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Best guess on when the economy will tank.


mead107
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Warren Buffett's favorite indicator hints that stocks are significantly overvalued

 

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“The stock market is significantly overvalued according to the Buffett Indicator,” said researchers at GuruFocus. “Based on the historical ratio of total market cap over GDP (currently at 194.6%), it is likely to return -3% a year from this level of valuation, including dividends.”

 

The Buffett Indicator rose to fame after a 2001 Fortune Magazine article written by Buffett and long-time Fortune writer/Buffett insider Carol Loomis.

 

“The ratio has certain limitations in telling you what you need to know. Still, it is probably the best single measure of where valuations stand at any given moment,” explained Buffett in the article.

 

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1 hour ago, mead107 said:

I figure stock market next October will be down 37%
unemployment 13%. 

what do you think?
 


I think that you are probably close to what will happen, maybe even a tad optimistic. 

<insert political rant about the stupidity of the current administration and how clueless they are about job creation and economic recovery>
 

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Not so sure it's only going to be a "tank" this time around.

Look at the headwinds

  • @17 million people currently out of work
  • 10 to 20 million illegals about to be added to the workforce
  • Biden allowing thousands a day across the border
  • He has promised to at least double the # of H-1B1 visas, giving away more jobs to foreign workers
  • closing the pipeline, drilling, and fracking down cost 10 thousand jobs now, but could impact 100s of thousands if not millions more
  • Biden will ease off on the Trump/China tariffs, sending even more jobs back overseas
  • He is going to increase corporate tax rates again, forcing trillions to be held overseas again
  • no end in sight for government mandated lockdowns
  • All this is going to create another real bad housing bubble burst

 

And you know there is a lot more, but we have literally gone in just a year from full employment, and real wages finally going up for the first time in decades, to a full on business market, where once again they set the rate they ill pay and you can take it or leave it. If they also increase the minimum wage we lose even more jobs and with so many out of work already, we may very well see a depression this time around. 

 

Small business is the largest employer in the country but the lockdown, increase in the minimum, and increase in taxes will hurt even more of them. Big business is going to have more success overseas once again than here, and no one in Washington with the balls to stand up for either big, or small business.

 

California has already mandated EV cars by 2034, and how many states will follow? Will Biden follow? If so, only Tesla arguably is in position to provide them, but China is already pushing their NIO brand here, and from what I understand has a few thousand already sitting in a lot in Texas waiting on Chairman Xo Xiden to clear them though the Transportation board. Suffice to say, this may signal the end of the once Big 3 of Detroit.

 

I'm usually an optimist by nature, but there is nothing to be optimistic about at least for the next 2 years. But this smells much worse right now that the "Great Recession"

As a side note, of course in will all be Trumps fault.... 

Edited by Cinga
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IMO the market will tank in the 20-30& range by end of the year.  The bottom could be 40%.

 

My amateur analysis is that the market is over valued and more new investors are chasing returns.  When the market does a normal correction, they will lose $ on paper, panic and start to sell off.  This will lead to more sales and the tank begins.

 

Combined with the actions that the Biden Admin (not sure he is but he is doing what he is told) is taking will increase the job killing policies and regulations.  This will impact profits which the crowd who thinks the market is not over valued need in order to keep their momentum going forward.

 

In all past recessions/corrections I never took a penny out, just kept investing.  This is the first time I have taken a modified defensive position expecting a tank.  I don't know when but expect it by end of the year.

 

With the Fed already having cheap $ policies, their toolbox will be thin in how to fight a crash.  I do not see Americans tolerating negative interest rates as in Europe.

 

I will leave with the Buffet quote:  "be fearful when others are greedy, and greedy when others are fearful.”  It feels like the vast majority are being greedy.

 

 

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16 hours ago, Just Joshin said:

IMO the market will tank in the 20-30& range by end of the year.  The bottom could be 40%.

 

My amateur analysis is that the market is over valued and more new investors are chasing returns.  When the market does a normal correction, they will lose $ on paper, panic and start to sell off.  This will lead to more sales and the tank begins.

 

Combined with the actions that the Biden Admin (not sure he is but he is doing what he is told) is taking will increase the job killing policies and regulations.  This will impact profits which the crowd who thinks the market is not over valued need in order to keep their momentum going forward.

 

In all past recessions/corrections I never took a penny out, just kept investing.  This is the first time I have taken a modified defensive position expecting a tank.  I don't know when but expect it by end of the year.

 

With the Fed already having cheap $ policies, their toolbox will be thin in how to fight a crash.  I do not see Americans tolerating negative interest rates as in Europe.

 

I will leave with the Buffet quote:  "be fearful when others are greedy, and greedy when others are fearful.”  It feels like the vast majority are being greedy.

 

 

Dont agree with the bolded, at least when it comes to the market performance. So much of the market is dominated now by either passive funds..ie ETFs, or through 401k funds...and individuals that have those investments tend to hold, hold, hold...between ETF and other passive vehicles(50% of market now) and 401ks...lot of money that needs to be constantly put to work

 

I do believe the focus of the meme stocks has give the impression that ALL gains in the market have been driven by the reddit trade...and i just don't  see it outside a few stocks. 

 

Now, are valuation frothy? No doubt . However, been proven last 20 years  paying huge valuation prmiums for great companies is worth it. But that is a discussion for another threead

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  • 2 weeks later...

  My casual impressions as follows.  Too much money chasing too few shares on the indices for quite a while now.  Just because a company might have a million shares that does not mean all one million shares are available for purchase on any given day.  Typically, only a small fraction are available in any one trading session so any good news tends to over stimulate price movement.  

 

  Abandoning traditional guidelines in lending for homes has created stimulation in the real estate market.  It was like shooting heroin for retiring home owners, builders, suppliers, and real estate associations.  We are at the point where there are no more potent "drugs" to try in terms of stimulation.  We have lowered down payments, interest, and monthly payments  to the point where they realistically cannot be lowered further.  In most cases homes can only go down from where they are at present.  

 

  While purchasing a vehicle does not create a store house of value in the vast majority of situations it can have the effect of losing value of money invested.  People take out minimal downpayment terms with extended contracts then proceed to run these vehicles into the ground.  Then they take the unpaid balance and throw it on to the back of the next purchase.   Again, I will acknowledge purchasing vehicles for the most part is not an investment strategy but the reckless use of money here prevents it from being used for wiser purposes which can be of the utmost importance in difficult times.

Edited by RochesterRob
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1 hour ago, Foxx said:

US Bond rates are exploding this morning. Along with a dollar spike, stocks are spooked.

 

Congress is tanking the economy with the "stimulus" bill. Interest rates going up too much too fast = 💣

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