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Stocks… — 38 Comments

  1. A correction is certainly possible but there has also been some speculation that Trump enemies are trying to scuttle a deal with China. The arrest in Canada of a Chinese CEO for a tech company during Trump’s meeting with Xi might be a sign.

    TORONTO (AP) — Canadian authorities said Wednesday that they have arrested the chief financial officer of China’s Huawei Technologies for possible extradition to the United States.
    China demanded her immediate release, and a former Canadian envoy to China warned the case might lead to retaliation by the Chinese against American and Canadian executives.

    Justice Department spokesman Ian McLeod said Meng Wanzhou was detained in Vancouver, British Columbia, on Saturday.

    Hmmm.

    I’m reading Lewandowsky and Bossie’s new book, “Trump’s Enemies” and it is interesting. They name names I hadn’t heard.

  2. Mike K,

    Yes, this Huawei arrest is a pretty big deal. The one thing that I think makes it even more interesting is it was the Canadians that arrested her. Everybody knows that these Chinese companies are engaging in widespread theft but no one has ever really tried to do anything about it. That has led to speculation that many, many world leaders quietly support the Trump efforts with regards to China.

    As for the stock market fluctuations the machines have totally run amok the last couple of months. We have been trading in a huge 7% range since the beginning of October with seemingly daily huge ups and huge downs. If you went dark today and checked the market after close it looks uneventful. But no, the Dow was down almost 800 at one time only to come almost all the way back in the end.

  3. I’m thinking of buying some Vanguard S&P 500 index fund so I want the market to go way down before I buy. This is always a problem, you want to buy low and sell high. Why don’t those climate scientist write a computer program that can predict the stock market next year instead of wasting their time writing a computer program that they claim can predict the climate in a century.

  4. Nervousness and investing in stocks and bonds do not go well together. The housing crisis in 2008 hurt many people, some losing 20 to 30% of the value of their investment. We lost about 12%. I don’t get the jitters when the market is at 25,000 and it drops 1000 points which is a mere 4%.

  5. I am more risk-averse than my husband, and I do often let him make the investment decisions. He and our broker together have steered us safely to retirement in comfort. In 2008, when the market was crashing, we were on a dinner boat on the Nile. Our American friends were frantically calling their brokers. We knew we were diversified, and that it was too late to do anything anyhow, so we had another drink and relaxed. We’re fine.

  6. Program and emotional trading make the market volatile. You lock in your losses when you sell down. So, don’t, unless you must.

  7. My .65 cent options sold for $8, and exercised one…
    have one left on the drop its at $5.50
    when everyone panicked i picked up some nice cheap ones
    [i do what your not supposed to do…play out of the money calls,
    swing trade and mostly long is my goal]

    most people don’t understand it…
    and that is not for lack of resources that are good and want you to earn

    the market puts your real world knowledge to the test and its understanding of principals and how all that tick tocks

    but its no harder than looking at top companies, saving some cash, waiting for a horrendous day in which the market gets truly slammed for no fault of the company itself and then buy some…

    to read Lynch tell you how he picked stocks that turned Magellan fund from podunk to slam dunk was easy… he mostly paid attention to what his wife and kids were doing… so, lets see.. if ya did that ten years ago, you would see gaming was solid, and there were great companies that had started in the 80s like electronic arts, or blizzard..

    the biggest issue is that they do not understand risk
    and they think the risk is lower if they are not in the market
    really?

    i have written software for trading… funky life no one believes anyway

    whats going on is panicked funders sloshing things around
    and part of it is also software that cut its teeth in more sanguine years of higher rates
    and some software, like the software’s that did computing on oil, took shortcuts in banking on government restriction so much, they sped up the computations under the assumption there would not ever be oversupply, there could only be recession. so guess what those machines did? they sold when the supply increased and prices went down, as if prices went down for a recession.

    that made buying a refiner a great idea why? well, oversupply meant their inputs went down in price, output price decline would lag and so their profit per share would rise.

    nothing fancy, other than the terms…
    when a factory input materials go down in price, the product price does not drop accordingly or automatically, right? so, the factory earns more than it did before…

    if you understand in real terms how the world works, and people, and so on…

    So it doesn’t matter if the market is going up, or going down…
    you can play either way…

    tomorrow is a coin flip…
    china is not happy over the arrest, but it does say, hey, we aint playing

    and the non farm payroll comes out
    if its too good the fed will be emboldened and the market will drop as margin is credit, and credit rates dictate how far your neck is out.. so, if they change rates, and necks are suddenly farther out, they pull back.. (like turtles). if its bad, then the economy is slowing, and that may confirm fears of recession, which will ignore that the earnings reports conference calls have been solid over and over…

    its easy to fear what you dont know
    and its easier to be irrationally afraid if that is compounded by myths, paranoia, etc.

    oh well..

  8. “But isn’t it usually safer to be in cash, except for the possibilities of theft and fire and flood?”

    And except for inflation. The Fed plansto have 2% inflation/year and might be happy with 2.5 to 3%. It’s like fast walking on a treadmill. You gotta work (earn) a little bit just to stay in the same place.

    parker is right that a 1000 point Dow drop isn’t a huge deal by itself. But, we had a couple 800 point drops on Tues. and Thurs., after lots of big prior declines.

    At the bottom today we were 10.5% below the S&P500 high on Sept. 30. So an official correction has been logged, past tense. On the bright side, some folks thought that today was the “capitulation” of weak investors throwing in the towel. Usually capitulation defines the bottom and the beginning of a rebound.
    ______

    The arrest of the Huawei CFO is definitely freaky. I didn’t realize that China authorities had already arrested a small number of U.S. execs prior to this. More of them might be arrested now. And was this move a Trump move or deep state move?

  9. Why I didn’t understand Trump’s election in 2016 as a buy signal, I’ll never know.

    I bought gold when Clinton was elected and did fairly well. I wish I had bought it again at $200 around 2000.

  10. My brother inlaw is a broker with a small group of investors. We trust him completely and he has earned that trust on the bottom line.

  11. I bought gold when Clinton was elected and did fairly well. I wish I had bought it again at $200 around 2000.

    Mike K: I bought gold at the start of the Gulf War and did well with that.

    I was surprised Bush 41 wasn’t reelected as the victorious C-in-C of the Gulf War. A friend’s opinion was Bush didn’t have the stomach for another term. Dunno.

    GHWB certainly wasn’t like Hillary who is absolutely Gollum-like in her pursuit of supreme power. The Precious!

  12. ARTless on December 6, 2018 at 8:36 pm at 8:36 pm said:

    the market puts your real world knowledge to the test and its understanding of principals and how all that tick tocks

    but its no harder than looking at top companies, saving some cash, waiting for a horrendous day in which the market gets truly slammed or no fault of the company itself and then buy some…

    to read Lynch tell you how he picked stocks that turned Magellan fund from podunk to slam dunk was easy… he mostly paid attention to what his wife and kids were doing…
    * * *
    Matches what I have thought for years; I don’t do individual stocks, but try to stay diversified, and IIRC my investment firm operates along those lines.
    As for the big housing drop, we long since made up any losses in the stock market.
    Our problem was that we had bought a house in the college town where 4 of our kids were living, to save on rents. Never expected any problems selling it when they got done.
    Hahahahaha.
    It’s being managed as a rental now, and we are looking to unload it someday.

  13. Ray on December 6, 2018 at 7:27 pm at 7:27 pm said:
    …Why don’t those climate scientist write a computer program that can predict the stock market next year instead of wasting their time writing a computer program that they claim can predict the climate in a century.
    * * *
    Because climate change is easier??

  14. I have been heavier in cash for a long time. As has been the case since 2008. The interest rates have been kept at an artificially low level for some time. Basically forcing anyone who wants any kind of return that keeps up with inflation to put their money in some sort of stock instrument.

    Its forcing normally risk adverse people into the market. It also prevents one of the chief corrective measures the government can take to help right the boat. That is lowering interest rates. Beyond that there have also been a few changes the last few years that have struck me as subtle. But designed for one point.

    1) 457’s (similar to a 401) have changed their rules to make it much harder to take out your money before hitting certain age restrictions.
    2) A certain very large financial planner has purposely slowed down how fast they respond to sell orders. And how many funds you can sell over a set time frame.

    The end result is that the average person is not only heavily induced into the market. But also cannot get out when it begins to crash. Leaving them holding the bag next time. Most of these ideas were sold as stabilizing the market. Which ironically it does. Simply because the little guy is artificially restricted to keeping their money in the market. While the big players can move around as needed.

  15. I was surprised Bush 41 wasn’t reelected as the victorious C-in-C of the Gulf War. A friend’s opinion was Bush didn’t have the stomach for another term. Dunno.

    He was so formidable after the Gulf War that Al Gore, who was Pamela Harriman’s first pick, decided to not run.

    But then he got hosed by the economy. First of all, he inherited a booming one from his predecessor, not unlike the current President. But unlike the Current, he didn’t take credit for it, let alone credit for a turnaround. He was too humble, as everyone has noted, but of course to do so would’ve been political suicide..because it would’ve be tantamount to smearing Reagan.

    The recession was mild. So much so that by the time Clinton took power it was over…although no one knew that at the time.

  16. “…he inherited a booming one from his predecessor, not unlike the current President.”

    “Booming” no less.

    Well, boomingly moribund, perhaps. (Moribund because of a huge assist from the—intentionally—hog-tying characteristics of ObamaCare. I suspect that one of the reasons why the (booming?—sorry, no) economy took off WHEN Trump was elected is because of the GOP pledge to do away with that steaming piece of deceitful legislation, which, famously, “we’ll just have to pass before we can read—and understand—all of it” paraphrasing those extraordinary words. But thanks to John McCain!…)

  17. The President has two tricks left up his sleeve that could help the market — an actual trade treaty with China that might appear credible, if it comes to pass; and the middle-class tax cut he mentioned during the recent campaigns, which then disappeared from sight temporarily. Other than that, the growth burst from 2016-17 has been slowing markedly, and some analysts say economic earnings are falling even as reported earnings have risen — that is, corporate accounting is artificially prolonging their profits recovery.

    The background problem, thanks to the Fed’s endless work under Bernanke and Yellen, is that the valuations on earnings in our stock market are near the highest in our financial history, as measured by the longer-term measure of Cyclically-Adjusted Price/Earnings ratios –CAPE — which is one of the things Robert Shiller of Yale won his (shared) Nobel Prize for studying.

    When CAPE valuations regress to the mean, it has been through severe drops (1929-32 and the bursting of the tech/internet bubble in 2000). Those are the only other times the CAPE numbers have been close to where they are now.

    These lofty levels are the principal cause Ocasio-Cortez and Bernie Sanders are taken seriously. One, it means there is so much wealth around that hare-brained schemes can sound almost plausible; and, two, one-half of the country madly envies the half they think has more money than they do. Envy quickly turns to hate.

  18. I was surprised Bush 41 wasn’t reelected as the victorious C-in-C of the Gulf War. A friend’s opinion was Bush didn’t have the stomach for another term. Dunno.

    I read Cheney’s autobiography and he said that Bush was the last one optimistic in the ’92 campaign. The fact that his approval ratting was so high after Gulf War I drove Mario Cuomo out and let the grifters in. George Mitchell got the recession to hurt Bush by blocking a capital gains tax cut when it was expected. Bush then broke his famous promise and, rather than explain why he had to do it, made weak jokes like “Read my hips.”

    Perot hurt him fatally by being Trump before Trump came along.

    The interest rates have been kept at an artificially low level for some time. Basically forcing anyone who wants any kind of return that keeps up with inflation to put their money in some sort of stock instrument.

    Yes, that was Obama’s way of keeping the crony capitalists happy.

  19. I invest and sleep soundly at night. I watch and see where the “momentum” money is going, then run the opposite. works almost every time. (I bought Tesla at $255 a few months back…) Also, never invest money you can’t afford to lose.

    sweet dreams!

  20. The coins been flipped +155 and no market effect…
    ie. rabbits dont know which way to run yet…

    “the time to buy is when there’s blood in the streets.” – Rothschild

    and you thought the only thing this renassaince type education and skill set was only good for trivia? ha! if knowlege is power, then in the long run, what does it mean to know more and know what others are missing?

    It would be mean not to share it… no?
    [Hillel the Elder would agree… ]

    How Much Do You Have to Hate Somebody to Not Proselytize?
    Penn Jillette, of the magician duo, Penn & Teller

    “I’ve always said that I don’t respect people who don’t proselytize. I don’t respect that at all.

    If you believe that there’s a heaven and a hell, and people could be going to hell or not getting eternal life, and you think that it’s not really worth telling them this because it would make it socially awkward—and atheists who think people shouldn’t proselytize and who say just leave me along and keep your religion to yourself—how much do you have to hate somebody to not proselytize?

    How much do you have to hate somebody to believe everlasting life is possible and not tell them that?

    “I mean, if I believed, beyond the shadow of a doubt, that a truck was coming at you, and you didn’t believe that truck was bearing down on you, there is a certain point where I tackle you. And this is more important than that.”

    https://www.youtube.com/watch?v=owZc3Xq8obk&feature=youtu.be

    Us latvians? we are the last of a group of natives who have lived for 3000 years in the place they are as they settled it just after the ice-age ended and the packs receeded…. [my genetic profile has a bit of innuit, etc]

    there are fewere than 2 million of us in the country, and after hitler and stalin and what happened, that will fade…

    in the US? there is only 90,000 of us compared to the 5 million Jewish people

    loaded into cattle cars… sent to the tiaga…
    take a look at just a hint of what they would experience when the doors opened…
    https://www.youtube.com/watch?v=pbRsT2S8TBg

    Monday is the anniversary of the printing of the Gulag Archpeligo in the ny times…

    Jordan Peterson has written a new forward for the latest editions.
    December 11, will be Aleksandr Solzhenitsyn birthday…

    We have forgotten what he tried to teach us… we should be ashamed…

    Want to know what he said of Trumps nationalism? or patriotism?
    and how the various parts are unbound?

    Love for one’s people is as natural as love for one’s family. No one can be faulted for this love, only respected. After all, no matter how much the modern world whirls and jerks about, we still aim to keep intact our family, and we hold it in special regard, suffused with sympathy.

    A nation is a family, too, except an order of magnitude higher in numbers. It is bound by unique internal ties: a common language, a common cultural tradition, a shared historical memory, and a shared set of problems to resolve in the future.

    “Why, then, should the self-preservation of a people be held a sin?”

    Aleksandr Solzhenitsyn

    Because at the core, the prophecy of the struggle of the Magyar…

    “he contended instead that the Soviet project represented the negation of Russian nationality”

    and then what came of it proceeded to the negation of the satellite nationalities

    “Gulag Archipelago has been placed on the required reading list for all Russian high school seniors” – Joseph Pearce

    Gradually it was disclosed to me that the line separating good and evil passes not through states, nor between classes, nor between political parties either—but right through every human heart—and through all human hearts. This line shifts. Inside us, it oscillates with the years. And even with hearts overwhelmed by evil, one small bridgehead of good is retained. And even in the best of all hearts, there remains … an unuprooted small corner of evil […] I have come to understand the falsehood of all the revolutions in history. They destroy only those carriers of evil contemporary with them (and also fail, out of haste, to discriminate the carriers of good as well). And they then take to themselves as their heritage the actual evil itself, magnified still more. – Solzhenitsyn

    Anniversaries were a big thing for a reason…

    the market just opened… all the best to everyone!!

  21. I’ve been deep in retirement planning this past year. Like all private school college faculty everything is with TIAA. They provide a free financial consultant, and I’ve met with him several times in the last few months. He, along with my daughter who works in finance, have moved me off my more conservative guaranteed annuity to a larger percentage of equities investments. He also has modeled our income stream out to age 95 based on many different scenarios, including a “2008 long term recession”. We are going to fine in all cases.

    Neo, keeping just cash means you are losing that money’s value each year at the inflation rate. And remember percentage changes are in reality an exponential function, which those losses accelerate. As my daughter exclaimed: “Dad, you’re only getting 4.5% in that annuity fund, when you could be making 8% in the equities with conservative investments.”

    I’m not worried now. Now the big decision is how to withdraw the money needed. On the horizon is the MDA which kicks in at age 70.5. At that point we will be faced with a good problem: We will start getting more money back than what is needed, so we need to tax shelter that money and put it where it will again grow, and leave a legacy for the daughters. The TIAA guy and I already have a “meeting” set for that in a couple of years.

  22. Off topic, but are you going to mention anything about the day that shall live in infamy?

  23. Nice planning Physics guy. I have had a similar experience with my public institution but have used Valic instead of TIAA.

    enjoy you’re well deserved retirement! (and buy a Tesla, why don’t you?)

    🙂

  24. Don’t worry, Trump is still President, so stocks have upside.
    Oh wait, worry, the Dems took the house, so more taxes & regs & less profit – downside.

    Or is that vice versa?

    Buffet has been mostly in cash for a couple of years, doing relatively poorly — but not losing.

    Don’t invest what you can’t afford to lose, but also don’t invest unless you’re pretty sure it will grow.

  25. [N]ever before has the United States attempted the extraterritorial rendition of a foreign citizen – Meng [Wangzhou] is a Chinese national – in connection with sanctions violations. It has imposed travel and banking restrictions, but seeking an arrest warrant for this is entirely without precedent. – David P. Goldman (also known as Spengler) Asia Times

    Meng was arrested on December 1, the day that President Trump and his economic team dined with President Xi Jinping and his advisers at the Group of 20 Summit in Buenos Aires. Trump has every interest in striking a deal with China that would enable him to declare some measure of victory in a trade war, and China has shown every indication that it is willing to make concessions to the United States on intellectual property protection, financial market opening and, at least in rhetoric, on industrial policy, while increasing its imports from the United States.

    The question is: Who ordered the arrest, and why?

  26. Buffet is a cheat… once you find out someone cheats, dont pay attention, you cant do what they do, so you cant get anything out of it!!!!!!!

    Buffet went to Obama and Obama got Keystone blocked
    this was AFTER buffet got 100% of BNSF rail…

    Given that berkshire hathaway is a value store for the mega wealthly, like Steyer, and so on… this had the result of moving the stock price from 100,000 per share to 200,000 per share

    fomenting liberal communist anger is cheaper than bribing politicians, not illegal, and can do the same thing, while hiding openly your collusions…

    i covered this here in the past, but neo makes us wait till WAY after the event if we ever get to pay attention. then this goes on, and voila, that information is now pertinent… being ahead of the time is useless, your ignored…

    artfldgr on January 24, 2014 at 4:57 pm at 4:57 pm said:
    http://www.thenewneo.com/2014/01/24/state-of-the-union-address-to-focus-on-income-inequality/

    Obama and kerry wont ok keystone…
    why? cause of the environment?

    warren buffet bought BNSF rail (hathaway did)…

    On November 3, 2009, Warren Buffett’s Berkshire Hathaway announced it would acquire the remaining 77.4 percent of BNSF it did not already own for $100 per share in cash and stock – a deal valued at $44 billion.

    now.. only the superwealthy can afford berkshire hathwway stock… 175,000 PER SHARE…

    as long as obama and kerry do not allow keystone, its BNSF that moves the oil… gas… etc.

    so all this is, is Oligarchy…

    knowing this without illusions lets you make money on stock
    not knowing this, lets you lose your country

    which is it you all are doing?

    also in the same post:

    It is now too late for the little people to turn back the tide. In a spirit of kindness Quigley is therefore urging them not to fight the noose which is already around their necks. He feels certain that those who do will only choke themselves to death. On the other hand, those who go along will eventually find themselves in a man-made millennium of peace and prosperity. All through his book Dr. Quigley assures us that we can trust these benevolent, well-meaning men who are secretly operating behind the scenes. THEY are the HOPE of the world. All who resist them represent TRAGEDY.

    – W. Cleon Skousen, in “The Naked Capitalist”, a review of Quigly “Tragedy And Hope”

    Why do some of the richest peple in the world support communism and socialism? Why would they support what appears to be the pathway to their own destruction? Dr. Carroll Quigley of Harvard, Princeton and Georgetown Universities states that he has been associated with many of these dynastic families of the super-rich. He therefore writes as an authority on the world’s secret power structure. His answers to the above questions may astonish you.”

    thats from the1970s..
    glad you guys still dont know this stuff now that its almost 2019

    kind of like getting a warning about hitler in detail 44 years before he took office
    people didnt believe it when he WAS in office, let alone 44 years before it
    which is why i told neo, it was a waste of time, we lost already…..

  27. There was a recluse named Walter Semasko who lived in Carson City, NV, who horded gold coins and bars, starting around 1960ish when gold was $35/oz. When he died, people used wheelbarrows to cart away all the gold hidden in his house. One of his surviving relatives netted $7M from the coins alone.
    _____

    We’ve now had the one of the longest stock market expansions in many decades, in spite of the historically substandard 1.5% GDP growth rate of the Obama period. So part of the problem is that the “correction” is long overdue.

    One of the issues with the Shiller CAPE is that a ten year average necessarily still includes the abysmal corp. earnings of the 2008 and 2009 time period. It won’t be until the end of 2019, when the CAPE will have those negative earnings numbers flushed out of it. That doesn’t negate the likelihood that the market was and maybe still is overvalued, just not as much as CAPE suggests.

    Lurch follows the time-honored success of contrarian investing. Move opposite to the herd. I’ve often wondered, have humans inherited some of the genes of herd or pack animals?

  28. “Talk comes from ideology but action comes from outlook.” Carroll Quigley, Carroll Quigley: Life, Lectures and Collected Writings

    ……human beings who are growing up crave sensation and experience. They want contact with other people, moment-to-moment, intimate contact. I’ve discovered, however, that the intimacy really isn’t there. Young people touch each other, often in an almost ritual way; they sleep together, eat together, have sex together. But I don’t see the intimacy. There is a lot of action, of course, but not so much more than in the old days, I believe, because now there is a great deal more talk than action. This group, the lower middle class, it seems to me, holds the key to the future. I think probably they will win out. If they do, they will resolutely defend our organizational structures and artifacts.

    They will cling to the automobile, for instance; they will not permit us to adopt more efficient methods of moving people around. They will defend the system very much as it is and, if necessary, they will use all the force they can command.

    Eventually they will stop dissent altogether, whether from the intellectuals, the religious, the poor, the people who run the foundations, the Ivy League colleges, all the rest. The colleges are already becoming bureaucratized, anyway. I can’t see the big universities or the foundations as a strong progressive force. The people who run Harvard and the Ford Foundation look more and more like lower-middle-class bureaucrats who pose no threat to the established order because they are prepared to do anything to defend the system.”

    ? Carroll Quigley, Carroll Quigley: Life, Lectures and Collected Writings

    He defined the enemy of the progressives was YOU…

    “The basis of social relationships is reciprocity: if you cooperate with others, others will cooperate with you.”
    ? Carroll Quigley

  29. BONUS FOR YOU: WHY YOUR A NAZI:

    “For example, I’ve talked about the lower middle class as the backbone of fascism in the future. I think this may happen. The party members of the Nazi Party in Germany were consistently lower middle class. I think that the right-wing movements in this country are pretty generally in this group.”
    ? Carroll Quigley, Carroll Quigley: Life, Lectures and Collected Writings

    They are acting on the writings of the 70s, you guys will be horrified as that moves forwards, as it takes that long to establish from the edifices to the public sphere…

    in the 70s, quigly decalred you fascists, and the elite believed the tale that they would be the gods of goodness and make a new world… they will do communism right…

    50 years later, your wondering and confused and making things up as to why the left is erroneously calling you fascists.. and nazis.

    really?

    where were you?

  30. i leave a lst note for neo

    “this book is almost inexcusably lengthy. For this I must apologize, with the excuse that I did not have time to make it shorter”
    ? Carroll Quigley, Tragedy and Hope: A History of the World in Our Time

    someone slipped up and let him talk… heh…

  31. Wall Street enjoys the benefits and green of labor and environment arbitrage, and the good perceptions from the short-term leverage of cheap debt/credit.

  32. Art continues to “blog” in the comments section. Thus self selecting a small readership. Oh well, genius has it’s own logic I suppose.

  33. Kai Akker on December 7, 2018 at 8:03 am at 8:03 am said:

    These lofty levels are the principal cause Ocasio-Cortez and Bernie Sanders are taken seriously. One, it means there is so much wealth around that hare-brained schemes can sound almost plausible; and, two, one-half of the country madly envies the half they think has more money than they do. Envy quickly turns to hate.
    * * *
    O-C and BS have not yet run out of other people’s money.
    On envy, in the Bible, the Lord cautions the rich to not be stingy, and the poor to not be jealous.

    Proverbs 22:2
    The rich and poor meet together: the LORD is the maker of them all.
    Psalm 49:16
    Be not thou afraid when one is made rich, when the glory of his house is increased; For when he dieth he shall carry nothing away: his glory shall not descend after him.
    Corinthians 13:4
    Charity suffereth long, and is kind; charity envieth not; charity vaunteth not itself, is not puffed up,

    More here:
    https://www.biblestudytools.com/topical-verses/bible-verses-about-greed/

  34. Kai Akker,
    I took a look at the chart. The Cyclical P/E 10 is of course another 10 year running average. Not sure about the other 3. All I am saying is that if the economy and markets stay exactly where they are now, in a year, or year and a quarter, those 10 year running P/E averages will drop by something like 20%. (Still overvalued, just not nearly as much.) Because those horrendous bankruptcy signaling negative earnings numbers from the big banks etc. will have timed themselves outside the 10 year average window.

    Another different but related issue is the notion that the P/E ratio of the S&P500 is just like the P/E of a single company. It isn’t. So in 2008, several giant banks threw their big earnings losses into the S&P500 averages sending it’s effective P/E sky high. Panic, sell the whole market! That ignored the fact that 400 or so companies in the S&P500 were doing relatively OK.

    It’s a bit like General Electric doing quite poorly now, in spite of the fact that they probably have a few divisions that are doing fine. They should probably spin off those divisions as a separate company, except doing so might cause the rest to actually go bankrupt.

  35. @TommyJay: I get your point, but the fact remains that the 10-yr CAPE is extremely high now, historically — and, historically, it does regress to the mean at some point. Here is the Hussman calculation, which I am inclined to trust because of his mastery of the math involved, demonstrated by a higher (negative) correlation with subsequent market performance of -0.89 vs Shiller’s -0.78.

    https://www.hussmanfunds.com/wp-content/uploads/comment/mc181002e.png

    That is one of the clearest market signals I’ve ever seen. Not about when, precisely — but about the degree of risk. It says to me that it is the most ever, at least going back 120 years. So, to your point that the CAPE ratio will fall as ’08-’09 data drops out–well, yes, somewhat; but looking at the history of these data, are we sure we want to see it fall?

    As to whether it was mostly the banks that produced such poor earnings around 2008, I don’t think that is correct. Here are a couple bread-and-butter companies of various other sorts that I chose randomly, giving four years of their earnings-per-share for 2007, ’08, ’09, ’10 in sequence:

    Intel: $1.18, 0.92, 0.77, 2.10
    Textron: 3.40, 1.29, -0.28, 0.30
    Kaman: 2.23, 1.40, 0.97, 1.36
    Park-Ohio: 1.82, -10.88, -0.47, 1.29
    Lawson Prods.: 1.25, -3.24, -0.32, 0.81
    Starbucks: 0.43, 0.21, 0.26, 0.62

    There were reasons to sell stocks, for those basing their investing on earnings. To see the Hussman CAPE at the highest level ever, beyond 1929, is something important, IMO.

    @Artful: Proverbs’s wisdom simply cannot be overestimated, so well-chosen words. I once had the (stress and) pleasure of “teaching” the book in a Biblical Studies group over a period of a month or so. A tremendous experience I couldn’t forget if I wanted to.

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