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Can anyone qualified/knowledgeable offer commentary on this? It sounds compelling, but since I don't know much about this I am suspicious of making too much of

Can anyone qualified/knowledgeable offer commentary on this? It sounds compelling, but since I don't know much about this I am suspicious of making too much of an argument where all the relevant background was provided to me by a person trying to make a point. (that is, the fact that it sounds compelling to me as a layman is very weak evidence that it's true)

gamblor956 8y ago
He starts off with specific facts, but within 3 or 4 paragraphs it is all supposition. By the midway point, it's supposition based on supposition. At the end, its a dozen layers of supposition. Also doesn't help his case that he misunderstands the role of equity in the Federal Reserve. Unlike equity in a private company, equity in the Federal Reserve is not an ownership interest. It's essentially a group insurance policy similar to Lloyd's.
nodesocket 8y ago
I have been a hobbyist investor in the market since I was 20. Take my thoughts with a grain of sand as I by no-means am a professional. Full disclosure; I am also bullish. While I will agree the market has been on an absolute rip roaring tear the last 1 1/2 years, YTD the S&P is only up 5.75%, which is marginally above pace for the historical average. 2018 has been much more volatile, with big swings, and until the last couple of week rally we've been trading nearly sideways. The good news is there are fundamental economic reasons for the rally. Unemployment is at 10 year record lows[1]. The Trump tax cuts really improved fundamentals for companies, allowing many to repatriate capital, increase hiring, and ramp up R&D spending. The GDP growth for the second quarter of this year was an astonishing 4.1%[2]. The US is growing faster than China, and comparing markets is winning the "trade war". Have some high tech growth stocks gotten ahead of themselves? Absolutely, look at their valuations and P/E. With that said, are we on a the verge of a recession and economic collapse, I'd argue firmly no. There are many sectors that are still undervalued in the market, chiefly banks. [1] https://data.bls.gov/timeseries/LNS14000000 https://data.bls.gov/timeseries/LNS14000000 [2] https://www.wsj.com/articles/strong-economic-growth-boosts-u-s-in-trade-battles-1533087875 https://www.wsj.com/articles/strong-economic-growth-boosts-u...
- fallingfrog 8y ago
  Banks! My goodness. You know, banks were making tons of money right before the 2008 crash too, it's just that the loans they were making were bad ones. They're in the same situation now, wouldn't you say?
  - nodesocket 8y ago
    Nope I would not say. Regulation has increased, they go through stress tests, and historically they are undervalued right now. Take Bank of America which has a P/E 14.75 and 1.92% divy yield. Again, I am bullish, which I have noticed is not the general sentiment here on HN. I recognize and fully acknowledge I could be completely wrong, but the bears have been calling for a recession and market collapse ever since Trump took office. Eventually of course there will be a correction (though we've already had a few micro-corrections this year). It is much easier to be a bear and negative, because eventually they'll be right. They just have to keep preaching doomes day and wait it out. Long term though, show me a better way to get return on capital than the market.
    - fallingfrog 8y ago
      Right, well of course I could also be wrong. But imho the market can't crash so long as the fed keeps shoving cheap money into the system, which encourages companies to take out huge loans, then buy back their own stocks with the money. Let me ask you this: so you think the trump tax cuts are going to have matching spending cuts? Of course not. So we're going to issue debt to pay for them, which we can only pay the interest on when interest rates are low, which does add a little extra foam to the bubble but will make the downside more painful when rates do have to rise.
    - fallingfrog 8y ago
      Oh - to answer the question about return on capital: use the money to convert the power grid to 100% renewables, which might literally save the world in a few decades time. There is more to life than maximizing profits in the short term.
sytelus 8y ago
I think I've a name for these type of articles: stock astrology. Very much like in astrology, you try to make future predictions based on made up theories often using some historical coincidences.

gamblor956 8y ago

He starts off with specific facts, but within 3 or 4 paragraphs it is all supposition. By the midway point, it's supposition based on supposition. At the end, its a dozen layers of supposition. Also doesn't help his case that he misunderstands the role of equity in the Federal Reserve. Unlike equity in a private company, equity in the Federal Reserve is not an ownership interest. It's essentially a group insurance policy similar to Lloyd's.

nodesocket 8y ago

I have been a hobbyist investor in the market since I was 20. Take my thoughts with a grain of sand as I by no-means am a professional. Full disclosure; I am also bullish. While I will agree the market has been on an absolute rip roaring tear the last 1 1/2 years, YTD the S&P is only up 5.75%, which is marginally above pace for the historical average. 2018 has been much more volatile, with big swings, and until the last couple of week rally we've been trading nearly sideways. The good news is there are fundamental economic reasons for the rally. Unemployment is at 10 year record lows[1]. The Trump tax cuts really improved fundamentals for companies, allowing many to repatriate capital, increase hiring, and ramp up R&D spending. The GDP growth for the second quarter of this year was an astonishing 4.1%[2]. The US is growing faster than China, and comparing markets is winning the "trade war". Have some high tech growth stocks gotten ahead of themselves? Absolutely, look at their valuations and P/E. With that said, are we on a the verge of a recession and economic collapse, I'd argue firmly no. There are many sectors that are still undervalued in the market, chiefly banks. [1] https://data.bls.gov/timeseries/LNS14000000 https://data.bls.gov/timeseries/LNS14000000 [2] https://www.wsj.com/articles/strong-economic-growth-boosts-u-s-in-trade-battles-1533087875 https://www.wsj.com/articles/strong-economic-growth-boosts-u...

fallingfrog 8y ago
Banks! My goodness. You know, banks were making tons of money right before the 2008 crash too, it's just that the loans they were making were bad ones. They're in the same situation now, wouldn't you say?
- nodesocket 8y ago
  Nope I would not say. Regulation has increased, they go through stress tests, and historically they are undervalued right now. Take Bank of America which has a P/E 14.75 and 1.92% divy yield. Again, I am bullish, which I have noticed is not the general sentiment here on HN. I recognize and fully acknowledge I could be completely wrong, but the bears have been calling for a recession and market collapse ever since Trump took office. Eventually of course there will be a correction (though we've already had a few micro-corrections this year). It is much easier to be a bear and negative, because eventually they'll be right. They just have to keep preaching doomes day and wait it out. Long term though, show me a better way to get return on capital than the market.
  - fallingfrog 8y ago
    Right, well of course I could also be wrong. But imho the market can't crash so long as the fed keeps shoving cheap money into the system, which encourages companies to take out huge loans, then buy back their own stocks with the money. Let me ask you this: so you think the trump tax cuts are going to have matching spending cuts? Of course not. So we're going to issue debt to pay for them, which we can only pay the interest on when interest rates are low, which does add a little extra foam to the bubble but will make the downside more painful when rates do have to rise.
  - fallingfrog 8y ago
    Oh - to answer the question about return on capital: use the money to convert the power grid to 100% renewables, which might literally save the world in a few decades time. There is more to life than maximizing profits in the short term.

sytelus 8y ago

I think I've a name for these type of articles: stock astrology. Very much like in astrology, you try to make future predictions based on made up theories often using some historical coincidences.