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"P/E appears to be high, but not horribly so, for the S&P 500:" The only time it's been higher is before the Great Depression and before the 2000 implosion. edit: Also remember that the S&P alone can be slightly misleading, since Apple represents a disproportionate amount of the earnings and trades at a (relatively speaking) low multiple.
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Feb 26, 2015 18:43
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Agronox posted:Well, when a ten year Treasury is yielding less than 2%, SPY at an earnings yield of over 5% doesn't look too bad. If stocks become even slightly scary, ie the market wakes up from its collective delusion that you won't lose money on stocks, those risk-free returns from boring old treasuries are going to look mighty attractive. (Particularly where they sit now, compared to their European peers.) nebby fucked around with this message at 18:49 on Feb 26, 2015 |
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Feb 26, 2015 18:45
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Yeah that's fair, on second look the P/E for the S&P 500 does look dangerously high. I would look for a correction sooner rather than later, if we don't see earnings going up by a lot very soon.
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Feb 26, 2015 18:46
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Arkane posted:"P/E appears to be high, but not horribly so, for the S&P 500:"  Actually we've blown past the dot com bubble depending on what valuation measure you look at. Median P/E of earning companies is one of those, because now *everything* is expensive, vs 2000 when a few sectors were *absurdly* expensive and the rest were not.
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Feb 26, 2015 18:48
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The dot com bubble affected NASDAQ far more than the NYSE, but I'm confused by how useful an aggregate P/E is if you ignore all negative P/Es.
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Feb 26, 2015 18:50
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Looking at pe, or shiller pe, is a data point and I don't think it is necessarily a good one to indicate a market is overvalued in itself. You could look at the equity risk premium, which is currently higher than historical levels and therefore is depressing valuations, and conclude the opposite of what p/e tells you.
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Feb 26, 2015 19:01
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The Federal Reserve is pumping billions of dollars into the stock market (albeit indirectly) through quantitative easing, and now that they've stopped doing that, just you wait for that delayed reaction...Jack's right, some real poo poo is going to go down (market correction) this year. Unless they start up the money printing machines again, since they don't really have any other choice to keep inflation going on (since interest rates are at 0%). They're deathly afraid of deflation, so they keep inflating by whatever means necessary, as a kind of desperate buffer against entropy.
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Feb 26, 2015 19:08
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Leperflesh posted:The dot com bubble affected NASDAQ far more than the NYSE, but I'm confused by how useful an aggregate P/E is if you ignore all negative P/Es. Re: equity risk premium I think it's a fair argument but context matters. When the world's central banks are universally driving down rates then the equity risk premium is, by definition, going to rise regardless of how much risk exists in stocks. So looking at the equity risk premium as "compensation for risk" and deciding it is a fair trade based upon historical norms seems like a bad idea since the premium is artificially inflated.
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Feb 26, 2015 19:09
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Tautologicus posted:The Federal Reserve is pumping billions of dollars into the stock market (albeit indirectly) through quantitative easing, and now that they've stopped doing that, just you wait for that delayed reaction...Jack's right, some real poo poo is going to go down (market correction) this year. Unless they start up the money printing machines again, since they don't really have any other choice to keep inflation going on (since interest rates are at 0%). They're deathly afraid of deflation, so they keep inflating by whatever means necessary, as a kind of desperate buffer against entropy.
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Feb 26, 2015 19:10
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jmzero posted:If you can just arbitrarily change the price of a stock (through price-fixing witchcraft or whatever) you wouldn't have them go up every day all the time. You'd have them go up and down willy-nilly so that you could buy and sell and make lots of money. If you believe lots of stuff is overpriced, you could be right (heck, I agree for large swaths of the market). But if you're going to have a conspiracy behind it, that conspiracy needs a sensible motive or mechanism. His point about net income being subject to accounting "tricks" is actually the only reasonable thing he has posted. There are literally thousands of accounting ways to adjust net income that don't effect revenue. In my experience working in valuation I can only think of a couple times I've ever really used p/e due to its limitations. The typical earnings multiple metrics used are TIC (or EV) to a normalized ebitda/ebit. You might not be seeing this because you are looking at the wrong financial statement (sorry for the jab but it doesn't make sense to ask someone where to find this on the balance sheet.)
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Feb 26, 2015 19:13
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nebby posted:If you're trying to make comparisons, as long as you do so consistently I think anything is fair game. On an absolute basis though if you were just looking at P/E then yeah it's kind of defeats the purpose. Even if you are only comparing two points in time, it sounds bogus to me. Consider: in ~1999, at the height of the dot com bubble, NASDAQ was rife with post-IPO dotcom startups. The great majority of them had negative earnings and thus negative P/E ratios. In 2003, most of those companies were gone. Without looking, I would guess that a lot fewer companies listed on NASDAQ had negative P/Es. Survivor bias. So the two numbers aren't measuring the same thing: the one from 1999 doesn't include the dotcoms you're actually trying to look at, while the one from 2003 is a more complete look at the market. The bubble vanishes, and you're left with average P/Es that are closer to each other, and now you can argue that if today's P/E (of positive-only companies) is similar to the one from 1999, why, we must be in another bubble! nebby posted:Also the US just printed its first negative CPI since 1955, excluding the financial crisis. Pretty amazing really. (Yeah, yeah, I read ZH ) ...oil...
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Feb 26, 2015 19:15
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nebby posted:
I think we read the same article In fact looking at the link to your image I am sure of it 
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Feb 26, 2015 19:16
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nebby posted:
This isn't true at all? Erp is not going to rise by definition due to lower risk free rates. Just think through your assertion - if it were true, changes in the risk free rate wouldn't have any effect on valuations. This is silly. mike- fucked around with this message at 19:28 on Feb 26, 2015 |
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Feb 26, 2015 19:16
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The more I think about it the more I would regard that chart as deliberately misleading. Yeah, hey, the profitable companies on the NYSE in the late 1990s were not in any way representative of the dotcom bubble, so comparing today's P/E of profitable NYSE companies against those is essentially meaningless.
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Feb 26, 2015 19:19
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From 2010:Jack posted:The whole stocks are going up because things are really bad and the fed is going to throw free money at it thing doesn't seem to be sustainable. Don't worry, you're bound to be right eventually
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Feb 26, 2015 19:26
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Comparing the current stock market to 1999 is a bit misleading I think; in 1999 treasury yields were 250% of what they are now and there was a revolutionary technology that was changing the economy in radical ways, and the opportunities for implicitly diversified investing were newer with e.g. index etfs. It was incredibly difficult to find and back a winner in that environment but staying out of stocks meant giving up opportunities in a wildly enthusiastic bubble where the potential gains in the short term were immense. Today the quality of non-stock investment options is pitiful and it consequently drives capital into the stock market which is a qualitatively different investment opportunity. Prudence still dictates diversifying into holding more predictable investments like bonds; but I think most investors are going to have a hard time moving assets over to a <2% yielding bond market with the opportunity to get a double digit return indexing the stock market. If we start seeing the growth rate taper off to where bonds look competitive, that will be dangerous. With the prevalence and ease of indexing, it's possible for a lot of capital to get tied up in the markets and weather a non-trivial amount of businesses failing without the people investing it deciding to pull out.
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Feb 26, 2015 19:30
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quote:You might not be seeing this because you are looking at the wrong financial statement (sorry for the jab but it doesn't make sense to ask someone where to find this on the balance sheet.) I said that the lies would accumulate on the balance sheet. If you're cooking your books over time (this conspiracy has been going on a while) where else would they accumulate? And of course companies can fudge stuff. I'm just challenging him to give something specific he thinks is happening (which should be easy because this is apparently universal). And I assume he won't because he hasn't looked at anything and is just reposting some scary vague "fatcats are out to get us" crap he saw on Facebook.
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Feb 26, 2015 19:48
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Leperflesh posted:
The Shiller PE ratio is probably the most misleading and useless metric in existence. It has shown the S&P to be overvalued 97% of the time over the past 25 years. Meanwhile the stock market increased in value eightfold.
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Feb 26, 2015 20:02
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jmzero posted:I said that the lies would accumulate on the balance sheet. If you're cooking your books over time (this conspiracy has been going on a while) where else would they accumulate? Look at bank earnings re loan loss reserves releases and so called 'one time litigation charges'. Also gaap vs non-gaap in something like CRM where they've never shown a gaap profit in their corporate history. Not to mention using debt to buy back shares to increase EPS, which isn't quite an accounting trick I suppose. Series DD Funding posted:Don't worry, you're bound to be right eventually Well now that every central bank on the planet is playing the reindeer game its a lot closer to happening. Also as long as we're dredging up old posts: Jack posted:The USD is the best idea for multiple reasons. The first off is that commodities will be decapitated in a debt deflationary environment. The second is that with the Eurozone instability there is always that threat that the Euro will dissapear. Lastly and most importantly is that financial institutions have been engaging in a massive USD carry trade and in a debt deflationary event that will unwind which will have the purchasing power of your USDs soar massively. Funny how things still haven't changed. Speaking of not changing, all the futures for asian, european, and the us indexes are within a few ticks of their daily highs. Yet I can't seem to find some unifying piece of news which would account for such things.
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Feb 26, 2015 20:06
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jmzero posted:I said that the lies would accumulate on the balance sheet. If you're cooking your books over time (this conspiracy has been going on a while) where else would they accumulate? Some accounting items that effect net income that do not represent any economic gains or losses will have a balance sheet impact, but you really aren't going to be able to tell this just by looking at a balance sheet. My point was that you look at the income statement to find this, not the balance sheet. Don't get me wrong, jack is clearly a crazy person and you are probably right in your assumption that he may be getting his information from some scare tactic Facebook post. However, it is correct that one major limitation (amongst many others) of the P/E ratio is that accounting net income is oftentimes substantially different than the actual economic gains the company is realizing for a large number of reasons. Multiples based upon revenues, on the other hand, do not have the same kind of limitations (although they have different ones) as revenue recognition is much more difficult to manipulate.
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Feb 26, 2015 21:49
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mike- posted:This isn't true at all? Erp is not going to rise by definition due to lower risk free rates.
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Feb 26, 2015 22:41
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nebby posted:I must misunderstand the erp (it's been a while since I've had my head in finance) -- I thought the ex-ante erp is just the differential between some estimate of the future return vs the risk free rate. So if the risk free rate goes down then the erp widens, all else being equal, right? No, it wouldn't widen by risk free decreasing. Like I said earlier, if you think that idea through, it would mean that changes in the risk free rate would have no effect on valuations as a decrease in rf would be offset by increases in the erp, and vice versa. Equity risk premium is basically the premium over the risk free rate that "investors" (in aggregate) require to compensate for the risk of purchasing equity securities. There are numerous different ways to estimate this premium, but it is independent of the risk free rate. Edit: another example that may help you conceptualize this is its kind of like the equity analog of bond spreads (ie the premium baa corporate bonds trade over rf etc..) mike- fucked around with this message at 23:21 on Feb 26, 2015 |
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Feb 26, 2015 23:09
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The US Stock market as a whole is perhaps overpriced, but that is not the same as believing a cabal of central bankers are colluding to fix the world economy. Stock are routinely at all time highs because, hold your horses, money is decreasing in value over time  In my day a dollar used to costa nickel I tell ya
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Feb 26, 2015 23:10
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Scenario time: I have a stock (PSEC) that I thought would be good for steady high yield dividends that I bought last year. My thinking is that while growth may not happen with the price, it couldn't hurt to park some money on a 10% return just to see what happens. I now understand a bit better that little firms like this position themselves exactly for that reason of looking like really attractive investments. I also did this with DNP which has done alright in roughly the same time frame. Combined I only put around 10% of what I invested in CY2014 into these two, sort of as an experiment. Anyway since then, the PSEC price has steadily declined and just recently the monthly dividends have taken a ~30% reduction (missed their earnings target pretty badly and some business slowdown also reported). I've owned the stock about 8 months and if I sold now, adding up the dividends it's paid out over time, it would result in a net 5% loss of my initial investment for my troubles. I understand that's not really the correct way to view things when deciding about the investments you have today, but just wanted to add it for context. Given both the declining dividend and price I feel like I want out as I don't have great hopes for them. Just curious for feedback of what others would do with this investment what other questions you would ask yourself that maybe I'm not for reaching the decision, how would you probe a company offering really attractive dividends before buying, etc. The options as I see them now are: 1) Sell, realizing the loss now with the expectation that it would only be worse later 2) Hold, the dividends are still pretty good and (maybe?) are unlikely to continue dropping 3) Wait to sell until I've held them past 12 months so that I can use it as a long term loss for tax purposes. Short version: If a stock you're holding is not doing well, what sort of process do you go through with deciding on what to do about it?
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Feb 26, 2015 23:28
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Jack posted:
You posted that almost three years ago, the dollar rally didn't come till about eight months ago. You've been sitting in cash since 2010 while the indices more than doubled. In other news bears have predicted 13 of the last 2 stock market corrections.
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Feb 26, 2015 23:48
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I also post in that very post that you can buy at 10:30 am in the morning and sell at close for an easy intraday scalp. Something which I've posted continually over the years and which worked again today. A day that I might add stocks closed yet again pinned to their daily highs in yet another miraculous V shaped recovery. Almost like they were meant to be fixed up there.
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Feb 27, 2015 01:20
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Rbear posted:So I signed up for robinhood and put a couple hundred in. This morning placed a trade for bioc, maximum number of shares allowed by the app for my account. The order was pending all day and I just got an email telling me my order was cancelled. It is kinda sad because the stock is going up and i didnt miss the ride up yet, it went up 30% today. Is it normal for brokers to cancel orders? I'm pretty sure I read somewhere that robinhoods market order still is a limit order +.05 of current market when you submit the order
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Feb 27, 2015 01:21
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People have been crowing that equities are 'overvalued' constantly since like 2010. If you've been sitting on the sidelines the past 5 years I feel bad for you, son.
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Feb 27, 2015 01:26
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That's just because the central bankers are luring you into a sense of complacency by rigging equity prices *somehow* for *reasons*
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Feb 27, 2015 01:38
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Jack posted:I also post in that very post that you can buy at 10:30 am in the morning and sell at close for an easy intraday scalp. Something which I've posted continually over the years and which worked again today. A day that I might add stocks closed yet again pinned to their daily highs in yet another miraculous V shaped recovery. Almost like they were meant to be fixed up there. So I take it you are a billionaire from your buy at 10:30 sell at close foolproof strategy?
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Feb 27, 2015 02:27
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I actually tested his strategy in Quantopian the last time he posted it, and it was a loser (surprise!) Edit: From 9/1/2010 until 2/25/2015, buying SPY at 10:30 and selling 1 minute before close, with $0.02 slippage: Total Returns  0.6%Benchmark Returns (buying and holding SPY) 115.6% Alpha -0.10 Beta 0.36 Sharpe -0.22 Sortino -0.29 Information Ratio -3.09 Volatility 0.08 Max Drawdown 13.2% Also, the close price is only closer to the high price than the low price 60% of the time for SPY over the same date range. Essentially, Jack is full of poo poo. ohgodwhat fucked around with this message at 05:11 on Feb 27, 2015 |
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Feb 27, 2015 04:52
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Jack posted:I also post in that very post that you can buy at 10:30 am in the morning and sell at close for an easy intraday scalp. Something which I've posted continually over the years and which worked again today. A day that I might add stocks closed yet again pinned to their daily highs in yet another miraculous V shaped recovery. Almost like they were meant to be fixed up there. I'm not crazy. You're all crazy! Look at the charts! Look at the chaaaaaarts!
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Feb 27, 2015 05:21
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Bhaal posted:Scenario time: I have a stock (PSEC) that I thought would be good for steady high yield dividends that I bought last year. My thinking is that while growth may not happen with the price, it couldn't hurt to park some money on a 10% return just to see what happens. I now understand a bit better that little firms like this position themselves exactly for that reason of looking like really attractive investments. I also did this with DNP which has done alright in roughly the same time frame. Combined I only put around 10% of what I invested in CY2014 into these two, sort of as an experiment. Would you invest further at the current price? No? Then probably sell. Yes? Then hold. Also there is no such thing as a long term loss so you might as well sell now if you to tax harvest, but it's pretty early in the year for that.
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Feb 27, 2015 05:37
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ohgodwhat posted:
This is a beautiful post and you are doing God's work.
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Feb 27, 2015 06:47
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ohgodwhat posted:I actually tested his strategy in Quantopian the last time he posted it, and it was a loser (surprise!) It's somewhat impressive how badly that does compared to the benchmark, considering that you're holding it for essentially 85% of normal trading hours.
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Feb 27, 2015 07:17
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ohgodwhat posted:I actually tested his strategy in Quantopian the last time he posted it, and it was a loser (surprise!) loll
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Feb 27, 2015 07:33
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ohgodwhat posted:Essentially, Jack is full of poo poo. Noooooooo
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Feb 27, 2015 07:37
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I haven't run the analysis recently but WTW just got crushed in after hours and at that price *might* be a good value play regardless of how lovely their business prospects are. Someone who actually has their poo poo together should run the numbers though. They look like a dying business but if they manage to implement the cost cutting the CEO is aiming for it could buy them some time to turn poo poo around.
nebby fucked around with this message at 08:08 on Feb 27, 2015 |
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Feb 27, 2015 07:57
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Erath posted:I'm pretty sure I read somewhere that robinhoods market order still is a limit order +.05 of current market when you submit the order They just changed it, now its a true market order (removing liquidity)
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Feb 27, 2015 11:04
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Do you think that ZJS1 will see a surge similar to F3A if their daughter Jinko Power gets listed on the stock exchange ?? And is this just a rumor so far or is there substance to it ? Cause if they do then their stock might sky rocket.
Hammerstein fucked around with this message at 11:47 on Feb 27, 2015 |
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Feb 27, 2015 11:36
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