Coronavirus/Economy/Stock Market

[svelte]

[quote=Rich Toscano]
Anyway back to the OP: when you buy stocks, you are buying a VERY long-term stream of earnings. Like, decades. [/quote]

Certainly true and how I’ve behaved over the long term.

However, I have less than a decade to go to retirement, so decisions I make now have a shorter amount of time to equalize than decisions I’ve made over the last several decades. Therefore, when I jump in with any more money is more important than it was before.

I don’t really even have to put more money in, but if I know the market is down due to overreaction, why not ride it back up? These opportunities don’t come along all that often. Perhaps once a decade it appears.

[svelte]

I like going back to Buffett’s favorite measurement, total market cap to US gross national product.

By that measure, the market has been overvalued since about June 2013 and, even now after the large fall this past month, it is still overvalued at 106% with 100% being optimal.

https://www.gurufocus.com/stock-market-valuations.php

[zk]

[quote=Rich Toscano]
zk, did you get a chance to read that Ben Inker piece I linked to in the last post? It’s written for finance nerds so not very accessible, but it does a great job of assessing long-term stock value, including looking back at history.[/quote]

A fascinating article, indeed. It does go right to the heart of the question I was asking. Very enlightening.

That chart, once I understood it, was really quite eye-opening.

Thanks, Rich!

[pinkflamingo]

Thank you so much Rich for moderating this blog. Does anyone know if there is a graph of market cap vs gdp for Europe?

[sdduuuude]

.

[phaster]

anyone here familiar w/ “The Fourth Turning”

http://www.youtube.com/watch?v=a40EbQPkSyA

seems given all the external factors on the market (i.e. climate change, covid-19, etc.) various long term trends are in play AND BAU tail winds of the last 25+ years in the equity market(s) won’t be there

[Rich Toscano]

[quote=pinkflamingo]Thank you so much Rich for moderating this blog. Does anyone know if there is a graph of market cap vs gdp for Europe?[/quote]

Market cap to gdp isn’t a very good measure imo. It’s comparing apples to oranges… stock prices to GDP (which includes all economic activity, not just those of public corporations). So it can be distorted if the ratio of public to non-public companies change, as has been the case. (The result in the case of the US is to overstate valuations).

This website has CAPE (price to 10 year inflation adjusted earnings), which is a better measure than mkt cap to gdp: https://interactive.researchaffiliates.com/asset-allocation

In specific, if you hit the “download” button near the lower right, you can get a spreadsheet with CAPE data for various countries/regions. The site has lots of other good info too.

Looking at the spreadsheet, as of 2/29, the CAPE for Europe was 16.6, and for the US it was 30.7. Both of those have gone down quite a bit since, though!

[zk]

That first chart is a doozy:

https://www.nytimes.com/interactive/2020/03/26/upshot/coronavirus-millions-unemployment-claims.html?action=click&module=moreIn&pgtype=Article&region=Footer

The article also speculates that job losses from the coronavirus could be on par with the 2008 financial crisis.

[The-Shoveler]

IMO The S&P could revisit 2200 (maybe I would move some in again at that point), breaks below 2100 I think no one knows where the floor is.

But I am lousy at this, but then again I did go all cash in 401K early Feb for what its worth and did move 30% at 2300 and sold the 2600 resistance.

Time will tell how wise that was LOL, My luck it goes straight up.

IMO this gov Sponsored panic recession still has a long way to play out, hope I am wrong but I fear no matter what is happening on the ground (how bad or good) the numbers get, the gov’s got to save face so they will extend the damage even if new cases drop off dramatically.

[outtamojo]

Trying to figure if this is going to be a v recovery or gradual. Actually, think it will be a V if news of a vaccine starts trickling out.

[FlyerInHi]

No way the recovery will be V shaped. Consumers are changing their habits as we speak and companies are also seeing that they don’t need certain employees. If anything, automation will accelerate thus cutting employment. Retail is permanently affected.

[zk]

[quote=FlyerInHi] Retail is permanently affected.[/quote]

Maybe. I don’t know. Buying groceries on line is dreary. Suddenly going to the grocery store seems almost magical. All that stuff they have, and you can go there any time you want and just walk up and down the aisles and buy whatever you want right then.

[svelte]

I figure the bottom will be sometime between Monday (reacting to Trumps extension of distancing until end of April) and the middle of April (when I think deaths in the US should peak).

As early as late April, I’m hoping we start to see a recovery though it will probably not be robust and will take a long time to get anywhere close to where we were before this hit…certainly not this year. Too much of a mess to mop up first.

[svelte]

[quote=zk][quote=FlyerInHi] Retail is permanently affected.[/quote]

Maybe. I don’t know. Buying groceries on line is dreary. Suddenly going to the grocery store seems almost magical. All that stuff they have, and you can go there any time you want and just walk up and down the aisles and buy whatever you want right then.[/quote]

Yeah I’m not that jazzed with online groceries either. It was OK in a pinch, but not sure I want to use it regularly. If I have a broken leg or something that makes regular shopping a hassle, sure.

Though I’m a bit of an introvert, I’m still a social creature too. I like to get out there and watch humanity in action.

[The-Shoveler]

Staying home is getting real old quickly LOL

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