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  • Nobel Prize Winner Shiller Is Damaging His Reputation With CAPE Ratio Talk [View article]
    J:

    Nice discussion, but here are a few problems I see with CAPE, one in its design and in its misinterpretation, even if that's not Shiller's fault:

    1) First, there's nothing "real" about "P." P, the current nominal price of anything contains the aggregate impact of all the inflation prior to that date, and even pre-supposes an inflation outlook, which affects how much people are willing to pay for a future stream of earnings. It accomplishes precisely nothing to deflate all the earnings for the prior ten years, as if this uncovers some hidden gem of information. As P fully includes inflationary effects, deflating E, for whatever period, just ensures that CAPE's idea of a median P/E will be higher that the garden-variety P/E's with which we're all familiar, and its ten-year methodology automatically ensures that any 2008-like effect will have lingering impact on the future ten-year calculations until such time as that period escapes the averaging period. Even disregarding the averaging methodology, how does comparing nominal prices against "real" earnings offer anything useful?

    2) And, this isn't Shiller's fault, but many observers of CAPE seem to forget that it can only be compared against itself, so when they hear a CAPE P/E of 20 or 24, they intuitively, but erroneously, think that sounds high because they've always heard that P/E's should be in the 15 range, but, of course, the classically-measured P/E is something entirely different than CAPE. But, folks forget that and are led astray in their perceptions by the reported CAPE P/E's.

    3) Even admitting that CAPE isn't a good timing tool, it's worse than that because, even when CAPE suggests that future market returns will be "below average," it says nothing about the returns of such markets as against other alternatives. It's meaningless to offer that future absolute returns will be less than some prior period, if those returns are still positive and above other alternatives. So, CAPE doesn't help with asset allocations, despite the belief by some that it does, except to the extent that it might prompt people to at least examine alternatives.
    Aug 22 06:22 PM | 1 Like Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #37 [View instapost]
    Hussman's strategy works perfectly, for him. He scares the bejesus out of folks, sells newsletters and makes management fees on non-performing funds into which he's scared his followers.

    What could possibly be better?
    Aug 22 05:05 PM | 2 Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #37 [View instapost]
    RD:

    I keep pointing out the combined impact of liquidity and low volumes. Maybe, you should ponder that further.
    Aug 22 04:24 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #37 [View instapost]
    SG

    You expect a dividend cut because of the market decline or because of earnings? I'd think only the latter would matter, and they would not voluntarily add to selling pressure.
    Aug 22 02:54 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #37 [View instapost]
    FG, RD

    Exactly as I predicted earlier, RIG rose into the ex-div date. It's common for yield issues to see pressure ex-div. Accordingly, I bought back my puts at a rather insignificant gain on div day at the open.

    I'll consider selling more puts if the weakness persists for a while.
    Aug 22 02:47 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #37 [View instapost]
    LMH:

    You keep looking at the issue from the writer's perspective, but the sale of puts, at any price, depends on a willing buyer, all of whom are bearish. There is no bullish put price for a buyer.
    Aug 22 01:34 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #37 [View instapost]
    LMH

    Writing puts is always bullish, but buying them at any price is bearish.

    When the buying demand for calls exceeds puts it indicates a bullish bias, but ironically is often a contrarian indicator.
    Aug 22 01:00 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #37 [View instapost]
    LMH:

    The write side of the equation is limited by availability of buyers, so if the put/call balance is weighted to calls, it evidences a stronger demand to buy call, which is a bullish disposition. But, that ratio is often a contraindicator.

    It's much better to have a put-heavy overhang because that means the short play has already been made and absorbed by the market, and it's the fact that those puts will have to be covered that provides upside impetus.
    Aug 22 12:13 PM | Likes Like |Link to Comment
  • 5 Reasons Why I Am Shorting The Market [View article]
    FG:

    Article published in 2013, not 2014. SPX on that date 1575.

    Hopefully, author has a day job.
    Aug 22 11:11 AM | 1 Like Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #37 [View instapost]
    You ask not an entirely simple question, but I'll say that I am more alert to bad news reported by a company than bad news or negative commentary by others.
    Aug 21 11:11 PM | Likes Like |Link to Comment
  • Zillow Housing Data Portends A Housing Downturn [View article]
    The Fed's efforts in reality only massively increased liquidity, sitting in excess reserves, and had little impact on rates, as has been seen from market behavior, as tapering has proceeded.

    The Fed wanted to restore liquidity, and in that they succeeded. Efforts to stimulate the economy beyond that were outside of their control.
    Aug 21 11:07 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #37 [View instapost]
    LMH

    On the contrary, the scary headlines are like receiving one of those discount codes when you want to make an Internet purchase.
    Aug 21 10:39 PM | 1 Like Like |Link to Comment
  • Zillow Housing Data Portends A Housing Downturn [View article]
    P. S. Guns.....
    Aug 21 10:31 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #37 [View instapost]
    SG:

    I like the regionals, too.

    But, it's the "scary" headlines on (NYSE:BAC) and (NYSE:C) actually make them such good values.
    Aug 21 10:27 PM | Likes Like |Link to Comment
  • Zillow Housing Data Portends A Housing Downturn [View article]
    JH:

    Rates will rise, eventually, if and when the economy demands it. The Fed has virtually no control over long-term rates and can only contain them by raising short rates above the long rates and inverting the curve. But, they have no incentive to do so unless inflation starts to get elevated.

    Your comment about rates and credit risk is particularly amazing to me, given your prior quote of "think Argentina." Which is it?
    Aug 21 10:21 PM | Likes Like |Link to Comment
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