Economy crash =/= stock market crash?

Type_45

masonic said:

Type_45 said:

This graph by Gold Switzerland is... interesting...

I don't know who GoldSwitzerland is, but if you wanted to give them some feedback, you could tell them to plot that graph with a log scale on the y-axis and inflation adjust the price. You then end up with something like this:

The May 2000 "peak" is no longer a peak (it's at $469 in today's money), and the 2003 "bottom" is higher in real terms than the supposed "peak". However, the point that gold is relatively expensive at this time is evident from the fact that it is close to $1800 in today's money, whereas the 100 year geometric mean (just by eye) is somewhere around $500 in today's money.

Their graph is about the Dow, not gold?

masonic

Type_45 said:

masonic said:

Type_45 said:

This graph by Gold Switzerland is... interesting...

I don't know who GoldSwitzerland is, but if you wanted to give them some feedback, you could tell them to plot that graph with a log scale on the y-axis and inflation adjust the price. You then end up with something like this:

The May 2000 "peak" is no longer a peak (it's at $469 in today's money), and the 2003 "bottom" is higher in real terms than the supposed "peak". However, the point that gold is relatively expensive at this time is evident from the fact that it is close to $1800 in today's money, whereas the 100 year geometric mean (just by eye) is somewhere around $500 in today's money.

Their graph is about the Dow, not gold?

Sorry, missed that! Why is someone called "GoldSwitzerland" not talking about gold?!!

Perhaps he should stick to gold as he has applied a truth about gold (that it is an unproductive asset that has no real growth) to an equities index (which has experience significant earnings growth over the last two decades). His red lines should therefore slope/curve upwards.

To understand this with a chart, we'd have to switch from the Dow to the S&P500. Here is a plot of price (blue) and earnings per share (orange) over the last 30 years:

The data goes out to May 2022. Earnings can certainly drop considerably, as they did in 2002, 2007 and 2020, but there is no sign of this happening yet, and the forward P/E puts the market at fair value. The minimum P/E based on this historic data is 13 (in Sep 2011), though it has gone as low as 8 in the 1980s. So GoldSwitzerland's analysis, applied to the S&P500, would put the lower bound drop at about 2600 (about a 32% drop from where we are), and the upper bound drop at about 4000, which is above where we are today, so up to 32% more based on today's earnings. If earnings collapse, you can see from the chart that a larger drop is possible, but equally, P/E can go quite high, as in 2009 (P/E = 108 at the bottom of the crash). At a P/E of 108, earnings could drop to 35 (an 80% drop) and still be capable of supporting today's price.

In short, the historic data can't tell you very much because there is too much variance in P/E and earnings per share.

MK62

Type_45 said:

This graph by Gold Switzerland is... interesting...

....why?......it's just a picture of the DJ30 with a graphic saying 33-80% fall...

grumiofoundation

Type_45 said:

This graph by Gold Switzerland is... interesting...

The only interesting thing I see is that GoldSwitzerland can't actually calculate a 33% drop and/or put some misleading red lines on a graph

InvesterJones

masonic said:

The US dollar index shows the value of the dollar relative to a basket of other currencies. It does not mean that the dollar is increasing in intrinsic value.

It shows it's value compared to other currencies, which is the applicable measure when one is talking about which currencies are being held globally as a reserve.

Type_45

I think the Dow will see 22,000 before it sees 40,000.

And it will see a long way further down than that.

InvesterJones

Type_45 said:

I think the Dow will see 22,000 before it sees 40,000.

And it will see a long way further down than that.

I was going to say, that's only a 40% drop. Have you changed your mind? Or are you still predicting an 80% drop - in which case telling us you're also predicting 40, 41, 42, 43 etc. % drops is already implied.

DoublePolaroid

If the dude throws out enough numbers, one is bound to eventually be correct, sufficient to "claim victory" which is basically what this entire thread is about.

Apropos of nothing, my 5 year old demonstrates the same approach to solving basic multiplication problems.

Type_45

FTSE 100 down 2% right now. 

quirkydeptless

"Drax powered ahead after JPMorgan Cazenove put the shares on "positive catalyst watch" and said it expects the company to upgrade guidance at its interim results"

FTSE 250 - Risers

Drax Group (DRX) 660.00p 1.93%

https://www.youtube.com/watch?v=anIOV6HmuBs

"He seems to have an eye for a good investment"