018/2019 Bear Market
01-26-2019, 03:33 PM
Quote: (01-26-2019 06:20 AM)Arado Wrote:
Quote: (01-25-2019 10:53 AM)robreke Wrote:
^ "The market is fundamentally overvalued. " - Probably so due to the multiple rounds of QE which went into stock buybacks. However, the PE ratio of the S&P 500 is pretty much within historical norms. Granted, it was getting a little high but this latest correction has brought it down. The forward PE ratio is not "bubble territory" or extremely overvalued at this point.
Again, depends on which metric you use. According to the CAPE (Cyclically adjusted price to earnings ratio) or just simply looking at stock market to GDP ratio it is in historically high levels of overvaluation.
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I was disagreeing with your claim that if this secular bull market lasts until 2025 then it will be 50% longer than the longest bull market. It will not, it would be about 4 years shorter than the secular bull of the 80s and 90s.
How about I refine it to say that this would be the longest rate hiking cycle? Again, problem is that the Fed doesn't have the same tools to stimulate that they did during the secular bull market period you are referencing.
Quote: (01-25-2019 10:56 PM)Repo Wrote:
Ok, so I'm far from an expert, but what the fuck is the true value of all the bonds that the Fed is holding? I think that is key here. Because if the Fed tries to reduce its balance sheet, the stock market ranks because it causes a liquidity crisis, and as we know most economists and Moodys are predicting a liquidity crisis to be the cause of the next recession. .. though they think it will be short and severe in nature. Anyway, as long as the Fed keeps their balance sheet stacked, then the losses are unrealized, but there is pressure for them to unload it. What gives first, will the true value of their balance sheet ever be made transparent to the public, or are we just holding off the next crisis as long as we can. Posting while I'm drunk but I think I summed it up about right.
I've posted earlier in the thread that the Fed holdings are 4+ trillion dollars. Total global central bank assets are well over 10 trillion dollars. That's a lot of funny money propping up these markets. This situation is extremely unfair to savers - people that are out of debt and just want their money to outpace inflation are out of options. They are forced to see their life's wealth accumulation gradually whittled away by rising prices, or speculate on index funds that could lose 30+ percent of their value in case Central Banks get cranky.
Yeah, my point was the Fed cant unload these assets either without tanking the economy. So were kind of stuck in a catch 22. Its like people dont realize the "strength" of the current economy is somewhat artificial as its propped up by the Fed continuing to hold these assets. The Fed tried unwinding its balance sheet very slowly and that's what's been causing ripples. We essentially still have not fully written off all the bad bets from the last recession and are trying to spread it out over decades so we can have a good economy.