T Nation

The Only Chart Required To 'Price' US Stocks

Really think about this statement…
“the NYSE Market Cap, this cycle, actually went up dollar for dollar with the expansion of the Fed’s pregnant balance sheet.”

Ok Ok we get it Man, everything’s goin’ to shit…What do you want us to do about it?
We know the economy’s fucked already from all angles…old news.

I’m not sure I get the chart JEATON. It might be helpful if they plotted the S&P along with that ratio and added a second y axis.

My interpretation - The S&P is trading at a lower multiple of the Fed B.S now ( around 5 ) than it has in the past ( between 10 - 20). And the increases as of recent in the Feds B.S have been matched lock-step with the increases in the market as shown by the consistent multiple of around 5 since 09.

ie. If we had recovered ( and went back to a multiple around 15), then the NYSE market cap would be much much greater then it presently is.

Also,

If the multiple stayed constant as the graph shows( since 09) , then the market would have to expand by more than a dollar for each dollar increase in the Feds B.S.

Ex - 100/10 doesn’t = 110/20

For the multiple to stay constant they would both have to grow at the same PERCENTAGE.

[quote]tmay11 wrote:
I’m not sure I get the chart JEATON. It might be helpful if they plotted the S&P along with that ratio and added a second y axis.

My interpretation - The S&P is trading at a lower multiple of the Fed B.S now ( around 5 ) than it has in the past ( between 10 - 20). And the increases as of recent in the Feds B.S have been matched lock-step with the increases in the market as shown by the consistent multiple of around 5 since 09.

ie. If we had recovered ( and went back to a multiple around 15), then the NYSE market cap would be much much greater then it presently is. [/quote]

Just caught your post with a quick check in. A little slow in my thinking after a fourteen hour work day. The point was that the market was no longer trading at any multiple of earnings (current, future or long term). Instead, it was trading, virtually in lock step, with the growth and size of the Fed balance sheet. In other words, fundamentals are meaningless. QE and Fed balance sheet are now all that matters.

[quote]JEATON wrote:

[quote]tmay11 wrote:
I’m not sure I get the chart JEATON. It might be helpful if they plotted the S&P along with that ratio and added a second y axis.

My interpretation - The S&P is trading at a lower multiple of the Fed B.S now ( around 5 ) than it has in the past ( between 10 - 20). And the increases as of recent in the Feds B.S have been matched lock-step with the increases in the market as shown by the consistent multiple of around 5 since 09.

ie. If we had recovered ( and went back to a multiple around 15), then the NYSE market cap would be much much greater then it presently is. [/quote]

Just caught your post with a quick check in. A little slow in my thinking after a fourteen hour work day. The point was that the market was no longer trading at any multiple of earnings (current, future or long term). Instead, it was trading, virtually in lock step, with the growth and size of the Fed balance sheet. In other words, fundamentals are meaningless. QE and Fed balance sheet are now all that matters. [/quote]

Yes, I know many people who were short the market starting around 2010.

They thought that the fundamentals would remain weak, which they have, but they failed to fully appreciate how much QE could inflate the market.

It makes investing terribly difficult.

[quote]tmay11 wrote:

[quote]JEATON wrote:

[quote]tmay11 wrote:
I’m not sure I get the chart JEATON. It might be helpful if they plotted the S&P along with that ratio and added a second y axis.

My interpretation - The S&P is trading at a lower multiple of the Fed B.S now ( around 5 ) than it has in the past ( between 10 - 20). And the increases as of recent in the Feds B.S have been matched lock-step with the increases in the market as shown by the consistent multiple of around 5 since 09.

ie. If we had recovered ( and went back to a multiple around 15), then the NYSE market cap would be much much greater then it presently is. [/quote]

Just caught your post with a quick check in. A little slow in my thinking after a fourteen hour work day. The point was that the market was no longer trading at any multiple of earnings (current, future or long term). Instead, it was trading, virtually in lock step, with the growth and size of the Fed balance sheet. In other words, fundamentals are meaningless. QE and Fed balance sheet are now all that matters. [/quote]

Yes, I know many people who were short the market starting around 2010.

They thought that the fundamentals would remain weak, which they have, but they failed to fully appreciate how much QE could inflate the market.

It makes investing terribly difficult.
[/quote]

Yes, very difficult. If one had simply decided to follow the Pied Piper (Bernanke) all would have been well, until it wasn’t (or won’t be. Hard to find anyone who will say this run has a lot of road left, but none is comfortable in stating exactly when the bridge will wash out.

One day, my uncle Shlomo went into his local pizza parlor in Brooklyn. “Large cheese,” he said, and went to sit down.

The guy behind the counter said, “Shlomo, you want that pie cut four pieces or eight?”

Shlomo pondered this a bit, then replied slowly, “Give it to me in four. I’m not hungry enough to eat eight.”

(This is germane to the above and explains it a bit more easily, I think.)

[quote]tmay11 wrote:
Yes, I know many people who were short the market starting around 2010.

They thought that the fundamentals would remain weak, which they have, but they failed to fully appreciate how much QE could inflate the market.

It makes speculating terribly difficult.
[/quote]

Fixed it for you.

Don’t fight the Fed. Just along for the ride. I am actually taking profits right now. Next year when QE ends (hopefully) we can go back to fundamentals. Until then ride the wave.

[quote]LIFTICVSMAXIMVS wrote:

[quote]tmay11 wrote:
Yes, I know many people who were short the market starting around 2010.

They thought that the fundamentals would remain weak, which they have, but they failed to fully appreciate how much QE could inflate the market.

It makes speculating terribly difficult.
[/quote]

Fixed it for you.[/quote]

Ha ! Care to share your strategies?

[quote]tmay11 wrote:

[quote]LIFTICVSMAXIMVS wrote:

[quote]tmay11 wrote:
Yes, I know many people who were short the market starting around 2010.

They thought that the fundamentals would remain weak, which they have, but they failed to fully appreciate how much QE could inflate the market.

It makes speculating terribly difficult.
[/quote]

Fixed it for you.[/quote]

Ha ! Care to share your strategies?
[/quote]

Invest in markets where things are not denominated in USA dollars or tied directly to easing money. This at least takes the money-printing out of the equation. You can then convert back to dollars at the inflated rate.

It just helps remove a variable, at least in part.

[quote]Jewbacca wrote:

[quote]tmay11 wrote:

[quote]LIFTICVSMAXIMVS wrote:

[quote]tmay11 wrote:
Yes, I know many people who were short the market starting around 2010.

They thought that the fundamentals would remain weak, which they have, but they failed to fully appreciate how much QE could inflate the market.

It makes speculating terribly difficult.
[/quote]

Fixed it for you.[/quote]

Ha ! Care to share your strategies?
[/quote]

Invest in markets where things are not denominated in USA dollars or tied directly to easing money. This at least takes the money-printing out of the equation. You can then convert back to dollars at the inflated rate.

It just helps remove a variable, at least in part.[/quote]

The question is who is not devaluing their currency right now? The USA seems to be in last place so putting your money in US currency seems to be better right now, then switch back to another currency after all the QE is done with all over the world. I don’t think the QE can stop all over the world. It is going to get a lot worse.

Ride the wave just to make sure your dollars keep up with inflation. Staying in cash is not that good. I am buying cash flowing hard assets like Real Estate.

[quote]tmay11 wrote:

[quote]LIFTICVSMAXIMVS wrote:

[quote]tmay11 wrote:
Yes, I know many people who were short the market starting around 2010.

They thought that the fundamentals would remain weak, which they have, but they failed to fully appreciate how much QE could inflate the market.

It makes speculating terribly difficult.
[/quote]

Fixed it for you.[/quote]

Ha ! Care to share your strategies?
[/quote]

Buy productive assets for the long haul and do not worry about their dollar price except to be able to buy more of them when they become cheaper.

I also like to gamble on forex - but I don’t consider that investing.

[quote]LIFTICVSMAXIMVS wrote:

[quote]tmay11 wrote:

[quote]LIFTICVSMAXIMVS wrote:

[quote]tmay11 wrote:
Yes, I know many people who were short the market starting around 2010.

They thought that the fundamentals would remain weak, which they have, but they failed to fully appreciate how much QE could inflate the market.

It makes speculating terribly difficult.
[/quote]

Fixed it for you.[/quote]

Ha ! Care to share your strategies?
[/quote]

Buy productive assets for the long haul and do not worry about their dollar price except to be able to buy more of them when they become cheaper.

I also like to gamble on forex - but I don’t consider that investing.[/quote]
agreed. I like to play with options, but I also want to be poised at the next major pullback to get into some dividend growing stocks. Park that crap and forget it.

[quote]jp_dubya wrote:

[quote]LIFTICVSMAXIMVS wrote:

[quote]tmay11 wrote:

[quote]LIFTICVSMAXIMVS wrote:

[quote]tmay11 wrote:
Yes, I know many people who were short the market starting around 2010.

They thought that the fundamentals would remain weak, which they have, but they failed to fully appreciate how much QE could inflate the market.

It makes speculating terribly difficult.
[/quote]

Fixed it for you.[/quote]

Ha ! Care to share your strategies?
[/quote]

Buy productive assets for the long haul and do not worry about their dollar price except to be able to buy more of them when they become cheaper.

I also like to gamble on forex - but I don’t consider that investing.[/quote]
agreed. I like to play with options, but I also want to be poised at the next major pullback to get into some dividend growing stocks. Park that crap and forget it. [/quote]

I prefer Real Estate, more precisely Rental Real Estate, dividends in the range of 20-50% which is much better than the S&P average of 2-3%. If inflation takes off the appreciation on Real Estate will be huge.