Trump on the market bubble
- Thread starter Pekelo
- Start date
Different yes, more rational - if that is possible when talking about the markets.
He did, did he.
Higher fed fueled bubble markets will do that ya know.
+ + +
Actually he might of taken in higher tax receipts - and quickly sent them offshore.
Hard to say on market levels because Trump's trade wars were a huge negative for the corporate world as well. The rate cuts were an attempt to counterbalance risks associated with the trade wars for the economy. The US economy continues to grow at a fairly modest rate nowhere near what Trump promised.
Yesterday...
"Trump made sure to criticize his Federal Reserve Chairman Jerome Powell for declining to lower interest rates further. Asked about the exploding trillion-dollar deficits his administration has created, the president claimed that lower interest rates will allow him to reduce the red ink in his second term."
"Trump made sure to criticize his Federal Reserve Chairman Jerome Powell for declining to lower interest rates further. Asked about the exploding trillion-dollar deficits his administration has created, the president claimed that lower interest rates will allow him to reduce the red ink in his second term."
Of course stimulus in boom times leads to greater government revenue, but let's not lose our heads. The net is still very negative. You may be experiencing the same euphoria one experiences when purchasing on "lay-a way." Deficits in boom times are fine so long as they are matched by increased investment. In the present case, the deficits are producing short term stimulus with insufficient long-term investment to counter the imbalance produced by leaving additional wealth in the economy at a rate greater than GDP Growth. This will lead to a correspondingly unpleasant corrective phase. But it is impossible to know when, at least not much in advance.
Let us not lose sight of at least four reasons for a broad measure of equities increasing at a rate greater than GDP growth: 1) stocks are observed to be going up in price on top of ubiquitous advice to buy. 2)increased aggregate, nominal earnings (inflation does not matter here, it is perception that counts); 3) increases due to stock buy-backs, sometimes using borrowed money which may produce only temporary increases in constant dollars depending on future inflation and other uncertain factors; 4) actual inflation due to money supply (credit) increasing faster than productivity. The last of these effects can be delayed by fed-treasury action, but not indefinitely.
To estimate where a broad index will return to in a calamitous collapse, i.e., one that succeeds in wresting most of the excesses out of the market, one can project the S&P forward from the most recent calamitous collapse, i.e., march 2009, at a rate approximating economic growth (~3% compounded). To the extent that future major corrections do not fully wring out excesses, and they hardly ever do, there is an inflation residual remaining in the broad equities market. Consumer price inflation is of course something that never gets wrung out other than in a deflation.
None of this is helpful to the day, or short term, trader, except perhaps in one way. The trader who understands that markets are driven by perception and nominal, rather than constant dollar, value, and that it is emotion rather than logic that leads us to buy stocks making a new peak, will not hesitate to buy an irrational market. They know such a market will very likely be even more irrational tomorrow. The best traders, however, understand that they are engaged in what is metaphorically a game of musical chairs, and they take pains to avoid being left without a chair when the music tops. To the person who trades longer term on macroeconomic developments and trends, these features I have outlined form a framework for their investing. They know, given a long enough horizon, markets will with certainty return to sanity, at least briefly. They are always guessing when.
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Using March 2009 levels in any analysis is ridiculous; valuations were insanely cheap we may never see such valuations again in our lifetime.
Well of course when the fed is handing over trillions how would you ever see such cheap valuations again. It's nearly impossible. I mean look at the secondary market for pre ipo companies worth billions of dollars. Money is literally pouring out to every nook and cranny around the globe. Would be nice if the fed can turn off the trillions in handouts and let the true value of an economy and market place find it's real valuation, but that's never going to happen since the addiction to free money and dependability on the fed is too strong now to keep an entire global world economy propped up consistently. Too late to stop now.
He has more 3 000 post and still can't understand that current valuation is the result of insane money printing
and actually march 2009 valuation were quite decent compared to early 80s
In those 3000 posts are some of the best long term forecasts on this site. I see no point in your opinions on "insane money printing". I've been very good at calling out bs on this site that sorts itself out after years go by. Mark this down. We aren't going to revisit 2009 valuations on US indexes in the next 20 years. That was a once in a lifetime opportunity to get in very cheap due to a massive financial crisis created by criminal banking fraud.
Some of you seem to think you can just point meaningless shit and somehow it has a role in investing or trading.