I don't buy that. The Nikkei is down 25% from its highs, this isn't about indirect factors, maybe the Japanese don't focus on rigging entities so heavily and allow some price discovery. Besides, there are plenty of other places to get yields without buying far over 'par', a 5 year CD is yielding 2.25%, bonds yield 3-4% avg etc. Many companies are issuing bonds at par yielding 3-5% without much risk.
Either way, stocks are a product of their price to earnings, period. Other factors are relevant, but don't override the historical p/e.
If price discovery doesn't occur with normalized valuations, it would most likely serve a negative effect when people start saying "how is the market so high based on fundamentals, this looks bad long term lets save more money ETC"
when indexes are artificially propped 50% over fair value, by a 3rd party, it distorts participants to know they are holding a perpetually toxic asset, that could implode whenever the fed allows it to. Thus, making new highs is serving as the exact opposite effect and is harming commerce. The fed is clearly too stupid to understand that markets must retract meaningfully and have price discovery. ultimately, people should be very afraid that you have an artificial temporary asset over historical fair value of 1400 SPY.
I believe the more the indexes deviate from the historical norm, the more nervous people should be and they should save more money. In other words, the higher the indexes go in valuation over historical norms, the larger the overvalued asset, which is a perpetual shoe waiting to drop. If the fed's plan is to prop the indexes this far beyond fair value, they will only scare people further, the higher the multiples versus earnings and historical ratio. I'm already fearful of holding anything at 200+ on the SPY just because historically 1400 is fair value.
when you got declining earnings, 15 to 1 leverage, 11billion diluted shares with a whopping 4.5billion alone in the "float" and institutions who dumped 100mil last qtr, a buyback that barely moves the shares by 2.5% a year and would take about 30 years to effect anything, a perpetually dead dividend due to the share count, and a risk at implosion should things go awry (see 10.99 low after oil/gas defaults worry)...
Yeah, it's gonna be hard to find any buyers who really wanna hold over $10. Of course, plenty of traders it seems to buy 12.50 and sold 13.30 today. Not bad. My congratulations on the 2-3 day easy 6% from bottom to top.
You are talking about a 1400 S&P fair value currently at 2120. That is a 40% haircut or 50% haircut. Long term, a purchase here throughout history has shown super significant downside. Tread cautiously. Not saying sell everything or even most, but taking 20-25% of your stocks into 5 year CDs, bonds, or something would be prudent. All the fools that keep chasing highs will eventually be spanked after 2 full years of unchanged indexes and max complacency imo. Regardless of what it does, sell a little here, at $220 if it reaches that, then more at $230 for a hedge.
htt p://w ww.multpl.com/shiller-pe/
I doubt that will happen to that magnitude but the indexes should from a valuation standpoint, drop 40% to S&P 1450 or so, that is a 15 p/e I believe (actually I think its 1375-1425 to be exact), and the historical norm.
At 2120 your throwing dice, nothing more. Just pure gambling on when it peaks I suppose, irregardless of fundamentals.
judging by the 2 year unchanged indexes, I'd say the fed isn't as interested in propping overvalued indexes as they once were. Maybe the banks are slowly selling to sheep idiots before a planned fall.
That's why I don't short, because the game has a 3rd party that could keep buying or completely stop and let the markets drop back to fair value. That said, as a long holder of 500k in funds and stocks, I don't mind selling 40% of my holdings on upswings when the indexes are 40% overvalued historically. We've been over this in the past. Nobody can time the top, and nobody should try. Maybe it's today, maybe its at $220, maybe $240. In the end, it'll sit at 15 p/e historically which is about 1550-1600 on the SPY. Playing hot potato until the descent won't make much difference in the end.
remember notwisthanding the underlying overvalued indexes under shiller, if earnings fall, yields fall, and the SPY yield could fall to 1.3% here in the $210 range, whereas, it would have to fall to $160 to give you a 2% yield. Keep that in mind. Yields are not set in stone.
next time the market is down 700 points I don't think it's gonna recover just saying. You can keep chasing it up 1.5% but eventually you'll be down 25%+ as values normalize. You should shift out of stocks on strength and shift into other yields. Keep some stocks of course, but if you're too much in stocks, now is a good time for profit taking.
Holding the SPY you are break even for 2 years with two 2% divs. That kind of isn't something I'd brag about. Plus, historically, you're overvalued by 40% on the shiller index, and only 3 times in history that's happened and both saw 40% declines the next 12-18 months. So good luck I guess patting yourself for those stats, which suck.
historically the Q's are 35% overvalued. So place your bets, do they get more overvalued historically or do they fall. Nobody can tell you nobody is psychic. I have 500k in stocks and funds, and sold 75k so far, I'd like to get down to only owning 275k from 500k, and I'm targetting high cost funds first as a hedge if it goes higher, I save the 1.6% fee some of these stupid funds charge. I bought most in 2012 and they nearly doubled
Its 26.4 today or so,and earnings are expected to fall so p/e might be higher technically. Arguably, stocks are extremely pricey. Historically, anyone buying this high would normally face a 30% loss soon thereafter. Guess we'll see over the next several months.
Uh over the last 2 years the S&P is unchanged, trading notwithstanding, if you "held" you made nothing but the SPY yield. So your 6 % gain trading is irrelevant.
Buying something 35% overvalued for a 2% yield (SPY at this level), when a 5 year CD can yield 2.25% and bond funds can yield 3-4%, is not like stocks are the only options at all. I think we are dead money anyway, rates stay at 0 or 0.5 or go slightly negative and earnings fall big. Either way, stocks are not attractive 35% overvalued with falling earnings.
Bonds are not overvalued. Most bond funds with only .6 % yields are down 10% for the year. I think bonds offer far better values now (long term bonds) than stocks. Bonds are first to get paid back, stocks are subject to defaults, dilution, and earnings misses etc and are 35% over the historical shiller p/e ratio. Personally, I prefer long term CD's right now, bonds and some stocks, but less stocks now due to overvaluation.
My bonds are yielding avg 3.5% across funds and individual bonds. I also have an average yield of 2.25% on CD's. Since stocks are 30-45% over "par" or over historical norms, you're buying a over par product big time. My bonds and CD's are not over par.
it was only over 40 once in existence, during the dot com bubble. It peaked twice at 25 and fell 25-30% after. Now it's at 26.48. I'm not saying dump everything, I'm just saying, you're holding overpriced stuff historically. If you sell, it goes 10% higher, you still sold overpriced stuff historically. Personally, I'd rather sell 40% of my stuff now than wait for a 30% plunge back to fair value, regardless of if it goes higher.