Stock market is a "fully-fledged epic bubble" and will burst

Stock market is a "fully-fledged epic bubble" and will burst

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Discussion

Derek Chevalier

3,433 posts

150 months

Thursday 12th May
quotequote all
Phooey said:
Derek Chevalier said:
Have a look at the relative valuations in the JP Morgan guide to the markets - not everything is expensive (however you might define it).
Which market/s or sectors do you think are not expensive (fair value?) at the moment?
https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/

Derek Chevalier

3,433 posts

150 months

Thursday 12th May
quotequote all
Phooey said:
Seeing as S&P500 (current P/E 20ish i think) is getting a mention atm, is there a chart somewhere that shows it's P/E during downturns or crashes?
Not sure of source quality, but there are several alternatives out there. Single-digit is not unheard of.

https://www.multpl.com/s-p-500-pe-ratio/table/by-y...

Phooey

11,755 posts

146 months

Thursday 12th May
quotequote all
Derek Chevalier said:
Not sure of source quality, but there are several alternatives out there. Single-digit is not unheard of.

https://www.multpl.com/s-p-500-pe-ratio/table/by-y...
Bloody hell was 2009 (70.91) a typo!

Looking at today we don't seem too far above average.. although will be a big drop if we go to single digits. Is PE a crude measure when we look at the businesses today vs say 50yrs ago, increased population etc?

Handy chart though - thank you smile

Phooey

11,755 posts

146 months

Thursday 12th May
quotequote all
Derek Chevalier said:
Could you save me the hassle.. bit much to take in wobble



speedy_thrills

7,580 posts

220 months

Thursday 12th May
quotequote all
Phooey said:
Seeing as S&P500 (current P/E 20ish i think) is getting a mention atm, is there a chart somewhere that shows it's P/E during downturns or crashes?
For the S&P500, recessions greyed out:


Earnings can be really variable over one year though, Shiller CAPE uses the previous 10 years of earnings:
https://www.multpl.com/shiller-pe

Here is some background on the measure and why it's popular.

lockhart flawse

1,954 posts

212 months

Thursday 12th May
quotequote all
Given that a lot of my investments are taking a hammering I did an excercise yesterday evening the result of which was a surprise.

I took out a 15 year investment plan with Skandia Life making monthly contributions starting in 2002. Taking 2 of the funds I chose, the Inv Perpetual High Income and Smaller Companies, the prices were as follows:

Highest price prior to credit crunch - 19/7/07 (both funds)
Date they hit lowest price after credit crunch - 9/3/09 (High Income - down 32.8% from high) 20/3/09 (Sm Comp - down 46.7% from high)
Date when they reached 2007 high figures again - 9/1/12 (High Inc) 1/3/12 (Sm Comp)

4 and half years to recover to previous high.

But it illustrates the benefits of pound cost averaging as I contributed each month.

bmwmike

4,671 posts

85 months

Thursday 12th May
quotequote all
lockhart flawse said:
Given that a lot of my investments are taking a hammering I did an excercise yesterday evening the result of which was a surprise.

I took out a 15 year investment plan with Skandia Life making monthly contributions starting in 2002. Taking 2 of the funds I chose, the Inv Perpetual High Income and Smaller Companies, the prices were as follows:

Highest price prior to credit crunch - 19/7/07 (both funds)
Date they hit lowest price after credit crunch - 9/3/09 (High Income - down 32.8% from high) 20/3/09 (Sm Comp - down 46.7% from high)
Date when they reached 2007 high figures again - 9/1/12 (High Inc) 1/3/12 (Sm Comp)

4 and half years to recover to previous high.

But it illustrates the benefits of pound cost averaging as I contributed each month.
And presumably you did well after the 4.5 years as you'd bought more for your £ during the low years. If you hadn't had the low period, you would have less overall units, and a lower outcome because you'd been buying at a higher price for longer. Its why i'm still buying tech stocks too. Maybe they'll take 5 years to recover, but i buy them for the AWS/Azure/GCP mostly, and those are what new business are built on, so i'm quite optimistic in this area and the only times i've lost money is when i've sold.







Phooey

11,755 posts

146 months

Thursday 12th May
quotequote all
speedy_thrills said:
For the S&P500, recessions greyed out:


Earnings can be really variable over one year though, Shiller CAPE uses the previous 10 years of earnings:
https://www.multpl.com/shiller-pe

Here is some background on the measure and why it's popular.
Thank you beer

Derek Chevalier

3,433 posts

150 months

Thursday 12th May
quotequote all
Phooey said:
Derek Chevalier said:
Could you save me the hassle.. bit much to take in wobble
I think you may have linked to this Youtube channel before - this one is worth a watch.

https://www.youtube.com/watch?v=jjWmaRKmnEA

There are two options discussed, both low cost and globally diversified.

1. Portfolio comprised of just plain vanilla indices
2. Portfolio comprised of plain vanilla indices with tilts to small-cap and value shares

Many investors have done the exact opposite of what has historically worked over the longer term - i.e piled into large-cap growth


Mr Whippy

25,469 posts

218 months

Thursday 12th May
quotequote all
Ouch, Apple taking a beating now.

Nvidia moving quickly back to pre-pandemic levels.

Tech seems to be getting worse as QT approaches.

Jon39

9,780 posts

120 months

Thursday 12th May
quotequote all


lockhart flawse said:

Given that a lot of my investments are taking a hammering I did an excercise yesterday evening the result of which was a surprise.

I took out a 15 year investment plan with Skandia Life making monthly contributions starting in 2002. Taking 2 of the funds I chose, the Inv Perpetual High Income and Smaller Companies, the prices were as follows:

Highest price prior to credit crunch - 19/7/07 (both funds)

Date they hit lowest price after credit crunch
- 9/3/09 (High Income - down 32.8% from high)
- 20/3/09 (Sm Comp - down 46.7% from high)

Date when they reached 2007 high figures again
- 9/1/12 (High Inc)
-1/3/12 (Sm Comp)

4 and half years to recover to previous high.
But it illustrates the benefits of pound cost averaging as I contributed each month.

The 2008 crash was an interesting, but extremely worrying event.
A very long time, since queues of people outside banks, attempting to withdraw their money, had last been seen in the UK.

Your percentage falls were slightly better than the average (red line) although that does not take income into account. Many companies did manage to keep dividends flowing during that crash (unlike the pandemic)

The chart does not go far enough forward, but 4½ years to recover was a long time.
We all like talking about wanting markets to go up, but having less of a fall than average during a downturn, is of equal importance.
In car terms, you can then begin the next stock market phase, one lap in the lead, making it far quicker to recover the percentage fall.

Monthly contributions obviously average out purchases, although as the fund builds, each payment would/should gradually represent a smaller proportion of the total fund value. Therefore might not help overall as much, when a fund value falls this far.
However, 2007 / 2009 was one of the extreme crashes. Probably have to go back to 1974 for a bigger decline.






bitchstewie

40,379 posts

187 months

Thursday 12th May
quotequote all
What bubble hehe


vulture1

9,928 posts

156 months

Thursday 12th May
quotequote all
Buy the dip!!! lol... Nah some of those non profit crazy tech growth and covid plays will never recover. 1 or two might make it but who can tell.

DaveA8

217 posts

58 months

Thursday 12th May
quotequote all
vulture1 said:
Buy the dip!!! lol... Nah some of those non profit crazy tech growth and covid plays will never recover. 1 or two might make it but who can tell.
Nip over to Seeking Alpha and one will find 20 or more pundits who've staked all on these Tech stocks. Peloton will be $120 this time next year Rodney!

Mr Whippy

25,469 posts

218 months

Thursday 12th May
quotequote all
bhstewie said:
What bubble hehe

This is what puts me off global trackery type stuff.
Investing in piles of utter rubbish that needs to be “timed” to work out, but which you can’t time because it’s wrapped up.

Jon39

9,780 posts

120 months

Thursday 12th May
quotequote all

DaveA8 said:
vulture1 said:
Buy the dip!!! lol... Nah some of those non profit crazy tech growth and covid plays will never recover. 1 or two might make it but who can tell.
Nip over to Seeking Alpha and one will find 20 or more pundits who've staked all on these Tech stocks. Peloton will be $120 this time next year Rodney!

Fascinating stuff.
You appear to be indicating the following.

One generation ago investors (gamblers) went mad buying hot shot tech stocks.
It did not end well and subsequently became known as the Dot Com bubble. Many 'burnt fingers'.

Now a new generation, who presumably might not know anything about the lesson of 1999, are hoping they can get rich quick.
Just hope they are using money they do not need.
Don't tell me, some have borrowed heavily, because they want their profits to be magnified.

I saw a news item earlier today about someone who took a mortgage to buy Cryptocurrency !! Think the article said the price fell 98% overnight. He now expects his home to be in a shop doorway.

All very sad.






Edited by Jon39 on Thursday 12th May 20:53

bmwmike

4,671 posts

85 months

Thursday 12th May
quotequote all
Mr Whippy said:
bhstewie said:
What bubble hehe

This is what puts me off global trackery type stuff.
Investing in piles of utter rubbish that needs to be “timed” to work out, but which you can’t time because it’s wrapped up.
Have to agree, though I think ETFs partially solve that problem or at least don't take 3 dubious days to sell or buy. I dislike regular funds for that reason.

Derek Chevalier

3,433 posts

150 months

Thursday 12th May
quotequote all
bmwmike said:
Mr Whippy said:
bhstewie said:
What bubble hehe

This is what puts me off global trackery type stuff.
Investing in piles of utter rubbish that needs to be “timed” to work out, but which you can’t time because it’s wrapped up.
Have to agree, though I think ETFs partially solve that problem or at least don't take 3 dubious days to sell or buy. I dislike regular funds for that reason.
Have to disagree - look at the percentage these stocks make up in a (truly) global equity fund.

bitchstewie

40,379 posts

187 months

Thursday 12th May
quotequote all
Mr Whippy said:
bhstewie said:
What bubble hehe

This is what puts me off global trackery type stuff.
Investing in piles of utter rubbish that needs to be “timed” to work out, but which you can’t time because it’s wrapped up.
Depends.

Derek beat me to it (and I don't work in the financial industry) but the stocks in the chart are inconsequential to a world index.

vulture1

9,928 posts

156 months

Thursday 12th May
quotequote all
DaveA8 said:
vulture1 said:
Buy the dip!!! lol... Nah some of those non profit crazy tech growth and covid plays will never recover. 1 or two might make it but who can tell.
Nip over to Seeking Alpha and one will find 20 or more pundits who've staked all on these Tech stocks. Peloton will be $120 market cap this time next year Rodney!
Fixed that for you. laugh