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Old 01-07-2021, 09:49 PM   #41
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My assessment is that sentiment is neither bullish nor bearish at the moment. But there are a lot of bullish facts right now.

I expected a good selloff on the Ga election results, so what do I know?
I expect the opposite - markets are going higher with the Biden stimulus and infrastructure spending.
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Old 01-07-2021, 10:06 PM   #42
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I expect the opposite - markets are going higher with the Biden stimulus and infrastructure spending.
I expected a sell-off in the short term only.. I previously said I expected stocks to rally after the presidential election no matter who won, though for somewhat different reasons.

The US economy is a coiled spring, corporate balance sheets are flush with cash to do acquisitions, buy backs, and capital investment.
You have millions of people who will be getting back to work, historically low interest rates continuing for years, earnings comparisons are easy, inflation subdued, Congress still feels it can spend with impurity, the vaccine put and many other reasons.
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Old 01-07-2021, 10:10 PM   #43
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USGrant I think has it largely correct. You cannot make sense of stock values while ignoring interest rates. They are the most critical single metric driving equity valuations and they are at historic lows.


Similarly, home values are way up, thanks to these low interest rates. Our neighborhood’s average home values were up over 8% in 2020 alone. Historically, for 30 years our particular home’s value has grown 4%+/year. Projected out another 20-30 years, the numbers become meaningful and I expect to realize a portion of those equity gains into our stock and bond portfolio someday when we inevitably sell.

This is my 4th house, so I am well acquainted with all of the extensive operating costs involved in homeownership, which detract from the 4%/year leveraged growth. It beats a sharp stick, though.
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Old 01-07-2021, 10:16 PM   #44
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@corn18

What is your take on the interest rate trend, compared with the p/e chart that you posted?

Interest rates 20 years ago were about 400% higher than they are today. What effect does that have on asset prices?

Great question. I think all the free money is driving earnings per share. If I were running a billion dollar company and had access to 0% debt, I would be grabbing all I could and buying as much stock back as possible. The Fed has been trying to limit that, but I can buy back share with my free cash flow from earnings and then use the 0% debt to fund my company. The smart ones will try to grow the top line with the debt. The really smart ones will try to grow the top line and bottom line. I think there are a lot of dumb ones that are just pissing away the cash.

Can you tell where the cheap money started?



While this is concerning, the end result is a simple market correction (say 50%) followed by a normal recovery of 3-5 years. There isn't any defect in all of this, just greed.

I have been perplexed as to why inflation hasn't kicked in, but I think it has, we're just not seeing it yet. Most of the cheap money has gone to corporations, not consumers and then the pandemic hit. And Americans are saying like crazy:



If the consumer gets more confidence (pandemic over, lots of money from Congress direct to the consumer), then spending will pick up and inflation should follow. If the Fed does their job, I think they should be able to keep it below 4%-5%, which might be ok. Anything more than that and things will get ugly.

What's all this mean to us? Rudder amidships, steady as she goes. This too shall pass.
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Old 01-07-2021, 10:22 PM   #45
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Similarly, home values are way up, thanks to these low interest rates. Our neighborhood’s average home values were up over 8% in 2020 alone. Historically, for 30 years our particular home’s value has grown 4%+/year. Projected out another 20-30 years, the numbers become meaningful and I expect to realize a portion of those equity gains into our stock and bond portfolio someday when we inevitably sell.

This is my 4th house, so I am well acquainted with all of the extensive operating costs involved in homeownership, which detract from the 4%/year leveraged growth. It beats a sharp stick, though.
I think the housing bump is driven by Covid (people working from home so they don't have a commute they can live further out they need more space for the same reasons etc) and a flight to the suburbs and exurbs for many of the same reasons plus others such as desire for more safety.

It may go on for a while but those things also run in cycles.
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Old 01-07-2021, 10:23 PM   #46
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I see it more as the 1920s. We are about to have a post-war post pandemic boom after the vaccines hit. Understand I mean early 20s not 1929.
Why would that be? Would you have expected a roaring 20s boom in January 2020? If not, then why in January 2021? At best, and I really don't believe this, if there were 3/4 of a year of pent up demand that wouldn't seem to cause a long boom.
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So much bullish sentiment
Old 01-07-2021, 10:29 PM   #47
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So much bullish sentiment

Quote:
Originally Posted by Montecfo View Post
I think the housing bump is driven by Covid (people working from home so they don't have a commute they can live further out they need more space for the same reasons etc) and a flight to the suburbs and exurbs for many of the same reasons plus others such as desire for more safety.



It may go on for a while but those things also run in cycles.

I’ll grant that it’s topsy turvy due to Covid and working from home and, unfortunately, safety concerns. We have parts of our city with the recently hot lofts prices are down, due to people suddenly wanting a yard and more room. Our neighborhood probably fits the bill for such fleers but the record low mortgage rates are certainly part of what’s driving it, too.
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Old 01-07-2021, 10:30 PM   #48
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Historical Home Price in the US (Median value 1951-2020)
^^^ Attachment might be nice.
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Old 01-07-2021, 10:37 PM   #49
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is this it?



Looks like a reversion to mean is highly likely in the near future. IMHO.
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So much bullish sentiment
Old 01-07-2021, 10:38 PM   #50
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So much bullish sentiment

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^^^ Attachment might be nice.


Sorry, I was fiddling with the source page to make it attach. Corn18 beat me to it. Thanks.
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Old 01-07-2021, 10:50 PM   #51
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Why would that be? Would you have expected a roaring 20s boom in January 2020? If not, then why in January 2021? At best, and I really don't believe this, if there were 3/4 of a year of pent up demand that wouldn't seem to cause a long boom.
I stated many of the reasons in this thread. I was not saying it would last a decade if that is what you got from it. That's why I said "early 20s"

Jan 2020 and Jan 2021 could hardly be more different. In Jan 2020 we did not have 0 percent interest pledged to continue for years. We also did not have trillions in fiscal stimulus. We were not reshoring supply chains in Jan 2020. In that month we also did not care where our drugs were manufactured. These are only some examples. .The changes to our economy since last January have been dramatic.

But feel free to craft your own analogies. There is nothing at stake here.
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Old 01-08-2021, 05:28 AM   #52
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Interest rates 20 years ago were about 400% higher than they are today. What effect does that have on asset prices?

Earnings (and dividends) are valued higher when interest rates are lower.
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Old 01-08-2021, 06:44 AM   #53
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Earnings (and dividends) are valued higher when interest rates are lower.
When I was in business, our company earnings were a lot higher when interest rates were lower.

1 because our most of our customer base (real estate developers) was better off due to lower rates so that we generated more earnings from increased sales.

2 because the cost of our business debt was lower so our earnings were higher.

Generally the health of most business is better when rates are low, so equities should do better when rates are low.
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Old 01-08-2021, 07:54 AM   #54
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I miss read "Bullish"
Came her to say that! Glad I'm not the only one.

Things are out of whack. So much cash in the system. It will be an adventure to see how this settles out.
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Old 01-08-2021, 08:28 AM   #55
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I don't know what's going to happen any more than I can predict the weather for the 4th of July next summer.


I'm just glad I'm here to see it and get to participate with my diversified little portfolio. We've been through a lot of bad weather over the last 35 years and enjoy it when its nice out. But, we're ready for some rain once in a while.


Enjoy the sunny days, but remember to pack your raincoat.
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Old 01-08-2021, 09:43 AM   #56
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I don't know what's going to happen any more than I can predict the weather for the 4th of July next summer.


I'm just glad I'm here to see it and get to participate with my diversified little portfolio. We've been through a lot of bad weather over the last 35 years and enjoy it when its nice out. But, we're ready for some rain once in a while.


Enjoy the sunny days, but remember to pack your raincoat.
This x1000. It is impossible to determine what the market is going to do. I think it about pointless to "look at the past" because how investments are made (and companies are run) have never been like what we see today. The number of investors will continue to climb and the days of calling up your broker (or even pit trading) are largely over with. As they say at WDW...

"Hello and welcome aboard; Please keep you arms inside the vehicle at all times and enjoy the ride."
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Old 01-08-2021, 10:25 AM   #57
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I think two things are driving the market right now, potential for more stimulus soon and outlook for easing relationship with China.
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Old 01-08-2021, 10:27 AM   #58
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I think two things are driving the market right now, potential for more stimulus soon and outlook for easing relationship with China.
While I don't disagree with you, I would also point out that there are 100+ reasons why it should be cratering. But yet here we are...
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Old 01-08-2021, 10:31 AM   #59
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Originally Posted by Stormy Kromer View Post
I don't know what's going to happen any more than I can predict the weather for the 4th of July next summer.


I'm just glad I'm here to see it and get to participate with my diversified little portfolio. We've been through a lot of bad weather over the last 35 years and enjoy it when its nice out. But, we're ready for some rain once in a while.


Enjoy the sunny days, but remember to pack your raincoat.
+1

I had taken a lot of our chips off the table in mid-late February because of Covid. My objective, I reasoned, was risk management, not to make the most money possible. I was convinced Covid was going to cause a severe downturn until a vaccine was developed. When the market tanked in March, I was feeling good about my decision. But then, as you know, the market quickly bounced back. As I waited for the "real" downturn, we were making new personal highs in our NW, despite having taken a lot of money offline (it helped that my wife still works).

I put the chips I had taken offline back on the table when a vaccine was announced, realizing that I was wrong* to mess with it in the first place. The Fed and Congress have managed to prop things up. What the consequences of this will be - if any, I don't know.

I have anxiety about the future, but we have around six years of expenses in cash that I think should allow us to weather whatever storm may arise. In the meantime, the bulk of our money is enjoying this ride.

I promised my wife to not impulsively mess with our investments again.

* Edited to add: But I wonder if I was really "wrong". After all, my objective was "risk management". And I did rest easy after decreasing our stock allocation. I suppose that objective was realized. <shrug>The jury is still out.
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Old 01-08-2021, 10:33 AM   #60
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I'll leave all the fancy calculations, historical backgound, speculations, and crystal balls to those more academically astute than I. I'm just not buying into the Bull(ishness) at the moment. I have quite a bit (for me) in cash yet I still wind up with more at the end of the year than what it started. All the dividends from tIRAs and taxable accounts have been/are swept into MM accounts. If there is an opportunity for "buys" in the next year or two maybe I will snatch up some more stock. But I'm not sure what the point would be at my stage in life.



Cheers!
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