stock market has peaked and about to crash. target around 1,800 S&P
Not saying you are wrong Richard but do you have a reason why stks or S % P will fall
I will give you some reasons why stks may not fall, just for discussion purposes
I like to listen to Buffett, he says his Co's face increased costs for materials or re-supply of retail goods. Customers seem to have an open wallet, price is not a factor and even when the consumer is told delivery will be at least 8 weeks, the consumer says no problem as every body else has the same story
We all know raw materials are going up a lot, and the investor is looking at digital coins and materials to make such products. Plus the entire commodity complex from soft to hard assets are seen as a hedge against inflation. Many people are positive near hyper-inflation of raw materials is a given [meaning 30 plus % increase in the coming 12 months]
Now back to Buffett. He is able to pass along the increased price, to the consumer with no problem which means his Co's will maintain their profit margin with no problem. He has a select few he watches closely and is amazed at the profit margin given the increased selling price.
Co's that are able to pass along price increases will be very profitable in the next 12 months. The discussion then becomes a mixed bag. Are the profit margins sustainable. Most think so, although this mean stagflation as wages will not keep up to inflation. This means stks will show good profit margins and price can only go up with inflation. I won't get into the Biden tax proposal discussion as
a] I think it is very bad for some biz while others will see huge profits.
b] This will be a wash [I think] but is not sustainable for more than 10 yrs at the most. I am talking stks in less of a time frame than 10 yrs.
c] very bad for the long term economic health of the country
However, we know there is a shortage of skilled labour. Your local gas station may only have 6 days supply of gas for 7 days of sales. So guess what. The gas station increases the price of pump gas so 6 days is rationed to 7 days and profits increase on every gallon of gas sold The gas station will make more money selling rationed gas as the competition is no existent. Everybody is short on gas deliveries. The number of qualified gas delivery truck drivers is less as many exited the driver's seat during the early stages of covid when gas demand decreased a lot. Today the number of delivery drivers is not enough to meet the demand of your local gas station. The qualifications to drive a gas delivery truck is 3 times as hard as just a CDL licence, including Hazmat training and exams. Most people won't train for this job, choosing to drive else where with less demands for all the extra training etc.
Skilled help,]as I mentioned] is in short supply plus many lower skills don't pay enough to get off the couch and go to work. So guess what. The price increases on the goods that are available and profit margins continue, with less goods from the USA but boat loads from China. I know most of it is junk goods made to fail in short order but that is the only game in town
The americian consumer has a pent up demand to buy, buy, buy every thing from houses to RV to fix the swimming pool to the back patio to ???
This price increase , of today, will not go down. Since when has your next car cost less than your last car. Prices always increase unless we have a true depression. Recessions are short lived and it is doubtful we even see a recession. At best a levelling off of higher price increases
I think I lost my bet with MM but that is how I see it
I only used a few examples, to give my thoughts as to why stks will maintain or increase in value.
I would also bring your attention to Tim's weekly post which shows some very good reasons why the economy is getting better. A healthy economy is good for stk prices unless Biden messes everything up for the USA
My biggest worry is the Biden proposals may bring the USA tumbling down. He can't continue to insult China and Russia with out consequences. Most likely economic consequences. He already got a good face slapping from China in Alaska. He sends his battle ships into a war zone and then with draws. That will show them. What I do not know but the USA may pay the price
Plus his tax and spend are not long term solutions for the USA. He is greatly taken, with the idea, as thinking of himself as the great americian hero, which makes him a token pawn for the extreme left
He is asking the FBI to hunt down anybody that was even near the capital on that fateful day while ignoring BLM, Antifa etc who do much greater harm.
Just an example of why I worry about Biden .and where his priorities may be. That much [Biden] I would consider a negative for stk prices.
On the other hand, has Biden or Harris even mentioned inflation. Do they take inflation seriously as boat loads of containers arrive daily.
I think inflation has the upper hand for stk prices to maintain or increase in value, all things considered.
When people pay good money for a virtual house then the consumer has gone mad trying to spend money.
Your odds just increased re: stks down as Janet Yellen may have indicated higher int rates sooner then the Fed told us
Now we are left to wonder who is the boss
Yellen or Powell
I did say in my post that Biden policies were the biggest danger to the economy and stk prices
At least that is what I think I said
Richard has a long history of making really, really extreme predictions.
What's your latest prediction for oil Richard?
You might actually be right this time if Biden manages to do enough damage to energy production.
And some of his policies threaten our economic growth which could hurt stocks.............though a stock market crash will likely not happen at the same time as extremely high oil prices.
I am very busy today and there is a chance I am early here. Lets see what happens on this friday with the employment report. I will post again at that time. In the end I will be correct but being early is what I am good at and in the future market being early by 5 minutes can kill you.
Always remember the market can be wrong longer than you can afford to be right.
any time valuations get this high, they don't stay up there for long.
when valuations are too high, then the probability of a positive return is very low (over the next 5 to 10 years).
when valuations are very low, then the probability of a positive return is much higher (over the next 5 to 10 yrs).
you have a better probability of Not losing much money if you are in gold currently.
Interesting article Bear. I have only one counterpoint to make about the article.
How do you measure valuations in an environment with negative REAL rates? There is no precedent.
The other thing that gives me pause is watching the analysis of the talking heads in the financial media and reading opinion pieces in the WSJ and Barrons I am struck by the universal agreement that interest rates (on the 10 year) are certainly going higher. 100% of analysts believe that the 10 year is going over 2% this year and a great majority believe that 3% is likely soon after.
I'm a contrarian by nature (isn't the crowd always wrong). In my life watching markets I've never seen market opinion more lopsided. I don't know if it is the FED with their QE thumb on the scale or the deflationary forces of technology (a positive deflation IMO), but I have a hard time seeing rising rates.
I, like many other fools, thought the pandemic might be the foe that would overwhelm even the FED. But here we are at ever greater stock highs. I guess markets can do anything.
I fully expect a strong jobs report today, in about a half hour. ADP came out strong, and while there is a weak corelation between that and the BEA Employment, it's not often too far off. ISM and PMI are also showing strong job growth in the near term.
Futures are up, probably in anticipation of the report, so a weaker than expected will probably lead to a down or at least subdued day. (Consensus is currently for 998k)
But the country is reopening, spending is high, job creation has been strong, etc, etc. For the forseeable, I am bullish equities.
The wild card is the current admin, and without getting too political in a TR thread, much of their policy is not exactly pro-business/pro-growth, tho massive stimulus does have an effect and there is talk of another round.. "Pay me now, Pay me later".