Are stocks expensive? Yes they are

The stock market has been on a record run. So should you jump on the bandwagon?
Consider a few charts measuring stock values in different ways.



This doesn't mean that the price can't go higher. It often does.
But at the same time, the old saying doesn't go "Buy high, sell higher."



So who is buying and who is selling?



Meanwhile, how many are positioned to take advantage of an unexpected market downturn?
Almost nobody. Everyone is positioned long.


Basically we have a market priced for perfection, where everyone expects nothing but blue skies and sunshine for as far as the eye can see.
What could possibly go wrong?

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I hate to make any recommendations on stocks to friends. On the other hand, the probability of a large correction is getting higher by the day, and I hate to see friends get clobbered. I say "fiends" because I am out of the market.

During the tech boom of the late 90's and early naughty's we had a phrase "next greater fool" to explain how tech stock, like Intel, had a potential upside even when already at obscene P/E ratios. People say that they have to make more than 1% return on their savings, and that the market has performed much better than that, and every one else is doing it. My response is to watch the current analysis and remember that your entire capital is at risk.

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Capitalism has always been the rule of the people by the oligarchs. You only have two choices, eliminate them or restrict their power.

thanatokephaloides's picture

Basically we have a market priced for perfection, where everyone expects nothing but blue skies and sunshine for as far as the eye can see.
What could possibly go wrong?


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"I say enough! If Israel wants to be the only superpower in the Middle East then they can put their own asses on the line and do it themselves. I want to continue to eat."
-- snoopydawg

Lookout's picture

Just wondering where all the world's investment money could go? I remember when you could earn money with a bank savings account. Gone are the where else would people invest?

That has to play into the overvaluing of the market.

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“Until justice rolls down like water and righteousness like a mighty stream.”

Cassiodorus's picture

Buy in, and pretty soon everyone is doing it and your asset's value increases. As more and more people buy in, the asset values increase and you've made money.

Oh, sure, at some point the whole thing comes crashing down when someone has to sell at a markdown because there are no longer any more buyers, and at that point the big fish eat the little ones and the game starts all over again. And eventually the whole matter will make Karl Marx look good for his prophesy at the end of Volume 1 of Capital, in Chapter 32:

What is now to be expropriated is not the self-employed worker, but the capitalist who exploits a large number of workers.

This expropriation is accomplished through the action of the immanent laws of capitalist production itself, through the centralization of capitals. One capitalist always strikes down many others... (pp. 928-929, Penguin edition)

But that's cool. Look at the numbers, baby. We're rich! And for the rest of us:

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"Be a loyal plastic robot for a world that doesn't care." -- Frank Zappa

1. Trumpeteers are pouring into the market, and there's a saying about fools and money. However, since his entire platform boils down to transferring public assets to private pockets, maybe they're onto something?

2. Will he really go on an infrastructure spree? See #1.

3. Where is all this capital coming from, and where is it going? You can no longer analyze the market by looking at fundamentals in the US. Chinese sentiment is key.

4. Wazzup with the housing market? Properties in global cities are hot, hot, hot...and....empty? WTF?

5. Surf's up at the Fed.

6. Inbound tourism is way, way down. There will definitely be some job losses there. Start of a snowball?

7. Massive cuts to federal payroll. That's game over for the economy right there.

8. Healthcare disaster, also game over.

Nobody likes Dems anymore, but investors should. In modern history, the market pretty much always goes down with Republicans and goes up with Democrats. If you're planning to buy and hold for the next few years, rethink.

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@Cassandrus @Cassandrus
I started shorting the market last week.
So far I'm in the black.
Let's see if that holds up.

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Hawkfish's picture

The last two graphs in particular show off Cassiodorus' big and little fish.

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We can’t save the world by playing by the rules, because the rules have to be changed.
- Greta Thunberg

shaharazade's picture

the fact that you play the market puts you in a whole different category from most of us floundering around with no idea or desire to play the cappie casino. I'm not criticizing you but wondering how people reconcile making money off the market while railing against the system. Then again we're materially disabled' as a friend once said. We inherited some ungodly stocks both energy and financial and like the fools we are ditched them as fast as possible.

I'm so primitive about money I think in terms of if you can't eat it, wear it, or live in it (with heat) what good is it. I'm not a purist just someone who lives from hand to mouth and eschews the scary market. Well then again I'm not a capitalist and yet I am. We make our money off our clients who are in most cases, corporations of the worst order. My favorite is The Lottery. Yeah! The state lottery kicked in and now is giving us work! Still I would like to able to know how to play the game and not be such a loser. Nah,I just can't wrap my head around investing in what's eating the world.

Hey!I do own property in cahoots with my CU so perhaps I can sell while the property market here is so damn hot. Where would I go with my obscene profit once I sold my home it to some investor/developer in Arizona or Shanghai? So I guess I'm saying the 'market' is really nothing anyone should pump money into. Then again I guess it is a screw or get screwed world so maybe we should eat some dog. Too late we cashed out and are skint.

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I'm not criticizing you but wondering how people reconcile making money off the market while railing against the system.

If I'm winning that means that some rich c*cksucker isn't.
That's how I justify it.

Let me give you an idea:
In 2003, right after the fall of Baghdad, the right-wing f*ckers were all over the TV telling us how our benevolent occupation was going to free up Iraq's oil and give us all cheap energy for a generation.
I thought, "You are delusional! I'm going to bet against you and take your money."
It was one of my best investments. I had about a 300% return on investment by 2007, when I sold and took profits.

To be honest, my record is mixed.
I also badly underestimated the central bank intervention after 2008 and pretty much missed one of the greatest rallies in history.

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Now that the FED has (maybe) started to return to a more normal interest rate, it's a race between earnings growth and interest rate hikes. The surge in the market following Trump's election is because people think the Republican trifecta is going to be good for corporate profits. I would agree except it will be bad for consumers and business seems to think that consumers have the same deep pockets as the rentier class.

So is the market going up or down? Yes.

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I've seen lots of changes. What doesn't change is people. Same old hairless apes.