Why Bitcoin's Rise Is Nothing To Celebrate [View article]
If bitcoins were to replace any major currency, it would be the largest transfer of wealth in the history of mankind. Am I the only one who sees that as a huge problem? Computer oriented types who exchanged $100 into BTC early on would become BILLIONAIRES while ordinary people who had their savings in dollars would lose everything. This is one reason I can't envision bitcoins ever taking over the world.
Finnish newspaper Talouselämä reports that the rescue package would include 100% losses to bondholders and stockholders of Cyprus banks - in contrast to this article.
Business Cycle Forecasting: The Superlative Results Of Robert F. Dieli [View article]
A few questions:
1. I didn't catch which part of the model was showing backtested results and which part was real-time results? 2. Yield curve is the best leading recession indicator that I know of. I've read some studies saying that combining other indicators with the yield curve weakens predictions, when compared to using the yield curve only. I would like to ask Bob and Jeff if you guys have compared the (preferrably real-time) results of using the aggregate spread to make a recession prediction with using just the yield curve (approximated by the "financial spread" inside the model)
I suspect that adding unemployment rate (and perhaps also adding inflation rate) into the model actually detracts the predictive power of the model and simply using the yield curve for predictions would provide better results.
Buybacks: A Controversial Method Of Returning Capital To Shareholders [View article]
They could have negotiated a better price (read: market price) with the seller. Or perhaps even below market price. If the seller was not willing to budge on the price then they for sure would not have dumped all their shares on the open market.
Buybacks: A Controversial Method Of Returning Capital To Shareholders [View article]
Here's an observation: buybacks are generally good for value investors, but bad for "buy & hold" investors. Why? The value investor holds his stock only when it is priced low, when a buyback is good allocation of capital. The buy & hold investor never sells his stock, so buybacks sometimes occur when the price is low, but more often when the price is high.
Thus, buybacks in the aggregate destroy shareholder capital. The value investor has just sold out before it happens.
It's practicly impossible to get into a popular IPO without connections. The only time laymen get fresh IPO shares is when the issue is unpopular and likely to make a loss after the shares are made public.
Germany In Recession Already, With The Rest Of The Eurozone [View article]
One quarter of negative GDP growth does not mean recession. Any definition I've seen includes 2 consecutive quarters and other factors which vary depending on who you listen to. Germany's GDP grew +0.5% in Q3 of 2011 so why are you acting like the data has confirmed your hypothesis?
Prof. Shiller And CAPE May Be Correct Generally, But The Market Is Currently Cheap [View article]
"my main thesis is to look at individual stocks"
I agree, I also try to find undervalued stocks based on fundamental analysis. However, good analysis is very time consuming, and you can improve time efficiency by narrowing down the field. This is where stock screeners and valuation methods like CAPE become useful: they tell you where to look, which stocks to analyze. PE10 is currently 12x for Europe and 20x for U.S. Both markets of course have undervalued stocks and overvalued stocks. But since Europe is cheaper on the average, I'm more likely to find better deals by looking into European stocks.
There is incredible home team bias among investors of all countries. Everyone feels more comfortable and familiar by investing in stocks listed in their own country, yet those feelings don't magicly transform into profits. I admit I'm guilty of this myself, I have a disproportionate amount of Finnish stocks in my portfolio. I'm still learning.
"my real problem is with predicting markets in the first place. I don't think it can be done and certainly not with simple statistics."
It has already been proven. Don't dismiss the evidence because you don't feel like it could work. Based on your article it's obvious you haven't even read any of the studies made on CAPE. The results are remarkable.
"My point, therefore, is that the current S&P 500 is just that, the current PE and therefore a fact."
Ratio of price / current 1 year earnings is a fact. Ratio of price / past 10 year average earnings is also a fact. So what? You're misleading readers by implying that your method of valuing the market is superior, when the opposite is true.
Prof. Shiller And CAPE May Be Correct Generally, But The Market Is Currently Cheap [View article]
Here's what really bothers me with your article: CAPE (with 10, 7 or 5 year inflation adjusted average earnings, or even without adjusting for inflation) has been PROVEN to be a BETTER predictor of future returns for the market as a whole than 1 year PE. I've personally come across evidence in Shiller's "Irrational Exuberance" and Siegel's "Stocks for the Long Run", but I'm guessing there is ton of academic research on this if you want to have a look.
Despite the overwhelming amount of evidence for using cyclically adjusted earnings instead of TTM or forward estimated earnings, you proclaim in your conclusion "The CAPE measurement used by Prof. Shiller is a hypothetical statistic with no precise time designation, only an assumption. Our S&P 500 graph calculation is a current fact." You're so misleading here it disgusts me. Shiller never claimed to predict exact outcomes with CAPE. When you invest at a time when PE10 multiples are low, you're likely to get higher returns than investing at higher multiples. Key word there is "likely" and I think it's extremely useful to investors even without exact date predictions, despite what you say. I don't think investors should be scared out of stocks just because the U.S. market is overvalued, I think they should look into markets that are undervalued! Europe for example.
With all that said I think you bring a huge amount of value into the investment community and I love FAST graphs. I just wish you wouldn't bash people like Shiller with strawman arguments. Shiller correctly predicted the tech bubble crash and the housing crash while nobody listened. If you think you have a better method for valuing the market as a whole, prove it. Show how it has overperformed CAPE in backtests on a non-arbitrary time period.
One more thing Chris, if you bother, can you please answer my question: was "investor interest" a good reason to buy internet stocks in '99? If the answer is no, then please tell me why "investor interest" is a good reason to buy gold today?
Like I said, I expect gold to fall once real interest rates go above 2%. So consider that event + 1 year the expiration for my forecast. I don't know how high gold can go during this period of negative real rates, and I don't know how long this period will last. It would make no sense for me to short gold right now when I can put my money in undervalued stocks.
"historically gold prices rise with other commodities."
Funny how historical ratios are only valid when they support your point of view. Yes, historically the price of gold rises along with the prices of goods and services, which includes other commodities. Past 10 years gold is about 200% up in real terms where I live (I don't know about Shanghai). Previous moments in history where gold saw this kind of performance have been notoriously bad times to buy gold. But I guess this time is different, this time gold will just keep going to infinity in purchasing power, right?
"In a nutshell, gold’s competitors – financial assets - started to perform well again ... Year by year success of these assets drew interest from more investors and appreciation continued. Is there any chance of that now?"
No, there is no chance of that. The bear market in stocks and real estate will continue forever and anyone who owns gold will be declared the King of New World.
Why Bitcoin's Rise Is Nothing To Celebrate [View article]
Cyprus's Bad Haircut Day [View article]
The Cyprus Precedent [View article]
Business Cycle Forecasting: The Superlative Results Of Robert F. Dieli [View article]
1. I didn't catch which part of the model was showing backtested results and which part was real-time results?
2. Yield curve is the best leading recession indicator that I know of. I've read some studies saying that combining other indicators with the yield curve weakens predictions, when compared to using the yield curve only. I would like to ask Bob and Jeff if you guys have compared the (preferrably real-time) results of using the aggregate spread to make a recession prediction with using just the yield curve (approximated by the "financial spread" inside the model)
I suspect that adding unemployment rate (and perhaps also adding inflation rate) into the model actually detracts the predictive power of the model and simply using the yield curve for predictions would provide better results.
Buybacks: A Controversial Method Of Returning Capital To Shareholders [View article]
Buybacks: A Controversial Method Of Returning Capital To Shareholders [View article]
Thus, buybacks in the aggregate destroy shareholder capital. The value investor has just sold out before it happens.
EOG Adds 700 Million Barrels Of Oil And Mr. Market Doesn't Care [View article]
Buy Facebook With Both Hands [View article]
Germany In Recession Already, With The Rest Of The Eurozone [View article]
Should You Really Care If Stocks Are Cheap? [View article]
Prof. Shiller And CAPE May Be Correct Generally, But The Market Is Currently Cheap [View article]
I agree, I also try to find undervalued stocks based on fundamental analysis. However, good analysis is very time consuming, and you can improve time efficiency by narrowing down the field. This is where stock screeners and valuation methods like CAPE become useful: they tell you where to look, which stocks to analyze. PE10 is currently 12x for Europe and 20x for U.S. Both markets of course have undervalued stocks and overvalued stocks. But since Europe is cheaper on the average, I'm more likely to find better deals by looking into European stocks.
There is incredible home team bias among investors of all countries. Everyone feels more comfortable and familiar by investing in stocks listed in their own country, yet those feelings don't magicly transform into profits. I admit I'm guilty of this myself, I have a disproportionate amount of Finnish stocks in my portfolio. I'm still learning.
"my real problem is with predicting markets in the first place. I don't think it can be done and certainly not with simple statistics."
It has already been proven. Don't dismiss the evidence because you don't feel like it could work. Based on your article it's obvious you haven't even read any of the studies made on CAPE. The results are remarkable.
"My point, therefore, is that the current S&P 500 is just that, the current PE and therefore a fact."
Ratio of price / current 1 year earnings is a fact. Ratio of price / past 10 year average earnings is also a fact. So what? You're misleading readers by implying that your method of valuing the market is superior, when the opposite is true.
Prof. Shiller And CAPE May Be Correct Generally, But The Market Is Currently Cheap [View article]
Despite the overwhelming amount of evidence for using cyclically adjusted earnings instead of TTM or forward estimated earnings, you proclaim in your conclusion "The CAPE measurement used by Prof. Shiller is a hypothetical statistic with no precise time designation, only an assumption. Our S&P 500 graph calculation is a current fact." You're so misleading here it disgusts me. Shiller never claimed to predict exact outcomes with CAPE. When you invest at a time when PE10 multiples are low, you're likely to get higher returns than investing at higher multiples. Key word there is "likely" and I think it's extremely useful to investors even without exact date predictions, despite what you say. I don't think investors should be scared out of stocks just because the U.S. market is overvalued, I think they should look into markets that are undervalued! Europe for example.
With all that said I think you bring a huge amount of value into the investment community and I love FAST graphs. I just wish you wouldn't bash people like Shiller with strawman arguments. Shiller correctly predicted the tech bubble crash and the housing crash while nobody listened. If you think you have a better method for valuing the market as a whole, prove it. Show how it has overperformed CAPE in backtests on a non-arbitrary time period.
How Low Could Gold Go? [View article]
How Low Could Gold Go? [View article]
Like I said, I expect gold to fall once real interest rates go above 2%. So consider that event + 1 year the expiration for my forecast. I don't know how high gold can go during this period of negative real rates, and I don't know how long this period will last. It would make no sense for me to short gold right now when I can put my money in undervalued stocks.
"historically gold prices rise with other commodities."
Funny how historical ratios are only valid when they support your point of view. Yes, historically the price of gold rises along with the prices of goods and services, which includes other commodities. Past 10 years gold is about 200% up in real terms where I live (I don't know about Shanghai). Previous moments in history where gold saw this kind of performance have been notoriously bad times to buy gold. But I guess this time is different, this time gold will just keep going to infinity in purchasing power, right?
"In a nutshell, gold’s competitors – financial assets - started to perform well again ... Year by year success of these assets drew interest from more investors and appreciation continued. Is there any chance of that now?"
No, there is no chance of that. The bear market in stocks and real estate will continue forever and anyone who owns gold will be declared the King of New World.
How Low Could Gold Go? [View article]