anybody smell smoke?

[pb4uski]

Huh? VTSAX is a good proxy for the domestic US stock market, and is UP 3.3% YTD with dividends reinvested.

VTSAX Vanguard Total Stock Market Index Fund Admiral Shares Fund VTSAX chart

 

[bobandsherry]

Only smoke I smell is the pork butt that's being smoked on my grill.

As for smoke in the economy, people have been smelling that for going on 6 years now. And one time they are right they'll thump their chest and say "I told you so", forgetting the other 100 times they were wrong.

 

[retiredunder50]

Dow on 1/2/18 opened at 24,809. On 6/29/18 it closed at 24,271.

 

[HGTVfan]

That’s what happens when you pour gasoline on the fire. But soon it burns out.

I smell the smoke, too.

 

[HGTVfan]

I am told that the economy is just smokin' along nowadays.

That’s what happens when you pour gasoline on a fire. But soon it burns out.

I smell the smoke, too.

 

[bobandsherry]

Dow on 1/2/18 opened at 24,809. On 6/29/18 it closed at 24,271.

DOW on 3/29 closed at 24,103. So what does all that really mean other than relatively flat, though one could say slightly up from 1Q.

 

[pb4uski]

Dow on 1/2/18 opened at 24,809. On 6/29/18 it closed at 24,271.

The Dow is a very poor proxy for the US domestic stock market... it is only 30 stocks. Well known and frequently referred to, but an very poor proxy.

Also, just looking at the index fails to consider dividends... the change in the index suggests a YTD decline of 2.2%... but the actual decline is only ~0.8% because of dividends received.

 

[retiredunder50]

DOW on 3/29 closed at 24,103. So what does all that really mean other than relatively flat, though one could say slightly up from 1Q.

One could also say that it is down 10% from the peak high on 1/26/18 where it stood at 26,617 (it's at 24,092 as I type this) and that a correction has occurred? Who knows what it all means until after we analyze the data much much later. One new variable to consider is that most companies have been juiced up with a significantly lower tax burden and the expectations were that it would translate to gains beyond stock buyback effects.

 

[MRG]

Anybody else smell smoke?

For about a month.

 

[njhowie]

One new variable to consider is that most companies have been juiced up with a significantly lower tax burden and the expectations were that it would translate to gains beyond stock buyback effects.

We also need to ask ourselves "Just where does the government get the revenues to replace those taxes no longer being collected"? It's over $1T/year. Government is spending more money, with less income, and at the same time raising interest rates.

 

[retiredunder50]

We also need to ask ourselves "Just where does the government get the revenues to replace those taxes no longer being collected"? It's over $1T/year. Government is spending more money, with less income, and at the same time raising interest rates.

that's why my initial post in this thread included: "and let's not discuss increasing deficits"


There are many indicators that could lead one to believe that this year will not be as smokin' as many of the prior years. Personally, I used to stay all in (especially when employed and feeding the retirement nest eggs). However, there are some unique events and an admittedly limited set of data that are somewhat more worrisome than before. Japan has gone through a lost 2 decade period. We have recent experience of a lost decade. Some pigs get slaughtered re-balancing might be prudent. Although, I could just as easily be wrong.

 

[bobandsherry]

Dow on 1/2/18 opened at 24,809. On 6/29/18 it closed at 24,271.

First DOW is such a narrow band of stocks, not sure that reflects the overall markets.... and let's not forget that DOW did have GE in the mix which dropped from $18/sh to $13 and change when it was finally dumped from the DOW as it wasn't reflective of the how US companies are doing. Guess it would be interesting to see how DOW performance would have been without GE.

And in a broader view than 30 stocks.... S&P opened at 2,683 and close at 2,718, so increase of 1.3% plus div.

Russell 2000 opened at 1,536 and closed at 1,643, that's an increase of 7%

And NASDAQ opened at 6,937 and then closed at 7,510, a whopping 8% increase in the 6 month period.

Perhaps the smoke you smell is things starting to heat up? Who knows...

I still stick with my what I said back in early March....

While it's been bumpy.... S&P on 2/22 closed at 2,704. Closed today at 2,787, up 3%. Only two days closed lower than on 22nd. NASDAQ and Russell 2000 up over 4%. DOW only up 1.5%, but such a narrow band of stocks. I expect more bumps but remaining optimistic on overall trend, at least through summer.

 

[bobandsherry]

FYI, performance YTD of the DOW components...

 

[Chuckanut]

What has felt funny to me is 8 years of very low interest rates, lower than I have seen in my lifetime.

Today interest rates while higher than two years ago, are still low. I remember getting 4-5% passbook rates at a Savings and Loan. 6+% on 1 and two year CD's.

In fact the threatened trade war will probably slow the economy since we are once again in uncertain waters. Smoke? Maybe just that small amount from a recently extinguished candle.

My 2¢. Take what you wish and leave the rest.

 

[Free bird]

Maybe its the FART bill you smell

 

[retiredunder50]

What has felt funny to me is 8 years of very low interest rates, lower than I have seen in my lifetime.

Agreed! The winners were those taking advantage of crazy low loan interest rates. I would have killed for a mortgage in the high 2/low 3% range. Of course, since most of us on this board don't match the general population's save/borrow profile, I suspect most of us suffered as a result. I just don't want to go back to high savings interest rates being coupled with spiraling inflation.

 

[bobandsherry]

Agreed! The winners were those taking advantage of crazy low loan interest rates. I would have killed for a mortgage in the high 2/low 3% range. Of course, since most of us on this board don't match the general population's save/borrow profile, I suspect most of us suffered as a result. I just don't want to go back to high savings interest rates being coupled with spiraling inflation.

I took advantage of low rates, did so by getting mortgage just before retired. Don't regret it. Has allowed me to stay invested for past 30 months, earning about 15% overall annually on my investments, while paying just over 3% on my mortgage. I therefore made $75,000 by keeping my money invested and paid $20,000 in interest. Having $55k more in my pocket as a result isn't too bad. I also remain liquid enough should any emergency or disaster come up, saved on what would have been a big tax bill due to gains. I have cash available to pay off my mortgage if the time should come that it makes sense to do so.

 

[youbet]

Dow on 1/2/18 opened at 24,809. On 6/29/18 it closed at 24,271.

But most of us are concerned with the entire USA economy and not just the megacaps in the DOW. The S and P 500 is a more useful index to me and actually I prefer the domestic broad market index often used by TSM funds.

 

[retiredunder50]

But most of us are concerned with the entire USA economy and not just the megacaps in the DOW. The S and P 500 is a more useful index to me and actually I prefer the domestic broad market index often used by TSM funds.

The S&P 500 didn't set the world on fire in the 1st 6 months. GDP was 2% for the first quarter. (Higher) deficit spending is back in vogue. Consumer savings rate is dropping as credit debt numbers are growing. The full impact of rising tariffs has yet to hit us but it's just around the corner. Rising energy costs and inflation are not helping. Retail sales numbers look good, we are pert near full employment, & home construction numbers came up in May. Throw in yield curve and industrial production data and consumer sentiment info AND everybody will argue a recession is coming or it's not. Just like the talking heads, I also don't know when, but I do know that smoking is not how I would describe the current status; maybe smoldering? If only we had access to jawboning rhetoric before it's delivered, geopolitical event planning, early info on the timing&duration&magnitude of the market swings, a prediction tool for natural disaster events, raw material availability...

 

[njhowie]

But most of us are concerned with the entire USA economy and not just the megacaps in the DOW. The S and P 500 is a more useful index to me and actually I prefer the domestic broad market index often used by TSM funds.

Considering the top 10 companies comprising the S&P500 and their weighting in the index, you might want to reconsider your statement/belief.

 

[Oz investor]

But most of us are concerned with the entire USA economy and not just the megacaps in the DOW. The S and P 500 is a more useful index to me and actually I prefer the domestic broad market index often used by TSM funds.

it is a little difficult to get US financial information , but i look at the traditional bellwethers and mid-caps and then commodity prices

and i am not that inspired by what i see ESPECIALLY with super low interest rates one might expect a credit squeeze to hit them hardest

 

[brett]

I am very concerned about the trade war. IMHO the tariffs are ill advised and will increase inflation, reduce employment, and negatively impact the markets. They are essentially a tax increase that will trickle down at a much faster velocity than tax cuts.

The auto industry has already rung the alarm bells but no one seems to be listening. Some agricultural commodities are already seeing price declines. Not good.

 

[VanWinkle]

You can't reset the trade imbalance without some pain. We shouldn't do it if it's just too hard? From what I have read, we have been getting porked for years by most of our trading partners. I am for a fair deal, just not sure when a fair deal has been reached.

Remember when we were being led into nuclear war? That has turned out better so far. There are no miracles, just hard work and patience. I will be patient for a while longer.

VW

 

[NYEXPAT]

The S&P 500 didn't set the world on fire in the 1st 6 months. GDP was 2% for the first quarter. (Higher) deficit spending is back in vogue. Consumer savings rate is dropping as credit debt numbers are growing. The full impact of rising tariffs has yet to hit us but it's just around the corner. Rising energy costs and inflation are not helping. Retail sales numbers look good, we are pert near full employment, & home construction numbers came up in May. Throw in yield curve and industrial production data and consumer sentiment info AND everybody will argue a recession is coming or it's not. Just like the talking heads, I also don't know when, but I do know that smoking is not how I would describe the current status; maybe smoldering? If only we had access to jawboning rhetoric before it's delivered, geopolitical event planning, early info on the timing&duration&magnitude of the market swings, a prediction tool for natural disaster events, raw material availability...

I am a fan of the Baltic Dry Index!

 

[Circles]

Had an odd feeling this morning.
I've been watching short term brokered CD rates and bank savings rate climb steadily... Oct 2017 a 1yr CD was 1.5%, today its 2.4%... .1% increase a month on average. As a ratio, thats a pretty steep climb.



Since everything is interconnected, something else has got to be starting to crack.


I'll admit to a significant bias to an implosion. If things were so great, central banks would not be printing money and propping up the stock market with the funds.

But... today something just feels "funny".

Anybody else smell smoke?

Just the result of the Fed raising interest rates.