this is structural in the US this could mean someone with minor health issues that is older. They stop looking for work and they drop off the statistics)
What is happening is that immigrants are filling in a portion of that 1/3rd (as native folks don’t want to do some jobs) of the LPR loss, but that is not filling in the 2/3rds loss due to the boomers retiring. This is why LPR keeps dropping.
This then results in the dependency ratio (workers to retirees) further dropping, which results in higher taxes and inflation.
This will limit employment until the boomer demographic wave is over and the dependency ratio stabilises at a sustainable level.
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IWM has way too many companies that are losing money. I prefer Vanguard’s VBR ETF which is small cap value. The S&P 600 etf SPSM is also a better choice.
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I’m generally not buying small caps or international for superior returns. I’m strictly looking for diversification. I have enough bets on the large cap money makers already. I agree buy the S&P 600 with the profitability filter for higher EV if that’s your goal.
Ran into some analysis of just how extreme the tech dot com era really was vs what we are seeing now in the S&P.
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Have put in a concentrated equity macro investment on overseas equity (China, HK). Similar to what I did with US Equities (made quite a healthy profit on that trade)
Going to ride that Chinese stimulus wave as much as I can over the next 12-24 months.
Tesla is so doomed
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But muh cybertruck
I wonder what they’ll dream up next…
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