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burghMan
Participant[quote=temeculaguy] Then I’m reminded of the adage “you think it’s expensive now, wait till it’s free.”[/quote]
What we have now is perhaps the worst form of economics: private entities subsidized by public money.
College education is already socialist. The UC system is the biggest employer in California. Government backed private student loans have been a huge factor in rising college costs. Private, for-profit colleges have made billions from students using government guaranteed loans to pay tuition.
We’d be much better off with a direct form or socialism than the one we have today. If government provided college for free, there would be more transparency and fewer middlemen taking a cut.
Participant[quote=ucodegen][quote=henrysd]
CAPE is only one measurement of stock market valuation just like SAT test scores used in college admission. It has serious flaw – it fails to consider the interest rate. Early 80 CAPE can’t compared with current time CAPE due to 10% difference in interest rate. Vanguard uses a modified version of CAPE called fair-value CAPE and adjust for current interest rate. In Vanguard research, current U.S. stock market is still considered overvalued, but only slightly due to low interest rate. This is in sharp comparison with many other pure CAPE modelers:
https://vanguardblog.com/2019/03/13/what-fed-projections-may-mean-for-longer-term-stock-returns/Contrarian view is negative stock marker sentiment is bullish for stocks. For the last half year the sentiment was mostly bearish with all the recession talk. Wall street would love to propel the market higher when so much retail investor money has sidelined.[/quote]
When considering valuation, not only do you need to consider the current interest rate, you also need to consider what ‘likely’ future interest rates may be and rates of inflation. Treasuries are not inflation protected unless you are picking up TIPS(Treasury Inflation Protected Securities). TIPS will tend to yield lower than standard treasuries. Most people consider treasuries to be safer than stocks, but that is not necessarily true unless you are holding to maturity.
- Interest rate risk At the current (11/6/2019) yield of 2.3%, they are an extreme form of leverage. The SEC has a good short publication on the interest rate risk on treasuries. Basically the price difference(possibly discounted) will be based upon both where the current yield curve is as well as the difference on the Coupon Rate vs Market Interest Rate of the Treasury. A 30 year held for 10 years then sold is basically a 20 year Treasury when sold. If the rates are the same in 10 years as now, you would be selling a 2.3% yielding ’20’ year treasury in a market where current 20 years are yielding 2.13%. You would be able to sell at a premium. However if the interest rate increases before selling and the 20 year treasuries are yielding 3%, you will have to sell for less than the face value.
- Inflation Only TIPS are inflation protected. On a non inflation protected ‘standard’ treasury, if it is yielding 2% while inflation is 1.5%, your actual gain is 0.5% because the tangible value of the treasury will have dropped by 1.5% while you were paid 2%. This is where boring dividend stocks have a potential advantage. The price of the stock, its revenue, its earnings and its dividends will tend to also increase by the rate of inflation while the treasury has remained the same.
To get a rough look of Stocks vs Treasuries, you can invert the PE ratio (provided the stock actually has earnings) and it gives you a rough idea of internal ‘yield’. A PE ratio of 30 would be a return of around 3.33% – held internal to the company if there are no dividends. PE represents P/E for the stock, E/P is effectively a yield. Of course stocks also have a risk in a increasing interest rate environment because of the rough equivalence yield to Treasury Rate.
NOTE: Using Black Tuesday 1929 as a guide for the ‘watch out’ PE is not a good idea. There was a lot more that went into causing Black Tuesday’s crash and the depression than just PEs. The financial accounting standards in 1929 were — well you could call it the Wild West… the NINJA equivalent to the mortgage crisis.[/quote]
Thanks for the response. It’s great to see some posts that use data. I understand that interest rates have a big influence, but the interesting question is: how do you work them into the valuation model for stocks?
Good points about other factors leading up to the 1929 crash. Markets are more transparent today, but I believe there are some hidden risks out there. Consumer debt is higher than it ever has been: https://www.marketwatch.com/story/us-consumer-debt-is-now-breaching-levels-last-reached-during-the-2008-financial-crisis-2019-06-19
Anecdotally I’m seeing more friends and neighbors living beyond their means. It’s not as much about real estate, but cars, swimming pools, vacations, etc. The data seems to back up my observations. I don’t think the data points to a crash, but I do think it suggests that the economy is going to slow down as the current level of consumer spending is not sustainable.
Participant[quote=flu]I know Shoveler… but in my case I think both definitions of dumb equally apply. And that’s ok. In America, it took me many years to learn this is a country where really dumb people can still make decent money, often more so that smart people that do analysis to paralysis. I’ll take dumb for the win.
Hey if Cardi B can make millions with a song like I like it like that, anyone can![/quote]
Participant[quote=henrysd]
CAPE is only one measurement of stock market valuation just like SAT test scores used in college admission. It has serious flaw – it fails to consider the interest rate. Early 80 CAPE can’t compared with current time CAPE due to 10% difference in interest rate. Vanguard uses a modified version of CAPE called fair-value CAPE and adjust for current interest rate. In Vanguard research, current U.S. stock market is still considered overvalued, but only slightly due to low interest rate. This is in sharp comparison with many other pure CAPE modelers:
https://vanguardblog.com/2019/03/13/what-fed-projections-may-mean-for-longer-term-stock-returns/Contrarian view is negative stock marker sentiment is bullish for stocks. For the last half year the sentiment was mostly bearish with all the recession talk. Wall street would love to propel the market higher when so much retail investor money has sidelined.[/quote]
Thanks henry, that’s exactly the kind of insight I was looking for. Do you know if there’s any site that maintains the current value of the modified CAPE?
Participant[quote=scaredyclassic]That’s basically .5% interest extra to go to schwab because it must remain there 1 year. Not that great.[/quote]
Right. There are a zillion ways schwab can get their $500 back from customers over the course of a year.
October 19, 2019 at 9:26 AM in reply to: Trump is actually tougher than the overrated 4 star general mattis. #813819Participant[quote=zk][quote=burghMan]One of my favorite movies. The movie about making the movie is also really interesting
https://www.imdb.com/title/tt0102015/?ref_=nv_sr_1?ref_=nv_sr_1%5B/quote%5D
I’m definitely putting this on my list of things to watch. I haven’t seen Apocalypse Now for 10 or 15 years. Do you think it would be better to watch Hearts of Darkness first and then Apocalypse Now again, or the other way around?[/quote]
I think if you are familiar enough with the Apocalypse Now, you could just watch the documentary.
October 19, 2019 at 9:21 AM in reply to: Trump is actually tougher than the overrated 4 star general mattis. #813818Participant[quote=temeculaguy]Normally I write lengthy responses when I disagree but I don’t know where to begin after reading these posts, so disappointed.[/quote]
Understandable, it wasn’t Brando’s best performance. But you have to admit that Dennis Hopper’s character was awesome.
October 18, 2019 at 6:36 PM in reply to: Trump is actually tougher than the overrated 4 star general mattis. #813809ParticipantOne of my favorite movies. The movie about making the movie is also really interesting
https://www.imdb.com/title/tt0102015/?ref_=nv_sr_1?ref_=nv_sr_1
October 18, 2019 at 5:00 PM in reply to: Trump is actually tougher than the overrated 4 star general mattis. #813805Participant[quote=scaredyclassic]Mattis would probably be saddened and troubled if his mistake killed a few thousand troops.
Trump would be laughing.
Advantage, trump.[/quote]
The incessant whining is not really a hallmark of a tough guy.
PRESIDENTIAL HARASSMENT!
— Donald J. Trump (@realDonaldTrump) September 24, 2019
October 18, 2019 at 2:23 PM in reply to: Trump is actually tougher than the overrated 4 star general mattis. #813799Participant[quote=scaredyclassic]But seriously, why are u.s. soldiers always perceived as tough. A guerrilla fighter in the jungle with no support and no hope is tough.
A cog in the worlds largest military machine just isn’t tough in the same way.[/quote]
“Charlie didn’t get much USO. He was dug in too deep or moving too fast. His idea of great R&R was cold rice and a little rat meat. He had only two ways home: death, or victory.”
Participant[quote=scaredyclassic]
Why is it a smear job? He should’ve embraced it as a positive.
sure my sons been making money off the system. Legally. That’s called smart. But you need to elect me because only I know the way to reform the system.[/quote]
Clever idea but i think that generally only works with taxes.
Funny thing is Trump used that angle and it worked with his base. (He didn’t even bother to include the part about reforming the system!)
Most of the “outrage” I see about Biden’s son is based on the claim that he was on the board of a company in an industry where he had no experience.
I think many Americans don’t understand that for someone with and Ivy League law degree and a relation to someone in a powerful position, is a pretty common to get a cushy board position. There are many examples of generic smart connected people sitting on boards in industries where they have no specific background. I have a friend with a Harvard Law degree that immediately after school got a C-level position in a financial industry where he had zero experience. The big degrees carry a lot of weight in these circles. As for the family connections, one doesn’t even need daddy to get you the job, they will come to you because of your name.
Biden’s situation isn’t unusual at all. At worst it’s very mild and quite ordinary nepotism.
Participant[quote=outtamojo]I dont like that Biden sent a letter to tv media asking them not to put Giuliani on
That is downright lame, as if Biden could not come up with other ways to fight the smear job.[/quote]It was a weak move, but are there other ways?
These days, smear jobs are more effective than ever. Much of Trump’s success can be attributed to his effective use of smear jobs. The “birther” claims were absurd and idiotic but literally millions believe them. Most of Trump’s approach to fighting his own misdeeds is to basically repeat “I know you are but what am I” over and over through right wing media.
There’s a saying: Teaching truth requires evidence but teaching falsehoods only requires confusion. Social media and 24 hour news have amplified this effect. Repeat a lie often enough and it becomes truth to many.
I think Biden has done everything that reasonably can be done to fight the smear job. Unfortunately it probably won’t be enough.
Participant[quote=temeculaguy]I may have misunderstood, I thought you wanted to sell your wine country house and retire to Idyllwild. If you just want a cabin, that’s a leisure decision like an RV or a boat. Do what makes you happy if you have the means it’s likely a better decision than either a boat or an RV.
Climbers and day trippers will barely sustain a business. 2,000 hikers a year doesn’t compare to your current digs. In fact you are missing out on not turning your place into a B&B once the kids move to college.
Temecula gets 2.7 million tourists a year. Napa/Sonoma gets 3.5 mil tourists a year. But 2.000 people hiked a spot in Idylwild? You are standing on a pile of hundred dollar bills and thinking of moving to a pile of pennies. I’m in a tract home but you are on land within the vineyards, there is opportunity right under your nose. I get it, you are a bit eccentric, but don’t for a minute think lots of other people want to spend their weekends volunteering as fire scouts. Good for you. Nobody gets rich rescuing cats, but my wife thinks that would be a great life. Luckily she has me to encourage her to keep her day job and she can have that as a hobby if she wants as long as it doesn’t involve the house. But it’s not an investment or a vocation, it’s a hobby/charity/volunteer opportunity.
Let it be your hobby, but you didn’t find gold. So buy a weekend home if you like but head to head, Temecula real estate will beat Idyllwild real estate over time for lots of reasons. I still think Arrowhead/Big Bear represent a better investment because it gets year round tourism, Idyllwild practically closes when it snows, it doesn’t capitalize on it like the other areas.[/quote]
I don’t have the data but I’d easily bet that Idyllwild gets more than 2000 visitors/year. Just, between myself and a few climbing buddies I could probably account for nearly 100 visitors last year.
But it’s true that the number of visitors to Idyllwild is probably a fraction of Temecula’s number and the demographics and spending habits are different. Many hikers don’t even stop at restaurants and there are no tour busses full of wine guzzling cougars.
Of course the economies of Arrowhead/Big Bear are much bigger, but that’s already priced into real estate and businesses.
I don’t think Mr. scardey actually believes he could make a lucrative living in Idyllwild. Although as an established lawyer that’s willing to travel occasionally, it could be a place to enjoy a balanced lifestyle.
ParticipantThere’s quite a few Idyllwild residents on the MountainProject climbing forums. You could probably get some good info there:
https://www.mountainproject.com/forum/104554745/southern-california
Tell them you are looking for “beta” on real estate and you’ll sound like you belong 😉
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