<p>Well… I guess I missed a little last week. I dont think the market has changed much from Monday .</p>
<p>It’s a shame Bullard opened his mouth. ;)</p>
<p>The vix has already dropped to a little over 20. Booooo</p>
<p>VIX is at 90th percentile now. In other words, only 10% of the time has VIX been higher than where it has been, over the past ~20 years.</p>
<p>VIX at 30+ was an obscenity, a lamb waiting to be slaughtered. I bought VXX 2016 strike 30 puts and will hold then till VIX goes to about 16 in a month.</p>
<p>That looks good. </p>
<p>Even though I’m not particularly fond of Shiller and his mucking in the market comments, I found this editorial in the NY Times yesterday to be great: <a href=“Business News - Economy - The New York Times”>http://www.nytimes.com/pages/business/economy/</a></p>
<p>Doct, which editorial? The one where Shiller says he isn’t selling yet?</p>
<p>I think it’s the one with the title When the Stock Market Theory is Contagious.</p>
<p>Drgoogle is correct</p>
<p>I cant read it. What are the points of the article that ring true to you?</p>
<p>Here is the article: When a stock market theory is contagious</p>
<p>Since Sept. 18, the stock market has fallen more than 6 percent. An abrupt decline last week — after five years of gains — prompted fears that the market may have reached a major turning point.</p>
<p>Has a bear market begun? It’s a great question. The problem is that short-term market movements are extremely hard to forecast. But we live in the present and must try to understand what’s driving markets now, even if it’s much easier to predict their behavior over the long run.</p>
<p>Fundamentally, stock markets are driven by popular narratives, which don’t need basis in solid fact. True or not, such stories may be described as “thought viruses.” When they are pernicious, they are analogous to the Ebola virus: They spread by contagion.</p>
<p>Continue reading the main story
RELATED COVERAGE</p>
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Theories that seem to explain the stock market’s direction often work like this: First, they cause investors to take action that propels prices even further in the same direction. These narratives can affect people’s spending behavior, too, in turn affecting corporate profit margins, and so on. Sometimes such feedback loops continue for years.</p>
<p>The most prominent story since the September peak seems to be one of a “global slowdown” with associated “deflation.” Underlying this tale are deeper, longer-term fears. There is a name for these concerns too. It is “secular stagnation” — the idea that there is disturbing evidence that the world economy may languish for a very long time, even for generations, as the word “secular” suggests.</p>
<p>I did a LexisNexis count of newspaper and magazine mentions, by month, of the phrase “secular stagnation,” and I found that they have exploded since November 2013. And a Google Trends search shows a similar pattern for web searches for the phrase since that time.</p>
<p>Why? It’s probably because Lawrence H. Summers, the former Treasury secretary and Harvard president, used the phrase in a talk he gave on Nov. 8 at the International Monetary Fund in Washington. Paul Krugman wrote approvingly about the talk in The New York Times nine days later.</p>
<p>Mr. Summers presented his secular-stagnation idea with uncharacteristic diffidence: “This may all be madness and I may not have this right at all.” But his talk seemed to release a thought virus.</p>
<p>Nations’ periods of slow growth can indeed last for decades. But why predict something like that right now, and generalize this prediction for the whole world? Here we do not find consensus, only ideas whose relevance is hard to judge. Some people say a theory of John Maynard Keynes — known as the “underconsumptionist theory” because it says people inherently underspend once they become prosperous — is taking hold. Others say investment opportunities offer lower — maybe even negative — returns because the economy no longer requires so much heavy machinery. Still others say that an aging population is a drag on growth, or that the financial disarray left by the 2007-9 crisis is re-emerging. All of these theories have a certain plausibility but hardly offer reason to expect a major turning point in the market right now.</p>
<p>Continue reading the main storyContinue reading the main story
The great economic historian Robert Fogel, who died last year at the age of 86, wrote in a 2005 paper that he was surprised by the resilience of scholarly attention to the secular-stagnation theory. He found that the term began to be used in 1938, during a time of world economic despair, and that its currency grew rapidly, hitting a peak in the 1940s. Lively debate on the topic endured in the 1980s, he noted, though the discussion eventually decayed to almost nothing by the 1990s.</p>
<p>There is little talk about secular stagnation in scholarly circles today. The recent chatter has centered in the news media, in conference panel discussions and in the blogosphere.</p>
<p>We can contrast this secular stagnation story with the narrative that drove down the stock market in 2011. By May 10 of that year, the Standard & Poor’s 500-stock index had already doubled since its financial-crisis bottom on March 9, 2009. And then the index fell by about 20 percent from May 2 to Aug. 9.</p>
<p>What set off that decline? It had to do with a different thought virus: the worry that Congress wouldn’t raise the debt ceiling in time to prevent the United States from defaulting on its debt. The nation didn’t default, but on Aug. 5, 2011, S.&P. downgraded the national debt for the first time.</p>
<p>While reports on this drama were alarming, it’s not obvious why they should have caused such a sharp market decline. Clearly, consumer confidence fell. And for both individual and institutional investors, my own crash confidence index, based on questionnaire surveys conducted by the Yale School of Management, dropped almost as far as its record low at the worst of the financial crisis in 2009. People worried that stock prices would fall. The “expected” component of the Michigan Consumer Sentiment Index dropped lower than at the worst of the financial crisis in 2009.</p>
<p>Why was the default story so virulent? The Michigan Consumer Sentiment Report for July 29, 2011, said that although respondents might not have understood the issues surrounding the national debt, they were hearing “repeated warnings of ‘dire economic consequences,’ ” and because of their experiences were “keenly aware of the grave consequences of excessive personal debt.” And there was much talk that a first federal default would have been an epic humiliation — or so it was being depicted at the time.</p>
<p>But that narrative ended when Congress raised the debt ceiling. The stock market soared again, once the news stopped reinforcing that fear of dire consequences.</p>
<p>The current secular-stagnation story is less dramatic than that of the debt crisis. But because it’s so vague, the negative feedback loop can’t be resolved as neatly. The question may be whether this thought virus mutates into a more psychologically powerful version, one with enough narrative force to create a major bear market.</p>
<p>The market is up what? 60 percent without a 10 percent correction? That is not normal. The world won 't end if we have a ten percent correction or even a larger one. </p>
<p>I find this article troubling.</p>
<p><a href=“The Depressing Signals the Markets Are Sending About the Global Economy - The New York Times”>http://mobile.nytimes.com/2014/10/16/upshot/the-depressing-signals-the-markets-are-sending-about-the-global-economy.html</a></p>
<p>"The world economy still hasn’t recovered from the last recession. Moreover, investors lack confidence that policy makers have the tools they would need to avert a new slide into recession after years of throwing everything they have at it to try to encourage recovery and prevent deflation, or falling prices. Coincidentally, commodity prices are declining largely because of supply, but the timing of that decline is bad: It makes the risk of deflation that much more severe.</p>
<p>Add it all up, and the markets aren’t betting on catastrophe per se; if they were, stock prices would be down more. But they are betting that central banks and other policy makers aren’t going to be able to get a handle on global deflationary forces that have been unleashed. That means we could be in for a slow grind in which global growth and inflation both stay below where people across the advanced world would like it to be."</p>
<p>Why are rates so low and inflation expectations so low? People and institutions are betting with real money.
Aren 't we having secular stagnation? </p>
<p>Growth has been subpar for several years now.</p>
<p>Here is an investment tip: <a href=“http://www.jantoo.com/cartoon/16517100”>http://www.jantoo.com/cartoon/16517100</a></p>
<p>:)</p>
<p>Some of my biotechs turned out to be inherent contagion plays. </p>
<ol>
<li><p>The market was down 9.8% on 10/15 - close enough to 10% for me.</p></li>
<li><p>Lots of stocks that have international exposure are down much more than 10%.</p></li>
<li><p>Where does it say that we need to have 10% corrections?? Because they happen on average every 3 years? What is the standard deviation for that distribution?</p></li>
<li><p>The market doesn’t have to do anything. The market is up 25.9% since January 2000, how normal is that. It is convenient to take how far the market has gone up from a specific date but from the long term - 15 years it has done sh**.</p></li>
<li><p>Here is another take on the world economy: <a href=“http://www.marketminder.com/a/fisher-investments-imf-sees-99-chance-growth-continues-projects-acceleration/f2dd48fb-8386-44aa-aaea-8be02ae0a573.aspx”>IMF Sees 99% Chance Growth Continues, Projects Acceleration | Insights | Fisher Investments;
</ol>
<p>I should point out that I’m not saying that the market can’t go down 10% or 100% for that matter. I have no idea and neither does any talking head or economist. So far things have worked out well for me. I’m up 10.8% and in this downturn have only lost 1.5%.</p>
<p>I’m shorting one stock that’s due to GOOGL missed earnings or revenues. This stock is in the same category, high flying multiples.Some stocks have stabilized but some haven’t.</p>
<p>BunsenBurner, love the cartoons. They are great. Hopefully one or more of these biotech companies will come through.</p>
<p>Doct, last year you kept posting about 10 percent corrections and how you expected one and what did I say? </p>
<p>Do you know why the market did s… for 15 years? Because the market was overpriced. </p>
<p>The economy has been growing at a subpar rate the last several years. That is just a fact.</p>
<p>Doct, I am glad you are doing well.</p>
<p>The market today is not as overpriced as it was 14 years ago. </p>
<p>Lockheed is working on nuclear fusion. Nuclear fusion is a game changer.</p>
<p>I love what biotech companies are doing. We have a cure for hep c. We have a drug that can prevent aids in a vast majority of cases. </p>
<p>There is a lot of good stuff happening.</p>
<p>As far as the 10% comment, from my perspective we got the 10% last week. Also even though I’ve been waiting for the 10%, doesn’t mean it will necessarily occur - some of it is wishful thinking. I had positioned myself to be market weighted going up and protected going down. I did go somewhat longer last week as I posted above. I didn’t go all in at the 9.8% like I hinted in earlier posts for one reason - fear - which is the enemy of any successful investing or financial decision.</p>
<p>Overpriced is in the eye of the beholder. Real estate where you live is overpriced by any traditional metric regardless of building restrictions, population density or anything else. The area has one of if not the least affordabilty of any housing market, yet prices remain high or go up. I’d wager that they will continue that way as far as the eye can see. If there is a seller willing to sell a house or stock at a given price and a buyer willing to buy at that price than it is in reality not overpriced.</p>
<p>Stocks are more volatile than real estate around here. After staying a few days in NYC, I think prices are pretty reasonable. :)</p>
<p>Generally, History tells us that when the stock market trades at higher pes, future returns are lower. I am a buyer so although my portfolio would take a hit, I would like to see stock prices drop. That will increase the odds my future returns will be higher.</p>
<p>If the market has a pe of 15 that is a 6.67 earnings yield… Plus dividends of close to 4 percent. That gives us a little over 10 percent returns. That is close to history numbers.</p>
<p>If the pe is 20 that is a 5 percent earmings yield. If dividends are 2 percent, that gives us a 7 percent return. </p>
<p>Forgetting dividends for a second, the difference between paying a 15 pe for the market and a 20 pe is 1.667 percent a year. </p>
<p>I am talking in generalities. I can argue that there are times this is isnt true. I dont want to do that. </p>
<p>There is an apartment building for sale that I hope a few of us can buy. I think the odds are dropping that we are going to buy it.</p>
<p>If I can buy the same apt with an 8 percent return, compared to a 7 percent return, my returns are going to be higher if I can purchase at 8. </p>
<p>By the way 8 percent historically for this buildng is a little overpriced. The area is just ok. </p>
<p>People are buying places for a 3.5 percent return in SF. </p>
<p>The prices of both areas is a function of interest rates. If rates change, the values of both areas will be lower than they would be otherwise.</p>
<p>With the fed buying up assets and keeping rates at zero, that has an effect on prices.</p>
<p>Stocks are a better value today than a month ago.</p>
<p>not according to this: <a href=“San Francisco Least Affordable for Millennials”>San Francisco Least Affordable for Millennials. </p>
<p>I used a :).</p>
<p><a href=“Trulia: Real Estate Listings, Homes For Sale, Housing Data”>Trulia: Real Estate Listings, Homes For Sale, Housing Data;
<p>“The median sales price for homes in New York NY for Jul 14 to Oct 14 was $1,140,000. This represents a decline of 2.6%, or $30,494, compared to the prior quarter and an increase of 8.6% compared to the prior year. Sales prices have appreciated 20% over the last 5 years in New York. The average listing price for New York homes for sale on Trulia was $3,299,764 for the week ending Oct 08, which represents an increase of 3%, or $95,133, compared to the prior week and an increase of 2%, or $63,700, compared to the week ending Sep 17. Average price per square foot for New York NY was $1,414, an increase of 9.5% compared to the same period last year. Popular neighborhoods in New York include Upper East Side, Upper West Side, Harlem, West Village, Chelsea, and Greenwich Village.”</p>
<p><a href=“Trulia: Real Estate Listings, Homes For Sale, Housing Data”>Trulia: Real Estate Listings, Homes For Sale, Housing Data;
<p>“The median sales price for homes in San Francisco CA for Jul 14 to Oct 14 was $942,000. This represents a decline of 0.8%, or $8,000, compared to the prior quarter and an increase of 13.5% compared to the prior year. Sales prices have appreciated 39.6% over the last 5 years in San Francisco. The average listing price for San Francisco homes for sale on Trulia was $1,520,914 for the week ending Oct 08, which represents an increase of 2.8%, or $41,853, compared to the prior week and an increase of 2.3%, or $34,788, compared to the week ending Sep 17. Average price per square foot for San Francisco CA was $842, an increase of 12.7% compared to the same period last year. Popular neighborhoods in San Francisco include Pacific Heights, Noe Valley, Russian Hill, South Beach, Bernal Heights, and SoMa.”</p>
<p>I have a kid living in SF and a kid living in Manhattan. You get more for your money in SF.</p>
<p>NYC is an alpha city which San Francisco isn’t. There are many internationals (Russians, Chinese etc) who are driving the prices up and compared to London and other international cities, NYC is cheap. You can live in Queens which is a lot less expensive and get good housing. Where do you go in SF?? Besides they’re all over priced just like many stocks are overpriced. </p>
<p>Well we can agree to disagree but I’m right and you’re wrong :)>- </p>