T Nation

1929, 2000, 2011


#1

Look at the chart and try to identify what those years have in common (approx).
Then, are we ready for what comes next?


#2

Do you think the money from QE2 is flowing into the stock market?


#3

This is getting tiresome. Everyone, on virtually every side of economic thought say the economy is improving.


#4

Unfortunately they are all wrong.


#5

Good point, I'll ignore the thoughts of some of the better economic minds in the country and heed the warnings of you and Headhunter - yeah that seems reasonable.


#6

I think "ignoring the thoughts of some of the better economic minds in the country" should be your default position by now.


#7

lol


#8

I don't believe Peter Schiff has said the depression is over(2+ years into this I think we can call it a depression now) and he is probably the greatest well known economic mind of our time.


#9

Yes. The Fed is just about the only buyer. Retail buyers are not driving up the market. Been going on since 2009.

"Do we have the Federal Reserve to thank for the recent stock rally? The only logical answer is yes, according to TrimTabs, a research firm that tracks money flows in and out of the stock market. As I read the title of their report, I thought it might be a mad-hatter conspiracy theory, but the analysis is rather compelling. If they are correct, it could have significant implications for the longevity of the powerful rally that lifted the market from its March lows last year."

http://www.fool.com/investing/general/2010/01/08/is-fed-buying-behind-the-stock-rally.aspx


#10

Yep. Its about to get worse. The Fed is propping up stocks hoping everyone buys the 'recovery' idea. Of course, its a mirage.

See the chart I posted? Look for a Dow at about 4000 in the next couple of years. THAT will be the time to go all-in on stocks.


#11

They are mistaking inflation with growth, if it was growth prices would go down and investment would go up, instead prices are going up because of inflation and people are riding the damn inflation train.


#12

I swear I need to take a damn economics class, because I never have any clue what the hell ya'll are talking about when it comes to this topic. And that hurts, because I like to think of myself as a pretty smart guy...but I have no experience whatsoever with economics.


#13

Hmm...let me think...listen to the predictions of most of the great economic minds in the country, or take the advice of a High School math teacher? Well...this is certainly a tough one.


#14

Nothing mysterious here. When the market is .4 above value (see chart), historically we have a big drop in the market. When the market is undervalued by .4 (such as in the 1930's, 40's, 80's, you should be all in the market.


#15

HH, can you explain what exactly "above value" and "under value" mean?


#16

Headhunter-can you tell me more about this valuation method, I can't seem to find it online.

Thanks


#17

Here's a good link.

http://www.zerohedge.com/article/cape-tobin-q-imply-market-48-overvalued

Further:
"What Does Q Ratio (Tobin's Q Ratio) Mean?
A ratio devised by James Tobin of Yale University, Nobel laureate in economics, who hypothesized that the combined market value of all the companies on the stock market should be about equal to their replacement costs. The Q ratio is calculated as the market value of a company divided by the replacement value of the firm's assets."

http://www.investopedia.com/terms/q/qratio.asp


#18

Most economists understand that a small bump in the economic rate is pretty meaningless when looking at the big picture of extended high unemployment, massive government debt busted pension funds etc.

It will be a rough ride.


#19

My macro course was the most painful course ever because it was Keynesian based and even way back then I knew it didn't make sense but I wasn't sure why.


#20

What are you having trouble understandin?