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Post by steadyeddy on Apr 2, 2023 2:15:07 GMT
Very interesting video to watchI find a very compelling and fresh perspective than the normal talking heads on the business news channels. |
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Post by FD1000 on Apr 2, 2023 13:45:27 GMT
Interesting video. His prediction: we should see a significant downside for the markets.
Let's test their theory. If P/E+inflation is around 19, it's great. Around 24, it's too expensive. The chart is not accurate.
First. The real PE numbers by starting of each year, see (www.multpl.com/s-p-500-pe-ratio/table/by-year) + add inflation = higher numbers
Second, SP500 performance in that year. See (finance.yahoo.com/quote/VFINX/performance?p=VFINX)
The table below shows the results. You can see several years with P/E+inflation above 24 and the stock market did nicely. 
Of course, high P/E tells you that valuation are stretched, but it can't predict the next year performance.
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Interview from Oxbow advisors on 02/2021 (oxbowadvisors.com/video-ted-oakley-oxbow-advisors-td-ameritrade-february-19-2021/)
"Market went from overvalue to very speculative."
FD: The SP500 made 28.75% in 2021
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BTW, the above isn't first or last prediction using valuation and especially PE.
Prof Shiller Prof Shiller created PE10(P/E over 10 years) and declared is can predict future stocks performance and what countries will do best.
In 05/2012 (article) Question:You have become famous for your cyclically adjusted 10-year price/earnings ratio. What do the latest numbers say about future stock market returns?
Shiller: we found a correlation between that ratio and the next 10 years' return.
If you plug in today's P/E of about 22, it would be predicting something like an annualized 4% return after inflation.
FD: reality, the SP500 made 13.6% in 10 years (04/31/2012-04/31/2022). Let's deduct the inflation and make it 11%. This is almost 3 time Shiller prediction. It is much better than countries with lower PE10 such as Emerging markets (link)
Attachments:
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Post by Fearchar on Apr 2, 2023 14:22:37 GMT
steadyeddy, Thanks. Another bearish outlook with several good reasons!
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Post by steadyeddy on Apr 2, 2023 16:37:58 GMT
Interesting video. His prediction: we should see a significant downside for the markets.
Let's test their theory. If P/E+inflation is around 19, it's great. Around 24, it's too expensive. The chart is not accurate.
First. The real PE numbers by starting of each year, see (www.multpl.com/s-p-500-pe-ratio/table/by-year) + add inflation = higher numbers
Second, SP500 performance in that year. See (finance.yahoo.com/quote/VFINX/performance?p=VFINX)
The table below shows the results. You can see several years with P/E+inflation above 24 and the stock market did nicely.
Of course, high P/E tells you that valuation are stretched, but it can't predict the next year performance.
==============
Interview from Oxbow advisors on 02/2021 (oxbowadvisors.com/video-ted-oakley-oxbow-advisors-td-ameritrade-february-19-2021/)
"Market went from overvalue to very speculative."
FD: The SP500 made 28.75% in 2021
==============
BTW, the above isn't first or last prediction using valuation and especially PE.
Prof Shiller Prof Shiller created PE10(P/E over 10 years) and declared is can predict future stocks performance and what countries will do best.
In 05/2012 (article) Question:You have become famous for your cyclically adjusted 10-year price/earnings ratio. What do the latest numbers say about future stock market returns?
Shiller: we found a correlation between that ratio and the next 10 years' return.
If you plug in today's P/E of about 22, it would be predicting something like an annualized 4% return after inflation.
FD: reality, the SP500 made 13.6% in 10 years (04/31/2012-04/31/2022). Let's deduct the inflation and make it 11%. This is almost 3 time Shiller prediction. It is much better than countries with lower PE10 such as Emerging markets (link)
, none of these market outlooks may be of interest to you since you are a trader. But for some of us that are buy&hold (with a mix of trading) these outlooks serve a very useful purpose of providing differing viewpoints. Nonetheless, your penchant to do research and disprove any market forecaster is evident. Not sure what purpose that serves though? Have you ever thought about that? |
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Post by retiredat48 on Apr 2, 2023 17:25:08 GMT
steadyeddy ,...thanks for video. I continue to be amazed that (this video but one example) how most guru advisors/prognosticators, when they are either for or against the market going up or down, only give one side of the argument. Like, this guy gives all "negatives". And I could say "yes, but" to many of them. Another guru may give all positives and the same can be said. BTW #2...to me, business news channels are mostly "all negative" on the market. BTW #3. Oxbow's view did not evolve in a day. So his final chart showing his investment strategy, sure begs some caution. Like he is still having clients in mostly cash, waiting for better valuations, but now having missed a great stock market run-up. He's been wrong so far. And the risk is, for him and anyone else in mostly all cash portfolios, is that if the market keeps going up, you may be left at the gate, too emotional to ever buy back in. Is anyone prepared to stay out of this market for the next decade?. My solution to this behavior challenge, is to never take my portfolio to below 50% stock fund ownership. Period...even though I may conclude a bear market is 95% a sure thing. The opportunity risks of being wrong are too great. Because as soon as I might buy back in, stocks would immediately tank into a bear market--double whipsaw!! Investing is not easy stuff. R48
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Post by Fearchar on Apr 2, 2023 18:50:41 GMT
Quantitative easing can drive markets in a direction that sound analysis would not predict.
Quantitive easing does not disprove sound analysis anymore than a global pandemic does.
Going forward, we know QE isn't likely in the cards for the foreseeable future.
Of course, never say never, but the markets future is largely in the hands of the FED.
If the FED were to pivot, it'd probably be because they had tightened too much.
On the other hand, perhaps they will deliver pleasant surprises.
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Post by steadyeddy on Apr 2, 2023 19:34:27 GMT
steadyeddy ,...thanks for video. I continue to be amazed that (this video but one example) how most guru advisors/prognosticators, when they are either for or against the market going up or down, only give one side of the argument. Like, this guy gives all "negatives". And I could say "yes, but" to many of them. Another guru may give all positives and the same can be said. BTW #2...to me, business news channels are mostly "all negative" on the market. BTW #3. Oxbow's view did not evolve in a day. So his final chart showing his investment strategy, sure begs some caution. Like he is still having clients in mostly cash, waiting for better valuations, but now having missed a great stock market run-up. He's been wrong so far. And the risk is, for him and anyone else in mostly all cash portfolios, is that if the market keeps going up, you may be left at the gate, too emotional to ever buy back in. Is anyone prepared to stay out of this market for the next decade?. My solution to this behavior challenge, is to never take my portfolio to below 50% stock fund ownership. Period...even though I may conclude a bear market is 95% a sure thing. The opportunity risks of being wrong are too great. Because as soon as I might buy back in, stocks would immediately tank into a bear market--double whipsaw!! Investing is not easy stuff. R48 , thanks. I always appreciate your thoughtful responses. Agree that no one should be 100% out of (or in) the market at any time. But having said that I always maintain some dry powder (never 100% invested) and apply that dry powder based on market outlook. Yes, investing is not easy stuff. |
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Post by FD1000 on Apr 2, 2023 19:48:24 GMT
The fact is: VALUATION can't predict market performance in the next 1-6-12 months and even more. This is why most investors should disregard it, maybe just make minor adjustments after years of testing it and be sure about the results. I have said the above about trading many times over 15 years. On the other hand, I don't believe in very quick trades based on hours-days, but weeks-months, after years of good results.... only for me. What amazes again and again, how many analysts try to forecast markets ST based on valuation when they know history is against them. I can understand and accept statements such as "when you have a very high PE, good chances that stock performance will be lower in the next several years than very low PE". But, if an analysis/fund manager would say the above, it would not make any headline/news, hence, he/she can't scare the children and gather more assets under management and/or charge their clients more. BTW, PE+inflation looks to me as a better measurement than only PE. PE10 should be better than just PE, but it failed too. Humans will always try to find the next golden goose(better risk-adjusted returns), at a minimum they should check if history is on their side. I also observed that markets change a lot faster than years ago. Value killed growth in 2022. Many analysts predicted the show must go on in the next several months in 2023, just to find out that QQQ outperformed value by over 20% in just 3 months and 20+% isn't a small % + markets were risky during that time. So, the first thing I do when I check a claim is to see if what they present is correct...and it's not. The chart below is from the video, and it's off per my attach above, in my first post. Attachments:
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Post by richardsok on Apr 2, 2023 20:10:06 GMT
r48 & FD -- Agree with many of your points, especially the uselessness of using valuation as an indicator of future trends. I'm not entirely persuaded that inflation is a net negative for the market, rather efforts to combat inflation are. Markets can climb when inflation is climbing also. If current inflation is 6 and avg SPY PE is 22 and he thinks we need 19 or lower to be bullish, then (wow!) we're a LONG way from buying oppties! We don't need a drop, we need either a crash or a bullish game-changer (according to him in the video).
Still, give the guy points for clarity and laying out his gutsy arguments specifically -- quite an improvement over El-Erian, whom I admire despite his often confusing interviews.
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Post by retiredat48 on Apr 3, 2023 14:39:15 GMT
Yes, commentator was quite clear...a good job.
And yes, El Erian can often be quite OTOH. Meaning, one-the-one-hand the market may go down, on the other hand it may go up!
I learned in speech class training that the best way to sound like an expert is to use "points"...such as "There are three key points that will determine the outcome. First"..................El Erian always talks this way. Watch for it.
R48
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Post by Deleted on Apr 3, 2023 17:05:39 GMT
Based on my reading so far.
1. Damodaran had said this is macro driven market and valuations are not very meaningful in this environment.
2. This is the most anticipated recession. Everyone is forecasting a recession. ( Some notable exceptions being Janet Yellen, Siegel and Sara)
3. Most wealth and asset management firms like oxbridge are 50% equity for their clients and predicting 25% stock market fall from here.
4. So far stock market has been very resilient confusing all experts.
5. Bond market is also predicting recession and then fed cuts. which I assume is positive for stocks.
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Post by Fearchar on Apr 3, 2023 18:51:41 GMT
Cuts by the FED would be positive. However, they will be slow to cut unless the economy is headed downhill. Rapid cuts will only happen if there is a serious problem forcing them.
Of course, it is always possible that they could be nearly perfect. That is cut just enough to hold off a serious recession. But, there are very few experts that optimistic
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Post by steadyeddy on Apr 7, 2023 17:49:47 GMT
I do not see a recession on the horizon at all. Job market is pretty strong. If we see several months of unemployment going up then we know recession is at hand.
Not right now.
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Post by newtecher on Apr 7, 2023 18:25:45 GMT
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Post by steadyeddy on Apr 7, 2023 19:48:01 GMT
haha... so in the other half cases unemployment started increasing before the recession started? this most anticipated recession will come on its own terms. My 2 cents I do not see the conditions being ripe yet. |
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