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Why do the talking heads keep mentioning the 150% run up in the last 4 years
Posted on 8/9/13 at 12:11 pm
Posted on 8/9/13 at 12:11 pm
Just watching CNBC and they keep saying they're not buying in bc the market is up 150% in 4 years, I could turn around and say we're not even up 10% in the last 5 years. It is just silly to keep mentioning the last 4 years in such a context without mentioning 6 months before that.
There is no catalyst to drive stocks down other than fed tapering today. We don't have a housing bust looming ARMs going out to people who can't afford the homes aren't as popular today bc most bought now with low rated fixed mortgages or cash. I get that tons are unemployed and wages are down and all sorts of bad things are going on with the economy, but companies are so global today that the United States isn't exactly their only source of income. Companies are also sitting on tons of cash, have healthy balance sheets, and are making more money in a leaner fashion with less employees.
I feel companies are in great shape and tons of stocks are fairly valued based on their earnings.Does anyone else feel companies are fairly priced, yes there are tons of overpriced companies out there, but I could show you Exxon,Chevron as 2 giants who are more than fairly valued based on earnings.
It just annoys me watching these guys, this one guy said Amazon was overpriced at $255 3 months ago just said he'd buy on dips to $290! Ah these guys are just annoying.
There is no catalyst to drive stocks down other than fed tapering today. We don't have a housing bust looming ARMs going out to people who can't afford the homes aren't as popular today bc most bought now with low rated fixed mortgages or cash. I get that tons are unemployed and wages are down and all sorts of bad things are going on with the economy, but companies are so global today that the United States isn't exactly their only source of income. Companies are also sitting on tons of cash, have healthy balance sheets, and are making more money in a leaner fashion with less employees.
I feel companies are in great shape and tons of stocks are fairly valued based on their earnings.Does anyone else feel companies are fairly priced, yes there are tons of overpriced companies out there, but I could show you Exxon,Chevron as 2 giants who are more than fairly valued based on earnings.
It just annoys me watching these guys, this one guy said Amazon was overpriced at $255 3 months ago just said he'd buy on dips to $290! Ah these guys are just annoying.
This post was edited on 8/9/13 at 12:15 pm
4
Posted on 8/9/13 at 12:28 pm to ThaBigFella
quote:
There is no catalyst to drive stocks down other than fed tapering today.
Well, the market is noticeably overbought and we're close to the end of Wave 5.
quote:
We don't have a housing bust looming ARMs going out to people who can't afford the homes aren't as popular today bc most bought now with low rated fixed mortgages or cash.
True and home ownership is at a historic low - nowhere to go but up - except the money isn't flowing. That is actually one area where rising interest rates (just a little, though) could provide a spark.
quote:
I get that tons are unemployed and wages are down and all sorts of bad things are going on with the economy, but companies are so global today that the United States isn't exactly their only source of income.
Yeah, but as we go, so goes the world. It may not be that way forever, but it is now.
quote:
Companies are also sitting on tons of cash, have healthy balance sheets, and are making more money in a leaner fashion with less employees.
Because of the uncertainties of Obamacare, primarily. Once the reality sets in (i.e. it will be much worse, from a cost standpoint that originally projected), this situation will actually worsen and could be the trigger that the housing bust was.
quote:
I feel companies are in great shape and tons of stocks are fairly valued based on their earnings.Does anyone else feel companies are fairly priced, yes there are tons of overpriced companies out there, but I could show you Exxon,Chevron as 2 giants who are more than fairly valued based on earnings.
I see values all over the market - like the thread about F, for example. I believe Ford is undervalued, as is V and PM (both in my portfolio - at least partially based on your analysis.)
But there is little question the S&P is overbought and not necessarily "overvalued" but more, emotionally "due for a correction". That is exploitable if you're patient and decisive.
Posted on 8/9/13 at 12:43 pm to Ace Midnight
Im with you Ace, tons of companies are overvalued bc people are seeking some type of yield, PM is one of those companies, historically it's been a 5% dividend, its 3.9% today bc people are dividend hunting, in my opinion 3.9% is still a phenomenal dividend, but the share price based on historical valuation would be $80 or so.
I just hate when people mention the 150% run up in 4 years without mentioning a total return under 10% in the last 5 years.
I just hate when people mention the 150% run up in 4 years without mentioning a total return under 10% in the last 5 years.
Posted on 8/9/13 at 12:46 pm to ThaBigFella
quote:
but the share price based on historical valuation would be $80 or so.
Meh - 200 day moving average is above $90 and I got it below $88 - I'm happy, and already have a 1/2 share "dividend" to show for it.
Posted on 8/9/13 at 12:48 pm to ThaBigFella
quote:
We don't have a housing bust looming
You sure about that?
Posted on 8/9/13 at 12:50 pm to Doc Fenton
Im sure, bc most houses are getting snapped up by investors anyways, we're gonna have tons of homes owned and rented. Home ownership may be down, but the weak dollar is sending more foreigners than ever here. I live in probably the nicest building in dallas and rent, my landlord is in brazil and has 4 units here. Another friend here rents from a guy in argentina who has 6 in the building. Foreigners are buying up whatever comes up for sale
the problem before with the ARMs was people weren't able to refinance when time came now most are locked in on 30 years fixed rates at cheap terms so we're not gonna have a flood hit the market like before when all the ARMs showed up at the same time
the problem before with the ARMs was people weren't able to refinance when time came now most are locked in on 30 years fixed rates at cheap terms so we're not gonna have a flood hit the market like before when all the ARMs showed up at the same time
This post was edited on 8/9/13 at 12:52 pm
Posted on 8/9/13 at 12:51 pm to Doc Fenton
quote:
You sure about that?
There just isn't the exposure for foreclosures and ownership is at an all time low - I don't know what could "bust" - it's already broken. If anything, with a very modest increase in interest rates, things could improve somewhat.
Posted on 8/9/13 at 12:55 pm to ThaBigFella
quote:
Im sure, bc most houses are getting snapped up by investors anyways, we're gonna have tons of homes owned and rented. Home ownership may be down, but the weak dollar is sending more foreigners than ever here. I live in probably the nicest building in dallas and rent, my landlord is in brazil and has 4 units here. Another friend here rents from a guy in argentina who has 6 in the building. Foreigners are buying up whatever comes up for sale
I don't understand how all that is supposed to support the idea that the current home market won't go bust. It almost seems like you're trying to argue reasons FOR an imminent bust.
Posted on 8/9/13 at 12:59 pm to Doc Fenton
doc how is it gonna go bust when all those homes are being paid for in cash by foreign investors. All those homes in nevada and arizona are being bought by hedge funds. So why would there be a bust? They could just hold on to the properties and rent them out. The last bust was fueled by people who couldn't afford homes buying them with ARMs that they weren't planning on refinancing, but when they had to refinance they couldn't so a flood of homes hit the market at the same time all over america.
Right now people either locked in low rates for 30 years or homes are being bought with cash by people here or from other countries, either way, we don't have a ton of "risky" loans floating around like before.
foreigners own miami where I have one business, and here in dallas the high end of the market is being snatched up by mexicans from the south and here in the condos, rich people from latin america are keeping this afloat, if those guys left, yes we'd have an issue but with the cheap dollar foreigners are buying like crazy. You know damn well when people pay cash they dont have to sell for a loss. They clearly have enough they can sit on it
Right now people either locked in low rates for 30 years or homes are being bought with cash by people here or from other countries, either way, we don't have a ton of "risky" loans floating around like before.
foreigners own miami where I have one business, and here in dallas the high end of the market is being snatched up by mexicans from the south and here in the condos, rich people from latin america are keeping this afloat, if those guys left, yes we'd have an issue but with the cheap dollar foreigners are buying like crazy. You know damn well when people pay cash they dont have to sell for a loss. They clearly have enough they can sit on it
This post was edited on 8/9/13 at 1:01 pm
Posted on 8/9/13 at 1:01 pm to Ace Midnight
quote:
There just isn't the exposure for foreclosures
Yeah, I get that part. The buyers are much different now than they were before, so we're talking about two totally different situations.
But just look at the indices. There's no reason for home prices to be as high as they are now, except for the fact that equities & bonds & commodities all suck as investments, and people have nowhere to go with all the cheap dollars currently sloshing around.
quote:
ownership is at an all time low
Huh?
quote:
If anything, with a very modest increase in interest rates, things could improve somewhat.
We'll see. I feel the same way about real estate now as I did back in 2005--thinking that it would stagnate and travel sideways for a very long time. Of course, I was very wrong in 2005 about how serious the problem was.
I still don't think there's a bubble or anything, but I do see the air getting taken out of residential real estate in the U.S. for quite a while starting sometime in the next year or so.
Posted on 8/9/13 at 1:03 pm to ThaBigFella
quote:
doc how is it gonna go bust when all those homes are being paid for in cash by foreign investors. All those homes in nevada and arizona are being bought by hedge funds. So why would there be a bust?
You don't have to have buyers defaulting in order to have a bust.
At the end of the day, hot money flowing in is hot money flowing in any way you slice it.
Posted on 8/9/13 at 1:03 pm to Doc Fenton
quote:
Huh?
I should have said - owner/occupancy is at an all time low - renting is higher than it has been, at least since WWII.
Posted on 8/9/13 at 1:05 pm to Doc Fenton
you're right but hot money in real estate isn't like stocks, it can't be liquidated overnight. The cash flowing into real estate especially at the high end is very real, these foreigners are very wealthy and when they pour cash in, they can hold on as long as they have to.
There is no "have to" sell in the even the market goes down. I know I wouldn't sell a paid off home for a loss just bc the market price was low, Id hold on.
There is no "have to" sell in the even the market goes down. I know I wouldn't sell a paid off home for a loss just bc the market price was low, Id hold on.
Posted on 8/9/13 at 1:05 pm to Doc Fenton
quote:
I don't understand how all that is supposed to support the idea that the current home market won't go bust. It almost seems like you're trying to argue reasons FOR an imminent bust.
what's "bust?" do you see it falling, or are you simply playing devil's advocate?
if we're seeing another housing bubble, it's gotta be pretty young IMO (and if that, it probably won't get out of control like the last one.) i just don't see a mechanism available to allow demand to nosedive in the same fashion as before- from where we are now.
i'm much more sure that it won't crash in south louisiana too
Posted on 8/9/13 at 1:06 pm to Doc Fenton
quote:
At the end of the day, hot money flowing in is hot money flowing in any way you slice it.
I see what you're saying - and I get that - the money flow could stop if something more attractive draws that money off.
But, I think things go more sideways in that situation - those people are going to "dump" their holdings at a loss, but hold them until the market recovers. I see much more stability now than at the 2007-2008 bubble which was related to the overload of toxic debt, coupled with a generalized downturn of the economy which pushed a bunch of people into foreclosure that might have been able to pay the thing - but for the economic downturn.
And many of those people are still renting.
(But I get what you're saying about the possible shutoff of new investment money.)
Posted on 8/9/13 at 1:11 pm to ThaBigFella
Well if a bunch of crazy foreigners are driving the market due to abnormal conditions having to do with cheap dollars, I just don't see that as a good sign for future prices.
Sure they can sit on those assets if they want, but (A) they don't have to, and (B) even if they just sit and hold, prices can tumble.
As for Ace's point, I will admit that there is a ton of slack in domestic demand because there are tons of young adults who are too poor to become homeowners right now. The question then becomes--is that ever going to change, or will it just keep getting worse?
I foresee employment rates continuing to drop further until they are all the way at pre-1980s levels, and sometime in the next couple of years. I know it seems like things can't possibly get any worse... but they can.
Sure they can sit on those assets if they want, but (A) they don't have to, and (B) even if they just sit and hold, prices can tumble.
As for Ace's point, I will admit that there is a ton of slack in domestic demand because there are tons of young adults who are too poor to become homeowners right now. The question then becomes--is that ever going to change, or will it just keep getting worse?
I foresee employment rates continuing to drop further until they are all the way at pre-1980s levels, and sometime in the next couple of years. I know it seems like things can't possibly get any worse... but they can.
Posted on 8/9/13 at 1:14 pm to Ace Midnight
quote:
But, I think things go more sideways in that situation
That's all I mean when I say "bust." Just having the air start hissing a little bit with moderate price drops whenever interest rates finally start to go up. And of course if interest rates don't start to go up, then we have even more serious problems.
Posted on 8/9/13 at 1:17 pm to Doc Fenton
quote:
That's all I mean when I say "bust." Just having the air start hissing a little bit with moderate price drops whenever interest rates finally start to go up. And of course if interest rates don't start to go up, then we have even more serious problems.
I agree that somebody has painted us into a corner - particularly on interest rates *cough* Greenspan *cough*, and the QE forever has only prolonged the day of reckoning...
...but that day is coming.
Posted on 8/9/13 at 1:18 pm to 90proofprofessional
quote:
what's "bust?" do you see it falling, or are you simply playing devil's advocate?
I admit that I'm mostly just playing devil's advocate here.
I'm not trying to identify real estate as a specific problem area. I'm just taking note that prices will likely rise to 2008 levels either this summer or next year, and that is definitely a little strange considering how bad the economy has been, and how everyone in 2009 & 2010 kept saying things like "we'll never see prices like we had again for another 50 years."
So it may not be a bubble, but whatever it is, it doesn't look very healthy either.
Posted on 8/9/13 at 1:20 pm to Ace Midnight
Well at least he can say that the discount rate was at 5.5% when he left in 2006. 
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