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06-06-2020, 04:26 PM
#631
Dangerous rule is that “lower interest rates justify higher valuation” ....over the years the rest of the rule has dropped off.
interest rates are low because growth rates are also low which essentially says no valuation premium is “justified.”
From where we are long term market returns aren’t going to be much ..possibly negative.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
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06-06-2020, 04:30 PM
#632
Originally Posted by Beagle
Some possible factors that might explain only a small portion of some of the apparent irrationality. None of this makes sense according to investment analysis text books I have read and I have never seen anything like it in my 35+ years investing so how about we try and make some new rules up and see if that explains anything ?
In Ben Graham's day 10 year interest rates were 4% and he postulated that v = e x (8.5 + 2G), where e = last years eps and g = the estimated sustainable growth rate for the next 7-10 years.
Behind the 8.5 no growth PE (11.8% earnings yield) lies the assumption that the market per se deserves a 6% risk premium, add the risk free rate of 4% and some stock or sector risk premium of on average 1.8% = 11.8% required earnings yield for a no growth stock = PE of 8.5.
Perhaps were we have got to now is 4% market risk premium + 1% sector or stock risk premium and 1% long term risk free interest rate = fair market earnings yield of 6% = no growth PE of 16.7 ? Perhaps 200 year low interest rates has implications for the 2G part of the equation as well ? Perhaps 2.5G or 3G is appropriate ?
Inflation - Perhaps we are currently in a period of deflation ?...but with all this infinite quantitative easing its not difficult to imagine many economies going into huge oversteer as we transition around the bend from recessionary conditions to recovery leading to possible very strong inflation.
Other random thoughts. Fear and Greed. Massive fear that peaked on 23 March appears to have given way to FOMO and Greed.
At the end of the day if you don't understand something, its best to avoid it. I like cash at present. Its still my favourite asset class.
Momentum and sentiment. How many investors these days are pure sentiment and momentum investors and TA and FA simply doesn't even come into it ?
A lot of the "investing" done right now is following principles that would have had you burnt badly even last year when we had a bull year. There's def a lot of irrational decision making giving gains right now, but that's the thing its going to be temporary, and I don't see this form of investing yielding gains forever, and it'll be interesting to see how many investors actually stick around when it gets "boring" again, having to wait 6-12months for sizable gains.
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06-06-2020, 05:00 PM
#633
Originally Posted by winner69
All your G’s there beagle ......It is this 5G thing that’s causing the markets going into orbit
That 5G causing funny things to happen
LOL that explains it all Time for a drink and relax. Worry about Monday's problems and conumdrums on Monday. https://www.youtube.com/watch?v=gxEPV4kolz0
Last edited by Beagle; 06-06-2020 at 05:03 PM.
Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.”
Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine
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06-06-2020, 06:07 PM
#634
Originally Posted by Hoop
Yes Bizarre..
Being investing over 40 years and I can not understand what is happening..It goes against everything I've been taught..
This time is different?..When a grow an extra arm or leg I will believe it.
Forget this zero interest + awash with cash as the total cause. Think what drives the Sharemarket ..
There are 4 primary drivers and many other secondary and tertiary drivers..
The 4 primary drivers are...Inflation, Interest rates, Dividend (yields), Earnings...
My understanding is 2 primary drivers are being hit, dividend (yield) and earnings. The market is not yet reacting to 2 of it's primary drivers..I consider this a warning.. a Market disconnect.
Being such an astute TA @hoop I’m a bit surprised that you’re looking for meaning, cause, in the market. I love FA for selection and confirming my choices, but after that I don’t care much about the reasons why the market treats my companies the way it does, more so that I consider that to be sentiment and my TA informs me when and how to act. It used to do my head in trying to figure out’ why’ a market moves a stock, but long ago I gave up, because it doesn’t matter and I don’t care, it just is and does.
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06-06-2020, 07:51 PM
#635
[QUOTE=Beagle;820293.
At the end of the day if you don't understand something, its best to avoid it.
Totally agree.
A great deal of the markets I do not understand at present,which means I am avoiding the majority of stocks.
However, those I do understand,which is not many, I am happy to hold or to add to.At the present time, I am only looking to add to one of my holdings.
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06-06-2020, 08:02 PM
#636
Oh great Percy ...would u mind to share your adding shares?
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06-06-2020, 08:25 PM
#637
Originally Posted by King1212
Oh great Percy ...would u mind to share your adding shares?
At present only adding to one holding.
It will be a couple months before I have accumulated a reasonable holding,hopefully.Under half way there.Another very illiquid stock unfortunately.
A nice bit of really bad news is much needed..!!..
Don't worry, if or when I get what I want, I will be barking as loud as The Beagle..lol.
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06-06-2020, 09:23 PM
#638
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06-06-2020, 11:00 PM
#639
Originally Posted by zero
Aren't interest rates being hit? Possibly I don't understand your concept of hit?
Some very good posts lately, I am enjoying reading the Posters views and learning from them..it makes me look at things from a differing viewpoint..
Zero..No not by my "hit" concept.....Interest rates action have been falling for years ditto with inflation and no surprises..To me it's more like a "boiling frog in progress" than a "hit"..Interest rates and inflation are in their sweet spots and any movement either way .. falling into the negatives or rising will put negative growth pressure on the Equity Market..A movement must happen eventually so I agree with W69's future outlook.
My concept of "hit" is a short term action (usually negative and unexpected) so the 2 drivers ..yield (e.g dividends, etc) and Earnings are what I consider as being "hit"...the sudden earnings fall. cancelled dividend payments. capital raising, we are seeing this now and I suspect we will see a lot more ...
After a crisis the 4 R's (Run Repair Recession Recovery) are put into motion, one after the other...the Co-vid pandemic we all agree is a crisis.. ..we have had the run phase (crisis) and currently experiencing the repair phase..Just how successful the repair phase will determine how serious the following recession and its recovery phases will be...
Can we escape the recession phase?..The "experts" think we have little to no chance of escaping the recession phase..however the Equity Market prices which are forward looking assume differently, or, is it a disconnect? Or, is the market focusing favourably on the "repair" mechanisms in play ie, the flood of liquidity to starve off the recession/depression, relief packages to businesses, etc
Baa_Baa..I've been a TAer for 20years but before that I was a long term FAer..Old habits die hard ...Putting it another way..my gut is still FA hot-wired...and I have this bad gut feeling ....
Beagle.. Ben Grahams book is a bible Every investor should have it..Interesting post with you playing around with the primary driver variables to select different scenarios...In Bear Market times (is this the time?) Russell Napier's Anatomy of the Bear is a must read as well...
Last edited by Hoop; 06-06-2020 at 11:08 PM.
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07-06-2020, 01:13 AM
#640
Member
The jobs report had a ‘misclassification error.’ Here’s what happened - The Washington Post
https://www.washingtonpost.com/busin...appinstalled=0
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