25 pointsby whack6 hours ago16 comments
  • sambaumann5 hours ago
    For reference when this was written in 2018, a P/E of the S&P of 24 was considered inflated. It stands at 29.34 as of now.
    • david-gpu4 hours ago
      It goes to show that time in the market beats timing the market. You may get lucky predicting a downturn, but it's just gambling at that point. Just look at the past century of returns across the world.
  • ArtTimeInvestor5 hours ago

         "...the slowing GDP growth rate in America..."
    
    What are they talking about?

    https://fred.stlouisfed.org/series/GDP

    • fogcity5 hours ago
      Click the "Edit Graph" button, and change the unit to "Change from Year Ago, Billions of Dollars" to see the evidence.
      • ArtTimeInvestor4 hours ago
        I don't see anything that looks like a "slowing" in mid 2018.

        Q1, Q2 and Q3 2018 are all higher than anything that came before.

        • renewiltord4 hours ago
          He said “slowing growth rate” not “shrinking economy”. Take 1900 to 2025 (or 2019 if you want to dodge covid) and EMA the (g’-g)/g and it will be visually apparent.

          Quite hard to see higher derivatives or rates in the g vs. t graph. You need to plot at least dg/dt vs t to see. But definitely need dg/g vs t to see.

          Haven’t looked at the true data (though it would be unsurprising) but your graph on its own hard to spot plus explanation makes no sense.

          100,200,300,400,500

          100%,50%,33%,25%

          Increasing g, decreasing dg/g

        • 4 hours ago
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    • OKRainbowKid5 hours ago
      I don't see the contradiction?
      • ArtTimeInvestor4 hours ago
        I don't see anything that looks like a "slowing" in mid 2018.

        Growth in Q1, Q2 and Q3 2018 was higher than anything that came before.

        • addaon4 hours ago
          Slowing refers to a change in the derivative, in this context. Slowing growth would be a decrease in change in GDP per year — a decrease in growth. But the claim is that the growth (first derivative) is what’s slowing — that is, the second derivative of GDP w.r.t. time went negative, which does seem to be the case in mid 2018 from the linked chart.
  • biophysboy5 hours ago
    >The PE ratio reflects earnings today, but the most important metric is projected future earnings.

    I think the key words are "projected future". Sometimes that estimation is easy; sometimes it is much harder. New tech introduces uncertainty. Speculative entrepreneurs tell stories that multiply the uncertainty.

  • Temporary_313375 hours ago
    One thing I learned about logic is that if you start with a false statement, whatever comes next doesn't matter "almost all valuations and returns are driven by corporate earnings" no they are not, at least not anymore.
    • crazygringo4 hours ago
      Then you're going to have a hard time learning any subject.

      Because it's pretty common for educational materials to start with the first-order approximation, then go into the places where you need second-order corrections to it.

      If you think the first-order approximation is false because there are exceptions, and you aren't even willing to read a few paragraphs down to find out about the exceptions and nuances, then hey, it's your loss.

  • christophilus5 hours ago
    Passive flows. Mike Green has covered this well for a long time. Here’s a recentish interview:

    https://m.youtube.com/watch?v=WSpR770JvXg&pp=ygUYbWlrZSBncmV...

  • burnt-resistor2 hours ago
    Inflation, financialization, price-profit spirals, and tulip bulbs.
  • techterrier6 hours ago
    vibes
    • dehrmann5 hours ago
      > In the short run, the market is a voting machine but in the long run, it is a weighing machine

      And we vote on vibes.

  • RickJWagner5 hours ago
    If you read that article, you are a prime candidate to benefit from Bogleheads.org

    Check it out. You’ll learn the easy, certain, slow way to accumulate wealth. Your future self will be very happy.

    • lich_king5 hours ago
      > certain

      And by "certain", you mean "not certain". The core tenet are index funds, and while for the average person, they're probably better than stock-picking, you're absolutely exposing yourself to market risk.

      • grunder_advice5 hours ago
        Yeah, in particular now that index funds are well known and very common one wonders what risk one is exposed to when one is dumping everything into broad market index funds.
      • jrowen5 hours ago
        We should also mention that it's "not certain" that you will return safely if you leave your house.
  • rwmj6 hours ago
    It's a shame Google doesn't let us use a log scale on that graph.
  • salkahfi6 hours ago
    (2018)
    • deadbabe5 hours ago
      The fact that this was from 2018 and people were saying the same thing about the stock market as what people are saying today, gives me conviction that it’s best to just not worry about it and just buy stocks and start making money.
      • david-gpu4 hours ago
        Indeed. Timing a bear market is a waste of effort. Just look at historical returns: more often than not the stock market will be at all-time highs. This has been going on for over a century.

        Dollar cost averaging (investing the same percentage of every paycheck) is the winning strategy over the medium and long run.

  • wilkommen5 hours ago
    Idk how people write posts like this anymore. Clearly the stock market isn't rational, and prices of stocks are not tied to financial fundamentals. Stocks are essentially a deflationary alternative currency that only people with disposable income can afford. The rich (and to a smaller extent, the middle class) take the currency which devalues every year (USD) and use it to buy the currency which increases in value every year (stocks and other digital assets), and this is part of the funnel that increases the wealth of the rich at the expense of the poor and middle class. People who think valuations of stocks are tied to fundamentals are smoking medical-grade copium. I too wish that the backbone of our financial system was a not a corrupt, rigged game that benefits a small and decreasing number of people every year, but it is.
    • WalterBright5 hours ago
      > Clearly the stock market isn't rational, and prices of stocks are not tied to financial fundamentals.

      Stock prices are tied to anticipated future earnings, not past or present financials.

      > only people with disposable income can afford

      Anyone can invest in stocks with $100 or less. As for disposable income, anyone that can buy beer, drugs, or lottery tickets has disposable income that can be invested in stocks.

      > part of the funnel that increases the wealth of the rich at the expense of the poor and middle class

      Corporations make money by creating wealth, not "funneling" it from other people.

      • bpt34 hours ago
        The numerous downvotes on this post containing basic statements of accepted fact is one of the more concerning things I've seen online in some time.
        • crazygringo4 hours ago
          Agreed. The level of financial illiteracy in many of the comments on the post is particularly concerning.

          Especially in response to a post that is solely trying to teach some basic economic principles.

          • WalterBright3 hours ago
            In the 1980s, my dad was the head of the finance department at a small college. He taught finance classes, and he taught how free markets worked. Student after student would come to him, and say this amazed them. They said they had never heard of a case for free markets.

            I attribute this to the complete lack of any school teachers or professors having any business experience whatsoever.

            None of my K-12 grade school classes said anything about free markets. None offered any accounting instruction, or finance instruction, or anything about managing money.

            It's a sad state of affairs.

          • bpt33 hours ago
            This site has turned into a worse version of reddit, which is what I would come here to get away from (I stopped commenting there long ago, and barely visit at all at this point).

            It's really unfortunate that what was a place to talk about tech and startups (and therefore capitalism and investing) with people living that experience is now yet another another online progressive cesspool.

        • wilkommen4 hours ago
          I find it reassuring. More people are waking up from our collective trickle-down, "free market hypothesis" fever dream and are starting to understand that there's nothing natural or rational about the stock market - it's just an elaborate wealth allocation machine that showers wealth on those who already have wealth (and showers more wealth on you, the more you already have). The stock market is about as natural or rational as the most Communist land redistribution program, except it runs in the other direction. Money is political, and politics is about power! Too many people are still brainswashed by elite propaganda to think a machine designed to increase the power of the rich is somehow a mechanism as natural as the sun and wind.
          • bpt33 hours ago
            This is exactly what I'm talking about. Nothing you said has anything to do with the post in question; it's just an angry, uninformed, emotional screed.
    • tastyfreeze5 hours ago
      The way to fix that is to stop debasing the currency.

      I stopped buying stocks a few years ago. The moment there is a contraction of credit or circulating currency we will see a 1929 style crash. Not worth the risk anymore.

      • wilkommen4 hours ago
        I think in the short to medium term, they will continue expanding the availability of credit and expanding the money supply when crashes happen in order to keep asset prices high. At some point there will be a breaking point, but I think 2009-style "Quantitative Easing" and 2020-style fiscal spending can and will happen again. So I'm still in, but this game won't last forever.
      • yks5 hours ago
        What does "contraction of circulating currency" look like in the post-cash world?
        • tastyfreeze5 hours ago
          A drastic rise in interest rate or actual destruction of bills.
          • david-gpu4 hours ago
            What incentive do any of the few actors with the ability to effect that change have to actually pull that lever? I imagine that you have spent a lot of time thinking about this, and I would like to understand your position.
            • tastyfreezean hour ago
              That is the problem. Reigning in debasement is what needs to happen or the dollar is dead. But, reigning in debasement means spending less. Spending less means people can't be reelected for "bringing federal money home". So, there is no incentive for Congress to cut anything. But, the piece that makes me pretty sure that debasement is the goal, is that by debasing the currency it makes it possible to pay off dollar denominated debt. I can't be the only one that sees it. Nations have been divesting of US Bonds for years now.

              I'll say it another way. The government can pay off its debt by making your money worthless.

              I changed my investment habits as soon as I recognized it. I am already happy I did.

            • bpt33 hours ago
              That's the core question. I would like to see the parent poster's answer as well, because I don't see it happening as long as the US can price debt in its own currency, and the only way that stops happening is after a catastrophe that isn't worth planning for because there's no way to survive financially.
  • ProllyInfamous5 hours ago
    >"Time IN the markets typically beats timING the markets."
  • 6 hours ago
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  • rvz6 hours ago
    printing your currency to zero.
    • munk-a6 hours ago
      That's a way to bolster it, certainly. None of the listed companies are on the hook for US debt and they'll just relocate if the US becomes a liability. Their value isn't (greatly) at danger of collapse if the debt becomes overwhelming.

      There are also healthy ways to encourage economic growth, but those are too boring for the current moment.

      • randerson5 hours ago
        The US is the largest market for most US companies, so if consumer buying power is erased (e.g. through a treasury default or inflating our way out of the debt) those companies will drop substantially in value.
        • munk-a5 hours ago
          Potentially that will be the case in actual terms. Likely that will be the case in terms of their growth rate. But (for most) that certainly won't be the case in relative terms - the large US corporations would ride through such a decline taking an even bigger slice of the global pie.
  • reedf15 hours ago
    This just isn't right.