February 29th, 2012, 10:44 am #1
Nasdaq hits 3,000 for 1st time since 2000NEW YORK (Reuters) - Stocks were slightly higher on Wednesday and the Nasdaq briefly hit the 3,000 level for the first time since December 2000 . . .
IMO, this is a mix of mostly good and partly bad news.
Obviously when people take their cash off the sidelines and invest in american technology companies it means they are confident those companies are not going to fall off a cliff anytime soon. The calls to stock up on guns and spam may have been a little premature.
it is also a sign that they are lacking confidence etc. in other investments.
more in a moment
February 29th, 2012, 11:01 am #2
As I said this is a mixed bag.
Since Jan 1, the Euro is up some 10% vs. the US Dollar, and
(people don't normally express it this way but . . . .),
the NASDAQ is up 30% vs the dollar.
Yes, it's a good thing when people's retirment accounts increase in value. My own family is using this opportunity to refinance our relatively small credit card debt with a retirement loan debt reducing our monthly payment by more than $150 a month.
At the same time all transactions are an exchange. They are all an act of selling one investment (expressing a lack of confidence) to buy another (expressing relative confidence.)
At the moment the Schiller P-E is approaching 25%, meaning unless corporate profits expand rapidly investors are likely to wind up settling for relatively small future returns.
Last edited by Long Island Bob; February 29th, 2012 at 11:05 am.
February 29th, 2012, 11:34 am #3
It compares the price of a stock, to the company's underlying earnings. The theory is it doesn't matter if you invest in a dividend stock or a re-invest and grow stock, if a company's earnings are 4% compared to the company's stock price then, there will be some stck price highs, and stock price lows, but your average investor will make 4% on his money.
IOW, long term, the company's owners' income/value cannot and does not grow more quickly than the company's earnings.
The ratio of incomes to earnings is expressed as a P-to-E (Price to earnings ratio.) Many investors believe that when the P-to-E gets "too high" it means stocks are overpriced compared to underlying earnings and stock prices will soon take a fall.
I dunno, sounds plausible.
However it works, if you look at an historical chart of the P-to-E ratio,
you'll see it's pretty high. For it to come back in line, either stock prices must fall, or corporate profits must rise.
February 29th, 2012, 11:38 am #4
I'm no economist but that sounds like the economy is getting better, at least for the one-percenters.
Maybe that will trickle down through the rest of the economy.__________________________________________________
These are the good old days.
February 29th, 2012, 11:48 am #5
And yes they do tend to become self-fulling prophecies. EG, I'm no 1 percenter but I have already used the current stock market high to pay off credit cards and provide my family with more spending money per month.
IOW it's already trickled down to me, and will create further benefits where ever we spend/invest that money.
February 29th, 2012, 12:09 pm #6
so anyway, long term these stock market price levels are not likely to be sustained.
Since 1880 we have seen this kind of distorted price level only 5-6 times,
and the results, for those who held too long were not good.
It is however a positive indicator or the economy's near-term future.
February 29th, 2012, 12:13 pm #7Cherokee (savage) and Irish (mic)
February 29th, 2012, 12:17 pm #8
heres a chart of the real p-e ratio
the current ration is 15.7
i like to compare the p-e ratio to the earnings yield of long term bonds to see if stocks are over or undervalued. by that ratio stocks are way undervalued but with rates artifically depressed i dont think that is all that valid right now.
but using a long bond of 5% would mean a p-e of 20 would be fair .yes i am a pirate,200 years to late
February 29th, 2012, 12:20 pm #9Nasdaq hits 3,000 for 1st time since 2000
What did the regime call U.S. business? Ah yes... lazy.
"Itís time to heed the words of Gandhi: 'Intolerance is itself a form of violence and an obstacle to the growth of a true democratic spirit.'" - Barack Hussein Obama 09/25/2012
February 29th, 2012, 12:22 pm #10
My wife and I are allowed to use our retirement account as collateral and borrow at a very low interest rate. We have a modest balance on a few old credit cards. The rate is quite high.
We are using this market rise to pay off our credit cards and reduce our monthly payment ~$150 a month. No one got hurt. There was no fighting. We benefitted and we are not 1-percenters.
If the other 99-percenters do not take advantage of similar opportunities I wouldn't blame Donald Trump.
February 29th, 2012, 12:26 pm #11
And no, I did not mean "fighting" in the literal sense.Cherokee (savage) and Irish (mic)
February 29th, 2012, 12:37 pm #12
Yes, your chart compares stock prices to corporate earnings over the past 12 months, and thus is a good indicator of where stock prices will go over the next 6-24 months.
Mine, (the Schiller P-to-E) looks at inflation adjusted earnings over the past 10 years. I am pretty confident that if one is trying predict long-term stocktrends, using data (only) from the past handful of months is inferior because it over-emphasizes the most recent dips and peaks in coporate earnings.
February 29th, 2012, 1:17 pm #13
But what my wife and I are doing is not all that sophisticated, any middle class family with a car loan or credit card debt can do the same.
Elsewhere a (figurative) teacher in Illinois is now selling her stocks and locking in her gains. In Illinois a (figurative) Catepillar worker has decided "the market is rising. It's time to get back in."
He will lose money if he holds too long.
Yes the so-called 1-percenters do exist, but the fact that the teacher will make money and the factory worker may make it or lose it, is not about what the 1-percenters do. It's not about crumbs and it's not about trickle down.
February 29th, 2012, 1:20 pm #14Honored Guest
- Join Date
- Jan 2012
Yeh, because they think Obama is going to loose and that Romney has gone far now to be a front runner to ensure Obama will loose.
I don't believe any of those things yet and the market is set up for a huge amount of profit taking between now and middle of November.ObamaCare is now a permanent new entitlement to add to the existing entitlements. Hello Greece, here we come.
February 29th, 2012, 1:45 pm #15