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Christobevii3 posted:Isn't a lot of the justification for current market pe that low rates accelerate growth so stocks are justified in high valuations? No. The high P/Es are justified, to the bulls, at least, on the basis of alternative investments like bonds. An example. (And let's use earnings yield, i.e. E/P, because it makes the point clearer. Stats are from multpl.com.) In 1981, the 10-year Treasury yielded 12.57%. So why would anyone be in stocks? You could make 12.57% sitting on your rear end risking nothing. The market reflected that; the earnings yield on stocks was 11.09% (or a P/E of roughly 9). More recently, 2007: 10-year yields 4.76%, SPY earnings yield 5.76%. September 1st of this year: 10-year yields 1.67%, SPY earnings yield 4.06%. Basically, these numbers shouldn't get TOO far out of whack against each other. They did in 2000 as P/Es skyrocketed in the tech bubble. And it's true, they're kind of out of sync right now, but not in the way you're thinking; if we go by this simple and crude measure it's BONDS that are bubbly.
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Sep 10, 2016 02:15
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Christobevii3 posted:Isn't a lot of the justification for current market pe that low rates accelerate growth so stocks are justified in high valuations? If rates raise or say current gdp projections keep coming in around 2% then the whole story is a farce. The amount of purchasing the ecb and Japanese central bank has done is staggering but short of bringing yields down in debt and juicing markets they still can't spark inflation. What exit strategies even exist? You stop doing it and today's actions become normal. Liquidation of any degree could create larger sell off That's what people say but ultimately stock valuation is driven by bond yield + risk premium, so bond interest rates being lower means stock yield is lower which means valuation (PE as a product of return) goes higher. e: /\ /\ what he said ist fucked around with this message at 02:50 on Sep 10, 2016 |
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Sep 10, 2016 02:18
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In theory sounds great, but how many times have bonds led vs stocks? Who wins here? Nobody or everybody?
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Sep 10, 2016 06:28
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Christobevii3 posted:In theory sounds great, but how many times have bonds led vs stocks? Who wins here? Nobody or everybody? Why would one lead the other in any sort of consistent way?
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Sep 10, 2016 09:42
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Dwight Eisenhower posted:9/2/2016 TSLA Open: 202.33 At the risk of sounding like an idiot who doesn't understand options, don't you want the stock price to fall when you buy puts? Investopedia suggests if the exercise price was $198, Oxnard could buy at $194 and execute the contract to sell at $198 for $4/share profit. That sounds valuable, unless I'm missing something here (maybe exercise price was a lot lower?).
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Sep 10, 2016 15:25
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Were the options free?
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Sep 10, 2016 16:15
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Agronox posted:No. While I don't disagree with this, I think it can be termed a lot simpler. Why would anyone want to buy into long term bonds right now when the 10-year is 35 basis points under inflation (~2%) and the SPY dividend yield is 2.1%? Stock valuations may be on the high side, but they are still reasonable. Meanwhile it makes more sense to stay in cash if you are looking for safety, given the duration risk of the long termed bonds. That is why I think the Fed will have a hard time keeping rates higher without selling off some of their QE holdings.
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Sep 10, 2016 17:08
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Aagar posted:At the risk of sounding like an idiot who doesn't understand options, don't you want the stock price to fall when you buy puts? There's a price to pay to buy the put in the first place based on expected move. The price drop would have to be beyond the market's implied volatility so there wouldn't be a $4 profit. Thats why I chose to sell a call spread instead of buying a put. You want the same thing to happen, the price to go down, and your risk is defined to a maximum loss but the break even point is higher with a call spread.
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Sep 10, 2016 17:17
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ohgodwhat posted:Were the options free? Obviously not, though I did not realize how steep the cost increase was the closer one gets to the current price, though in retrospect it's obvious it has to be that way. http://www.nasdaq.com/symbol/tsla/option-chain So in my example, based on Sept 16 option expiration, it would cost $2.27/option for a strike price of $190? (currently at $194). And thus the price would need to fall $6.27 to break even? Seems like a lot of risk for little gain. Or, you buy puts for pennies and a strike price that is highly unlikely that you wouldn't buy unless you have actual inside info. I think I'm on the trolley. Also thanks mearn - that sounds like a better way to do it. I would assume in both cases it beats selling short (which had a potentially unlimited downside), but why do puts over call spread? Better potential profit if the stock tanks?
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Sep 10, 2016 19:06
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theoretically puts will inflate with volatility as well, and volatility expands when markets move (like in a crash), plus lower fees, and also gamma momentum. And yes, you have the potential for higher upside.
darkhand fucked around with this message at 22:06 on Sep 10, 2016 |
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Sep 10, 2016 22:00
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Aagar posted:At the risk of sounding like an idiot who doesn't understand options, don't you want the stock price to fall when you buy puts? If you read the initial post of the guy he's taking down it reads like there is going to be a bombshell that tanks the stock. Not a 4% dip.
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Sep 10, 2016 22:33
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Any opinion on using VIX or VXX to hedge against volatility/downside risk in the coming week or two? I'm looking at allocating 10-15% to them until the 21st. Note I am pretty risk tolerant (no debts, no dependents).
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Sep 11, 2016 05:25
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Is there any active day trader here?
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Sep 11, 2016 05:50
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Art Flower posted:Is there any active day trader here? Probably. I have some tin if you're interested.
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Sep 12, 2016 01:15
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Art Flower posted:Is there any active day trader here?
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Sep 12, 2016 02:40
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Art Flower posted:Is there any active day trader here? Most of us are more like swing traders, but there might be some day traders around. There's definitely gamblers if that's who you're looking for. Incidentally, shorted some S&P minis earlier tonight. Market is edgy to begin with and (sorry about politics!) Hillary's pneumonia might make things... jittery.
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Sep 12, 2016 03:13
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tumor looking batty posted:Probably. I have some tin if you're interested. yeah I'm interesed
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Sep 12, 2016 04:48
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Josh Lyman posted:Yes. Obviously you haven't been following the thread well enough. yeah it's been a while I didn't visit SA forum and I've just found this post.
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Sep 12, 2016 04:51
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Agronox posted:Most of us are more like swing traders, but there might be some day traders around. There's definitely gamblers if that's who you're looking for. Nah I'm quite serious about day trading. Probably I'll be looking for some swing trading too.
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Sep 12, 2016 05:18
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I'd be surprised if there were any active daytraders right now. Sundays are kinda slow. Moto42 fucked around with this message at 06:24 on Sep 12, 2016 |
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Sep 12, 2016 05:26
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Moto42 posted:I'd be surprised if there were any active daytraders right now.
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Sep 12, 2016 06:51
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Art Flower posted:Nah I'm quite serious about day trading. Probably I'll be looking for some swing trading too. To be honest a person's chances of pulling off significant or consistent profits as a day trader seem very low unless you have some sort of a) flow knowledge, b) statistical edge, or c) proven algorithmic method and the software to execute it. The odds are very much against you.
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Sep 12, 2016 06:54
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Art Flower posted:yeah I'm interesed Ok. How about 10000000000000000000000 dollars for it
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Sep 12, 2016 12:57
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And out of my futures trade exactly flat but for commissions. Stinking ramp while I was asleep...
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Sep 12, 2016 13:39
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Agronox posted:And out of my futures trade exactly flat but for commissions. Stinking ramp while I was asleep... so if you don't include your costs you didn't make money.
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Sep 12, 2016 14:05
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pointsofdata posted:so if you don't include your costs you didn't make money. isn't that the definition of 'exactly flat'?
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Sep 12, 2016 14:24
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I think everyone who has been arguing that valuations are too "high" for five years and wishing for a bear market are about to finally get their wish. I'm super interested in how the next bear market goes, whether or not I'm right about the timing of this specific one, with all the current geopolitical upheaval and the new bizarre financial system where everyone just invests in lovely index funds and accepts negative bond yields and it's not a meritocracy everything everything moves towards the ideal statistical mean because no humans make decisions anymore and at what point in a crisis do you decide maybe humans should be involved again and is that a mistake?
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Sep 12, 2016 14:41
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Agronox posted:To be honest a person's chances of pulling off significant or consistent profits as a day trader seem very low unless you have some sort of a) flow knowledge, b) statistical edge, or c) proven algorithmic method and the software to execute it. The odds are very much against you. They are low but it's not impossible. I think there are easier ways to make money nowadays with Venture capitalists throwing money at anyone who knows a computer language
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Sep 12, 2016 16:25
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Pryor on Fire posted:I think everyone who has been arguing that valuations are too "high" for five years and wishing for a bear market are about to finally get their wish. I'm super interested in how the next bear market goes, whether or not I'm right about the timing of this specific one, with all the current geopolitical upheaval and the new bizarre financial system where everyone just invests in lovely index funds and accepts negative bond yields and it's not a meritocracy everything everything moves towards the ideal statistical mean because no humans make decisions anymore and at what point in a crisis do you decide maybe humans should be involved again and is that a mistake? Funny that you mention these two things in the same breath; most people are pouring money into index funds and are not gambling on individual stocks, but the money dumped into those index funds ends up propping up individual stock prices. With a constant inflow of demand as people buy up index funds and contribute to their retirement accounts which are significantly invested in index funds, there's a consistent demand pressure that ramps up indiscriminately across all constituents of an index. If you have indiscriminate demand across the market that is continually reinforced with additional capital what would happen? Mightn't it buoy the prices of all the individual constituent stocks of indices? If you want to see a bear market, the money has to have somewhere else to go, which means either some popular strategy of individual stock investment, bond yields going up, sitting in cash becoming acceptable, or some other place where people want to chunk their capital. If new capital keeps flowing into index funds, and it will so long as returns on bonds are so pitiful, you'll keep seeing P/E getting "out of whack". I don't think we'll see a bear market until the demand for bonds dies down and the rates go up. And if we get a whiff of a bear market, some chunk of money will flee stocks and head for bonds, buoying the demand, and depressing bond rates...
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Sep 12, 2016 16:38
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Is there a graph that shows index funds swallowing up more and more over the years? Are you describing an index fund bubble?
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Sep 12, 2016 17:26
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Pryor on Fire posted:I think everyone who has been arguing that valuations are too "high" for five years and wishing for a bear market are about to finally get their wish. I'm super interested in how the next bear market goes, whether or not I'm right about the timing of this specific one, with all the current geopolitical upheaval and the new bizarre financial system where everyone just invests in lovely index funds and accepts negative bond yields and it's not a meritocracy everything everything moves towards the ideal statistical mean because no humans make decisions anymore and at what point in a crisis do you decide maybe humans should be involved again and is that a mistake? It took 6-8 months after everyone knew in 2007 for things to shake down. Plus we have three central banks ready to ease from a phone app and not a long meeting now. SP500 eps keep coming down for last couple years with a market going up. Still hoping it will be temporary and we will have 3% gdp in next two quarters can only go on for so long. Current excuse is exclude energy and say it isn't that bad. If anything else falters then you'll see it.
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Sep 12, 2016 17:42
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cowofwar posted:Is there a graph that shows index funds swallowing up more and more over the years? Are you describing an index fund bubble? This is a really good question that calls out some bullshit I was spewing. Are passive instruments, e.g. indexes, accounting for more of the market? I found this highly questionably sourced article claiming Morningstar thinks passive funds account for 22% of the market in 2010, up from 11% in 1999. Not finding a great piece of data to illustrate that more passive investment is happening, and was just extrapolating that because the conventional wisdom is to index, that's where a lot of money goes now. Which might be accurate, but is not made for the right reasons or with the right supporting evidence. IF the hypothesis that index funds account for more money in the market is accurate, I'd be reluctant to call that a bubble. Stocks have inherently more upside potential, indexing gives you exposure to that upside potential at greater risk. If the number of companies that are returning on that potential upside are sufficient to compensate for the ones that fail outright, indexing will correctly crush bonds. And if you think about it, it's hard to imagine a scenario where indexed investment fails hard, but bonds don't. I don't see that changing without bond rates rising, a prolonged bearish demeanor to counteract index demand across index constituents, or the mystical Other Popularly Believed Viable Investment Vehicle.
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Sep 12, 2016 17:51
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Agronox posted:And out of my futures trade exactly flat but for commissions. Stinking ramp while I was asleep... And holy poo poo am I glad I bailed out of this trade... Would've lost my shirt.
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Sep 12, 2016 20:16
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Agronox posted:And holy poo poo am I glad I bailed out of this trade... Would've lost my shirt.
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Sep 12, 2016 20:24
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Josh Lyman posted:You were short eminis? Yep. Put on last night and closed this morning.
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Sep 12, 2016 21:08
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Dwight Eisenhower posted:I don't think we'll see a bear market until the demand for bonds dies down and the rates go up. And if we get a whiff of a bear market, some chunk of money will flee stocks and head for bonds, buoying the demand, and depressing bond rates... This has been happening repetitively over the last 3-4 years. I also think that you can't discount the amount of cash sitting on the sidelines waiting for this mythical bear market. Every time the market dips for a bit, the sideline cash goes into stocks. I am strong believer that one of the big drivers of the stock market over the last 8-9 years has been the fact that nothing else is worth investing in. Assuming you want to just beat inflation, stocks are the only game in town. Cheesemaster200 fucked around with this message at 22:19 on Sep 12, 2016 |
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Sep 12, 2016 22:16
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We're going to need a bigger catalyst than a 25bps rate hike rumor to see an actual bear market. Wait for Trump to try and actually build the wall, or invade North Korea to actually see another 2008.
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Sep 12, 2016 23:08
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Agronox posted:To be honest a person's chances of pulling off significant or consistent profits as a day trader seem very low unless you have some sort of a) flow knowledge, b) statistical edge, or c) proven algorithmic method and the software to execute it. The odds are very much against you. Yes, I already know how hard it is but at least it is different from lotto. The odds can be increased with my effort. I hope so.
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Sep 12, 2016 23:23
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tumor looking batty posted:Ok. How about 10000000000000000000000 dollars for it Uh oh, nevermind. lol
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Sep 12, 2016 23:24
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Art Flower posted:Yes, I already know how hard it is but at least it is different from lotto. Why is it different from the lottery?
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Sep 12, 2016 23:47
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