Dow All Time High
So are you celebrating with champagne or staying weary because of the impending correction?
What is your opinion on this comment?
I can point out the changes.The bond markets have evaporated. Rates cant get any lower, noone is setting them higher and governments are going to print. Gold isn't the safe have they thought it was and commodities dont pay a return. The big money needs a return (because it isnt their money) and they cant get it in anywhere else apart from stocks. Doesn't mean they will, just means they cant.
Give it a few months, kaboom.
1. Italian Government is total disarray
2. US sequester overwritten by the Fed just issuing another $85bn anyway
3. Cyprus to get bailout but terms are...ahem...secret
4. Baltic Dry Index (indicator of freight levels) at lowest level since 2008
5. Japan hints CTRL-P sooner than planned.
6. Eurozone unemployment at record highs.
Waiting for a correction, but then again I've been waiting for it a while now and have missed out on the boat. At least that's what my bull friends say.
I just don't see the good that people are seeing, and I'm not cynical to think that this bull market is simply the result of an increased money supply and quantitative easing pushing money from debt to equity. Then again, who am I?
Wasn't all of last month a correction, a minor one at that?
I could see the markets contracting (sort of) tommorrow but as far as a 100 basis point correction in both the dow & S&P, not seeing it.
Crazy, and VIX just keeps crawling lower.. Would be happy if anyone could point out some significant changes that actually have improved the economy over the last years (which i must've missed) that would entitle dow to be at an ath.
I can point out the changes.
The bond markets have evaporated. Rates cant get any lower, noone is setting them higher and governments are going to print. Gold isn't the safe have they thought it was and commodities dont pay a return. The big money needs a return (because it isnt their money) and they cant get it in anywhere else apart from stocks. Doesn't mean they will, just means they cant.
Give it a few months, kaboom.
I don't think the markets are going to react to any political uncertainty until an actual event does happen (Greece Default, Italy leaving the Euro).
My concern long term is the inflationary consequences of EVERYONE printing. I feel that inflation is grossly understated. TIPS might be the answer and I'm looking into them more and more.
The worry I would have there is you need to trust the CPI to accurately reflect inflation, of which I'm dubious about.
Economic fundamentals are absolutely terrible around the world at this point, yet markets don't reflect it. Market highs have basically just been fuelled by central banks printing.
I still don't get why the Dow is the consensus measure of the market. IMO the S&P 500 is a better indicator due to broader coverage and being market-cap weighted vs. price weighted for the Dow.
That being said, I'm a believer that this run is entirely artificial. When the inevitable correction comes it will be nasty.
http://uk.finance.yahoo.com/echarts?s=%5EGSPC#symbol=%5Egspc;range=my;c…;
click this link, select max on time period, look at the growth during the golden years of the US, then tell me where you think we should be.
When I do that, i get a really cool picture of a W over the past few years which leads me to believe it's a 'triple peak' and we are going to fall back. Or maybe its the other way around. Not sure.
(that was a joke, but it sucked because i'm tired this morning) The trend is your friend. At this point it doesn't matter where it should be it only matter where it is.
What if i told you that the only thing that will determine if DOW will fall or rise is the amount of buyers and sellers on each side. My bet correction could start after this week or so, but i would never short it, would buy after the dip of 1000 points, so far still buying.
why would you never short?
This market is entirely artificial. Whenever a large amounts of money are forced to reach for yield rather than fundamental value, you have a recipe for disaster. One must resist the siren calls to 'chase the market' when there are few good value investment to be had.
To Unforeseen, the TIPS rate will almost always understate inflation because many of the important prices are left out of inflation estimates- so, it cannot protect you. The Fed doesn't see inflation for two reasons: 1) they have excluded several important prices (food and energy costs) and 2) they only look at the geographical area of the United States. They are kidding themselves if they don't see the amount of 'monetary stimulus' that is leaking out of the U.S., driving up commodity prices and straining standards of living worldwide. The Fed can pretend that it isn't a semi-global Central Bank- but that doesn't mean it isn't.
http://www.bls.gov/cpi/cpiqa.htm
http://www.bls.gov/cpi/cpiqa.htm[/quote]
I know that, but I think you missed the point I am trying to make. Yes, the TIPS rates adjusts according to the CPI, but, as I said, it will almost always understate inflation. One important reason for that is hedonic adjustments. Take a look- http://www.bls.gov/cpi/cpihqaqanda.htm. If an 16 GB iPhone has a 15% better camera and a 10% increase in battery life that last year's model and retails for the same price a 16 GB iPhone did last year, the hedonic adjustments will say the price has declined. That means they will be claiming deflation in iPhone pricing. That is clearly nonsense. Same with food. Hypothetically, if the current consumer basket contained 28-day aged prime ribeye steaks and its price rose by 30% this year, then the BLS can elect to replace it with with ground beef whose price remained unchanged (because they claim that people would change their preferences) and the BLS would claim consumer meat prices have not risen or rose slightly. That is clearly nonsense. It may be the case they people would change their preferences, but that change would be: 1) be a result of rising prices (i.e. inflation that is not being captured); and 2) result in a decrease in the quality of living. If those two facts are not reflected in your CPI adjustments, you may end up with TIPS that generate more money nominally speaking, but will not buying an increased standard of living- quite the opposite, in fact.
My problem with TIPS is that you have to go out to 20 year terms to get any real yields. So my fear is that if inflation really starts to take off you are only getting adjustments every six months from CPI that won't do jack to counteract a jump in interest rates.
I like the idea of TIPS, but the fact that it is tied to the CPI also concerns me. I still have money in equities, but I've been doing much more selling than buying so far this year until I get a better view on where things are heading.
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