Stock Valuations Are Higher Than in 1929 But Lower than in 2000 What Does This Mean Valuations are considered high due to low inflation (below 2%). However, when inflation goes back to 2% (or higher) which is the Fed target, valuations and prices will come down. How About Stock Returns for the Next Decade Source … Continue reading Why stocks will underperform for the next decade
"This time it's different," say supporters, as they did in 2000. Dot-com stocks, it was said at the time, could go to the moon and beyond because the Internet will continue to expand for decades. The assertion that the Internet would continue to expand was correct, but the assumption that this growth would send stock … Continue reading Financial assets as a percentage of economy hit all time high
The business cycle differs from the economic cycle in that GDP growth is much more persistent than EPS growth. EPS declines can happen even when the economy is growing. Despite positive economic growth in the 68 years since 1950, earnings have fallen in 23 of those years… 34% of the time! In the 2000s and … Continue reading The stock market is not the economy
The use of the "historical average" for the stock market's price/earnings ratio is one of the most flawed oversights (or distortions!) in stock market research. Too often, the current P/E is calculated using an updated version of earnings for a future date (forward operating earnings). The forward-looking, earnings-adjusted P/E is then compared to the historical … Continue reading The truth about P/E
The key gauge to measure inflation is the PCE price index or PCEPI which stands for Personal Consumption Expenditures Price Index. Different equations are used to calculate the PCE price index: Based on GDP data from manufacturers, the BEA calculates how much is consumed. Manufacturer orders, utility sales, service receipts, and securities brokerage commissions are … Continue reading Inflation?
The IPO exchange traded fund which is represented by the likes of Zoom and Uber ... point to a bear...
According to today's National Case-Shiller Home Price Index for "February," which represents the rolling three-month average of sales reported in public records in December, January, and February, house prices rose 12.0% from a year earlier, the largest rise since February 2006, near the height of Housing Bubble 1.
Abstract: The VIX was introduced to the financial markets in 1993 by Dr. Robert Whaley and is a measure of the stock market's expectation of volatility based on S&P 500 index options. The VIX has become popular as a hedge against volatility. In this paper we test using the Elliott Wave Oscillator and relative VIX … Continue reading A Dynamic Wave-VIX Approach to Investing
Here's a headline from CNBC on May 12, 2020: Young investors pile into stocks, seeing 'generational-buying moment' instead of risk The headline's message corresponds to many investors' belief that the stock market is at the start of a bull run, not at the end. Yes, financial history reveals that the same psychology was on view … Continue reading The generational buying moment
According to the Quantity Theory of Finance, the sum of money in an economy has an effect on the prices of goods. According to the theory, more money in an economy leads to higher prices and vice versa. Despite the fact that the hypothesis has many flaws, it is widely accepted that more capital contributes … Continue reading Inflation … really?