Will there be a crash to crazy asset valuation?

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Thesaints
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Re: Will there be a crash to crazy asset valuation?

Post by Thesaints »

nisiprius wrote: Sun Jun 13, 2021 10:23 am Jenga is a commercial tabletop game in which people build a tower of nicely-made wood blocks until it becomes unstable and falls. Theoretically if you imagine no external forces and geometrically perfect blocks there is no reason in Newtonian physics why it should ever fall. That means that it is fairly hard to develop any quantitative theory of how high a Jenga tower can be.
Well, we do build tall towers and bridges. There is a lot of theory behind and we are able to tell a safe design from a risk one, but I get the idea.
Johnathon Livingston
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Re: Will there be a crash to crazy asset valuation?

Post by Johnathon Livingston »

000 wrote: Sun Jun 13, 2021 3:38 pm
Johnathon Livingston wrote: Sun Jun 13, 2021 10:56 am I predict that as long as the Fed maintains the same low interest monetary policy, stocks will be the best game in town for investors and will continue to do well. Ie. The Fed has been propping up the stock market and the economy since 2008, and there is no end in sight to this economic strategy. Some flattening, contraction, or correction is possible, but I don’t think a “crash” in stocks is foreseeable. The 2000 crash was driven by speculative investment in make-nothing .coms because the internet was new and people thought anything with a .com in the name would be the future big thing. They didn’t know how to value those stocks. The 2008 crash was driven by irresponsible lending and borrowing. There are more safeguards in place.
Sounds like you're fighting the last battle.
No. I’m just contrasting the current situation to the last two big crashes that many of us lived through.
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JonnyDVM
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Re: Will there be a crash to crazy asset valuation?

Post by JonnyDVM »

newyorker wrote: Sun Jun 13, 2021 6:48 pm Answer is to stay the course? What should I do with my dry powder guys? Put it into market? vs CD?

So many decisions 🤯
What??? No!!! We just went over this. Choose the asset allocation you’re comfortable with and go with it. DCA into equities instead of lump sum if you would feel better about it.

For the record I would whup all of you at Jenga. Step 1- if you’re playing without a beer you’re definitely doing it wrong.
I’d trade it all for a little more | -C Montgomery Burns
Thesaints
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Re: Will there be a crash to crazy asset valuation?

Post by Thesaints »

JonnyDVM wrote: Sun Jun 13, 2021 6:55 pm
newyorker wrote: Sun Jun 13, 2021 6:48 pm Answer is to stay the course? What should I do with my dry powder guys? Put it into market? vs CD?

So many decisions 🤯
What??? No!!! We just went over this. Choose the asset allocation you’re comfortable with and go with it. DCA into equities instead of lump sum if you would feel better about it.

For the record I would whup all of you at Jenga. Step 1- if you’re playing without a beer you’re definitely doing it wrong.
The problem is that sometimes it might be very hard to tell what the current course is, or what allocation is comfortable.
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JonnyDVM
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Re: Will there be a crash to crazy asset valuation?

Post by JonnyDVM »

Thesaints wrote: Sun Jun 13, 2021 6:57 pm
JonnyDVM wrote: Sun Jun 13, 2021 6:55 pm
newyorker wrote: Sun Jun 13, 2021 6:48 pm Answer is to stay the course? What should I do with my dry powder guys? Put it into market? vs CD?

So many decisions 🤯
What??? No!!! We just went over this. Choose the asset allocation you’re comfortable with and go with it. DCA into equities instead of lump sum if you would feel better about it.

For the record I would whup all of you at Jenga. Step 1- if you’re playing without a beer you’re definitely doing it wrong.
The problem is that sometimes it might be very hard to tell what the current course is, or what allocation is comfortable.
If it’s really that hard I would consider a financial advisor. Seriously. Not everyone can do it themselves and that’s OK. Much like most of you couldn’t pull three pieces in Jenga without toppling it. Step 2) Go low early. Helps get the pressure cranked up…
I’d trade it all for a little more | -C Montgomery Burns
Marseille07
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Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

JonnyDVM wrote: Sun Jun 13, 2021 7:24 pm If it’s really that hard I would consider a financial advisor. Seriously. Not everyone can do it themselves and that’s OK. Much like most of you couldn’t pull three pieces in Jenga without toppling it. Step 2) Go low early. Helps get the pressure cranked up…
I think you're a pro. The thing is, some of us trade much more volatile instruments, and these instruments trained us to stay calm during 1x SPY (or even less when you mix in bonds) downturns, which are a walk in the park compared to those instruments.

But the folks who haven't experienced 2008 and such, 1x SPY going up and down is a scary thing.
trajan08
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Re: Will there be a crash to crazy asset valuation?

Post by trajan08 »

The answer is 42
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David Jay
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Re: Will there be a crash to crazy asset valuation?

Post by David Jay »

Will there be a crash...?
Yes. Without question.

In fact, depending on your age, there will likely be a half dozen serious crashes in your investing lifetime. This is a good time to set an asset allocation that you can live with when the next crash comes.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Thesaints
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Re: Will there be a crash to crazy asset valuation?

Post by Thesaints »

JonnyDVM wrote: Sun Jun 13, 2021 7:24 pm
Thesaints wrote: Sun Jun 13, 2021 6:57 pm
JonnyDVM wrote: Sun Jun 13, 2021 6:55 pm
newyorker wrote: Sun Jun 13, 2021 6:48 pm Answer is to stay the course? What should I do with my dry powder guys? Put it into market? vs CD?

So many decisions 🤯
What??? No!!! We just went over this. Choose the asset allocation you’re comfortable with and go with it. DCA into equities instead of lump sum if you would feel better about it.

For the record I would whup all of you at Jenga. Step 1- if you’re playing without a beer you’re definitely doing it wrong.
The problem is that sometimes it might be very hard to tell what the current course is, or what allocation is comfortable.
If it’s really that hard I would consider a financial advisor. Seriously. Not everyone can do it themselves and that’s OK. Much like most of you couldn’t pull three pieces in Jenga without toppling it. Step 2) Go low early. Helps get the pressure cranked up…
I don't think the two-bit advisor an individual investor can hire has a good answer. In fact, probably nobody does. The only viable strategy I see at present is increasing safety margins by a lot. Risk now is very difficult to assess.
Nathan Drake
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Re: Will there be a crash to crazy asset valuation?

Post by Nathan Drake »

Johnathon Livingston wrote: Sun Jun 13, 2021 10:56 am
newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
I think the bottom will fall out of collectibles and other products that are overpriced right now. I don’t buy that stuff to begin with but in general I’m not making any big purchases until inflation subsides.

I predict that as long as the Fed maintains the same low interest monetary policy, stocks will be the best game in town for investors and will continue to do well. Ie. The Fed has been propping up the stock market and the economy since 2008, and there is no end in sight to this economic strategy. Some flattening, contraction, or correction is possible, but I don’t think a “crash” in stocks is foreseeable. The 2000 crash was driven by speculative investment in make-nothing .coms because the internet was new and people thought anything with a .com in the name would be the future big thing. They didn’t know how to value those stocks. The 2008 crash was driven by irresponsible lending and borrowing. There are more safeguards in place.

I think speculation is driving investment in American technology growth companies, but these companies have an amazing track record and actually make something. While money has flowed out of growth stocks, they have flowed into value stocks. So, the money hasn’t left the stock market, it’s just been moved around. If you buy the whole market, then you’ve done very well this year while growth stocks bounce around and growth funds take a hit.

Some are concerned that the Fed is letting inflation get out of control by not raising rates because the Fed has become politically motivated and is trying to help underprivileged people by easing the federal government’s spending. That could lead to an inflation frenzy that causes the Fed to have to make a hard correction, and that whole situation could send the US into a recession. That would send the world into a recession. Then we’d have a crash. But, the mainstream view is that inflation is temporary and is more or less offsetting the low inflation from a year ago. Most believe it will all pass.

There is also concern about a housing bubble forming and even an ETF and index investment bubble forming. Ie ETFs could become illiquid and index investments can result in overvaluing crummy companies. I don’t buy any of that, but do think a contraction in real estate is possible.

At the end of the day, you just have to stay the course.
Was Cisco a "make nothing .com" company?
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JonnyDVM
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Re: Will there be a crash to crazy asset valuation?

Post by JonnyDVM »

Marseille07 wrote: Sun Jun 13, 2021 7:29 pm
JonnyDVM wrote: Sun Jun 13, 2021 7:24 pm If it’s really that hard I would consider a financial advisor. Seriously. Not everyone can do it themselves and that’s OK. Much like most of you couldn’t pull three pieces in Jenga without toppling it. Step 2) Go low early. Helps get the pressure cranked up…
I think you're a pro. The thing is, some of us trade much more volatile instruments, and these instruments trained us to stay calm during 1x SPY (or even less when you mix in bonds) downturns, which are a walk in the park compared to those instruments.

But the folks who haven't experienced 2008 and such, 1x SPY going up and down is a scary thing.
Not sure if the pro reference was meant in regards to investing, Jenga, or ironically, but I like it regardless.

Yes. Investing can be scary. You and me, we see a dip and we see dollar signs because we’re greedy SOB’s. Anyone not investing now because they’re scared of a crash is quite likely to have the behavioral issue of making rash decisions and selling when the market does eventually drop. There’s many, many investors like that. They would be MUCH better off using a fee based financial advisor to keep their allocation in order and talk them off the ledge when the market dips. Not everyone is cut out for this do it yourself stuff and that’s OK. Not all advisors are ripoff artists/bad people. There are plenty of good ones out there.

Jenga Step 3) And this is the most important. You really have to get in your opponents head. Snide comments go a long way. Yelling “CLOCK! CLOCK”. Saying “my uncle is a structural engineer, you want me to give him a call?” Also boo loudly when they successfully remove a piece. All of that helps.
Last edited by JonnyDVM on Sun Jun 13, 2021 8:42 pm, edited 1 time in total.
I’d trade it all for a little more | -C Montgomery Burns
Johnathon Livingston
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Re: Will there be a crash to crazy asset valuation?

Post by Johnathon Livingston »

Nathan Drake wrote: Sun Jun 13, 2021 8:07 pm
Johnathon Livingston wrote: Sun Jun 13, 2021 10:56 am
newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
I think the bottom will fall out of collectibles and other products that are overpriced right now. I don’t buy that stuff to begin with but in general I’m not making any big purchases until inflation subsides.

I predict that as long as the Fed maintains the same low interest monetary policy, stocks will be the best game in town for investors and will continue to do well. Ie. The Fed has been propping up the stock market and the economy since 2008, and there is no end in sight to this economic strategy. Some flattening, contraction, or correction is possible, but I don’t think a “crash” in stocks is foreseeable. The 2000 crash was driven by speculative investment in make-nothing .coms because the internet was new and people thought anything with a .com in the name would be the future big thing. They didn’t know how to value those stocks. The 2008 crash was driven by irresponsible lending and borrowing. There are more safeguards in place.

I think speculation is driving investment in American technology growth companies, but these companies have an amazing track record and actually make something. While money has flowed out of growth stocks, they have flowed into value stocks. So, the money hasn’t left the stock market, it’s just been moved around. If you buy the whole market, then you’ve done very well this year while growth stocks bounce around and growth funds take a hit.

Some are concerned that the Fed is letting inflation get out of control by not raising rates because the Fed has become politically motivated and is trying to help underprivileged people by easing the federal government’s spending. That could lead to an inflation frenzy that causes the Fed to have to make a hard correction, and that whole situation could send the US into a recession. That would send the world into a recession. Then we’d have a crash. But, the mainstream view is that inflation is temporary and is more or less offsetting the low inflation from a year ago. Most believe it will all pass.

There is also concern about a housing bubble forming and even an ETF and index investment bubble forming. Ie ETFs could become illiquid and index investments can result in overvaluing crummy companies. I don’t buy any of that, but do think a contraction in real estate is possible.

At the end of the day, you just have to stay the course.
Was Cisco a "make nothing .com" company?
It might as well have been. It hung out with them and went down with them.
Robot Monster
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Re: Will there be a crash to crazy asset valuation?

Post by Robot Monster »

newyorker wrote: Sun Jun 13, 2021 6:48 pm Answer is to stay the course? What should I do with my dry powder guys? Put it into market? vs CD?

So many decisions 🤯
Is it that you're too nervous about adding more to the market because of high valuations? If your time horizon is 20 years or more, you will probably do very well to invest in the market, even when valuations are high. If you invested in the dot-.com bubble of 2000 you would have endured a lost decade, but as it stands today you would have made an inflation adjusted annual return of 4.67%, and that's hardly the stuff of nightmares.

The most important thing is never sell during a crash, even if it seems like everything is falling apart and the talking heads on TV turn pessimistic. I wouldn't want you to add more risk then you are comfortable with, because if you're not comfortable with your level of risk exposure, you might very well panic sell. In Jason Zweig's book Safe Money, he puts forth three commandments for "guidance on how to add stocks safely to your portfolio." The first commandment is: Thou shalt take no risk that thou needst not take. I think this might be extra valuable advice for you.
"Picking an AA and sticking with it will get you much better off than any strategy that relies on pontificating on the market." -- our favorite golfer
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whodidntante
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Re: Will there be a crash to crazy asset valuation?

Post by whodidntante »

UpperNwGuy wrote: Sun Jun 13, 2021 4:32 pm
whodidntante wrote: Sun Jun 13, 2021 3:46 pm It's hard to imagine a long and deep crash in asset prices in an environment where the Federal government is actively propping them up. Ride the wave, I say. People who invest primarily in safe assets or not at all could be much worse off, but such people were already allergic to wealth building.
Preach it, brother!

And welcome back to bogleheads. We've missed you.
Thank you!
Northern Flicker
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Re: Will there be a crash to crazy asset valuation?

Post by Northern Flicker »

Marseille07 wrote: Sun Jun 13, 2021 4:57 pm
HomerJ wrote: Sun Jun 13, 2021 4:54 pm Your opinion is wrong... it is not correct to ignore dividends.. That would like ignoring interest from CD.

You: "CDs don't pay anything at all.. "
Me: "Um they pay 1% interest.. not much, but you do get some extra money at the end"
You: "No I don't think we should count that interest.. and my opinion is just as important as anyone."

If you change the definition of "return", it makes it impossible to discuss finance.
Are you saying the price index doesn't measure "return"? Really?

So it's wrong to say S&P500 is up 13.08% YTD because it doesn't include dividends and doesn't adjust for inflation?
We can leave inflation out of it and focus on noninal returns. In recent years, the S&P500 price index has been a reasonable estimate of S&P500 return over short periods of time because the index dividend yield has been very low. Over longer periods of time, onitting dividends becomes a larger drag on the accuracy of the price index as a measure of return. 100 years ago, dividend yields were much higher, so a price index would understate return a fair bit even in a year, but over 15 or 16 years, it would drift quite a bit from the total return.

That's why your estimate of how long it took large-cap US stocks to recover from 1929 was off by 10 years.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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CyclingDuo
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Re: Will there be a crash to crazy asset valuation?

Post by CyclingDuo »

newyorker wrote: Sun Jun 13, 2021 6:48 pm Answer is to stay the course? What should I do with my dry powder guys? Put it into market? vs CD?

So many decisions 🤯
So how's that "I'll ask a group of strangers on the internet what I should do with my money" strategy working out for you?

Wash, rinse, repeat yourself through all of this...

https://www.bogleheads.org/wiki/Boglehe ... philosophy
"Save like a pessimist, invest like an optimist." - Morgan Housel
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CyclingDuo
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Re: Will there be a crash to crazy asset valuation?

Post by CyclingDuo »

newyorker wrote: Sun Jun 13, 2021 6:48 pm Answer is to stay the course? What should I do with my dry powder guys? Put it into market? vs CD?

So many decisions 🤯
So how's that "I'll ask a group of strangers on the internet what I should do with my money" strategy working out for you?

Best scenario I can think of is for you to wash, rinse, repeat yourself through all of this...

https://www.bogleheads.org/wiki/Boglehe ... philosophy
"Save like a pessimist, invest like an optimist." - Morgan Housel
Marseille07
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Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

Northern Flicker wrote: Mon Jun 14, 2021 1:51 am That's why your estimate of how long it took large-cap US stocks to recover from 1929 was off by 10 years.
Please. It is not my estimate. It is what the price index showed. I didn't create it and I'm not estimating anything.
mikejuss
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Re: Will there be a crash to crazy asset valuation?

Post by mikejuss »

Yes. But can you tell me when the crash is coming?
Nathan Drake
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Re: Will there be a crash to crazy asset valuation?

Post by Nathan Drake »

Johnathon Livingston wrote: Sun Jun 13, 2021 8:36 pm
Nathan Drake wrote: Sun Jun 13, 2021 8:07 pm
Johnathon Livingston wrote: Sun Jun 13, 2021 10:56 am
newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
I think the bottom will fall out of collectibles and other products that are overpriced right now. I don’t buy that stuff to begin with but in general I’m not making any big purchases until inflation subsides.

I predict that as long as the Fed maintains the same low interest monetary policy, stocks will be the best game in town for investors and will continue to do well. Ie. The Fed has been propping up the stock market and the economy since 2008, and there is no end in sight to this economic strategy. Some flattening, contraction, or correction is possible, but I don’t think a “crash” in stocks is foreseeable. The 2000 crash was driven by speculative investment in make-nothing .coms because the internet was new and people thought anything with a .com in the name would be the future big thing. They didn’t know how to value those stocks. The 2008 crash was driven by irresponsible lending and borrowing. There are more safeguards in place.

I think speculation is driving investment in American technology growth companies, but these companies have an amazing track record and actually make something. While money has flowed out of growth stocks, they have flowed into value stocks. So, the money hasn’t left the stock market, it’s just been moved around. If you buy the whole market, then you’ve done very well this year while growth stocks bounce around and growth funds take a hit.

Some are concerned that the Fed is letting inflation get out of control by not raising rates because the Fed has become politically motivated and is trying to help underprivileged people by easing the federal government’s spending. That could lead to an inflation frenzy that causes the Fed to have to make a hard correction, and that whole situation could send the US into a recession. That would send the world into a recession. Then we’d have a crash. But, the mainstream view is that inflation is temporary and is more or less offsetting the low inflation from a year ago. Most believe it will all pass.

There is also concern about a housing bubble forming and even an ETF and index investment bubble forming. Ie ETFs could become illiquid and index investments can result in overvaluing crummy companies. I don’t buy any of that, but do think a contraction in real estate is possible.

At the end of the day, you just have to stay the course.
Was Cisco a "make nothing .com" company?
It might as well have been. It hung out with them and went down with them.
A lot of companies are hanging out with the P/E 40 and up club today as well
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HomerJ
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Re: Will there be a crash to crazy asset valuation?

Post by HomerJ »

Marseille07 wrote: Mon Jun 14, 2021 8:45 am
Northern Flicker wrote: Mon Jun 14, 2021 1:51 am That's why your estimate of how long it took large-cap US stocks to recover from 1929 was off by 10 years.
Please. It is not my estimate. It is what the price index showed. I didn't create it and I'm not estimating anything.
It's not your estimate, but YOU brought it up to make a point. An incorrect point that just confuses the discussion.

The price index gives the wrong answer when someone asks you "how long did it take U.S. stocks to recover their losses?"
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Marseille07
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Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

HomerJ wrote: Mon Jun 14, 2021 10:25 am It's not your estimate, but YOU brought it up to make a point. An incorrect point that just confuses the discussion.

The price index gives the wrong answer when someone asks you "how long did it take U.S. stocks to recover their losses?"
That's subjective. The price index is what it is. And that wasn't even the original question being raised, the discussion was stemming from a poster saying the US market always recovers (I'm paraphrasing it but this was the gist).

Please don't craft a question I wasn't addressing.
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HomerJ
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Re: Will there be a crash to crazy asset valuation?

Post by HomerJ »

Marseille07 wrote: Mon Jun 14, 2021 10:32 am
HomerJ wrote: Mon Jun 14, 2021 10:25 am It's not your estimate, but YOU brought it up to make a point. An incorrect point that just confuses the discussion.

The price index gives the wrong answer when someone asks you "how long did it take U.S. stocks to recover their losses?"
That's subjective. The price index is what it is. And that wasn't even the original question being raised, the discussion was stemming from a poster saying the US market always recovers (I'm paraphrasing it but this was the gist).

Please don't craft a question I wasn't addressing.
You confused the waters with misleading data...
Marseille07 wrote: Sun Jun 13, 2021 12:23 pm
Robot Monster wrote: Sun Jun 13, 2021 12:20 pm Indeed. Just because the US has "always made it out of crashes better than before" in the past does not guarantee the future will be the same.
Indeed. And even for the US, we had a 26-year stretch between 1929-1955. Sure we *eventually* made it higher, but that's a long long time.
The crazy thing is that I agree with you guys that the future is not guaranteed to repeat the past. We absolutely could have a crash with a very long recovery, longer than our remaining lifetimes even. Nothing is certain.

But your statement about 26 years being a long time to "make it out of a crash better than before" was incorrect. But a lot of people make this mistake. There have been hundreds of articles about this trying to fix this misconception. We tried to explain it to you as well by pointing out how dividends work.

You doubled-down by stating you think dividends don't matter.

They matter a LOT. If you don't include dividends, all your calculations and conclusions will be wrong.

Don't use a price chart. Don't look at websites that only use price charts. You're getting bad information when you do that. Bad information in, bad conclusions out.

You want to use good data right when talking about finance and making financial decisions, right?
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Marseille07
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Re: Will there be a crash to crazy asset valuation?

Post by Marseille07 »

HomerJ wrote: Mon Jun 14, 2021 10:52 am Crazy thing is that I agree with you guys that the future is not guaranteed to repeat the past. We absolutely could have a crash with a very long recovery, longer than our remaining lifetimes even. Nothing is certain.

But your statement about 26 years being a long time to "make it out of a crash better than before" was incorrect. But a lot of people make this mistake. There have been hundreds of articles about this trying to fix this misconception. We tried to explain it to you as well by pointing out how dividends work.

You doubled-down by stating you think dividends don't matter.

They matter a LOT. If you don't include dividends, all your calculations and conclusions will be wrong.

Don't use a price chart. Don't look at websites that only use price charts. You're getting bad information when you do that. Bad information in, bad conclusions out.

You want to use good data right when talking about finance and making financial decisions, right?
Buddy, I didn't double down on anything. I was just saying the price index showed what it did. And I accepted that the total return index recovered by 1945. Both universes can stand on their own.

And I am not even disputing that looking at the total return is probably more useful.
Angst
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Re: Will there be a crash to crazy asset valuation?

Post by Angst »

whodidntante wrote: Sun Jun 13, 2021 8:47 pm
UpperNwGuy wrote: Sun Jun 13, 2021 4:32 pm
whodidntante wrote: Sun Jun 13, 2021 3:46 pm It's hard to imagine a long and deep crash in asset prices in an environment where the Federal government is actively propping them up. Ride the wave, I say. People who invest primarily in safe assets or not at all could be much worse off, but such people were already allergic to wealth building.
Preach it, brother!

And welcome back to bogleheads. We've missed you.
Thank you!
+1 Hope you've been enjoying your time away! Perhaps you've been surfing?

You do plan to hop off that wave when the Fed begins ending its support, right?!
The rocks and coral can be merciless... 8-)
james22
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Re: Will there be a crash to crazy asset valuation?

Post by james22 »

nisiprius wrote: Sun Jun 13, 2021 10:23 am Jenga is a commercial tabletop game in which people build a tower of nicely-made wood blocks until it becomes unstable and falls. Theoretically if you imagine no external forces and geometrically perfect blocks there is no reason in Newtonian physics why it should ever fall. That means that it is fairly hard to develop any quantitative theory of how high a Jenga tower can be.

We also can sense when the tower is starting to become unstable, and say "it can't go on much longer, it is certain to fall over soon." Yet the whole pleasure of the game is that the exact moment of collapse is quite unpredictable, and people are constantly being surprised when several people in a row are able to continue adding blocks well past the point where it looked ready to fall... or, when it suddenly falls unexpectedly, possibly due to a stray air current or vibration or an accidental nudge by a clumsy player.
Stability leads to instability (critical state).

Malden's classic Fingers of Instability:

https://www.mauldineconomics.com/frontl ... -mwo040706
When people say things are different, 20 percent of the time they are right. John Templeton
000
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Re: Will there be a crash to crazy asset valuation?

Post by 000 »

Johnathon Livingston wrote: Sun Jun 13, 2021 6:54 pm
000 wrote: Sun Jun 13, 2021 3:38 pm
Johnathon Livingston wrote: Sun Jun 13, 2021 10:56 am I predict that as long as the Fed maintains the same low interest monetary policy, stocks will be the best game in town for investors and will continue to do well. Ie. The Fed has been propping up the stock market and the economy since 2008, and there is no end in sight to this economic strategy. Some flattening, contraction, or correction is possible, but I don’t think a “crash” in stocks is foreseeable. The 2000 crash was driven by speculative investment in make-nothing .coms because the internet was new and people thought anything with a .com in the name would be the future big thing. They didn’t know how to value those stocks. The 2008 crash was driven by irresponsible lending and borrowing. There are more safeguards in place.
Sounds like you're fighting the last battle.
No. I’m just contrasting the current situation to the last two big crashes that many of us lived through.
Yet you cite those contrasts as reasons not to worry: reasons, as you say, to believe that "stocks will be the best game in town for investors" and " I don’t think a 'crash' in stocks is foreseeable". The next crash won't likely be caused by identical factors as the last ones, so the contrast is not very helpful.
manuvns
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Re: Will there be a crash to crazy asset valuation?

Post by manuvns »

i am planning to take out loans (rates under2%) on all my appreciated used cars with gap insurance and wait for crash . if things do not work out i will drive them in a ditch .
Johnathon Livingston
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Re: Will there be a crash to crazy asset valuation?

Post by Johnathon Livingston »

000 wrote: Mon Jun 14, 2021 3:49 pm
Johnathon Livingston wrote: Sun Jun 13, 2021 6:54 pm
000 wrote: Sun Jun 13, 2021 3:38 pm
Johnathon Livingston wrote: Sun Jun 13, 2021 10:56 am I predict that as long as the Fed maintains the same low interest monetary policy, stocks will be the best game in town for investors and will continue to do well. Ie. The Fed has been propping up the stock market and the economy since 2008, and there is no end in sight to this economic strategy. Some flattening, contraction, or correction is possible, but I don’t think a “crash” in stocks is foreseeable. The 2000 crash was driven by speculative investment in make-nothing .coms because the internet was new and people thought anything with a .com in the name would be the future big thing. They didn’t know how to value those stocks. The 2008 crash was driven by irresponsible lending and borrowing. There are more safeguards in place.
Sounds like you're fighting the last battle.
No. I’m just contrasting the current situation to the last two big crashes that many of us lived through.
Yet you cite those contrasts as reasons not to worry: reasons, as you say, to believe that "stocks will be the best game in town for investors" and " I don’t think a 'crash' in stocks is foreseeable". The next crash won't likely be caused by identical factors as the last ones, so the contrast is not very helpful.
Your mincing of my words isn’t worth my time to respond to. Make your own predictions.
Last edited by Johnathon Livingston on Mon Jun 14, 2021 4:15 pm, edited 1 time in total.
Johnathon Livingston
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Re: Will there be a crash to crazy asset valuation?

Post by Johnathon Livingston »

Nathan Drake wrote: Mon Jun 14, 2021 9:21 am
Johnathon Livingston wrote: Sun Jun 13, 2021 8:36 pm
Nathan Drake wrote: Sun Jun 13, 2021 8:07 pm
Johnathon Livingston wrote: Sun Jun 13, 2021 10:56 am
newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
I think the bottom will fall out of collectibles and other products that are overpriced right now. I don’t buy that stuff to begin with but in general I’m not making any big purchases until inflation subsides.

I predict that as long as the Fed maintains the same low interest monetary policy, stocks will be the best game in town for investors and will continue to do well. Ie. The Fed has been propping up the stock market and the economy since 2008, and there is no end in sight to this economic strategy. Some flattening, contraction, or correction is possible, but I don’t think a “crash” in stocks is foreseeable. The 2000 crash was driven by speculative investment in make-nothing .coms because the internet was new and people thought anything with a .com in the name would be the future big thing. They didn’t know how to value those stocks. The 2008 crash was driven by irresponsible lending and borrowing. There are more safeguards in place.

I think speculation is driving investment in American technology growth companies, but these companies have an amazing track record and actually make something. While money has flowed out of growth stocks, they have flowed into value stocks. So, the money hasn’t left the stock market, it’s just been moved around. If you buy the whole market, then you’ve done very well this year while growth stocks bounce around and growth funds take a hit.

Some are concerned that the Fed is letting inflation get out of control by not raising rates because the Fed has become politically motivated and is trying to help underprivileged people by easing the federal government’s spending. That could lead to an inflation frenzy that causes the Fed to have to make a hard correction, and that whole situation could send the US into a recession. That would send the world into a recession. Then we’d have a crash. But, the mainstream view is that inflation is temporary and is more or less offsetting the low inflation from a year ago. Most believe it will all pass.

There is also concern about a housing bubble forming and even an ETF and index investment bubble forming. Ie ETFs could become illiquid and index investments can result in overvaluing crummy companies. I don’t buy any of that, but do think a contraction in real estate is possible.

At the end of the day, you just have to stay the course.
Was Cisco a "make nothing .com" company?
It might as well have been. It hung out with them and went down with them.
A lot of companies are hanging out with the P/E 40 and up club today as well
Yes. And people have been worried about high stock valuations for nearly a decade now. And vanguard predicts lower returns over this decade, especially for US stocks. That’s based on traditional valuation and predictive models that predate the post 2008 low interest rate era. Only time will tell if that predictive modeling is outdated and the methodology deserving of revision. For example, there is research suggesting that the price to book value of “growth stocks” should be revised to include intangible assets that have traditionally been booked as expenses, especially research and development expenses. When these expenses are translated to assets, the price to book value ratio is reduced for many companies and some may be reclassified as value stocks. https://www.google.com/amp/s/www.wsj.co ... 1604791101

Vanguard dismisses this, but it deserves consideration. See page 2-3: https://advisors.vanguard.com/iwe/pdf/ISGVVG.pdf
Nathan Drake
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Re: Will there be a crash to crazy asset valuation?

Post by Nathan Drake »

Johnathon Livingston wrote: Mon Jun 14, 2021 4:11 pm
Nathan Drake wrote: Mon Jun 14, 2021 9:21 am
Johnathon Livingston wrote: Sun Jun 13, 2021 8:36 pm
Nathan Drake wrote: Sun Jun 13, 2021 8:07 pm
Johnathon Livingston wrote: Sun Jun 13, 2021 10:56 am

I think the bottom will fall out of collectibles and other products that are overpriced right now. I don’t buy that stuff to begin with but in general I’m not making any big purchases until inflation subsides.

I predict that as long as the Fed maintains the same low interest monetary policy, stocks will be the best game in town for investors and will continue to do well. Ie. The Fed has been propping up the stock market and the economy since 2008, and there is no end in sight to this economic strategy. Some flattening, contraction, or correction is possible, but I don’t think a “crash” in stocks is foreseeable. The 2000 crash was driven by speculative investment in make-nothing .coms because the internet was new and people thought anything with a .com in the name would be the future big thing. They didn’t know how to value those stocks. The 2008 crash was driven by irresponsible lending and borrowing. There are more safeguards in place.

I think speculation is driving investment in American technology growth companies, but these companies have an amazing track record and actually make something. While money has flowed out of growth stocks, they have flowed into value stocks. So, the money hasn’t left the stock market, it’s just been moved around. If you buy the whole market, then you’ve done very well this year while growth stocks bounce around and growth funds take a hit.

Some are concerned that the Fed is letting inflation get out of control by not raising rates because the Fed has become politically motivated and is trying to help underprivileged people by easing the federal government’s spending. That could lead to an inflation frenzy that causes the Fed to have to make a hard correction, and that whole situation could send the US into a recession. That would send the world into a recession. Then we’d have a crash. But, the mainstream view is that inflation is temporary and is more or less offsetting the low inflation from a year ago. Most believe it will all pass.

There is also concern about a housing bubble forming and even an ETF and index investment bubble forming. Ie ETFs could become illiquid and index investments can result in overvaluing crummy companies. I don’t buy any of that, but do think a contraction in real estate is possible.

At the end of the day, you just have to stay the course.
Was Cisco a "make nothing .com" company?
It might as well have been. It hung out with them and went down with them.
A lot of companies are hanging out with the P/E 40 and up club today as well
Yes. And people have been worried about high stock valuations for nearly a decade now. And vanguard predicts lower returns over this decade, especially for US stocks. That’s based on traditional valuation and predictive models that predate the post 2008 low interest rate era. Only time will tell if that predictive modeling is outdated and the methodology deserving of revision. For example, there is research suggesting that the price to book value of “growth stocks” should be revised to include intangible assets that have traditionally been booked as expenses, especially research and development expenses. When these expenses are translated to assets, the price to book value ratio is reduced for many companies and some may be reclassified as value stocks. https://www.google.com/amp/s/www.wsj.co ... 1604791101

Vanguard dismisses this, but it deserves consideration. See page 2-3: https://advisors.vanguard.com/iwe/pdf/ISGVVG.pdf
A decade ago, P/Es weren't anywhere near as high as they are today.

But right, this time is "different", and paying 40 times earnings is going to mean a perpetual 15% annual return like the past decade. Valuations never matter.
rockstar
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Re: Will there be a crash to crazy asset valuation?

Post by rockstar »

This is simply: equity values went up, earnings went down because we closed, and ta da we have high PEs. Now, if earnings go up faster than equities go up, PEs should come back down. We'll see over the next two quarters of reopening what that looks like.
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HomerJ
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Re: Will there be a crash to crazy asset valuation?

Post by HomerJ »

Nathan Drake wrote: Mon Jun 14, 2021 6:35 pm A decade ago, P/Es weren't anywhere near as high as they are today.

But right, this time is "different", and paying 40 times earnings is going to mean a perpetual 15% annual return like the past decade. Valuations never matter.
This is EXACTLY what people were saying in 1996. Paying 25 time earnings was CRAZY HIGH. They ended up being wrong (including the Nobel prize winner PhD economist who INVENTED CAPE).

So why are you so sure? You talk about "extreme" valuations, but the definition of "extreme" keeps changing. That's the problem I have with valuations.

Maybe 40 is too high, or maybe earnings will increase, and the ratio will go smaller without a price drop. Lot of people out ready to spend some money, so why couldn't earnings increase? Is it written somewhere that it has to be a price drop to bring down P\E?

Or maybe there will be a crash and a price drop...

And then the markets will likely recover and go on to new heights in another 10-20 years.

The 10% long-term nominal gain of the stock market INCLUDES the crashes. It's okay if the market crashes and your money invested there is long-term money.

Well, at least, so far. But, so far, you didn't have to read the tea leaves correctly, and get out at the right time to become rich.

Buy and hold, right through the crash, and we still all got wealthy in the long-run.

Sure, if you read the leaves right, you'll be more rich. But, if you read them wrong, you'll be less rich. Or maybe even not rich at all.

Good luck... I hope you can read them right.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Johnathon Livingston
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Re: Will there be a crash to crazy asset valuation?

Post by Johnathon Livingston »

Nathan Drake wrote: Mon Jun 14, 2021 6:35 pm
Johnathon Livingston wrote: Mon Jun 14, 2021 4:11 pm
Nathan Drake wrote: Mon Jun 14, 2021 9:21 am
Johnathon Livingston wrote: Sun Jun 13, 2021 8:36 pm
Nathan Drake wrote: Sun Jun 13, 2021 8:07 pm

Was Cisco a "make nothing .com" company?
It might as well have been. It hung out with them and went down with them.
A lot of companies are hanging out with the P/E 40 and up club today as well
Yes. And people have been worried about high stock valuations for nearly a decade now. And vanguard predicts lower returns over this decade, especially for US stocks. That’s based on traditional valuation and predictive models that predate the post 2008 low interest rate era. Only time will tell if that predictive modeling is outdated and the methodology deserving of revision. For example, there is research suggesting that the price to book value of “growth stocks” should be revised to include intangible assets that have traditionally been booked as expenses, especially research and development expenses. When these expenses are translated to assets, the price to book value ratio is reduced for many companies and some may be reclassified as value stocks. https://www.google.com/amp/s/www.wsj.co ... 1604791101

Vanguard dismisses this, but it deserves consideration. See page 2-3: https://advisors.vanguard.com/iwe/pdf/ISGVVG.pdf
A decade ago, P/Es weren't anywhere near as high as they are today.

But right, this time is "different", and paying 40 times earnings is going to mean a perpetual 15% annual return like the past decade. Valuations never matter.
Possibly. Or, looking at it differently, valuations using historical methodologies may be inadequate for evaluating modern technology growth stocks for the reasons I outlined above. And on top of that, predictive models based on mean reversion may not be adequately accounting for the artificially low interest rate environment created by the Fed that has driven more demand for stocks (ie propped the market up and encouraged deflationary technology growth in the US). Under this alternative view we would be witnessing the establishment of a new mean if you’re looking at it using traditional models.
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Beensabu
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Re: Will there be a crash to crazy asset valuation?

Post by Beensabu »

Marseille07 wrote: Sun Jun 13, 2021 4:57 pm Are you saying the price index doesn't measure "return"? Really?
I think you're just confusing capital appreciation with total return.

Capital/price appreciation (X) is part of total return (Z). The other part is reinvested dividends (Y).

X + Y = Z

It is one thing to say "It took ?? years for the price to recover back to what it was"

and another to say "It took ?? years for you to get your initial investment back"

and yet another to say "It took ?? years to get the spending power of your initial investment back".

Savvy?
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next."
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Re: Will there be a crash to crazy asset valuation?

Post by Dottie57 »

Thesaints wrote: Sun Jun 13, 2021 7:45 pm
JonnyDVM wrote: Sun Jun 13, 2021 7:24 pm
Thesaints wrote: Sun Jun 13, 2021 6:57 pm
JonnyDVM wrote: Sun Jun 13, 2021 6:55 pm
newyorker wrote: Sun Jun 13, 2021 6:48 pm Answer is to stay the course? What should I do with my dry powder guys? Put it into market? vs CD?

So many decisions 🤯
What??? No!!! We just went over this. Choose the asset allocation you’re comfortable with and go with it. DCA into equities instead of lump sum if you would feel better about it.

For the record I would whup all of you at Jenga. Step 1- if you’re playing without a beer you’re definitely doing it wrong.
The problem is that sometimes it might be very hard to tell what the current course is, or what allocation is comfortable.
If it’s really that hard I would consider a financial advisor. Seriously. Not everyone can do it themselves and that’s OK. Much like most of you couldn’t pull three pieces in Jenga without toppling it. Step 2) Go low early. Helps get the pressure cranked up…
I don't think the two-bit advisor an individual investor can hire has a good answer. In fact, probably nobody does. The only viable strategy I see at present is increasing safety margins by a lot. Risk now is very difficult to assess.
My cousin is an advisor. The years of the GFC were miserable and long. Her job during that time was to talk people out of panic selling. Some people insisted on selling. Some held firm. Some had to be talked out of selling multiple times.

I hope I never see something like that again.
Nathan Drake
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Re: Will there be a crash to crazy asset valuation?

Post by Nathan Drake »

HomerJ wrote: Mon Jun 14, 2021 7:45 pm
Nathan Drake wrote: Mon Jun 14, 2021 6:35 pm A decade ago, P/Es weren't anywhere near as high as they are today.

But right, this time is "different", and paying 40 times earnings is going to mean a perpetual 15% annual return like the past decade. Valuations never matter.
This is EXACTLY what people were saying in 1996. Paying 25 time earnings was CRAZY HIGH. They ended up being wrong (including the Nobel prize winner PhD economist who INVENTED CAPE).

So why are you so sure? You talk about "extreme" valuations, but the definition of "extreme" keeps changing. That's the problem I have with valuations.

Maybe 40 is too high, or maybe earnings will increase, and the ratio will go smaller without a price drop. Lot of people out ready to spend some money, so why couldn't earnings increase? Is it written somewhere that it has to be a price drop to bring down P\E?

Or maybe there will be a crash and a price drop...

And then the markets will likely recover and go on to new heights in another 10-20 years.

The 10% long-term nominal gain of the stock market INCLUDES the crashes. It's okay if the market crashes and your money invested there is long-term money.

Well, at least, so far. But, so far, you didn't have to read the tea leaves correctly, and get out at the right time to become rich.

Buy and hold, right through the crash, and we still all got wealthy in the long-run.

Sure, if you read the leaves right, you'll be more rich. But, if you read them wrong, you'll be less rich. Or maybe even not rich at all.

Good luck... I hope you can read them right.
I’m not 100% out of US equities right now. I could be wrong. But I see better values elsewhere and new contributions won’t be going towards US TSM
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Re: Will there be a crash to crazy asset valuation?

Post by whodidntante »

Angst wrote: Mon Jun 14, 2021 11:24 am
whodidntante wrote: Sun Jun 13, 2021 8:47 pm
UpperNwGuy wrote: Sun Jun 13, 2021 4:32 pm
whodidntante wrote: Sun Jun 13, 2021 3:46 pm It's hard to imagine a long and deep crash in asset prices in an environment where the Federal government is actively propping them up. Ride the wave, I say. People who invest primarily in safe assets or not at all could be much worse off, but such people were already allergic to wealth building.
Preach it, brother!

And welcome back to bogleheads. We've missed you.
Thank you!
+1 Hope you've been enjoying your time away! Perhaps you've been surfing?

You do plan to hop off that wave when the Fed begins ending its support, right?!
The rocks and coral can be merciless... 8-)
I got vaccinated then I found some lads willing to laugh at my jokes and overplay their hands. Good games lately.

As for the stock market, I'll be beaten and broken on the shore when the crash comes. Hoping to buy more on the bet it will be worth something someday. But it's the best I can do. I don't know a way to get the risk premium without taking the risk.
Nathan Drake
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Re: Will there be a crash to crazy asset valuation?

Post by Nathan Drake »

Johnathon Livingston wrote: Mon Jun 14, 2021 7:51 pm
Nathan Drake wrote: Mon Jun 14, 2021 6:35 pm
Johnathon Livingston wrote: Mon Jun 14, 2021 4:11 pm
Nathan Drake wrote: Mon Jun 14, 2021 9:21 am
Johnathon Livingston wrote: Sun Jun 13, 2021 8:36 pm

It might as well have been. It hung out with them and went down with them.
A lot of companies are hanging out with the P/E 40 and up club today as well
Yes. And people have been worried about high stock valuations for nearly a decade now. And vanguard predicts lower returns over this decade, especially for US stocks. That’s based on traditional valuation and predictive models that predate the post 2008 low interest rate era. Only time will tell if that predictive modeling is outdated and the methodology deserving of revision. For example, there is research suggesting that the price to book value of “growth stocks” should be revised to include intangible assets that have traditionally been booked as expenses, especially research and development expenses. When these expenses are translated to assets, the price to book value ratio is reduced for many companies and some may be reclassified as value stocks. https://www.google.com/amp/s/www.wsj.co ... 1604791101

Vanguard dismisses this, but it deserves consideration. See page 2-3: https://advisors.vanguard.com/iwe/pdf/ISGVVG.pdf
A decade ago, P/Es weren't anywhere near as high as they are today.

But right, this time is "different", and paying 40 times earnings is going to mean a perpetual 15% annual return like the past decade. Valuations never matter.
Possibly. Or, looking at it differently, valuations using historical methodologies may be inadequate for evaluating modern technology growth stocks for the reasons I outlined above. And on top of that, predictive models based on mean reversion may not be adequately accounting for the artificially low interest rate environment created by the Fed that has driven more demand for stocks (ie propped the market up and encouraged deflationary technology growth in the US). Under this alternative view we would be witnessing the establishment of a new mean if you’re looking at it using traditional models.
Modern technology growth stocks are no different than any growth stocks that have come before it during booms and busts.

Investors overpay for growth, paying for the infrastructure in a philanthropic way that over the long term tends to have fairly poor returns in aggregate if they are particularly speculative.

At the end of the day it’s just a business, the same general rules apply. This time is not different.
Peebs
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Re: Will there be a crash to crazy asset valuation?

Post by Peebs »

Just look at any long term price chart of the Dow or S&P 500 and draw your own conclusions. The US economy is firing on all cylinders and next year, as the ROW gets vaccinated, those countries will recover and prosper and that will continue to lift US company earnings.

While we're at it, any fixed income allocation makes little sense for people who won't need liquidity in the next 5-10 years--pay attention youngsters. FI is a drag on wealth creation. Wealth is created from equity ownership because wealth accrues to owners. Using emojis doesn't make you look smart, so consider that. Seven years ago this forum looked like a cartoon page.
Northern Flicker
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Re: Will there be a crash to crazy asset valuation?

Post by Northern Flicker »

Marseille07 wrote: Mon Jun 14, 2021 8:45 am
Northern Flicker wrote: Mon Jun 14, 2021 1:51 am That's why your estimate of how long it took large-cap US stocks to recover from 1929 was off by 10 years.
Please. It is not my estimate. It is what the price index showed. I didn't create it and I'm not estimating anything.
Well this was the post that started that angle of the discussion:
Marseille07 wrote: Sun Jun 13, 2021 12:23 pm
Robot Monster wrote: Sun Jun 13, 2021 12:20 pm Indeed. Just because the US has "always made it out of crashes better than before" in the past does not guarantee the future will be the same.
Indeed. And even for the US, we had a 26-year stretch between 1929-1955. Sure we *eventually* made it higher, but that's a long long time.
You then trotted out the price index to justify 1955 as how long it took for the market to recover its losses. That is not how to measure it.
My postings are my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
Dfree
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Re: Will there be a crash to crazy asset valuation?

Post by Dfree »

I was carrying some dry powder in Feb. 2020 because I predicted a covid crash. I didn't sell any equities because I wasn't THAT certain.

I gleefully dropped the dry powder into VTSAX while the market plummeted. Then, I was laid off and chose to hold some back.

I made about $10K more than if I had invested the dry powder when I earned it.

I probably will never have a better opportunity to time the market. And I barely clawed an extra $10k out of it.

Not much point in predictions, even when you're right.

It's funny how we have to learn these lessons ourselves.

Back to OP's question (because idle, pointless speculation is fun)....I predict a 1-2 year bull run followed by a belly flop into the typical "this time is different" weeping and gnashing of teeth. I am particularly concerned about corporate debt and debt financed asset speculation.

This prediction has a +/- 100% margin of error. And it is 0% actionable.
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HomerJ
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Re: Will there be a crash to crazy asset valuation?

Post by HomerJ »

Dfree wrote: Tue Jun 15, 2021 12:25 am This prediction has a +/- 100% margin of error. And it is 0% actionable.
Heh, quote of the year. :)
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
namajones
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Re: Will there be a crash to crazy asset valuation?

Post by namajones »

JonnyDVM wrote: Sun Jun 13, 2021 7:05 am What we can predict with almost certainly, is that in the long run the market will return more than you put in it.
You cannot predict this. Of all the dangerous predictions I've read here, this is the most persistent and probably the most persistently dangerous.

The market can and has gone down and stayed down for longer than many people have years left on this earth. And even if it had not, there's no guarantee that it would not in the future. Remember that as you determine your asset allocation.

If you want to live by the notion that you can't predict the future, then you have to accept that you cannot predict "with almost certainty" that the market will return more in the long run than you put into it--especially in your "long run." The long run is, after all, the future.

Hope for the best, yes, but plan for the worst.
mikejuss
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Re: Will there be a crash to crazy asset valuation?

Post by mikejuss »

Dfree wrote: Tue Jun 15, 2021 12:25 amBack to OP's question (because idle, pointless speculation is fun)....I predict a 1-2 year bull run followed by a belly flop into the typical "this time is different" weeping and gnashing of teeth. I am particularly concerned about corporate debt and debt financed asset speculation.
My prediction is that the biggest weepers and gnash-ers will be those who have all-equities (and especially leveraged equities) portfolios. We'll see!
skor99
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Re: Will there be a crash to crazy asset valuation?

Post by skor99 »

HomerJ wrote: Sun Jun 13, 2021 12:32 pm
newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
You should ALWAYS plan around a crash happening tomorrow that takes 2-10 years to recover. Because it might.

This is always true.

If you're not retiring for 15+ years, you might still be mostly in stocks even assuming a crash tomorrow. Because you have time to wait for the stock market to recover.

If you're closer to retirement, you should have more in bonds/CDs/cash, because you might need to start withdrawing money before the stock market fully recovers.

Once you're prepared mentally and financially for a crash happening tomorrow, you no longer have to worry about it.

Trying to predict a crash is very hard. Trying to hedge at some times, and not other times is a bad idea. Always be prepared. Then you don't have to worry about it anymore.
The problem for 50+ Folks is that the ageism in employment market might make them retire, even if they don’t want to.
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HomerJ
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Re: Will there be a crash to crazy asset valuation?

Post by HomerJ »

skor99 wrote: Tue Jun 15, 2021 9:23 am
HomerJ wrote: Sun Jun 13, 2021 12:32 pm
newyorker wrote: Sun Jun 13, 2021 12:37 am I know... nobody knows nothing.

Stock price is all time high
RE market is super hot
Collector cars and watches are super expensive

Do you guys predict a crash to these? If so, what is the best way to hedge against it? CD? Bond?
You should ALWAYS plan around a crash happening tomorrow that takes 2-10 years to recover. Because it might.

This is always true.

If you're not retiring for 15+ years, you might still be mostly in stocks even assuming a crash tomorrow. Because you have time to wait for the stock market to recover.

If you're closer to retirement, you should have more in bonds/CDs/cash, because you might need to start withdrawing money before the stock market fully recovers.

Once you're prepared mentally and financially for a crash happening tomorrow, you no longer have to worry about it.

Trying to predict a crash is very hard. Trying to hedge at some times, and not other times is a bad idea. Always be prepared. Then you don't have to worry about it anymore.
The problem for 50+ Folks is that the ageism in employment market might make them retire, even if they don’t want to.
Exactly, and that's why I said one should be more conservative the closer you get to retirement. Because you might lose your job in a recession, and not be able to find comparable work afterwards. You don't want to be pulling from stocks when they are down 50% to pay your bills.

Knowing that a crash is possible and losing your job is possible, someone older should have a decent amount in bonds\CDs\cash. Enough to live on while waiting for the stock market to recover.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Robot Monster
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Re: Will there be a crash to crazy asset valuation?

Post by Robot Monster »

HomerJ wrote: Tue Jun 15, 2021 9:56 am Knowing that a crash is possible and losing your job is possible, someone older should have a decent amount in bonds\CDs\cash. Enough to live on while waiting for the stock market to recover.
I worry the Fed has conditioned people to expect a fast recovery, and that it might not play out this way.
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HomerJ
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Re: Will there be a crash to crazy asset valuation?

Post by HomerJ »

Robot Monster wrote: Tue Jun 15, 2021 10:04 am
HomerJ wrote: Tue Jun 15, 2021 9:56 am Knowing that a crash is possible and losing your job is possible, someone older should have a decent amount in bonds\CDs\cash. Enough to live on while waiting for the stock market to recover.
I worry the Fed has conditioned people to expect a fast recovery, and that it might not play out this way.
I agree with this. One should have at least 5 years in safe assets entering retirement, and I plan to have 10-12 years.

There's no guarantee the next recovery will be as fast as the last two.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
Caduceus
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Re: Will there be a crash to crazy asset valuation?

Post by Caduceus »

I don't know if there will be a crash. But I think current stock valuations are rich, unless business fundamentals surprise us in the next few years. People are paying rich valuations, in the aggregate, for every dollar of earnings.

It doesn't have to crash though. Earnings can improve while prices trade sideways or mildly downwards, for example.

That said, I am having trouble finding things to invest in. 25.7% of my portfolio is currently in cash doing absolutely nothing. I've started reading more foreign companies' annual reports.
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