It’s Probably Nothing

7 Replies to “It’s Probably Nothing”

1. I pray each night that this bubble bursts on Obama, so he can take his rightful blame. And before the election next year so that the rest of Canada can see what the Shiny Pony is all about before they try to elect him.

2. Durden uses some strange metrics to make his case.
   I would have gone with the P/E of the S&P 500 which indeed looks spendy, but not unreasonably so if we assume that (a) interest rates remain low and (b) the economy continues to expand.
   But those, I admit, are two big “if”s.

3. … Call it what you want…
   The calm before the storm?
   The pride which goeth before the fall?
   Week before the Zombie Apocalypse?
   A really good time to stock up on flour and sugar, beans and bullets?
   The same thing that happened in 2008 and we all lived despite the gloom and doom on TV?
   This Time It Will Be Different?
   Time to start choosing your new cottage up north on Lake Muskoka because there’s a fire sale coming?
   Obama’s comeuppance?
   Time to sell Apple and buy a farm?

4. I remember 2008 very well. A very expensive educational year.
   Fool me twice, shame on me.

5. A stock price is only what the last person paid for it. capital gains are great but dividends are where it is at.
   There are lots of great affordable dividend producing stocks out there.

6. The economy of the US contracted 2.9% first quarter this year. This is an inflationary cycle in stocks; look and see that yields haven’t changed.

7. Yes, Paul I agree. One’s investment success will be defined by how many shares you were able to purchase given the funds on hand, not the price paid for them – which soon becomes meaningless, along with earning dividends, hopefully reinvested in more shares.
   It should be no surprise whatever that PE ratios are high; that is to be expected in a low interest rate environment. A PE ratio is a measure of how long it will take to get your investment back in earnings. For instance a PE ratio of 25:1 means it will take 25 years for earnings to equal your share price paid. At interest rates of 4% it will take the same 25 years to get earnings equal to your investment. Of course, always consider taxation issues, seeking the highest possible net real return (return after taxes and inflation).
   When loss of economic productivity of retiring/sick boomers finally overtakes technology gains (the only thing holding back inflation right now IMO), higher inflation and interest rates will pummel bond prices as yields rise over a period of years. It won’t be good for stock investors either, but both markets will adjust.
   IOW when investment and perhaps real markets crash/correct due to rising interest rates, look for buying opportunities that present real value over intrinsic worth. That will be a couple of years in the making, at least. For the present, I agree stock prices are definitely on the high side, the US market has been overvalued for at least 10 years, though discrete opportunities are always out there.
   IMHO there are only three safe places to invest your money right now: cash; or, high quality dividend earning stocks; or rental properties you manage yourself. All carry differing degrees of risk. The worst thing you can do is follow the herd. Always be a contrarian – when the media/public is greedy, you should be fearful; when they’re fearful, you should be greedy. So, when markets correct, buy, buy buy. That’s how the real money get’s made, rather than jumping in after significant market appreciations.