Stock Market - I just don't understand
Abuskedti
Posts: 1,917
Sequestration, hihg unemployment, all kids of global economic concerns, housing market down.. yet the dow is at an all time high. it has been rising at what seems an unsustainable rate with respect to inflation since about 1984
why?
why?
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Dow 20,000. Only a matter of time (although *i* am personally not sure we have that kind of time left)
Stock market = where the money goes.
well, along with the metals markets, and the oil markets, generally.
and when times are better than they are now, a good bit in to speculative commercial real estate.
So, with the amount of money created in the last 10 years has been so phenomenal that *all* those markets (stock, oil, and gold) have topped out. Remember, *TRILLIONS* were handed over to the banks when we gave them "the bailoutz". Where do you think they stuffed it? Under a mattress?
If I opened it now would you not understand?
if you looked at that article,
and saw this chart:
and then started squirming in your pants, wondering how in hades we don't currently have the most massive inflation the world has ever seen ...
Well, this sad little nosedive of a chart is why:
and if it *ever* "corrects", we are all fucked.
[the "velocity of money" is the speed at which currency is circulating the economy. any one with half a wit should be able to look at this and say, "shit is NOT okay", 'things are NOT getting better".]
If I opened it now would you not understand?
are you saying the stock markey is viable and sustainable and likely to hit 20,000? Or are you saying that based on the "speed" of money, we are in a world of shit and more likely to stop at 10,000 before we hit 20,000 if we can survive that long?
Neither, really.
Regarding the first part of your first "?" mark, "are you saying ... [it] is sustainable"
No. I'm not saying it's sustainable. It's "sustainable" so long as money continues to find its way to the market in significantly larger orders of magnitude than it finds its way to the street. So long as money continues to pour in to the stock market AND REMAIN THERE without being extracted in to the REAL economy ... so long as it is padding in big money bank accounts ... then sure, it is "viable". But it is just building another bubble. To bring on another flash-crash or short term wallop of a "correction".
Regarding the second part of your first "?" .... "[are you saying it is] likely to hit 20,000?"
Yes and No.
I agree with the fundamental premise of that blokes article.
There is no reason, "fundamentally", given how the market is driven (by a perpetual ever increasing influx of dollar creation) for it to not *eventually* reach 20,000[djia] ... but i do feel like, it is an improbability in the near term (and i will define near term here as "in the next five years") because of the nature of the **psychological** hurdles that need to be breached for it to reach that mark.
We are in a down economy. About the only people who don't know that are the goofbuckets that believe what the mainstream news channels are pushing (a rather sadly large segment of the population) ... but the actual brains driving wall street, by and large, know this, and they know we have no business (outside of inflationary mega-trends) being up at 14000djia again. Not here. Not now. It makes no sense.
If you are asking me to make some infamous predictions, i would speculate that we are probably likely to drag our head against an all time high for the next month. I would imagine we probably breach it on some random day, and have a little sperm-shooting session on MSNBC and the likes (with the possible exception of someone like Rick Santelli, who may piss in the cheerios), then have a few bad down days following the breech (a "sell off" or "correction") ... we will probably continue to drag our heads in the mid to high 13000s a while longer ... hell, maybe even pop over the all time high again. Maybe even by a few hundred points. I would GUESS ... at this point, that we start driving backwards *significantly*. I don't know WHAT the catalyst will be, or what fabricated news event may be blamed ... but, based on my gut alone, i would guess we don't get much above 14000 without falling backwards significantly for a while.
Regarding THE SECOND QUESTION
"Or are you saying that based on the "speed" of money, we are in a world of shit and more likely to stop at 10,000 before we hit 20,000 if we can survive that long?"
I think you have mashed together two separate comments and made a non-sequitur.
Regarding the velocity of money, that comment was made in NO relation to the stock market.
It was meant to logically counterpose the graph of the monetary base (or the M2, either one, you pick, i like the Monetary "BASE" graph, because it is more acutely severe... ie more "shocking") and "explain" in easy visual terms a rather inexplicable phenomenon (on the surface) ... NAMELY: why in gods name, if the monetary base has EXPLODED in an EXPONENTIAL CURVE, why ... WHY WHY WHY are we not experiencing THE WORST INFLATION IN HISTORY?
The answer to the question that said chart poses can easily be found in the second chart i posted ... the velocity of money. It has equally and inversely essentially fallen off of an exponential CLIFF. The theoretical supply of money (all things else being equal, which they are not, which is what the second chart, the Velocity of Money is explicitly showing) having increased at-near-vertical has been "RECTIFIED" (for now) by the rate of circulation of money falling off at-near-vertical.
None of that was to have had any intended relation to the 20,000djia scenario.
The only relation is in the money supply, which is nearly 1:1 DIRECTLY related, all growth in the stock market in the late near term having been, by and large, mere money supply growth stuffed in to stocks.
If I opened it now would you not understand?
I whipped this article up the other day to post ...
but then canned it to my drafts folder, because ... well, i just didn't feel like being all-that-controversial on that day ... but maybe it will show you where i am coming from with my "sure we could get to 20,000"--but-then-again--"maybe not so much" attitude. We are still facing a *fuck load* of head winds here. That we are back at 14000djia again so soon is already almost-too-much-magic to believe in. For it to go to 20,000 ... well ... Monetary Policy would have to drive the economics of the country PURELY with NO respect or relation to reality for that to happen ... IMHO. And i don't believe it can.
Show This To Anyone That Believes That “Things Are Getting Better” In America
-By Michael, on February 10th, 2013
theeconomiccollapseblog.com
How can anyone not see that the U.S. economy is collapsing all around us? It just astounds me when people try to tell me that "everything is just fine" and that "things are getting better" in America. Are there people out there that are really that blind? If you want to see the economic collapse, just open up your eyes and look around you. By almost every economic and financial measure, the U.S. economy has been steadily declining for many years. But most Americans are so tied into "the matrix" that they can only understand the cheerful propaganda that is endlessly being spoon-fed to them by the mainstream media. As I have said so many times, the economic collapse is not a single event. The economic collapse has been happening, it is is happening right now, and it will continue to happen. Yes, there will be times when our decline will be punctuated by moments of great crisis, but that will be the exception rather than the rule. A lot of people that write about "the economic collapse" hype it up as if it will be some huge "event" that will happen very rapidly and then once it is all over we will rebuild. Unfortunately, that is not how the real world works. We are living in the greatest debt bubble in the history of the world, and once it completely bursts there will be no going back to how things were before. Right now, we are living in a "credit card economy". As long as we can keep borrowing more money, most people think that things are just fine. But anyone that has lived on credit cards knows that eventually there comes a point when the game is over, and we are rapidly approaching that point as a nation.
Have you ever been there? Have you ever desperately hoped that you could just get one more credit card or one more loan so that you could keep things going?
At first, living on credit can be a lot of fun. You can live a much higher standard of living than you otherwise would be able to.
But inevitably a day of reckoning comes.
If the federal government and the American people were forced at this moment to live within their means, the U.S. economy would immediately plunge into a depression.
That is a 100% rock solid guarantee.
But our politicians and the mainstream media continue to perpetuate the fiction that we can live in this credit card economic fantasy land indefinitely.
And most Americans could not care less about the future. As long as "things are good" today, they don't really think much about what the future will hold.
As a result of our very foolish short-term thinking, we have now run up a national debt of 16.4 trillion dollars. It is the largest debt in the history of the world, and it has gotten more than 23 times larger since Jimmy Carter first entered the White House.
The chart that you see below is a recipe for national financial suicide...
Of course things have accelerated over the past four years. Since Barack Obama entered the White House, the U.S. government has run a budget deficit of well over a trillion dollars every single year, and we have stolen more than 100 million dollars from our children and our grandchildren every single hour of every single day.
It is the biggest theft of all time. What we are doing to our children and our grandchildren is beyond criminal.
And now our debt is at a level that most economists would consider terminal. When Barack Obama first entered the White House, the U.S. debt to GDP ratio was under 70 percent. Today, it is up to 103 percent.
We are officially in "the danger zone".
If things really were "getting better" in America, we would not need to borrow so much money.
Our politicians are stealing from the future in order to make the present look better. During Obama's first term, the federal government accumulated more debt than it did under the first 42 U.S presidents combined.
That is utter insanity!
If you started paying off just the new debt that the U.S. has accumulated during the Obama administration at the rate of one dollar per second, it would take more than 184,000 years to pay it off.
So what is the solution?
Get ready to laugh.
The most prominent economic journalist in the entire country, Paul Krugman of the New York Times, recently suggested the following in an article that he wrote entitled "Kick That Can"...
You mean that we might actually do damage to the debt-fueled economic fantasy world that we are living in if we stopped stealing so much money from future generations?
Oh the humanity!
It is horrifying to think that all that one of the "top economic minds" in America can come up with is to "kick the can" down the road some more.
Unfortunately, neither Paul Krugman nor most of the American people understand that our financial system is actually designed to create government debt.
The bankers that helped create the Federal Reserve intended to permanently enslave the U.S. government to a perpetually expanding spiral of debt, and their plans worked.
At this point, the U.S. national debt is more than 5000 times larger than it was when the Federal Reserve was first created.
So why don't the American people understand what the Federal Reserve system is doing to us?
It is because most of them are still plugged into the matrix. A Zero Hedge article that I came across today put it beautifully...
If nothing is done about our exploding debt, it is only a matter of time before we reach financial oblivion.
According to Boston University economist Laurence Kotlikoff, the U.S. government is facing a "present value difference between projected future spending and revenue" of 222 trillion dollars in the years ahead.
So how in the world are we going to come up with an extra 222 trillion dollars?
But it is not just the U.S. government that is drowning in debt.
Just check out this chart which shows the astounding growth of state and local government debt in recent years...
All over the United States there are state and local governments that are on the verge of bankruptcy. Just check out what is going on in Detroit. The only way that most of our state and local governments can keep going at this point is to also "kick the can" down the road some more.
And of course most of the rest of us are drowning in debt as well.
40 years ago, the total amount of debt in the U.S. economic system (government + business + consumer) was less than 2 trillion dollars.
Today, the total amount of debt in the U.S. economic system has grown to more than 55 trillion dollars.
Can anyone say bubble?
The good news is that U.S. GDP is now more than 12 times larger than it was 40 years ago.
The bad news is that the total amount of debt in our financial system is now more than 30 times larger than it was 40 years ago...
At the same time that we are going into so much debt, our ability to produce wealth continues to decline.
According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001. That number dropped to 21.6 percent in 2011. That is not just a decline - that is a nightmarish freefall. Just check out the chart in this article.
We are becoming less competitive as a nation with each passing year. In fact, the U.S. has fallen in the global economic competitiveness rankings compiled by the World Economic Forum for four years in a row.
Most Americans don't understand this, but the United States buys far more from the rest of the world than they buy from us each year. In 2012, we had a trade deficit of more than 500 billion dollars with the rest of the world.
That means that more than 500 billion dollars that could have gone to U.S. workers and U.S. businesses went out of the country instead.
So how does our country survive if hundreds of billions of dollars more is flowing out of the country than is flowing into it?
Well, to make up the shortfall we go to the countries that we sent our money to and we beg them to lend it back to us. If that doesn't work, we just print and borrow even more money.
Overall, the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975.
That is 8 trillion dollars that could have saved U.S. businesses, paid the salaries of U.S. workers and that would have helped fund government.
But instead, our foolish policies have greatly enriched China and the oil barons of the Middle East.
Sadly, politicians from both political parties continue to boldly support the one world economic agenda of the global elite.
Just consider how destructive many of these "free trade" deals have been to our economy...
When NAFTA was pushed through Congress in 1993, the United States had a trade surplus with Mexico of 1.6 billion dollars.
By 2010, we had a trade deficit with Mexico of 61.6 billion dollars.
Back in 1985, our trade deficit with China was approximately 6 million dollars (million with a little "m") for the entire year.
In 2012, our trade deficit with China was 315 billion dollars. That was the largest trade deficit that one nation has had with another nation in the history of the world.
In particular, our trade with China is extremely unbalanced. Today, U.S. consumers spend approximately 4 dollars on goods and services from China for every one dollar that Chinese consumers spend on goods and services from the United States.
But isn't getting cheap stuff from China good?
No, because it costs us good paying jobs.
According to the Economic Policy Institute, the United States is losing half a million jobs to China every single year.
Overall, more than 56,000 manufacturing facilities in the United States have been shut down since 2001. During 2010, manufacturing facilities in the United States were shutting down at a rate of 23 per day. How can anyone say that "things are getting better" when our economic infrastructure is being absolutely gutted?
The truth is that there are never going to be enough jobs in America ever again, because millions of our jobs are being sent overseas and millions of our jobs are being lost to technology.
You won't hear this on the news, but the percentage of the civilian labor force in the United States that is employed has been steadily declining every single year since 2006.
Younger workers have been hit particularly hard. In 2007, the unemployment rate for the 20 to 29 age bracket was about 6.5 percent. Today, the unemployment rate for that same age group is about 13 percent.
If you are under the age of 30 and you aren't living with your parents, there is a really good chance that you are living in poverty. If you can believe it, U.S. families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.
Our economy has been steadily bleeding huge numbers of middle class jobs, and many of those jobs have been replaced by low paying jobs in recent years.
According to one study, 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs.
And at this point, an astounding 53 percent of all American workers make less than $30,000 a year.
Oh, but "things are getting better", right?
Maybe if you live on Wall Street or if you are an employee of the federal government.
But for most families this economic decline has been a total nightmare. Median household income in America has fallen for four consecutive years. Overall, it has declined by over $4000 during that time span.
Sometimes people forget how good things were about a decade ago. About three times as many new homes were sold in the United States in 2005 as were sold in 2012.
But we like to live in denial.
In fact, a lot of families are trying to keep up their standards of living by going into tremendous amounts of debt.
Back in 1983, the bottom 95 percent of all income earners in the United States had 62 cents of debt for every dollar that they earned. By 2007, that figure had soared to $1.48.
Fake it until you make it, right?
But how much debt can our system possibly handle?
Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.
Total credit card debt in the United States is now more than 8 times larger than it was just 30 years ago.
We are a nation that is completely addicted to debt, but as the financial crisis of 2008 demonstrated, all of that debt can have horrific consequences.
As the economy has slowed in recent years, the Federal Reserve has decided that "the solution" is to recklessly print money in an attempt to get the debt spiral cranked up again.
Have they gone overboard? You be the judge...
And of course this won't have any affect on the value of the money that you have been saving up all these years right?
Wrong.
Every single dollar that you own is continually losing value...
Overall, the value of the U.S. dollar has declined by more than 96 percent since the Federal Reserve was first created.
As the cost of living continues to go up and wages continue to go down, millions of American families have fallen out of the middle class and into poverty.
If you can believe it, the number of Americans on food stamps has grown from about 17 million in the year 2000 to more than 47 million today.
But "things are getting better", right?
Incredibly, more than a million public school students in the United States are homeless. This is the first time that has ever happened in our history.
But "things are getting better", right?
There are now 20.2 million Americans that spend more than half of their incomes on housing. That represents a 46 percent increase from 2001.
But "things are getting better", right?
In 1999, 64.1 percent of all Americans were covered by employment-based health insurance. Today, only 55.1 percent are covered by employment-based health insurance.
But "things are getting better", right?
Today, more Americans than ever have found themselves forced to turn to the federal government for help.
Overall, the federal government runs nearly 80 different "means-tested welfare programs", and at this point more than 100 million Americans are enrolled in at least one of them.
According to the U.S. Census Bureau, 49 percent of all Americans live in a home that receives direct monetary benefits from the federal government. Back in 1983, less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.
So is it a good sign or a bad sign that the percentage of Americans that are financially dependent on the federal government is at an all-time high?
And in future years the number of Americans that are receiving benefits from the federal government is projected to absolutely skyrocket.
Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse. It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
If you take a look at Medicare, things are very more sobering.
As I wrote recently, it is being projected that the number of Americans on Medicare will grow from 50.7 million in 2012 to 73.2 million in 2025.
At this point, Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for every single household in the United States.
Are you ready to contribute your share?
Social Security is a complete and total nightmare as well.
Right now, there are approximately 56 million Americans collecting Social Security benefits.
By 2035, that number is projected to soar to an astounding 91 million.
Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.
Oh, but don't worry because "things are getting better", right?
I honestly do not know how anyone can look at the numbers above and come to the conclusion that the economy is in good shape.
We have accumulated the largest mountain of debt in the history of the world, our economic infrastructure is being gutted, we are bleeding good jobs, government dependence is at an all-time high and we are getting poorer as a nation with each passing day.
But other than that, everything is rainbows and lollipops, right?
If you want to see the economic collapse, just open up your eyes.
And if dramatic changes are not made quickly, things are going to get much, much worse from here.
Please share this article with as many people as possible. Time is quickly running out and there are a whole lot of people out there that we need to wake up while we still can.
If I opened it now would you not understand?
Sometimes I'm really glad I don't have kids so that they don't have to deal with the shit that's being made for them. :(
As the saying goes " I wish i knew then what i know now " i would of opted out of having kids bak in 93 ...
To even further simplify, do you see us as eating up resources and affecting our environment is ways that are unsustainable or are we just not distributing these resources in a logical manner? I'm only asking these things because I think it would help some of us to understand economics is terms that are more concrete and less abstract. Otherwise, I find myself falling back on believing it's all smoke and mirrors.
Oh, and it's ok to tell me I'm a bear of little brain. It's been done before.
I don't really have the answer to your question. You are essentially framing the core element of the debate that has been the driving current of all discourse on the political-economy since time immemorial. This is the question that has been the divide between communism and capitalism throughout the 20th century, and the one that will have to be resolved for the future of mankind as well.
It boils down to human motivation, how it is understood, how it can be changed or manipulated, and if people can rise above animalistic and selfish base tendencies to form a higher society for the higher good of all, or whether they will force themselves and their neighbors in to ever lower economic circumstances in the future by maintaining their rigid and narrow self-interested focus.
If you are asking me, personally, the answer is clearly neither, but BOTH.
We are eating up resources unsustainably BECAUSE the system was NEVER DESIGNED TO BE THAT WAY ... it was designed to distribute resources in a way that was the most ECONOMICALLY EFFICIENT (whatever that really means: see the arguments in the last two Zeitgeist movies that point this fallacy out quite well) ... so there is no focus on sustainability by error of design -- no one thought that would be an issiue (okay, maybe Malthus).
I think the ultimate question regarding the sort-of-unspoken-question you were hinting at is the above mentioned: human motivation -- can it be reconditioned. This is the crux of Illuminism itself. What the Freemasons are *really* on about. A new, selfless world order with brother looking after brother, and all doing everything for the greater good of everyone CAN NOT exist until essentially EVERYONE has surmounted that portion of their nature which is purely selfish, and is reoriented (BY CHOICE, and BY VOLITION OF WILL, not force or duress) to exerting ALL MENTAL AND PHYSICAL EFFORT in the direction of THE GOOD OF THE MANY.
So man will continue to descend on this out of control economic roller coaster to lower lows (with very bumpy and fast shifting highs along the way -- a lot of turbulence ahead) until man can be convinced to LOOK INWARD and CHANGE HIMSELF.
Michael Jackson - Man In The Mirror
Song is probably more relevant now than ever. And is exactly what "they" are "on about".
And lastly. Some sobering (all thought not too revelatory) insight:
NY Times: Cheers Are Few as Dow Jones Average Hits Milestone
NOTE: the title has been changed on the page to (although google result still displays the above):
As Fears Recede, Dow Industrials Hit a Milestone
The economy may be struggling to recover, but by one closely watched measure the fear that not long ago paralyzed the markets has lifted.
The oldest and most popular gauge of the stock market on Tuesday surged past the nominal high it last reached more than five years ago, before the financial crisis hit with full force.
In the past, such a recovery would have led to celebrations on Wall Street and spread optimism about the economy. But the gain by the Dow Jones industrial average — the stocks of 30 American corporate giants like Coca-Cola, ExxonMobil and Microsoft — was a more downbeat event.
Wall Street executives were not dismissing the rally out of hand, but after several years of turbulence they were not cracking open the Champagne either.
“The market reflects an improving economy in the U.S. and abroad,” said James P. Gorman, the chief executive of the Wall Street firm Morgan Stanley. “It helps individuals through their 401(k)’s and other investments. That being said, it has been a very fast move, and prudent investors would be well served to tread carefully and look for improving economic evidence to support any moves to higher levels.”
It has taken nearly five and half years for the Dow to get this far. Now there are concerns about whether the forces that have driven the market rally — the huge stimulus actions by the Federal Reserve and banner corporate profits — will be sufficient to push it higher.
Ordinary investors, who have largely sat on the sidelines of the market, will be asking themselves whether it is time to start investing in stocks again, given the gains that have taken place.
“What’s amazing about this bull market is that people still don’t think it’s real,” said Richard Bernstein, chief executive of Richard Bernstein Advisors, a money management firm. “We think this could be the biggest bull market of our careers.”
The Dow broke through with a gain of 125.95 points, or 0.9 percent, closing at 14,253.77 on Tuesday. Since hitting a low in March 2009, with the panic of the financial crisis still fresh, the market measure has more than doubled.
The recovery is remarkable because the American housing market remains weak, Europe still has moments of severe instability, and fiscal battles drag on in Washington.
Using other yardsticks, however, the performance of the blue-chip Dow does not look quite as impressive.
The much broader Standard & Poor’s 500-stock index, the benchmark favored by investment professionals, was slightly below its 2007 high even after it climbed 14.59 points on Tuesday, nearly 1 percent, to 1,539.79. And when adjusted for inflation, both the Dow and the S.& P. 500 were well below their levels at the start of the last decade.
The Nasdaq composite index also surged Tuesday, rising 42.10 points, or 1.3 percent, to 3,224.13, but it remains well below its 2000 high, when it topped 5,000.
Previous highs occurred when investors believed the economy could keep growing without any extraordinary assistance. By contrast, this rally has occurred on the back of enormous monetary stimulus by the Fed and the world’s other central banks.
Since the end of 2007, five major central banks have injected some $6 trillion into the global economy, according to figures from the Bank for International Settlements. This was done to prevent bank runs and revive economies.
As the stimulus forced down interest rates, it eventually whetted investors’ appetite for riskier assets like stocks.
“Central banks do matter. Central banks have always mattered,” said David Rosenberg, chief economist at Gluskin Sheff & Associates, who started work as a Wall Street economist on the day the stock market crashed in 1987.
The looming question is what will happen when the Fed stops its stimulus. Mr. Rosenberg said that after the crisis the stock market declined sharply on two occasions when the Fed signaled that it might temper its monetary easing.
“In both cases, the Fed backtracked,” he said.
Still, the Fed’s easy money does not look like it is going to dry up soon. The stock market’s sharp move up in recent days occurred after two senior officials from the Federal Reserve, including the chairman Ben S. Bernanke, emphasized their commitment to a slack monetary policy.
The Fed has said that it will keep up the stimulus until unemployment is well below current levels. And Fed policy makers will be all the more likely to take that stance if fiscal policy acts as a brake on the economy.
The strength of the stock market is not strongly reflected in the real economy. Consumer confidence is well below the level it hit during the last high in October 2007. The unemployment rate was then 4.7 percent, compared with 7.9 percent now.
Some analysts question how much further the stock market can rise if the Fed’s actions do not lift the economy out of its sluggishness.
“I don’t think the market is going to look past several quarters of weak growth,” said Barry C. Knapp, a markets strategist with Barclays. He said the types of stocks that have done well this year are those that investors buy when economic growth is low, like health care and consumer staples.
Still, the recent rally has a strong corps of believers who have been bullish for a long time.
“I think 2013 is a year where those who’ve been really skeptical of this market have to rethink their arguments,” said Thomas Lee, the chief U.S. Equity strategist at JPMorgan Chase.
While acknowledging that much of the market’s gains have come from the Fed’s monetary policies, Mr. Lee said that corporate profits have continued to rise, and that other signs of confidence in the markets, like mergers and stock buybacks, have also rebounded.
“I think we’ll have a bull market for several more years,” he said. “It’s been a pretty healthy rally.”
Stocks can become more vulnerable to declines when their valuations climb to historical highs. But right now stocks do not look particularly pricey.
[Drifting: THIS IS OUTRIGHT BULLSHIT: Percentage of Stocks That Are Expensive - MORGAN STANELY
Robert J. Shiller, a professor of economics at Yale, has built a model for gauging whether stocks are cheap or expensive. Right now, stock valuations are above historical averages, but well below the stratospheric highs they have reached in bubbles, he said. According to his model, stocks are signaling that they can return about 3 to 4 percent a year. [Drifting: BULLSHIT. Above chart shows LAST TWO TIMES STOCKS WERE THIS EXPENSIVE, WE HAVE EPIC CRASHES]
“That’s not horrible,” he said, though he was quick to add that the stock market had a mind of its own.
The stock market’s volatility has scared retail investors for several years. A total of $556 billion has been taken out of mutual funds focused on American stocks since October 2007, according to the Investment Company Institute. That is an enormous pot of money that largely missed out on the market’s recovery.
But recent figures show a sudden change of mind among retail investors. In January, some $32 billion in net investments flowed into mutual and exchange-traded funds that focus on American stocks, according to TrimTabs Investment Research, one of the highest one-month figures in the data company’s records.
Mr. Gorman of Morgan Stanley said, “I would hope retail investors don’t pile into the market at this point, but step in cautiously.”
In the bond market, interest rates edged higher, although they remain historically low. The price of the Treasury’s 10-year note slipped 5/32, to 100 30/32, while its yield rose to 1.90 percent from 1.88 percent late Monday.
Susanne Craig, Nathaniel Popper and Michael J. de la Merced contributed reporting.
If I opened it now would you not understand?
Lets do lunch, this topic seems a bit difficult to have on a bulletin board