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Since this is pretty much the Real Estate thread as well....

 

I've been bombarded with stories on the air and in the Times about how Calfiornia is not in a BUBBLE because there is NO over building. Meanwhile the same "experts" haven't noticed all the sales they've pulled forward: Over and over, they're telling 20 somethings to buy condos with ARMs. It's a great "investment" and you'll move before the ARM kicks in. In fact, EVERY single early-20-something I know is now the proud owner of crappy/crampy condo. Who is left to buy?

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Dr. Hussman explains why what most sell-side anal cysts "do" most of the time -- that is, make earnings forecasts -- is completely irrelevant and worthless:

 

anal cysts believe that short-term S&P 500 earnings growth is actually correlated with returns on the S&P 500 (the correlation between year-over-year earnings growth and annual total returns on the S&P is literally 0.0).

 

In fact, the correlation runs in the opposite direction:

 

Over the past 50 years, there's been a slight positive correlation (0.12) between the annual return on the S&P 500 and the growth in S&P 500 earnings over the following year.

 

Makes sense ... stock prices forecast ... earnings are a rearview mirror indicator.

 

If you're looking for considerations that have a large impact on investment returns, here's the dynamite: changes in market P/E ratios (particularly from extreme levels to historical norms or opposite extremes) can strongly affect the returns that investors earn over periods as long as 10-30 years. Fluctuations in earnings growth? Not so much.

 

In other words, in the equation [ Price = (P/E) * Earnings ] , P/E dominates, particularly over longer periods.

 

Currently both P/E and earnings are near peak levels, so it is vain to expect large upside in stocks from here.

 

Stronger Earnings Are Likely. So What?

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Currently both P/E and earnings are near peak levels, so it is vain to expect large upside in stocks from here.

but interest rates will be....er, um, wait a minute....

 

:shocked GMTFO!

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yet, as this mounting acrimony between Stoolville's two intellectual giants belies, there remains a reticent mutual respect between them

Mutual respect? I'd say a crush. :P Their banter reminds me of Hepburn and Tracy.

sure beats Kudlow and Creamer

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As Bills Mount, Debts on Homes Rise for Elderly

By JENNIFER BAYOT

NYTimes

 

""All the indicators would suggest that there is increasing debt being assumed by older Americans," said Nicolas P. Retsinas, director for the Harvard Joint Center for Housing Studies. "It used to be the notion that when you were old, you wanted to extinguish your mortgage. Increasingly, people don't look at it that way. They look at their home as liquid; it's a way to substitute cheaper debt for higher debt.""

 

""I'm 85 years old; I can't live forever," said Ms. Williams, who still receives offers for credit cards. "

 

http://www.nytimes.com/2004/07/04/business...ml?pagewanted=1

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yet, as this mounting acrimony between Stoolville's two intellectual giants belies, there remains a reticent mutual respect between them

Mutual respect? I'd say a crush. :P Their banter reminds me of Hepburn and Tracy.

MH (r.) gives the BARE a direct cranial injection of

PhD brain cells. Sadly, there is no discernable improvement.

49-150.jpg

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Over the past 50 years, there's been a slight positive correlation (0.12) between the annual return on the S&P 500 and the growth in S&P 500 earnings over the following year.

 

Makes sense ... stock prices forecast ... earnings are a rearview mirror indicator.

 

Nah, markets don't forecast. It's just that expanding liquidity pushes stock prices up first, earnings later, and vice versa. Contracting liquidity affects stock prices first. Earnings come down a bit later.

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There's a technical term for that. What is it? I can't think of it. You know like the ice cream sales and crime rate thing. Right.

 

Later Gang! Tanks as always for an entertaining and informative thread!

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EBAY WILL FALL TO

 

 

Ebay looks very ripe. It's continued to rise this year, long after the Naz and most of its P.O.S. components already topped.

 

This is the decline when E-bay is finally going to get its come uppance

 

AMAT about to go below $18.

 

If so the Bear has resumed.

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A silly question for all. There's gambling (trading) money and then there's nestegg/retirement money in my world of sleepless nights. Where do you have that nestegg/retirement money? CASH, Gold, EBAY? I currently have mine all in cash sitting in ING direct @ 2.5%. I'd like to earn more than that and more than Government of Canada bonds.

 

Is it possible with minimal risk?

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A silly question for all.  There's gambling (trading) money and then there's nestegg/retirement money in my world of sleepless nights.  Where do you have that nestegg/retirement money?  CASH, Gold, EBAY?  I currently have mine all in cash sitting in ING direct @ 2.5%.  I'd like to earn more than that and more than Government of Canada bonds. 

 

Is it possible with minimal risk?

No.

 

It is not possible.

 

To earn more you have to take more risk.

 

Not that the risks are not worth it in many alternatives.

 

But realize that 2.5% with guaranteed principal is actually earning you much more than that on a relative basis if stocks are declining.

 

That is, cash itself is a position -- you will be able to buy more shares of good stocks for the same amount of money later than you could now.

 

So if you look at it that way you are making money in stocks by NOT buying on the way down, while others who refuse to sell because they can't "get out even" suffer greater and greater losses.

 

If you wait for the next big decline in stocks then you can get in at lower prices for the next ride up. In the meantime you are getting wealthier on a relative basis by waiting patiently in cash, and you have the advantage of observing from the sidelines without the bias that comes from being "in" the stock market.

 

Investors who always remain fully invested in good opportunities never get to take advantage of any great opportunities because when they come along they have no cash to do so.

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