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We are somewhere between "Fair" and "Overvalued", not a bubble

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#1 NAV



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Posted 12 January 2018 - 11:26 PM



I posted this in October 2017. There was a lot of resistance to the SPX 3000+ idea back then. It's mainstream now and being universally accepted.




From that post (P/E calculation discounting the effect of tax cuts)



At 16.9 P/E - S&P 2570 (Fair)

At 20 P/E - S&P  3034 (Overvalued)

At 25 P/E - S&P 3792 (Bubble territory)


So fundamentally we are somewhere between Fair and Overvalued. We should get to overvalued sometime in the next 1-2 months if we continue along this parabolic path of advance. 


As for technicals, there is nothing to analyze really. It's newton's second law "Every body continues in it's state of rest or uniform motion until unless compelled by an external force". Until there is a change in market characteristic (volatility or price decay or technical damage), the uptrend will continue, no matter how much thought or analysis goes into it. Long is the only way to go. There are no shorters left. Those serial shorters on message boards are likely paper traders. Nobody survives continually shorting a parabolic markets in real-life trading.


I remain bullish on Gold/Silver long term.


Bitcoin has topped and the speculation in ICOs (who lack both technology and business models) should end pretty soon.


I am busy with some projects for the next couple of months. Will drop in whenever i get some free time or i see any change in market character. Until then, enjoy the ride.


"It's not the knowing that is difficult, but the doing"





#2 pdx5



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Posted 13 January 2018 - 03:13 PM


"Money cannot consistently be made trading every day or every week during the year." ~ Jesse Livermore Trading Rule

#3 pedro



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Posted 13 January 2018 - 08:33 PM

For P/E to be useful, there has to be price discovery driving the P.   There isn't.

Prices have been driven by buybacks.

Buybacks have been driven by low (administered) rates (debt financing).       (Just compare to cost of living "inflation" for evidence)

And low rates have been orchestrated by central bank bond purchases.    $20 Trillion to date.


Initial word on the tax reform is that it will continue to propel buybacks, and not do all that much for fixed capital investment.

I'm not saying its Wiley Coyote time, but I am saying standard benchmarks have been distorted to the point of being mostly useless.

Eventually, the tide WILL go out, and then we'll see what the emperor has on.

#4 Data



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Posted 14 January 2018 - 10:38 AM

There is a new preferential tax rate for corporate stock purchases.   The system can be gamed to get a lower tax rate for profitable years and a higher tax rate when losses are expected to be reported.

Edited by Data, 14 January 2018 - 10:39 AM.