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American stocks are at their most expensive in decades
- deleted 3y ago[deleted]
- whoomp12342 3y agopendulum swings. hang on to your hats ladies and gentlemen
- andsoitis 3y agohttps://archive.is/x5fZU https://archive.is/x5fZU
- andsoitis 3y ago> And on that measure, shares now look more expensive—and thus lower-yielding—when compared with bonds than they have in decades. If one is optimistic about the private sector driving wealth creation (rather than the government), then one's view is likely that shares will still be higher-yielding on a risk-adjusted basis. Of course, other factors like time horizon and one's personal risk appetite also matter. If, however, one is not bullish on the long-term wealth creation of American companies (and by extensions the stock market), then the question becomes where would you rather put your money? Personally, I have a hard time seeing better alternatives for the average individual.
- allendoerfer 3y agoIn other words: TINA.
- andsoitis 3y agoPerhaps. But maybe I (and others) are just not researching enough.
- mrcode007 3y agoBonds yield higher returns now than the S&P500. Claiming that there is no alternative is financial illiteracy. I suspect most folks simply don’t know how to buy different kind of bonds and resort to buying bond funds or ETFs etc.
- andsoitis 3y ago> Bonds yield higher returns now than the S&P500. Claiming that there is no alternative is financial illiteracy. For the record, I don't think I claimed there is no alternative. While bond yield might be higher right this instant (or for the last 6 months, say), does not automatically mean your risk-adjusted return over 20 years is likely to be higher (historically shares have outpaced bonds by a fair margin). Which makes me wonder where you are putting your money and consequently whether: (a) you would advise putting one's investment money into bonds and (b) at what point would you advise to switch and (c) do you think there's something that would be even higher yield than either
- CameronNemo 3y agoSorry I signed an NDA with my time travel provider. Just wait six months, you'll figure it out.
- andsoitis 3y agoYou might have said this in jest, but I think it is a strong argument against the possibility of time travel into the past.
- datadrivenangel 3y agoefficient market hypothesis. No time travel because all valuable information has already been sent back through time.
- eru 3y agoThe answer from financial theory is that you should be buying the market portfolio that includes stocks and bonds (and other assets) in the same proportion as their market capitalisation.
- albertop 3y agoCan you give me one example of government wealth creation?
- FollowingTheDao 3y agoWhy do people always forget the government is made up of people and people create things.
- tjrgergw 3y agoHere come the Free Market Fundamentalists... I don't know, roads?
- eru 3y agoCompare https://fee.org/articles/russian-smugglers-renovate-road-neglected-by-the-government/ https://fee.org/articles/russian-smugglers-renovate-road-neg...
- tjrgergw 3y agoAh yes, I want my roads built by smugglers. You people would rather die than commit heresy against the Church of Free Market.
- eru 3y agoBuilding private roads is (almost) illegal in most of the world, so you'll mostly see criminals do it. See also https://www.accessmagazine.org/spring-1993/private-toll-roads-in-america-the-first-time-around/ https://www.accessmagazine.org/spring-1993/private-toll-road... Financing roads from tolls is fairly straightforward.
- tjrgergw 3y agoFinancing by tolls, there's another excellent example of wealth creation by the government, thank you.
- eru 3y ago> If, however, one is not bullish on the long-term wealth creation of American companies (and by extensions the stock market), then the question becomes where would you rather put your money? Personally, I have a hard time seeing better alternatives for the average individual. There's a whole global economy out there.
- CityOfThrowaway 3y agoYes! Where specifically in the global economy are you more excited about than the US?
- basch 3y agoTaking a peak at https://www.avantisinvestors.com/avantis-investments/avantis-international-small-cap-value-etf/ https://www.avantisinvestors.com/avantis-investments/avantis... 28% of it is Japan. https://www.economist.com/finance-and-economics/2023/04/13/after-decades-of-stagnation-wages-in-japan-are-finally-rising https://www.economist.com/finance-and-economics/2023/04/13/a...
- wing-_-nuts 3y agoJapan's demographics are a horror show. As is most of asia's. Heck, as is most of europe's. About the only places with decent demographics are latin america and africa and they're going to face outsized problems with global warming.
- eru 3y agoThose problems are well known, so should already be priced in. If they are not priced in, please feel to free to take up the appropriate short positions: That will both turn a profit for you, and contribute to efficient prices for the rest of us.
- eru 3y agoNo where specifically, that's the point. It's about diversification. On a domestic level, that's why you buy the S&P500, not YOLO everything on Tesla. Even if there's no other stock that 'you are more excited about than [Tesla]'.
- kitanata 3y ago[flagged]
- abeppu 3y agoIf equities are currently highly valued, should we expect IPOs to come back?
- bboygravity 3y ago2023 "journalism": hey guyz the stockmarket looks like its at pretty high levels did you see that?
- 93po 3y agoThis style of reporting has existed for decades
- FollowingTheDao 3y agoNot for long!!!!!
- advaitruia 3y agoThe metric to measure how expensive equity is sounds flawed. Expected earnings divided by share price is not indicative of actual equity returns - especially over 1 year?
- jgalt212 3y agoThe Fed's balance sheet is still 2X bigger than it was pre-pandemic. The money has to go somewhere. https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL
- wing-_-nuts 3y agoI started investing in '08. I've always been a pretty staunch boglehead, and I've always held 'age in bonds' which is pretty conservative. Most of my bonds were in the TSP G fund (zero risk, 10y treasury yields) with a little in short term bonds. Seeing how badly even short term bonds have gotten slaughtered in this downturn has made me pretty jaded. They'll have a much smaller role in my asset allocation going forward. Probably no more than 30% of my portfolio even in retirement.
- metaphor 3y ago> Most of my bonds were in the TSP G fund (zero risk, 10y treasury yields) with a little in short term bonds. You're clearly confused. The TSP G Fund[1] is comprised of 100% nonmarketable short-term Treasuries specially issued to the TSP; 10-year T-notes don't exist in its composition whatsoever. and its nominal return over any arbitrary period has never been negative...in other words, bond duration risk simply isn't applicable to the fund. Furthermore: >> The G Fund rate is calculated by the U.S. Treasury as the weighted average yield of approximately 183 U.S. Treasury securities on the last day of the previous month. [1] https://www.tsp.gov/funds-individual/g-fund/ https://www.tsp.gov/funds-individual/g-fund/
- wing-_-nuts 3y ago>In practice, monthly returns have closely matched the percentage rate for the 10-year U.S. Treasury Note almost perfectly. The G Fund and 10-year are 98.4% correlated since 1988 https://www.govexec.com/pay-benefits/2023/05/tsp-g-fund-debt-ceiling-market-turmoil/385889/ https://www.govexec.com/pay-benefits/2023/05/tsp-g-fund-debt...
- metaphor 3y agoThat's nice but entirely irrelevant. If you were 100% allocated in TSP G Fund and Treasury yields spiked across the curve, your account balance never goes down and you could withdrawal the entire amount at any time without losing a single penny. If you were 100% allocated in 10-yr T-notes and Treasury yields spiked across the curve, well...you'd be swallowing a substantial loss proportional to your unhedged duration exposure if you were either to liquidate your position before maturity or before yields normalize. This[1] is what you don't understand. [1] https://www.investopedia.com/terms/b/bond-yield.asp https://www.investopedia.com/terms/b/bond-yield.asp