TAX BILL PROPOSALS...Brinker's main topic of the day was the tax bill that had passed the House, and on Friday, passed the Senate. It now goes for reconciliation. As BB said, it is still only proposals. A finished product may or may not reach President Trump's desk by Christmas. Thanks to dRahme, audio clip of Brinker's opening political-tax talk
STOCK MARKET....Brinker commented that it's hard to find tax losses this year and talked about how much the market has gone up since the low in 2009.
Charlie from Carson City, a "decades long subscriber to the newsletter" asked: "I've been looking at the newsletter for the last few months and struggling to understand the arithmetic as it relates to the S&P 500 and the price/earnings ratio."
Brinker replied: "As we have explained....again in the December newsletter, there is always the potential for period of over-valuation - and of course that's the answer to the question."
Honey EC: Hmmm, that answer left a little to the imagination so I picked up my December Marketimer (I subscribe so that I can be sure I am writing only facts.) and looked at what it says about price-earnings that Charlie was "struggling with":
It says that Brinker estimates 2018 operating earnings will reach the $142 level and he is maintaining his P/E estimate of 17 to 18 times earnings. Based on that estimate, he projects that the S&P 500 has the potential to trade into the 2700s.....He added that "extended bull markets can bring stock prices into overvalued territory in some cases," but he does not expect to see it reach the 30 times earnings over-valuation that it did in year-2000.
MARKETIMER ACTIVE/PASSIVE PORTFOLIO....Caller Jay from Chicago asked about the Marketimer 80-20 Active-Passive Portfolio. BB replied: "In our Active-Passive Portfolio, we have a significant allocation to the market at large by using index fund investing."
Honey EC: For decades, Brinker has included the Active-Passive Portfolio in Marketimer. it is simply 80% Vanguard Total Stock Market Fund, and 20% Vanguard All-World Fund. Over the years, this simple approach has often out-performed the portfolios with some managed funds in them.
BRINKER'S RECOMMENDED STOCK ALLOCATIONS....Caller Dan from New York asked about his 40/60 stock allocation at age 80. Brinker replied that a 40% equity allocation at his age "would not trouble me, assuming that you have a favorable market outlook." Then BB added: "I would be comfortable with the allocation that you have right now."
Honey EC: It is clear from BB's advice to that caller that he "has a favorable outlook on the market." He is fully invested and he recommends dollar-cost-averaging new money.
KEEP INDIVIDUAL STOCK HOLDINGS TO 4%....Brinker reminded listeners not to own more than 4% in any one stock.
IT'S BEEN A VERY GOOD YEAR SO SPREAD IT AROUND... Brinker reminded listeners that this was a good time of the year to "spread around" some of the fantastic gains that the stock market has made this year. He mentioned UNICEF.
HONEY EC: It's a good idea to check your charities to find out how much of your money goes to help the people you want it to help. There are huge differences. Some have lots of highly paid people at the top and others don't. Salvation Army is one of my favorites.
ELIMINATING THE STATE TAX DEDUCTION: Caller Michael from Carson City, Nevada, and BB have lovefest about the joys of living in a non-tax state, and why they shouldn't be responsible for irresponsible states like California and Illinois. Thanks to dRahme, audio clip of BB's comments.
NATIONAL DEFICIT AND DEBT.....Brinker stated as "accepted fact" that the tax proposals will increase the national debt by $1 1/2 trillion and claimed that he had not heard an of the GOP even mention the national debt. He had no problem with caller Paul from New Mexico calling them "hypocrites."
Honey EC: I submit that Brinker is deliberately ignoring the increase in the economy that has happened already - last two quarters, GDP came in at over 3%.
WHERE WAS THE PRIOR CALLER DURING THE PRIOR 8 YEARS....Referring to a prior caller complaining about the national debt, Tom from Carson City, wanted to know where he was during the past 8 years when it doubled - up about $10 trillion.
Tom also mentioned that he was going to have lower taxes under the tax bill, in spite of what "talk show hosts" may say. Brinker hung up on him and then condescendingly told him that "he was in the right category" to get the tax breaks.
WHO WINS AND WHO DOESN'T WITH TAX PROPOSAL....Brinker's conclusions. There are only three winners:
1. Business owners
2. High earners
3. High net worth.
Honey EC: I submit that logically speaking, Brinker's conclusions are not possible.
FRANKJ'S MONEYTALK GUEST-AUTHOR SUMMARY
Bob’s third hour guest
today, Dec. 3, 2017 was Dan Ariely, a professor of Behavioral Economics at Duke
University. Dan’s newest book is: "Dollars and Sense: How we Misthink Money and How to Spend Smarter" Dan has a
co-author on this book, Jeff Kreisler.
(Editorial comments in italics.)
Bob had to filibuster for a
few minutes past the usual time when a guest comes on. Then he went to the phone to bring Dan in and
there was dead silence. This has to
cause a knot in the stomach of talk show hosts, but Bob abided and in a few
moments, Dan was there.
Bob led off by asking Dan
what he thought about the pending tax reform.
After a detour into some research he did, the guest said that our
relationship with the government is adversarial with regard to taxes. The tax code is too complex, people feel
disenfranchised and personally, he experiences fear and worry that he might
have made a mistake on his taxes.
He added, the government
should give taxpayers a receipt showing where there taxes go, and added people
should have a choice as to what their taxes pay for.
I think that would be real interesting to see. The IRS could add a non-binding survey to the
tax return and simply ask people to rank various areas of spending or, assign a
percentage.
The guest went on to say
he’s worried we aren’t getting the goals right.
We seem to be meeting the goal of reducing taxes on businesses and large estates but the goals for
individuals were not clear.
Dan’s Theory of
Relativity: This was interesting. Suppose you are about to buy a pen for $15
and the clerk tells you the same pen can be had a few blocks away for just $5. You save $10 … is it worth it to you to walk
a few blocks?
Now suppose you are buying
a nice suit for $1015 and the same thing happens – someone mentions that you
can go a few blocks down the street and buy the same suit for $1005. Again the savings is $10.
Would you walk a few blocks
to save ten bucks on a pen? Would you
walk a few bucks to save ten bucks on a suit costing over $1000?
I would take the walk for the pen, but not for the
suit. Taking a page out of Herb Cohen’s
book, “You Can Negotiate Anything,” I would nudge the suit salesman to throw in
a tie to go with the $1015 suit.
In another example of
behavioral economics he cited the purchase of a phone. One model costs $100 more than another. The purchaser will spend about 1000 hours per
year on the phone. Will the extra cost
and presumably extra features and convenience make a difference or is this a
price only transaction?
He did an experiment with
Duke Univ. students where he ran a lottery that awarded coveted basketball
tickets to winners. Then the winners
were asked how much they would sell their ticket for? Some said they wanted more than $2000. Those who didn’t win a ticket were asked
what they’d pay for one. Answer:
$150.
The guest said this
demonstrated the ownership can dictate perspective. And,
this concept is clearly demonstrated when someone is dickering with a car
dealer over the value of their trade-in.
He didn’t call it this, but
there was an example of “Keeping Up With the Joneses.” In ancient times wealth was measured by how
much livestock you owned vs. your neighbor.
The wealth was out there on the hillside for all to see. Today we cannot “see” other people’s wealth –
but we can see their spending. So this
illustrated his point on how money has become invisible. He said there was a study that showed when
someone won the lottery their NEIGHBORS’ spending went up. This got a chuckle out of Bob.
The Pain of Paying –
with cash that is. When we fill the gas tank we know exactly
what we’re going to pay because we see the numbers rolling by on the meter
right next to us. If we pay for an
expensive dinner with cash we have a better sense of the cost than if we use a
credit card. People who pay their
energy (utility) bills with automatic deductions pay less attention the actual
cost than those who write a check to the utility. Result:
the auto deduction crowd ends up increasing their energy use about 4%.
Take away: Try
to analyze your own behavior.
Honey here: Thank you for that great summary! And they say you can't make a "silk purse" etc. :)
Radio Stations
710KNUS Denver
WNTKKKOB770
95 comments:
I read that Bob does not care for the current party that controls Congress - with all of his tax talk.
I would have thought that Brinker's description of the "Senate Passed Version" of the proposed Tax "Reform" Act would be BALANCED - Negatives like the removal of the deductibility of State Income Tax, Property Tax over $10,000, and Sales Tax, TOGETHER WITH THE POSITIVES - the OFFSETTING RISE IN THE STANDARD DEDUCTION and OTHER TAXPAYER BENEFICIAL OFFSETS.
His failure to mention THE POSITIVES to that New York caller makes it appear that BOB IS BATTING and THROWING LEFT TODAY - subtly pushing the opposition to the tax proposal.
PATHETIC!
Bob in Oakland here. Brinker seems a good and grounding voice about realities of tax bill. Already some useful strategy offered (using multiple brokerage accounts)regarding change in ability of stock seller to chose which lot to sell.
Wondering how you frequent commenters here feel about Bob's description around 39 minutes after the hour about who benefits from tax bill?
Since there appear to be many deficit hawks here how are you feeling about the bill?
Haha, way to demagogue taxes, Bobby. You sound just like Karl Marx, Bernie Sanders, Chuck Schumer, Pocahontas, Mz. Pelosi, et al.
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Hi Bluce....If you read my last post, you will get a glimmer of what I am thinking about Brinker right now.
Bob from Oakland here again.
Thanks Honey for the service your site provides, and for your clarity in regard to your opinion of him currently. When you ask that he be truthful do you mean he needs to state his politics or that some of his commentary is actually false?
Please, I'm interested if you are suggesting specific lies or unbalanced omissions?
A lot of people on the lower end of middle class are going to save $1000+ in taxes with this proposal. That may seen insignificant to someone of Bob's wealth but those people are going to be quite pleased.
Ironic that Bob went on the air 31 years ago. And the last massive tax cuts were also enacted 31 years ago. Either a complete coincidence, or tax cuts boil Bob's radiator.
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Bob from Oakland....Brinker needs to be truthful about his own politics.
And he needs to stop with the "unbalanced omissions," and opinions stated as fact.
Bob will never like anything done by President Trump or his people. He is too much enamored with Nancy Lagosi/Piglosi and her ilk and he hates our President.
Regarding whether the tax bill will increase the debt, I'm not an economist, so here's what I know:
1) the Dems, after years of tax and spend big government, are suddenly concerned about the debt when it's a Republican bill
2) people whose integrity I respect greatly, Larry Kudlow and Art Laffer, say the tax cuts will more than pay for themselves
3) after years of anemic growth under Obama, we've got to change direction
4) if we cut spending to fund only what is really constitutionally valid we solve the deficit problem and the freedom problem all at once.
Dr. Bob
Doug at about 45 minutes into the second hour claimed that if you were over 65 the personal exemption doubled and now it is all being swept away by the proposed tax reform. He is right and wrong. Right that the personal exemption goes away, but it did not double for people 65 and over. He's mixed up, the standard deduction went up some if you were over 65 and/or blind.
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PATHETIC indeed. Bob Brinker is showing his true colors which is okay if he would just be truthful about it his own political views. Instead, he pretends to be a "non-partisan" financial advisor.
When the two Brinker subscriptions get down to the point where they are not worth his 9 hours a month, he will retire.
Honey: Yes, good post.
Bobby shows his left-wing views yet again, as he has for decades.
Bluce,
Welcome Back!
Frankly, (or Blucely) I was worried - hope everything is OK!
JC
Long time lurker, first time poster. Thanks for this site!
I thought the fellow from NV brought up good points to Bob. Why bash taxpayers in state's without State income tax. Bash the out of control government officials in State's with state income tax to get spending under control as the caller noted. I think the answers Bob gave were extremely weak.
To me, in the past, Bob would bash out of control U.S. Gov't spending (the $20 trillion under President Obama). Today, when the NV Caller challenged him in a very polite way, Bob pointed out NV was a fical gem (my words not his) and Illinois was a failure. He ran from this question in my opinion.
Subscriptions or not, the best info says strongly that Bob is more than old enough and wealthy enough to quit whenever he pleases.
I suspect he doesn't because he loves what he does, and who wouldn't love that job ?
It is like expressing one's views to the public , as on this blog, but to the tenth power.
Bob from Oakland weighs in.
To Anonymous.
I am an economist or at least I have a degree in economics.
1 Don't you feel compelled to point out hypocrisy? - that's what dems are doing, pointing out the irony of the deficit hawks voting for this .
2 Trickle down does not work, check history. Remember the silence in the room when the administrations guy asked the Wall Streeters who would be adding jobs as a result of this law?
3 Ok growth was slow. That has kept inflation down and the stock market tripled. Does not translate to "we've got to change" - don't fix what is not broken.
4 Abstractly we can all cheer for reduced spending.
The tax bill however, cuts revenue more than spending by 1.4 trillion. Are you suggesting there is something unconstitutional about the way the congress passes laws to tax and spend? The "freedom problem" you refer to is a meme created out of extreme political dialog, an oversimplified talking point representing a tiny minority. Each of us may feel less than ideally free, but you may be talking about other issues than mine. An example of which is I'd like to be free to do biz with large corporations without having to give away my rights to a trial (mandatory arbitration). I'd like to be free to benefit from entitlements like social security and medicare without one party conspiring to systematically reduce benefits.
I'd like to invest freely knowing regulations will protect me from dishonesty.
A severe cut in government spending will cause recession and a lot of suffering for those who loose benefits.
Bob is hurting his talk show credibility for financial advice, since utilizing the show for partisan propaganda. If he was a honest broker of info, he could discuss the process. A process that minimizes informed public and honest info. Media is mostly useless and contribute to the problem. Come to find out the accounting agencies that rate budgets are full of bias and politics. BB should point out the hypocrisy of these agencies. For example the assumptions they are held to. The miss on Obama Care savings. Mnuchin stood up and outed one agency that was a popular anti Trump source for bad rating of tax plan.
Brinker doesn't really come out and say directly the new plan plan won't help the economy. Indirectly he lets listeners think it will skyrocket national debt that will hurt economy, but he never mentioned the force when the last Executive held office. Why is that. Also, Brinker never informs his public on how important and powerful an economic force to move GDP growth up just one percent is. This is all critical for nations future. Nor does he mention the benefit to lower taxes and take the consideration out of decision making. It's very damaging to the economy when we have an extremely complicated tax code and when this cost is the primary driver for business success. It's a negative force in which making less is more attractive and simpler. Limiting your growth, job creation, invention, and efficiency as the effort is less worth the risk. We have a burgeoning lower class that has figured this out. Why bother.
Also, Bob never put the U.S. corp tax rate within international comparisons, since we have the top rate. The damage this does all across the economy. Then one must understand that in the end business don't pay taxes as they are passed through to consumers. It's just an political trick to utilize class warfare jealously for popularity. We could start hating farmers and demand they pay all our tax load. They could, but you would eat much less.
I did read a commentary on this political force within the country and how caustic it has become. The dishonesty at all levels. The lack of quality consumer info and intelligent discussions. The article also included public and government debt load. It was an ominous statement of future economics and national might. The international community is also burning with the U.S. type actions. This author claimed it will end badly. Also, when things like these happen there is no limits on fed emergency actions. I do think draining the swamp is ugly, but it gives citizens a chance to witness corrupt forces.
For me, all tax cuts are good.
If they improve the economy, a rising tide will lift all our boats. But, suppose they don't. We still have the extra money in our pockets and the government has less to waste and to interfere in our lives.
How can we lose?
Anonymous, when you talk about "one party systematically conspiring to reduce benefits", I presume you are talking about the Democrat party. E.g. IPAB
Honeybee,
Just checking...
Did you receive a post from me - probably about 3:15 or so?
Thanks,
JC
Thanks Honeybee!
You are the Greatest!
JC
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Thanks Jerrod...Once in a while, one gets past me when I am multi-tasking. :)
Bob from Oakland (economics degree):
As one with an economics degree who would like to partake of the Social Security and Medicare entitlements I have a couple of book recommendations. These should be on Bob Brinker's reading list but I'll settle for them being on HB's reading list.
Michael D. Tanner's "Going for Broke: Deficits, Debt and the Entitlement Crisis," and,
John F. Cogan's book: "The High Cost of Good Intentions."
Best wishes.
Bob in Oakland -
Defense of constitutional principles is extreme? It's Big Government, which violates our founding principles, that's extreme. "Extreme" is an overused leftist talking point, meant in the tradition of Alinsky to marginalize political opponents. Sorry, you don't get to control the language.
Yes, I am suggesting there is something unconstitutional and it is a freedom issue since the bigger the government the smaller the individual. Libs typically defend big government by citing the General Welfare clause. However, it has been bastardized by judicial overreach into becoming a blanket excuse for big government. That the founders specified the federal government be bound to specific enumerated powers underscores that the General Welfare clause was not a blanket opening to what the federal government has become. It was meant to refer to expenditures that merely benefit the whole US, not specific interests (hence General Welfare). James Madison said, "With respect to the two words general welfare, I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators." For you to suggest this view is held by a small "extreme" minority is outrageous. The Convention of States, which will get the federal government back into the box it is supposed to be in, has passed 12 states.
Your defense of slow growth is laughable. As Churchill said, the sole virtue of socialism is the equal sharing of misery.
I agree with Billy. Taxes feed the beast of big government and the professional political class (comprised of both Dems and RINO Republicans). A complex tax code is the tool by which the professional politicians sell influence and maintain their gig. That's what you're defending, Bob in Oakland. I therefore favored a low flat tax, to take power away from the professional pols. But I'll take what I can get in the direction of lower taxes. Lower taxes will generate growth and as I said, there is disagreement among economists about what will happen to total revenues, so don't state it as a decided issue. But it's not the government's money in the first place. Limit spending to that valid under enumerated powers and that will ensure a smaller deficit.
So Bob in Oakland, maybe you should get out of the Oakland left wing echo chamber a while and maybe you'll come to realize just how damaging left wing big government policies are.
Dr. Bob (really a doctor, really named Bob)
My tax accountant told me, "You need some LIFO!" I thought she was saying my hips are too blubbery. Turns out she's a smart tax accountant.
So long LIFO. Me and my FIFO are devastated. Luckily BB has assuaged the pain with a plan: Just get multiple brokerage accounts to fool the feds. Yes, I feel that my $4.95 toward MTOD has earned itself this month, and I'm serious.
It's brilliant. Just spread it around like the neighborhood kitty cat does, a little here, a little there. Pretty soon the kitty controls her own fate.
But in D.C., it's so weird how the "tax reformers" focused on the low-hanging fruit. Everybody's taxable investments since the 2009 S&P500 low of 667 have gained a ton, so Uncle Sam wants his piece of the action. No more hiding the gains until death for a step-up in basis for the lucky heirs.
Therefore we morn the death of LIFO and SIM. You were great Americans but alas, America has become a colony of the Eurozone.
And that's the way it is...
Sir Walter
Caller of the Day
Chris in San Ramon has a $2.5 million portfolio, and her (newly - found?) financial advisor wants her to get into individual stocks (and bonds) – unlike BB’s portfolio #3 that the caller referenced.
This advisor wants her to:
1) avoid the fees of mostly index funds
2) avoid the risk of over-diversification
3) gain the ability to harvest losses and maximize gains
All of the following can be provided for the tiny sum of 1.25% on the first million -- $12,500.
1) move money around faster
2) day-trade
3) successfully avoid major market declines and re-enter at the bottom
BB’s response to all this was “Unadulted Nonsense”. . . “something for the uninitiated”.
This summation of the 5 or 6 - minute discussion between Chris and BB really doesn’t give full body to the scope of the dialogue.
Perhaps dRahme could edit–in–summary the actual call since I fully expect the topic to be covered in the Moneytalk final exam.
For added color, see my prior post - (November 27, 2017 at 7:41 PM).
If the financials stats are good one should be fully invested. However, we should guard against excessive frothy optomism and foolish investment behavior. We have a period of time within a goldilocks economy. Like Honey posted P/Es are still within justifiable range given the bullish trend of better financial future and all the cheap liquidity handed out. There is a lot of money on the sidelines, still. Bonds are risky investment as compared to their long historical importance average. Given the importance of time in market the risk is currently worth the potential gain.
I have read a few investment letters that have political bend. They inject personal politics in the mix and may be attempting to pull markets down for the reason. This is common occurance as politics are polluting the country. My industrial journals are, also, rated by their politics. Editors and journalist push articles to inform public with an always present back stab to their political opponents. Why I'm bothering to mention this, is on this subject I do know the historical truth and have multiple sources of information. When important govenment events occur the always Left leaning Industrial sector rags will have damming missinformation even through most of the readership is not of that persuassion. They are using their proffession as just another avenue to push public opinion within a different venue.
The trickle down effect of economics that was mentioned. It didn't work as the fed easy money and Phillips curve would have suggested. The fed knew equity assets would be driven up, but thought the trickle down effect would help wage earners and job growth. I believe what they forgot is busisness had a ominious take on government invertervention and deficit spending. Most knew this was an experiment. That the country was teetering on brink of deflation. Everyone was fearfull of the DC political machine and what damage it could inflict. This DC group never learns and will recycle old solutions if it fits in with their desires of power, popularity, and politcal control. Why did the last Excutive study the Great Depression.
Doctor Bob, thanks for the terrific post. And, Go Seahawks.
rasputin here
"I want a tax cut!"
"You don't pay any taxes."
"Never mind."
Jerrod, thanks. Good to "see" you!
Doing okay here.
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Jester....dRahme's first clip that I put in the summary include the caller Chris from San Ramon.
I found the call so "interesting" that I had asked dRahme to include the call in his clips.
Here it is again. The call is after the tax talk.
Bob from Oakland, great post (December 3, 2017 at 3:50 PM) point for point.
I only disagree with your last sentence. Recession will come but not as a result of reduced government spending via this tax "reform". Your concern re: reduction of benefits for SSI & Medicare are real - starve the beast is in play unfortunately no mention of means testing the heck out of these safety net programs which is sorely needed. Warren Buffet should not be on Medicare and should not receive SSI payments since both programs are safety net insurance programs.
1.5 Trillion added to debt in exchange maybe get +0.88 added to GDP over 10 years, doesn't sound smart to me if this projection turns out to be real. Also the tax "reform" bill per Brinker 80:20 ratio of short end of the stick benefit to middle class no problem except if economy falters as a result of this overhang of unsustainable debt.
I'm still riding the stock market wave higher trying not to be greedy but danger signs are beginning to pop up.
Question to be pondered: If the mandate to buy health insurance goes away (in the senate version) does that mean insurance companies will again be able to deny health insurance based on preexisting conditions and insurance companies will bring back lifetime caps. Insurance companies are strangely silent on this. Many will recall this was the trade-off in ACA to justify the mandate.
Final question to be pondered: I wonder why neither version of tax reform includes doing away with carried interest. Maybe Trump will insist on this being included.
Greed is Good... but only to a certain point. So watch for that point.
smile
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Note to all readers:
SSI is a welfare - disability program.
SSA is the retirement benefit paid to those who have worked and paid in from every paycheck throughout their working life.
Did I say welfare and work are different? You betcha.
Same difference between Medicare and Medical/Medicaid.
Muddying the waters is wrong. Let's not make that mistake on this site.
Good catch HB. Thanks for catching my ignorance.
I thought SSI was the blanket abrev. for SSA. I was obviously wrong.
Obviously in my post I should have written SSA not SSI as it was consistent with Medicare mention in my post and no mention of Medicaid.
smile
Nobody has an accurate measure of bump in GNP from tax reform. It is going the right direction, that's the important part. It depends on the phase in and permanancy of reform. This reform is good for the nation on whole and middle class of which depends on a healthy economic country. U.S. has the best of best corporations, so not good to undermine our strength even if it feels good. We own the high tech sector, also.
We should be ashamed on how much damage to country for not reforming fed tax code earlier. Was it thirty some years before this reform. Problem is its just to easy to demagogue such reform as their will always be political opportunity to put party before country. This review, update, and should be a regular occurance. I do think we have a poor system to improve. Much work to move that job assignment. Probably, best to start over with simple consumption tax. The FDR experiment for political popularity, enacted the can of worms with a patrotic temporary war tax. The result was class warefare and pushing to much power to beauocrats whom desire to run the economy. It was popular poison wherein the divison of Americans first started.
You tax what you want less of. Do we hate income that much and those that are more productive? Income doesn't do much other than make people with less jeaulous. Some wealthy class never spend it but give it away late in life. Now, spending money is a good tax point and extremely fair and low cost conformance. IRS last I read takes 30% of tax revenue for their operations.
I agree with Honey on donating to the Salvation Army, and not to institutions like UNICEF.
Right now the S&P 500 earnings per share is about $105, and its price is about $2600 per share (or 2600 points). That equates to a PE ratio (trailing twelve months) of about 24.8, based on dividing 2600 by 105.
I don't see how Brinker is forecasting a much lower PE ratio than 24.8. The median PE ratio since the early 1990's has been around 20.
AD
Agree also Honey that they are intentionally confusing welfare like Medicaid with retirement benefits like Medicare. This is the same way they confuse illegal immigration with legal immigration. It is a cynical and Orweillian way to promote their political agenda.
AD
HB you might have missed not posting my thanks for catching my error post. Please post it as it is already leading some like AD to a false conclusion.
I posted shortly after I saw your post. If you don't have it I will recreate it.
smile
Oddly enough, I always heard that the founder of Goodwill received 90% of the money and only 10% went to the cause. I checked on web sites and with phone calls and found out that Goodwill takes less for operations than Red Cross or The Salvation Army. If red cross has a special drive then all of the money goes for that, like the recent hurricanes. I still am leery of Goodwill. I always give old clothes to Salvation Army and cash contributions to Red Cross for specific projects.
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Smile...I believe it is there. Look above AD's two posts and let me know if that is not the one you are talking about.
HB, yes that is the one. Thank You for finding and posting this for me.
For those as ignorant as I was:
https://www.benefits.gov/benefits/benefit-details/4412
Man do I have a lot to learn on Social Security and Medicare. I still have a few years to bone up.
This is the second time you have schooled me on some of this retirement stuff. First one if you remember was I had no clue that after paying into Medicare for my working career and earned the credits necessary to be eligible for Medicare that I would have to pay monthly premiums for Medicare. I'm thinking to myself what was the purpose of those payments from my side and my employer's side... just to gain access to monthly Medicare premiums... LOL.
Interesting market today... I thought we would be off to the races and we were early on till the fade. Hope this is not a case of buy the rumor sell the fact.
smile
Smile, where did I make a false conclusion about the Left employing Orwellian methods like controlling the narrative by falsely equating illegal immigration to legal immigration ? What false conclusions are you referencing ?
More importantly, for the PE ratio to reach Brinker's forecast (a value of 18), then earnings would have to increase from $105 a share to about $158 a share, and the S&P 500 would have to remain flat at 2600 points.
AD
AD said: "Right now the S&P 500 earnings per share is about $105, and its price is about $2600 per share (or 2600 points). That equates to a PE ratio (trailing twelve months) of about 24.8, based on dividing 2600 by 105.
I don't see how Brinker is forecasting a much lower PE ratio than 24.8. The median PE ratio since the early 1990's has been around 20."
In her summary this week, Honeybee correctly stated: "Brinker estimates 2018 operating earnings will reach the $142 level and he is maintaining his P/E estimate of 17 to 18 times earnings. Based on that estimate, he projects that the S&P 500 has the potential to trade into the 2700s.....He added that "extended bull markets can bring stock prices into overvalued territory in some cases," but he does not expect to see it reach the 30 times earnings over-valuation that it did in year-2000."
The P/E ratio discussed by Honeybee is based on a forward estimate of Operating Earnings. If the S&P traded at 2700 it would be at a P/E ratio of 19 based on Brinker's estimated 2018 operating earnings.
AD, for clarity, please specify what flavor of earnings you are using. Please don't compare apples with oranges.
AD, excerpt of your post here: "Agree also Honey that they are intentionally confusing welfare like Medicaid with retirement benefits like Medicare."
Your agree was to HB's post @ December 4, 2017 at 9:00 AM. HB's post was a response to mine posted December 4, 2017 at 8:45 AM where I made an honest mistake re:SSI abbreviation which HB alerted me to this error & should have been SSA, and was not an attempt to conflate or confuse an earned benefit with one that is not.
If that was not your intent then my bad, but that is the linkage or false conclusion I alluded to.
smile
No one is talking of the rich and corruption of the 501c. This tax organization pays no tax. So much wealth is tied up in these foundations and spending requirements are loose in my opinon and many others. The rich and powerful love them, where in they can enjoy tax free wealth via foundation supposidly helping society. I think is was Gates foundation that just built a Taj Mahal office. Pretty nice retirement to go around world receiving strokes for deciding where to spend. Your expensive trips all paid and kudos for being such a wonderful person. Beats paying 40%-60% in taxes and attemping to fend off media attacks. Soros has one and is able to support his anticapitalism crusade as well as employ political shenanagins. How is this possible? I remember Don Imus who had a beautiful ranch built for bringing handicapped kids for the purpose of their enjoyment. I rated the tax free expense high for the value, given the short duration of benefit. The estimates of 501c cost to revenue is huge.
By the way the P/E ratio is rated poor for market timing other than then the general cue to avoid over priced stock. Problem is within a bull cycle market, much return can be generated from overpriced stock and the trend can continue for years. Also, I thought their was a descussion on Brinkers flavor of P/E and I thought he utilized trailing earnings as the forward variety has much fluff? The desire to use real numbers.
Investopedia has a good take on "The value of using P/E ratio for timing". The conclusion was that P/E ratio plus some other benchmark does improve the chance for limiting drawdown. A simple moving average MA of P/E works well at the one year interval. This is an indicator or benchmark that investors are continuing to invest if the MA goes up. A one year running average works to minimize static. Quite impressive how this practice will harvest such a large portion of gains and avoid some of the harse drawdowns.
It is dangerous for new money to go in at high P/E market as it will take decades to recover after the eventual large draw down. That was one take I made from the post. It may be best to avoid new investment in high P/E climates. They didn't say, but it would be great to save this new money in stable investments and utilize at a time during recession impact. Keep old money chugging along, but with caveat emptor of some timing formulation to get out. It's just to easy to be complacent otherwise. Don't worry as some will just avoid high P/E markets altogether for this reason. To lesson the chance of experiencing the eventual crash. Their average return is similar without the fretting. Yes, if all else fails and you have no need for savings for seven years, probably best to wait it out and only save new money for low P/E periods.
In 2015 the IRS spent 11.4 billion dollars for their operations which yielded about 3.3 trillion in revenue. They spent .0035% not 30%.
This is an excellent and easy to understand detail of the proposed tax changes from each house.
> https://www.northerntrust.com/insights-research/detail?c=2b306289d8df79b21f6d69c45eeed309
Worth looking at.
Smile, that was not my intent. My intent did not relate to your post. My intent brings up past discussions with HoneyBee about the state of immigration in her state of California. That included how the Left has provided an Orwellian narrative on immigration as well as social welfare spending.
Biker, as far as the PE ratio, my first go to source is www.multpl.com . It shows the latest earnings per share as $105. My other source is http://www.wsj.com/mdc/public/page/2_3021-peyield.html
PE ratio = 2600 / 105 = 24.76
Earnings will rise from $105 to $142 per share "of S&P 500" ? Hence, that is about a 40% increase in earnings within 12 months. That is a 35% increase in earnings within 12 months :-/
And that is in an environment with more head wind against the market since we have many rounds of Quantitative Easing in the rear view mirror, and a $20 trillion debt and rising interest rates in front of us. Hence, it seems rather overly optimistic for Bob Brinker to forecast a 35% increase in earnings.
AD
AD
That should have read, total compliance for Fed IRS Income Tax is 23% plus the $11.5 billion to run the IRS. Ive seen estimates at the 30% level, probably if including the drag on economy and bad economic decisons due to the law. Fed income tax revenue sits at $1.8T. Busisness is out $147 billion for compliance. Total compliance cost of $409b. It is a total drag on the economy and distorts efficiency. That cost is multiple of accounting. You tax what you want less of. The productive class makes the income. Maybe we should award productivity and tax spending.
Tax breaks for the rich will only improve the situation. Read the "parable of the Talents" from the book of wisdom. Even Obama half quoted it but did not give the full meaning.
Matthew 25:29 For whoever has will be given more, and they will have ...
biblehub.com/matthew/25-29.htm
For to the one who has it, it shall be given, and it will be increased to him. But whoever does not have it, that which he has will be taken from him. GOD'S WORD® Translation To all who have, more will be given, and they will have more than enough. But everything will be taken away from those who don't have much.
Parable of the Talents. The “Parable of the Talents”, in Matthew 25:14–30 tells of a master who was leaving his house to travel, and, before leaving, entrusted his property to his servants.
AD: As stated at www.multpl.com, you are using Trailing Reported earnings. Brinker is using Forward Operating earnings. Big difference, both in terms of timing and what is included in the earnings stream. It is meaningless to compare P/E ratios with different types of earnings. Please read:
https://www.briefing.com/investor/Learning-Center/Ask-An-Analyst/what-is-difference-bewteen-reported/
Brinker is not forecasting a 35% increase in earnings within 12 months. According to https://ycharts.com/indicators/sp_500_operating_eps, 2Q 2017 S&P operating earnings were $30.51. Annualized that is $122. So my take on his projection of $142 for 2018 is an increase of ~16% over ~18 months.
JC said Bluce, Welcome Back! Frankly, I was worried - hope everything is OK!
I echo that and multiply it by at least 3X. I was gonna send you an email but now that I'm over 39 (HAH!!) it got misplaced with my winning lotto ticket and marketimer subscription.
Glad to see you back. I stayed away from here in case I was the reason that you left, and Ms Bee never even noticed. ;-)
Biker, I only would use trailing twelve months (ttm) earnings for the PE ratio, and also trailing 10 years, as the Shiller PE ratio does.
The last 12 months earnings as of June 30, 2017 is $104.75 per share.
Why annualize based on 2017's 2nd quarter earnings ? I think it provides an incomplete forecast of the next 12 months earnings. Especially since the 2nd quarter of 2017 may be more favorable than the other quarters.
Brinker is forecasting that earnings will rise from $104.75 a share to $142 a share within the next 13 months.
This is all part of trying to building investor confidence especially among those investors who place a lot of premium or focus on valuation measures like the Price to Earnings Ratio.
AD................................
AD
AD: If you prefer, I could take a years worth of trailing operating earnings; 2016 Q3 thru 2017 Q2 had $116 operating earnings (https://ycharts.com/indicators/sp_500_operating_eps). So Brinker's estimate of $142 operating earnings by the end of 2018 is a prediction of an increase of ~22% over ~18 months.
I'm not trying to defend Brinker's prediction of operating earnings. All I'm trying to do is to help you understand the difference between reported earnings and operating earnings. Hey, that would make a good question for the MoneyTalk Final Exam. (Hint: The reading assignment in my previous post might be helpful.)
OBSERVATION 2018 P/E expected to be $144.33. about 18.34 x
Source: http://us.spindices.com/search/?query=earning+estimate&Search=GO&sortType=Relevance
Yes, Biker I understand the difference between reported earnings and operating earnings. Its based on GAPP or accounting manifestations. Yes, operating quarterly earnings per share was $30.51 for June 30, 2017.
The reported EPS was $27.01 for June 30, 2017, which is a $0.45 drop from last quarter's reported EPS :-/
And Bob Brinker is referring to $142 in 2018's operating earnings.
I am not so optimistic. The S&P 500 risk premium is at the same level it was in 2008 prior to the market crashing: http://eu.spindices.com/indices/strategy/sp-us-equity-risk-premium-index-tr
May you have three measures of P/E?
1. As reported financial statement. The bottom line real money history trail.
2. Operational or direct cost and profit of business. A measure of base efficiency.
3. Operational estimate of next 4 quarters. Intelligent guess that may include fluff.
Thank you trees for clarifying about the tax compliance cost. The 1.8 trillion is personal income tax only. Corporate tax is 355 billion and estate tax is another 23 billion. Since the corporate tax is just a pass through to the end users, should that change the percentages?
RV- I suppose.
I do not witness the exuberance of financial markets. No risk deniers. I do see a lot of concern and worry such as anonymous. The high P/E is one factor of QE liquidity. We have much cheap money floating about and stock buy backs. So, less stocks and more money. The Trump effect is real. We have a powerful executive that manages to survive the swamp. Every other politician would have caved to the power brokers long ago. This effect may be a primary driver of investors betting on a brighter future. Also, don't forget we are the new Saudi petrol wealth country. We are putting the axe to Obamacare and most do realise, better and cheaper insurance path possible. We have a tailwind with good benchmarks.
What could go wrong? Fed raises interests to fast. Flash crash. This is probably the biggest concern. I don't think you could suffer much from any decision. Best to split the difference then you will be half right at the minimum.
Atlanta-based Cumulus Media files Chapter 11 bankruptcy protection
https://goo.gl/zQBgB1
JC
PS:
Rumor has it that there has been an ongoing problem with on-air talent tardiness and absence.
;-)
I’m soo happy we now have a president that cares about us!
To be honest, during the Obama administration with unemployment near 42% and s stock market that went nowhere for 8 years I was considering ‘taking a gas pipe’. Now we all have hope with our president that wants the best for his citizens.
TOM from Grass Valley
Well gents, all 3 flags show the market as overvalued: Dow Yield less than 2.2%, Undervalued stocks <17%, Over/Under ratio >2.
Boy has it been a very, very profitable run! The Trump Bump has turned into the Trump Mountain, but all things must come to an end eventually. I'm waiting for a few stocks to cross the long-term tax rate early 2018, then I'm pulling back from 90% to 75% stocks. Enjoyed reading this blog for the various viewpoints during this nice bull market.
Date Dow<2.2%UV<17% O/U>2
1-Dec 2.17 11.6 2.78
15-Nov 2.20 13.7 2.28
1-Nov 2.16 13.7 2.34
15-Oct 2.23 12.0 2.86
1-Oct 2.28 12.4 2.41
TOM from Grass Valley,
Hilarious post.
Thanks for the laugh. 'Gas pipe" lol coming from Grass Valley too much.
smile
Mk I do think your newsletter is a good investment. Pulls your odds higher of not making as many mistakes. More competition to the smart money institutional investors. Your method is a basic quantitative approach. Using data for investment decisions and taking emotions out. As you know this approach is number one in financial community with the best track record. What is your asset target? Meaning given the up trend go signal, what to invest in? Or down signal?
You are 90% stock and only going to 75% with a down signal?
I'm using a different approach based on quant analysis and TAA. I have a newsletter with six determined to be indicators of economic health. If any one of these indicators drop or signal danger a risk off signal is issued. This means basically danger. Then a close following of S&P 500 simple moving averaged. If this drops to losing, then a sell signal is issued. Most of the time the average moves to positive and no action required. This system is designed to be in the market as much as possible. It will suffer some corrections, but it does catch some big ones, also. Its primarily designed to avoid a big chunk of recession losses. Once selling the goto is 10 year government bonds. This waiting period could be months, but probably years. Investments go to S&P 500 index and or international index. The latter is a good deal given the slightly better returns and safety. This is a dual momentum option setup we hear now popular and Bogle blasted once.
.
Great news for the economy with a gain of 228,000 NEW JOBS CREATED IN JUST THE MONTH OF NOVEMBER ALONE • Wall Street economists had expected an increase of about 200,000, according to Bloomberg.
Trees, I'm not a newsletter guy exactly, just a value investor who owns about 20 undervalued dividend paying blue-chip stocks. I just use those newsletter metrics to give me the balls to stay in the market when it's totally overvalued. I'd love to get out but being retired <50yo I need to be in to face inflation...I used to be a bond guy when they made sense, miss those days...
But I had <75% stocks before Trump but went 90%+ immediately upon the election anticipating current events, so I'm not a total quant (% is financial not net worth). And I'm not out yet since Trump is the gift that keeps on giving (regulation-wise, esp)! But it has been a VERY profitable year in dividends alone. Thank you Mr. Trump, you added about 20% to my net worth...
To the good bond investment days. Today read Bogel's take on markets. He is rated about 95% accurate with his bond calls and 75% with stocks. The guy thinks, for a decade out, his government & commercial bond blend will be at 3% annual growth and stocks not doing much better at a mere 4%. He believes interest rate will be at a standstill.
My take on these low returns. Stocks are returning 33% more than bonds. That would make bonds a poor choice. In that investment atmosphere, may it be better, not to invest in indexes. Better to seek out the best sectors and individual stocks and play that game? Same with international investments vs U.S. Also, the biggest investment return would be to stay alert to drawdown potential and not ride out the wave if it would take a decade to return to breakeven. It may take a lot of homework and diligence to move the needle within future investments. I don't like that.
Also, read investment advice as to what to do with capital when taking profits out of stock. Better to utilize for paying off debt as it pays better than bonds. I read the institutional investors are buying more unconventional. More real estate. I don't like that as would prefer getting out of that business.
NK. I too am grateful for the 20% gains last year. But to be honest my portfolio is up 280% since 2009.
Jim Behr
Monterey
"Thank you Mr. Trump, you added about 20% to my net worth..."
LOL if run-up is all due to Trump, based on your thank you, why pare down at all till he is near out of office? The answer is obviously in the indicators you are watching not your thank you.
I only bring this up to force others who may believe your thank you over the facts, to think about the facts and leave the nonsequiturs for others.
Another misread is the regulations myth. The Run-up is primarily earnings driven large cap. Large Caps like Amazon, Google Apple Microsoft etc. did not benefit from regs. reduction. If you think they did - name one regulation pared back that filtered down to eps. for these large caps.
Boom Bust Business cycle still has runway left. No recession on immediate horizon which is what Brinker is correctly looking for.
Debt and impact of interest paid on that debt relative to budget will impact as we normalize rates. Still going slow on rate normalization and QT.
Musical chairs analogy eyeing the exits.
One final thought for those giving credit to a single individual on the upside, you would also need to give credit on the downside to that person when that eventuality occurred. I don't think you want that.
The market doesn't care about politics it cares about growth which continues from the last 8 years.
smile
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MARKET ALERT: Dow, S&P 500 close at record highs
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MK....President Trump is bringing jobs, money, optimism, and lots of other good things back to the United States after 8 years of "you didn't build that" and "get off your high horse" and bowing down to our enemies. It's America First.
(Smile, you had your say, so don't waste my time with more preaching.)
So is my portfolio and a few others that I manage.
Honeybee said:
(Smile, you had your say, so don't waste my time with more preaching.)
Honeybee,
NOMB, but I concur with you 1,000% - perhaps even more than that!
JC
smile: The answer is obviously in the indicators you are watching not your thank you.
You clearly don't understand my stock metrics. They got worse after the Trump Bump because stock prices went up faster than dividends, making stocks even more overvalued than they were. My indicators actually made me less likely to buy. You aren't just wrong, you are 180 degrees wrong.
To explain: I bought extra stocks because of an anticipated a Trump Bump; I merely watched those metrics to make sure I didn't get way too overvalued. Had Hillary got elected, I would have sold down to 50% or even 25% and hunkered down. But Trump is radical change, especially with regs and the FED. He will appoint so many on the FED it's gonna be wild.
But all your protesting makes me laugh. I'm buying popular opinion; I really don't care if it's true. And I made a ***load of money in one year doing so. I don't really are what Trump does, nor do I let my politics get in the way of making money. I'm retired yet made more $ in 2017 than I did in my last year of high-wage work. Needless to say, I'm all "smiles". Thank you Mr. Trump. I'm gonna take some profits early 2018 and perhaps buy some more dips back up to 90% if they ever appear. Since I buy stocks and not an index I can find value in any overvalued market. I hope to continue to exploit the Trump Bump.
Jerrod, I agree with Tom. The stock market went nowhere for 8 years (triple from 3/9/09 = nowhere). Fake news the economy improved greatly from depths of worst recession since the great depression. Trillion dollar deficits and 800,000 jobs lost in a month did not happen as result of the financial collapse.
smile
I'm up 35 plus percent since November 2016. Why did it happen? There seems to be a tidal change in attitude and optimism since last November in both business and consumers.
I did catch Ex-pres Obama on TV with his best Alfred E Neuman look or maybe it was Curious George take credit for the recovery that he said he built. It very much reminded me of ex-Microsoft CEO Steve Balmer coming to Seattle and criticizing the present CEO Nadella.
Under Steve B., not to be confused with Steve O of the movie JackA** fame, MSFT languished at $25 per share for 10 years. Steve B wasted company energy and money on one worthless investment and initiative after another. As a parting gift he bought Nokia for about 4 Billion in wasted money.
Under Nadella MSFT has risen to over $80 per share.
Seems both Barry and Steve are blinded by hubris. They both had their fair chance but now there is a new sheriff in town .
For the past 12 months I look at my portfolio and I am wearing a WATERMELLON smile!!
signed,
smirk!
O.k if I have this correct, the hole was so deep that it took 8 years to start the ship sailing on right path and the current resident is just basking within prior job performance. Well, some truth in that as the economy is a hand off. One can measure the rate of change as an indicator of job performance. Also, factor out the FOMC and natural disasters. Also, a portion of our natural resource discovery/development and inventions. Ditto on the states ability to self improve their own economy. One must factor in the added regulatory overhead as by definition the act works to decrease competitiveness by avoiding open market efficiency. Best estimates to date is $4 trillion since 1980. This does not include the IRS conformance cost.
Seems to me the market has done well since 2009 because of innovation, clever and hard working entrepreneurs, and the fact that the panic was way overdone. All this was IN SPITE of Mr Obama’s efforts. Mr Trump is removing the things that kept the markets and the economy from having much better results. He does deserve some credit, and so do the American public for rejecting that woman.
Pavlov’s Cat
Trump was truly inspiring last night. It almost, literally brought tears to my eyes. I do not remember anything so inspiring since Reagan spoke back when I was a teen ad perhaps Trump has now transcended Reagan. Trump is a great leader, carries an inspirational message, and is propelling this nation back to greatness. The economy is taking off...in the past 3 weeks I there has been a deluge with requests from would be small business owners wanting assistance with entering the economy on their own terms. I was seriously looking at retirement, under the tyranny of Obama, the world of capitalism was a dismal, dreary, and depressing place. But now, I am simply drawn to the crackle of energy reverberating through the economy; the allure is almost irresistible. Donald Trump is unleashing the power of capitalism and vested self- interest. It is a wonder to behold. God bless you Donald Trump, you are truly making America great again.
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TFB...During President Trump's speech last night, I had tears in my eyes several times - tears of joy. I also laughed many times - love his subtle, but powerful sense of humor.
MK, if I understood your argument the market went up because you thought it would based on general or specific initiatives like regs. reduced etc. and fed changes. I still can't get anyone who thinks this way to give me a specific example and impact to earnings. But who cares about specifics.
Did the market stop going up when health care reform failed? Answer - no.
I did not dissect your indicators because they don't interest me because they are not earnings based. I referenced them only in a general sense as a counter to your thank you.
If your indicators are not earnings based they are tangential and therefore suspect relative to earnings growth drivers. What is the Dv yield on Amazon or Google? How did these large cap stocks benefit from reg reduction or fed change? They did not.
Relatively low interest rates and accelerating earnings = TINA market.
My point was that if you give the credit to Trump for the bump and Trump is not going anywhere why cash out now. Your indicators were wrong for how many % points of the run?
I am not being argumentative, I just thought a different view point based on actual market drivers would be beneficial not just hope and optimism of change having nothing to do with large cap. growth driver.
smile
smile: My point was that if you give the credit to Trump for the bump and Trump is not going anywhere why cash out now. Your indicators were wrong for how many % points of the run?
Sheese. I've been as clear as a bell. To spell it out (again):
1) I was about to shift from 75% to 50% stocks & hunker down for a bear market.
2) Trump elected. Knew he would make big pro-business changes (regs/FED/EPA).
3) Metrics showed market overvalued, but still within technical bounds, 50-75%.
4) Dumped 90% cash in high ROIC stocks Nov-Feb 2017 (Trump worth the risk).
5) I made a ***load of money on Trump. Will lock in these profits Nov-Feb 2018.
6) Stocks at nosebleed levels now, but still plan to buy back in carefully if I can.
Clearly your politics blind you; Trump is cutting regs, opening ANWR, building pipelines, and has a R Congress ready to spend money on infrastructure & cut taxes for big business. This is good for stocks. And most importantly, the public thinks so and is now more optimistic. I made this bet, was right, made a lot of money. QED.
Why take profits? 1) Stocks are now WAY overvalued due to Trump and need to correct, 2) Trump may not have the political muscle soon to do anything. But I'll keep making money on Trump as dips and politics allow. I repeat: thank you, Mr. Trump. Sorry this bothers you.
BTW, did anyone read of institutional investors migrating away from passive investments to active managed funds? They think active managed funds are more capable of minimizing drawdowns. Also, they are increasing cash and alternative investments such as real estate. They currently sit at 37% stocks, 37% bonds, and somewhere around 10% case and the rest real estate. So, smart money is down to 37% stocks. This is the pension folks attempting maximize security.
I'm not convinced of the merit in spreading out risk with ratio's. Is it a good market for bonds or stocks? Is it a good economy or not? Now, one can be extra careful and avoid high risk, but IMHO it is black or white. Risk on or off. If stocks are better we should be 100%. Look at the investment history of just staying in S&P 500. Even with the ups and downs, a great bet over time. If you did nothing else than S&P 500 and only pull investment upon extra high evaluations and fear you would be a capable investor. Government bonds only within the most perilous times. Other than that 100% S&P.
.
Note to Trees....If I have to spend more than 3 seconds figuring out your acronyms or deliberately misspelled name of the president, I delete rather than publish.
MK,
LOL, I guess we will never get from you the direct connection between what you knew the market would do and actual earnings which is the driver for most investors. We will also never know how long your indicators were reading overvalued.
With a TINA (there is no alternative) market most everyone who stayed the course is up.
Politics has little to do with earnings barring complete ineptness.
Anyone who was out of the market from 3/9/09 forward is kicking themselves. Most who stayed the course are up 300% to 600% and more from that low point.
Humbly counting that blessing.
I too am eyeing the exits but will ride this puppy till I see precursors which will impact negative on growth.
smile
To Mr. Trees,
You may have stumbled upon brilliance.
I clipped a column from the WSJ Investor Section about 8 years ago containing data from a study that concluded a 50-50 mix of S&P 500 and cash performed nearly as well as a 50-50 mix of S&P 500 and bonds over a long time. Remember 2008? Bond fund values dropped as well.
You asked, rhetorically, about the bond market. If an investor doubts it is "good", then just eliminate it from the portfolio.
I think BB's short-duration approach attempts to straddle the two extremes.
Mr. Cooper, Reno NV
smile: We will never know how long your indicators were reading overvalued.
You are wrong (again). I listed my precise metrics in my first comment (above). I even listing them biweekly! So, unlike Brinker (or you) everyone knows exactly when MY metrics went overvalued (1-Dec) and I started to prepare to exit back to 75%. My above comment is clear, cogent, precise. Only somebody blinded by political pique could have misunderstood it:
Well gents, all 3 flags show the market as overvalued: Dow Yield less than 2.2%, Undervalued stocks <17%, Over/Under ratio >2. Boy has it been a very, very profitable run! The Trump Bump has turned into the Trump Mountain, but all things must come to an end eventually. I'm waiting for a few stocks to cross the long-term tax rate early 2018, then I'm pulling back from 90% to 75% stocks. Enjoyed reading this blog for the various viewpoints during this nice bull market.
Date Dow<2.2%UV<17% O/U>2
1-Dec 2.17 11.6 2.78
15-Nov 2.20 13.7 2.28
1-Nov 2.16 13.7 2.34
15-Oct 2.23 12.0 2.86
1-Oct 2.28 12.4 2.41
MK,
Your attribution is simply not supported.
The direct connection between reg reduction, Anwar etc that you mentioned and earnings driver is simply not there for big cap stocks which have driven this market higher. Missing in Action is a single example of reg. elimination that impacted the earnings of say an Apple, Google Amazon Facebook or Microsoft.
Beyond reg. reduction there is only recent tax cuts which maybe added 2 to 5% of the upside and that is being generous.
Earnings, relatively low interest rates and a continuation of the global recovery is the answer to the bump. Unless you feel the credit for the earnings of the Companies does not belong to those companies.
http://www.yardeni.com/pub/peacockglstkytd.pdf
As you can see foreign markets have done better than US. I remember at the beginning of the year David Tepper of Appaloosa hedge fund said he was under-weighting US stocks in favor of investments outside the US. Looks like he was spot on.
Continued growth and earnings is the recipe for higher earnings and stock markets. Recession or inhibitors to growth is the antithesis. Any other rationale is simply not supported as I stated from the outset.
smile
MK,
1-Nov 2.16 13.7 2.34 if I'm reading correctly all three fired.
But for the Dow dividend yield measure (flaky valuation measure ) looks like your readings would indicate overvalued way back
Also do you have readings back to Nov. 8, 2016. If so post.
smile
smile,
1) We disagree on cause, especially Dow dividend yield, my primary metric.
2) I don't buy/sell stocks within a week of an indicator flagging, I wait for a month or two of data since only a fool tries to pick the exact top, I look for the top 1/8 at best 1/3 at worst.
3) You think you know more than the market on what drives stocks? Great, have fun. I merely follow along. I worked in industry and can assure you Trump changed the underlying value of private companies with his reigning in the Obama anti-business agencies. It's a big deal: New wells, new pipelines, new hope. Most importantly Congress can now pass infrastructure & tax bills. So it's all Trump, all the time. First real business at the top. Why I bought stocks in a overvalued market right after he was elected. He's the most important metric I used. And I made big bucks in a single year of Trump doing so.
MK,
Circular reasoning. Your attribution fails.
Foreign markets up more than US. Your head would implode if you tried to use your attribution to explain this.
In the end you lucked into a TINA market bump.
TINA markets are nobrainers, everyone who stays the course makes money. Low interest rates, growing earnings, and recovering world economies.
Low bar for the market - semblance of normalcy was the only requirement for the TINA bump.
Re: dow div. yield as a measure of valuation, I would dissect the issues there but I suspect you already know its short comings re: this indicator or maybe you don't but who cares.
If you ever find your way to posting that 11/8/16 indicator data, I suspect that minus the dow div yield indicator it would provide additional confirmation to what I previously stated. You already admit to buying "stocks in a overvalued market". Overvalued based on indicators, but now all 3 indicators say overvalued even as your "most important metric" still reads stand pat which shoots a hole in your initial reasoning. Ergo Circular reasoning.
Identifying causation helps to id caution signals for getting out.
TINA bump market everyone in equities makes money.
Tight monetary policy leading to slower growth is usually the bull killer.
smile
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