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(Washington Post)   "What we're seeing now is a stock market boom that is simultaneously driving Americans' wealth higher, supporting economic growth, and is well-supported by the fundamentals of what companies are earning"   (washingtonpost.com) divider line 30
    More: Unlikely, stock market bubble, Americans, economic growths, price-to-earnings ratios, economic bubble, Treasury bond, Corporate America, day trading  
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1135 clicks; posted to Business » on 23 Jan 2013 at 12:18 PM (2 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



30 Comments   (+0 »)
   
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2013-01-23 11:58:00 AM  
Sure does look like the Wall Street and Detroit bailouts, stimulus plan, and other steps taken by Obama to stabilize the economy and get them pointed upward again were total failures, and that our failure to elect Romney has destroyed business in this country.
 
2013-01-23 12:15:03 PM  
Damn you, Fartbama
 
2013-01-23 12:35:15 PM  
Didn't read the post,

But with the Quantitative Easing the fed did, this helped drive up stock indexes correct? Basically, the money that we do have is more worthless than it was prior to 2007 even though the Dow is back up at those levels?
 
2013-01-23 12:48:36 PM  

bennett311: Didn't read the post,

But with the Quantitative Easing the fed did, this helped drive up stock indexes correct? Basically, the money that we do have is more worthless than it was prior to 2007 even though the Dow is back up at those levels?


That would cause a gain slightly larger than inflation because the equivalent money base value rises and returns on treasuries are so lousy that it drives investors into the market looking for higher returns. Inflation is 2-3% since then so since 2007 that would give you a rise of 13% vs. 85% for the Dow. There's not enough oomph in inflation and low treasuries to cause all of it.

Regardless, the money that we do have has been more worthless every year since the year ending 1933 when the value of the dollar rose 10% year over year, wiping out wages and increasing the relative cost of debt.

/waiting for the "what about food at the grocery store" question
//that's CPI
///it's not relevant to this discussion
 
2013-01-23 12:55:27 PM  
And as soon as enough of you rubes put your money in the kitty, they will harvest again.
 
2013-01-23 12:57:37 PM  

bennett311: Basically, the money that we do have is more worthless than it was prior to 2007 even though the Dow is back up at those levels?


If you want to know, there's an easy litmus test: Look at what you buy on a regular basis, and see if the prices have skyrocketed in the last five years. Are lunch prices still the same? Are your utility bills more or less where they've been? Then your money isn't "worthless". If you think it is, send it to me; I'll take it off your hands for free.

My main concern is that the article assumes too much about the correlation between the stock market indexes, GDP and general prosperity. Our wealth has probably expanded in the last five years, but if the working class is still mired with high unemployment and falling wages, then price stability is nothing to brag about.

We're being farked, but at least complain about the right orifice.
 
2013-01-23 01:00:27 PM  

Insatiable Jesus: And as soon as enough of you rubes put your money in the kitty, they will harvest again.


Which is why this isn't a bubble. Once the public regains confidence (because the public always sells at the bottom and buys at the top), then we'll have another bubble. I'd say you should keep buying for the next five years, but the real time to buy was 2009.

It's like real estate. Here we are in an appreciation phase and the conventional wisdom was bearish a year ago. Avoid the herd.
 
NFA
2013-01-23 01:00:40 PM  

bennett311: But with the Quantitative Easing the fed did, this helped drive up stock indexes correct? Basically, the money that we do have is more worthless than it was prior to 2007 even though the Dow is back up at those levels?


Bogus.

We never experienced the serious inflation all the Chicken little's were crowing about.
 
2013-01-23 01:09:16 PM  
And by "Americans", they mean "American CEOs", of course.
 
2013-01-23 01:10:32 PM  

NFA: bennett311: But with the Quantitative Easing the fed did, this helped drive up stock indexes correct? Basically, the money that we do have is more worthless than it was prior to 2007 even though the Dow is back up at those levels?

Bogus.

We never experienced the serious inflation all the Chicken little's were crowing about.


Plus any weakening of the dollar improves US exports. Not to mention we owe all our debt in our own currency, which we can print more of at any time. Which in turn makes American exports even more competitive.
 
2013-01-23 01:47:34 PM  

bennett311: But with the Quantitative Easing the fed did, this helped drive up stock indexes correct? Basically, the money that we do have is more worthless than it was prior to 2007 even though the Dow is back up at those levels?


CPI in December of 2007 = 207.342
CPI in December of 2012 = 229.594

Annual rate of inflation for those 5 years = 2.06%

If I do the same calculation for the Reagan years (Jan. 1981 to Jan. 1989), I get 4.22%. It sounds like our money has been holding its purchasing power better over the last five years than it did during the administration of a president whose economic policies the political right approved of.
 
2013-01-23 02:11:06 PM  
Is this the thread where people who spend their entire income complain that the stock market gains aren't doing THEM any good and so therefore it doesn't count?
 
2013-01-23 02:16:54 PM  
When your party is in power, stock market gains are a true reflection of the fundamental strength of the economy thanks in large part to the party in power, and specifically the president.

When your party is out of power, stock market gains are irrelevant because they don't truly reflect the fundamental weakness of the economy thanks in large part to the party in power, specifically the president.

When your party is in power, stock market losses are irrelevant because they don't truly reflect the fundamental strength of the economy. And besides, it's not like the president has much control over that anyway.

When your party is out of power, stock market losses are a true reflection of the fundamental weakness of the economy thanks in large part to the party in power, and specifically the president.
 
2013-01-23 02:18:08 PM  
"We will not have any more crashes in our time." - John Maynard Keynes, 1927

"There will be no interruption of our permanent prosperity." - Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929

"I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress." - Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

"[1930 will be] a splendid employment year." - U.S. Dept. of Labor, New Year's Forecast, December 1929

"...there are indications that the severest phase of the recession is over..." - Harvard Economic Society, Jan 18, 1930
 
2013-01-23 02:34:43 PM  
Two outa three ain't bad. A P/E of 14 isn't exactly cheap, and an earnings yield in the 6-7% range isn't the 10%+ it was in the late 70s and early 80s, but neither is it bubbilicious territory.

1.bp.blogspot.com

Over a 2-5 year timeframe, there are earnings yield divergences that look eminently tradeable, but over a generational timeframe, earnings yields have tended to converge to the cost of capital.

The more logical explanation for the convergence seem to be the ones that involve arbitrage between stock and debt; if you can borrow at 2%, you can buy back shares on which you might otherwise have paid a 4% dividend. Share count goes down, EPS goes up, traders are happy and bid your stock up. As your stock price rises, your dividend remains constant, but the dividend yield drops. Somewhere in the middle, yield-hungry widows and orphans stop buying your former blue chip, and traders regard your shares as fully valued or even a little overpriced.

After the first CFO figures out how to do this, everybody else wants to follow his or her lead. 30 years later, the market's P/E ends up permanently higher than its historical norm, and earnings yields have converged towards the cost of capital. It's got very little to do with politics, and a lot to do with the realization that a little leverage can be a good thing. That, and the fact that everybody who didn't lever up in the 80s was likely to wake up to a hostile bid from some LBO tycoon. You either levered up or got bought out for the cash on your own book.
 
2013-01-23 02:35:11 PM  

bennett311: Didn't read the post,

But with the Quantitative Easing the fed did, this helped drive up stock indexes correct? Basically, the money that we do have is more worthless than it was prior to 2007 even though the Dow is back up at those levels?


$5 Footlong 2007 = $5
$5 Footlong 2013 = $5*

*Spicy Italian is now $5.25, a total of 5% increase over a five year period. It's like living in the Weimar Republic.
 
2013-01-23 02:44:07 PM  

Target Builder: bennett311: Didn't read the post,

But with the Quantitative Easing the fed did, this helped drive up stock indexes correct? Basically, the money that we do have is more worthless than it was prior to 2007 even though the Dow is back up at those levels?

$5 Footlong 2007 = $5
$5 Footlong 2013 = $5*

*Spicy Italian is now $5.25, a total of 5% increase over a five year period. It's like living in the Weimar Republic.


But gas is more expensive so we'll be printing trillion dollar bills any day now! BUY GOLD!
 
2013-01-23 03:00:27 PM  
More like an asset bubble being fueled by Helicopter Ben's Magic Printing Press™.
 
2013-01-23 03:22:59 PM  
A bubble is never a bubble until it is. And remember, if you go out far enough in time, its always a bubble.
 
2013-01-23 03:49:36 PM  

Spare Me: More like an asset bubble being fueled by Helicopter Ben's Magic Printing Press™.


More like, "And here are where money is being dropped instead of actually being spent on something useful"
 
2013-01-23 04:51:38 PM  
HAHAHAHAHAHA

And housing prices can never go down!!
Fundamentals are strong!!11!

Check is in the mail!!!111

The value of the large bank stocks is book value. Book value. That's not normal. Nobody knows when the casino crashes again and with it the market collapses again.

////something something your wife
 
2013-01-23 05:25:41 PM  
A decent amount of the stock market boom came from the following process:

Step 1: Have the Fed set interest rates to record lows.
Step 2: Issue corporate bonds at these record low rates.
Step 3: Use corporate bonds to purchase shares in your own company.
Step 4: Watch as the Earnings Per Share (EPS) increases as the number of outstanding shares decreases.
Step 5: Watch the Stock Price increase as investors react to the increase in EPS.
Step 6: Cash in on the fact your Bonus increases as the Stock Price increases.

Is it a savvy business strategy or blatant manipulation?

//Step 7: Cry as you missed out on the only time to cheaply expand your company by boosting Capex instead of fudging EPS.
 
2013-01-23 07:08:23 PM  
These articles piss me off. I hope this article's author chokes on a bowl of penises.

Our stock market recovered via an increasingly weakened currency. Why doesn't anyone raise this point?
 
2013-01-23 08:06:19 PM  

MBA Whore: These articles piss me off. I hope this article's author chokes on a bowl of penises.

Our stock market recovered via an increasingly weakened currency. Why doesn't anyone raise this point?


Because socialism, or the president is near. Take your pick.
 
2013-01-24 02:47:58 AM  

MBA Whore: These articles piss me off. I hope this article's author chokes on a bowl of penises.

Our stock market recovered via an increasingly weakened currency. Why doesn't anyone raise this point?


No doubt you can explain what you said there - weakened how?

Not by inflation - it's been steady around 2% for several years.

Not by an increased cost to borrow - the govt is paying a whopping 1.8% on ten year bonds.

Not by dramatic changes in exchange rates with any other major currency.

So, again, weakened how?

/my MBA is from a real university
//not the online Phoenix U
 
2013-01-24 01:31:24 PM  

El Pachuco: MBA Whore: These articles piss me off. I hope this article's author chokes on a bowl of penises.

Our stock market recovered via an increasingly weakened currency. Why doesn't anyone raise this point?

No doubt you can explain what you said there - weakened how?

Not by inflation - it's been steady around 2% for several years.

Not by an increased cost to borrow - the govt is paying a whopping 1.8% on ten year bonds.

Not by dramatic changes in exchange rates with any other major currency.

So, again, weakened how?

/my MBA is from a real university
//not the online Phoenix U


I suspect MBA Whore is an MBA whore in the very literal sense: hangs out in bars in business districts giving blowers in bathroom stalls to lonely overworked executives in exchange for vodka and cigarettes.
 
2013-01-24 02:47:19 PM  

Rapmaster2000: Insatiable Jesus: And as soon as enough of you rubes put your money in the kitty, they will harvest again.

Which is why this isn't a bubble. Once the public regains confidence (because the public always sells at the bottom and buys at the top), then we'll have another bubble. I'd say you should keep buying for the next five years, but the real time to buy was 2009.

It's like real estate. Here we are in an appreciation phase and the conventional wisdom was bearish a year ago. Avoid the herd.


I started paying into my 401k and bought a house in 2009, so I am feeling pretty smart. =)

/In reality it was just dumb luck
//I'll take what I can get though
 
2013-01-24 05:33:35 PM  

Harvey Manfrenjensenjen: When your party is in power, stock market gains are a true reflection of the fundamental strength of the economy thanks in large part to the party in power, and specifically the president.

When your party is out of power, stock market gains are irrelevant because they don't truly reflect the fundamental weakness of the economy thanks in large part to the party in power, specifically the president.

When your party is in power, stock market losses are irrelevant because they don't truly reflect the fundamental strength of the economy. And besides, it's not like the president has much control over that anyway.

When your party is out of power, stock market losses are a true reflection of the fundamental weakness of the economy thanks in large part to the party in power, and specifically the president.


This.
 
2013-01-24 10:30:27 PM  
Unlikey subby?  No doubt you've been wisely and safely in cash for the past 3 years.  Good plan.  When you finally convince yourself that the market is going to go and decide to jump in would you do me a favor and let me know?  Because that is surely a sign that the current rally is over and it's time to move to cash
 
2013-01-25 08:11:58 AM  
"Be fearful when others are greedy. Be greedy when others are fearful" - Warren Buffett
 
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