Is the Stockmarket in a bubble?

badger09

Jegersmart wrote: »

"money" and "printing" are words that need to be taken into account before one gets to looking at basic indicators such as P/E ratios. Look at interbank lending in Europe........most banks prefer borrowing almost free money from the ECB.....

In the current context one cannot look at history for many pointers I am afraid.

I guess we will find out what will happen when QE is taken out of the equation.....

Good luck all.

J

So..... "this time it is different" :eek:

deadpeasant

Originally Posted by deadpeasant
Could someone please unpack that for me? What is the discount rate on future income? Thanks

bowlhead99 wrote: »

This comes from the fact that you value a company by what you will get out of it in the future ...

Ultimately companies might achieve lower valuations in a high interest rate environment.

Does that cover it, without being too patronising?

Yes indeed. Many thanks.

sabretoothtigger

badger09 wrote: »

So..... "this time it is different" :eek:

No, debasement of currency is thousands of years old. I would maybe refer to the years post nixon perhaps as a modern reference

But modern stocks and our instant flow of money is different. Its all virtual now, before they would alter metal content now its not apparent what anything is worth

The end results should be the same as history

merlingrey

sabretoothtigger wrote: »

No, debasement of currency is thousands of years old. I would maybe refer to the years post nixon perhaps as a modern reference

But modern stocks and our instant flow of money is different. Its all virtual now, before they would alter metal content now its not apparent what anything is worth

The end results should be the same as history

They say when the Roman empire started they was using 100% silver coins, when it fell the coins was only 5% silver.

A politician can look good lowering taxes (or not raising taxes) and do the sly move of debasing currency to raise money instead it is a silent tax but you know it is there when year after year everything gets more expensive.

Glen_Clark

merlingrey wrote: »

They say when the Roman empire started they was using 100% silver coins, when it fell the coins was only 5% silver.

A politician can look good lowering taxes (or not raising taxes) and do the sly move of debasing currency to raise money instead it is a silent tax but you know it is there when year after year everything gets more expensive.

Not only that. QE shifts wealth from the poor, to the wealthy (asset owning) classes, which is obviously very popular with the current government.

Jegersmart

Glen_Clark wrote: »

Not only that. QE shifts wealth from the poor, to the wealthy (asset owning) classes, which is obviously very popular with the current government.

Yes, and to be clear it causes asset inflation. As I said before, I have started to take profit because I don't want to be staying 100% in on the back of asset inflation through QE. It would be at best very unpredictable to judge when and how the markets react to a potential end of QE. I am not saying it will be this year (end of QE), but I think it highly unlikely that we see another 20% rise of equities from here without backtesting some lows first.

imho ofc.

J

JohnRo

Jegersmart wrote: »

Yes, and to be clear it causes asset inflation. As I said before, I have started to take profit because I don't want to be staying 100% in on the back of asset inflation through QE. It would be at best very unpredictable to judge when and how the markets react to a potential end of QE. I am not saying it will be this year (end of QE), but I think it highly unlikely that we see another 20% rise of equities from here without backtesting some lows first.

I agree, we won't have answers to whether the rise in asset values measured against monopoly money has anything to do with the assets themselves or is purely a result of currency debasement, capital inflows and a layer of hopeless optimism on top.

I'm inclined to think the equity price rises, along with the price rises of everything else are for the most part as permanent and real as the financial repression that's taking place in the developed western world.

The world economy is still basically on it's knees so that's not responsible and the only people having a relatively good time right now are those in a similar financial position to western governments, who've immersed themselves in huge, serviceable, pre-QE debt.

Interesting times.

sabretoothtigger

the poor, to the wealthy (asset owning) classes

That might be true but many people own a house so it could be a few more people 'gain' then otherwise

cepheus

A shock slump in manufacturing today all but extinguished hopes that the UK economy will avoid a triple-dip recession.

The 1.5 per cent plunge in output during a snow-hit January was much worse than expected and analysts said it drove the 'penultimate nail' into the coffin of hopes that the economy could return to growth in the first quarter of 2013.

http://www.thisismoney.co.uk/money/news/article-2292051/Shock-manufacturing-slump-pretty-game-hopes-UK-economy-avoid-triple-dip.html

Yet the FTSE 250 is still up. Once again, it's like having two separate economies,one real for workers, the other a respectable casino for [STRIKE]gamblers[/STRIKE] investors. Perhaps the strength of Sterling reflects the national economy better than indigenous stocks?

doughnutmachine

Jegersmart wrote: »

"money" and "printing" are words that need to be taken into account before one gets to looking at basic indicators such as P/E ratios. Look at interbank lending in Europe........most banks prefer borrowing almost free money from the ECB.....

In the current context one cannot look at history for many pointers I am afraid.

I guess we will find out what will happen when QE is taken out of the equation.....


J

i have a US 20$ coin from 1910, it contains an ounce of gold, so it has a gold value of $1600. money printing has always happened...