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FYI: How worried are you about the stock market? Is the near tripling of stock prices since the 2009 market bottom a cause for concern? This week’s WEALTHTRACK guest has some different and positive perspectives on the market
Be aware that other Central Banks (Bank of Japan for one) are ready to open up their own liquidity spigot as the Fed tightens down their own. Prepare for burps, air bubbles and more burps as markets react to these changes.
If the US stock market's performance is correlated in anyway with five years of Fed support I can imagine the Japanese stock market and stocks closely tied to Japan being the next benificiary of BofJ's new round of money printing.
Finally, an interesting chart compares HJPNX (Hennessey Japan Fund) to the performance of the S&P 500 (SPY) going back to the beginning of the Fed's support. I give Hennessey's managers a lot of credit for keeping this fund's performance up while other Japanese-centric funds have lagged miserably.
He said something that caught me off guard, at the 8 minute mark. Something to the effect that since 10 year Treasury bonds have a yield of 2.5%, that is equivalent to a stock with a P/E ratio of 37.5, and he said Apple has a P/E of only 14 and the S&P 500 has a P/E of about 16.5 in comparison, so bonds are very expensive.
Do you buy into that line of reasoning that bonds yielding about 2.5% are equivalent to stocks with P/Es of 37.5, and therefore bonds are very expensive?
Not sure where he got that 37.5 P/E figure. Any idea?
2.5 x 37.5 = 93.75, so that's not it.
Do you ever equate the 10-year Treasury yield to a given P/E?
I just viewed that segment a couple of more times, and am now convinced that he just made a mistake on his math. He said 37.5 P/E, but should have calculated it to be a P/E of 40. But I'm not sure I buy into this idea that a 10-year Treasury yield equates to a P/E of 40 in a stock.
Is that a logical way to look at it?
I know people will look at the inverse of the P/E: the E/P is the earnings yield, and people compare that to a bond. So if a stock has a P/E of 20, it's earnings yield is 5, and they then compare that to the yield on bonds
The economies and monetary system is still much perverted. The monetary shock to the social systems (many regular folks) is still not normal; and may not be again, whatever the Phd's and similar consider to be normal at any given time in society and the money that moves within that society. Are some bonds too expensive? Apparently not yet. I can imagine the impact upon (housing sector and related industries for one) numerous sectors of the economy if rates start to move too fast and high without any good reason. The Fed is going to stay "handoffs" with a slow and easy position. The Fed may have many data points; but I am not assured their policy decisions will be correct.
The economies and monetary system is still much perverted. The monetary shock to the social systems (many regular folks) is still not normal; and may not be again, whatever the Phd's and similar consider to be normal at any given time in society and the money that moves within that society. The Fed may have many data points; but I am not assured their policy decisions will be correct. Japan, monetary policy and recession? Take care, Catch
I agree with you Catch......"I am not assured their policy decisions will be correct" It is very difficult to try and control the economy the way the Fed is trying to. They want a very specific amount of inflation, 2%. Not more, not less. They want to control the unemployment numbers. Can they control both of these? And Yellen even comments on the stock market, and mentions some specific sectors that might be getting overheated. Supposedly they don't target the stock market to try and control it, but it definitely factors into their decisions.
Do US bonds provide value relative to other foreign bonds? What are some European bonds yielding? I don't own any bond funds because I think mid-long term is negative, but the yield that US bonds are offering appears to still be compelling when directly compared to some major alternatives.
scott, US bonds do provide good value relative to foreign bonds. The yield on almost all foreign government bonds is substantially lower than the yield on US government bonds. "What are some European bonds yielding?". Scott, I have seen that data in the past couple of months, but don't have it "at the ready". But I can tell you that European bonds from almost all the financially stable European countries yield substantially less than US gov't bonds. There are 2-3 European countries whose bonds yield more than the US gov't bonds, but they are countries whose "credit rating" is much lower than the US, and who were in a bit of trouble in the relatively recent past.
Good bond funds in my mind are there for good managers to navigate the market better than I could. Over the last 5-7 years I identified the best managers for me. So I own MWTRX, PIMIX, TGEIX, and TGBAX. That's where my bond money is.
Comments
Japan.
Be aware that other Central Banks (Bank of Japan for one) are ready to open up their own liquidity spigot as the Fed tightens down their own. Prepare for burps, air bubbles and more burps as markets react to these changes.
If the US stock market's performance is correlated in anyway with five years of Fed support I can imagine the Japanese stock market and stocks closely tied to Japan being the next benificiary of BofJ's new round of money printing.
Finally, an interesting chart compares HJPNX (Hennessey Japan Fund) to the performance of the S&P 500 (SPY) going back to the beginning of the Fed's support. I give Hennessey's managers a lot of credit for keeping this fund's performance up while other Japanese-centric funds have lagged miserably.
He said something that caught me off guard, at the 8 minute mark.
Something to the effect that since 10 year Treasury bonds have a yield of 2.5%, that is equivalent to a stock with a P/E ratio of 37.5, and he said Apple has a P/E of only 14 and the S&P 500 has a P/E of about 16.5 in comparison, so bonds are very expensive.
Do you buy into that line of reasoning that bonds yielding about 2.5% are equivalent to stocks with P/Es of 37.5, and therefore bonds are very expensive?
Not sure where he got that 37.5 P/E figure.
Any idea?
2.5 x 37.5 = 93.75, so that's not it.
Do you ever equate the 10-year Treasury yield to a given P/E?
I just viewed that segment a couple of more times, and am now convinced that he just made a mistake on his math. He said 37.5 P/E, but should have calculated it to be a P/E of 40. But I'm not sure I buy into this idea that a 10-year Treasury yield equates to a P/E of 40 in a stock.
Is that a logical way to look at it?
I know people will look at the inverse of the P/E: the E/P is the earnings yield, and people compare that to a bond. So if a stock has a P/E of 20, it's earnings yield is 5, and they then compare that to the yield on bonds
The economies and monetary system is still much perverted.
The monetary shock to the social systems (many regular folks) is still not normal; and may not be again, whatever the Phd's and similar consider to be normal at any given time in society and the money that moves within that society.
Are some bonds too expensive? Apparently not yet.
I can imagine the impact upon (housing sector and related industries for one) numerous sectors of the economy if rates start to move too fast and high without any good reason.
The Fed is going to stay "handoffs" with a slow and easy position.
The Fed may have many data points; but I am not assured their policy decisions will be correct.
Japan, monetary policy and recession?
Take care,
Catch
It is very difficult to try and control the economy the way the Fed is trying to.
They want a very specific amount of inflation, 2%. Not more, not less. They want to control the unemployment numbers. Can they control both of these? And Yellen even comments on the stock market, and mentions some specific sectors that might be getting overheated. Supposedly they don't target the stock market to try and control it, but it definitely factors into their decisions.
"What are some European bonds yielding?". Scott, I have seen that data in the past couple of months, but don't have it "at the ready". But I can tell you that European bonds from almost all the financially stable European countries yield substantially less than US gov't bonds. There are 2-3 European countries whose bonds yield more than the US gov't bonds, but they are countries whose "credit rating" is much lower than the US, and who were in a bit of trouble in the relatively recent past.