15 декабря, 21:48

Links for 12-15-17

What Is Bitcoin Really Worth? Don’t Even Ask. - Robert Shiller What Can Central Banks Do To Manage the Next Financial Crisis? - Ben Bernanke How the MillerCoors joint venture changed competition - Microeconomic Insights What Happens if the Tax...

15 декабря, 15:43

Are Recent S&P 500 Returns Excessive Relative To History?

The US stock market has been on a tear lately. Has the party gone too far? A rising chorus of analysts say that caution is advised, citing several valuation metrics. The Shiller PE Ratio, for instance, is currently at its second-highest level since the late-1800s. Valuations appear stretched, but history reminds that this form of […]

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11 декабря, 15:49

Shiller Says Minds Are Moving Into a 'State of Worry'

Dec.11 -- Robert Shiller, professor of economics at Yale University, discusses growth versus value and volatility in equities. He speaks with Guy Johnson on "Bloomberg Surveillance."

10 декабря, 18:11

Six Ways US Stocks Are The Most Overvalued In History

Submitted by Mish Shedlock US large cap stocks are the most overvalued in history. Let's investigate six ways. Crescat Capital claims US large cap stocks are the most overvalued in history, higher than prior speculative mania market peaks in 1929 and 2000. Their 25-page presentation makes a compelling case, with numerous charts. It's worth your time to download and investigate the report. Six Ways Socks Most Overvalued in History Price to Sales Price to Book Enterprise Value to Sales Enterprise Value to EBITDA Price to Earnings Enterprise Value to Free Cash Flow Here are a few snips from the report. Bear Market Catalysts There are many catalysts that are likely to send stocks into bear market in the near term. A likely bursting of the China credit bubble is first and foremost among them. Our data and analysis show that China today is the biggest credit bubble of any country in history. We believe its bursting will be globally contagious for equities, real estate, and credit markets. The US and China bubbles are part of a larger, global debt-to-GDP bubble, which is also historic in scale, and the product of excessive, lingering central bank easy monetary policies in the wake of the now long-passed 2008 Global Financial Crisis.    These policies failed to resolve the debt-to-GDP imbalances that preceded the last crisis. Now, easy money policies have created even bigger debt-to-GDP imbalances and asset bubbles that will precipitate the next one.We are in the very late stages of a global economic and business expansion cycle with investor sentiment reflecting record optimism typical at market peaks, a sign of capitulation at the end of a bull market. Crescat is positioned to profit from the coming broad, global cyclical market and economic downturn that we foresee. We strongly believe that our global equity net short positioning in our hedge funds will be validated soon. Cyclical PE Smoothing It is critical to use cyclical smoothing to accurately gauge market valuations in their current and historical context when using P/E.Yale economics professor, Robert Shiller, received a Nobel Prize in 2013 for proving this fact so we hope you will believe it.    The problem with just looking at trailing 12-month P/E ratios to determine valuation is that it produces sometimes-false readings due to large cyclical swings in earnings at peaks and valleys of the business cycle. For example, in the middle of the recession in 2001, P/Es looked artificially high due to a broad earnings plunge. P/Es can also look artificially low at the peak of a short-term business cycle, which can produce what is known as a “value trap”, such as in 2007 during the US housing bubble and such as we believe is the case today in China, Australia, and Canada.   Shiller showed a method for cyclically-adjusting P/Es using a 10-year moving average of real earnings in the denominator of the P/E. Shiller’s Cyclically-Adjusted P/E, called CAPE multiples have been better predictors of future full-business-cycle stock market returns than raw 12-month trailing P/Es. Shiller showed that markets with historically high CAPEs lead to low long-term returns for long-only index investors. Shiller CAPEs are fantastic, but they can be improved by including an adjustment for corporate profit margins which makes them even better predictors of future stock price performance and therefore even better measures of cyclically-adjusted P/E for valuation purposes.    .Shiller’s CAPEs simply need an adjustment for profit margins because margins are a key element of earnings cyclicality. We can understand this by looking at median S&P 500 profit margins in the chart below. For example, even though profit margins were cyclically and historically high during the tech bubble, they are even higher today. In the same spirit of Shiller’s attempt to cyclically adjust earnings to determine a useful P/E, CAPEs need to be adjusted for cyclical swings in profit margins. When we multiply Shiller CAPEs by a cyclical adjustment factor for profit margins (10-year trailing profit margins divided by long term profit margin), we get a margin-adjusted CAPE that is not only theoretically valid but empirically valid as it proves to be an even better predictor of future returns than Shiller’s CAPE!   Credit goes to John P. Hussman, Ph.D. for the idea and method to adjust Shiller CAPEs for swings in profit margins.As we can see in the Hussman chart below, margin-adjusted CAPE, shows that today’s P/E ratio for comparative historical purposes is 43, the highest ever! The 1999 peak P/E was 41 and the 1929 P/E was 40. Once again, we can see that today we have the highest valuation multiples ever for US stocks, higher than 1929 and higher than 1999 and 2000! Margin-Adjusted CAPE It's easy to discard such talk, just as it was in 2000 and 2006. People readily dispute CAPE, concocting all sorts or reasons why it's different this time. The most common reason is interest rates are low. We also hear "stocks are cheap to bonds" which is like saying moon rocks are cheap compared to oranges. I do not know when this all matters. And no one else knows either. What I am sure if is that it will matter. How? I don't know when, nor am I sure "how" it happens. It could play out as a crash or stocks can decline over a period of 6-10 years with nothing worse than a 15% decline in any given year, accompanied with several sucker rallies leading people to believe the bottom is in. History Lesson Some might ask: If you don't know when or how, of what use is such analysis.The answer is that history shows this is a very poor time to invest in stocks. That does not mean, they cannot go higher(and they have). History also suggests that people who invest in bubbles, start believing in them. People believe in bubbles because they have to, in order to rationalize their investments. Others know full well it's a bubble but they think they can get out in time. Historically, few do because they are conditioned to "buy-the-dip" philosophy, and keep doing so even after it no longer works. Yesterday, I noted Oppenheimer Predicts PE Expansion, Most Bullish S&P Forecast Yet.So if you are looking for a reason to stay heavily invested in this market, you have one. But don't fool yourself, this is the most expensive market in history.  

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06 декабря, 22:15

Robert Shiller on GOP tax plan and home prices

CNBC's Diana Olick speaks to Robert Shiller, Yale University professor, about the effect of tax reform and interest rates on the housing market.

04 декабря, 19:36

(Поле чудес) Финансовые эксперты продолжают сравнения биткоина с "пузырями" прошлого

Стремительный рост биткоина и других криптовалют, наряду с их волатильностью, вновь привлекли внимание финансовых экспертов, включая магната и инвестора Карла Айкана (Carl Icahn), а также лауреата Нобелевской премии по экономике Роберта Шиллера (Robert Shiller).В интервью CNBC, Айкан, основатель Icahn Enterprises, признался, что не очень разбирается в биткоине, и добавил, что ему это "напоминает пузырь". Подчеркнув, что он "просто не понимает" энтузиазма в отношении биткоина и других криптовалют, он сравнил его с земельным пузырем 18-го века, заявив:"Джон Лоу продавал землю в Миссисипи, которая была абсолютно бесполезной, а французы платили за нее, отдавая все свои деньги. И вот однажды этот пузырь лопнул... вот что для меня криптовалюты".Знаменитый Миссисипский пузырь, созданный шотландским авантюристом и экономистом Джоном Лоу, по существу состоял в том, что ему дали полномочия открыть компанию для управления торговлей землями вблизи реки Миссисипи, на которые претендовала Франция. По словам историка Джона Моэна (Jon Moen) из Университета Миссисипи, Лоу финансировал предприятие, которое выпускало бумажные акции для инвесторов, которые с надеждой на прибыль в "в золоте и серебре" охотно их скупали, что принесло ранним инвесторам прибыль более 1 900% менее чем за год.По словам Моэна, тогда многие стали миллионерами, но все пошло под откос, когда люди поняли, что большая часть земель - бесполезные болота. Айкан считает, что то же самое произойдет и с биткоином, который вырос за год на 1 000%, как только люди больше не будут видеть в нем ценность. Однако он не учитывает того, что рост криптовалюты сопровождался резким увеличением ее популярности. Айкан добавил:"Честно скажу вам, я не понимаю криптовалюты. Видимо, я последний из таких людей. И я стараюсь остерегаться того, чего не понимаю".Роберт Шиллер: "биткоин не упадет до нуля, а просто снизится"Лауреат Нобелевской премии по экономике Роберт Шиллер (Robert Shiller) также поделился своим мнением биткоине. Он считает, что криптовалюта потерпит крах, подобный краху фондового рынка США, который предшествовал "Большой депрессии". Шиллер сравнивает влечение к биткоину с сюжетом "детективного фильма", который привлекает людей, которые хотят перехитрить систему.Экономист из Йельского университета Роберт Шиллер получил Нобелевскую премию по экономике в 2013 году. Его популярность частично проистекает из его предсказания краха пузыря интернет-компаний и на рынке жилья - в 2000 году он опубликовал книгу под названием "Иррациональный оптимизм", в которой подробно описываются эти крахи.На конференции в Вильнюсе, которая прошла на прошлой неделе, он сказал:"Биткоин - это просто потрясающе. Он дает ощущение того, что ты самый умный, самый быстрый и понял то, чего никто другой не осознает. А еще биткоин кажется антиправительственным и нерегулируемым. Это такая замечательная история. Если бы она только была реальной".Шиллер добавил, что он не знает, когда криптовалюта остановится, но сравнил ее с фондовым рынком в 1920-х годах. По его словам, она будет идти вверх, но мы "в конце концов придем к 1929 году". Он добавил, что криптовалюта рухнет, но "не до нуля, она просто сильно потеряет в цене".В сентябре этого года Шиллер уже высказывал свое мнение по поводу биткоина, назвав его "пузырем".Новограц и Citigroup не согласныЛегендарный миллиардер Майк Новограц (Mike Novogratz) не раз высказывал свое мнение в поддержку биткоина и других криптовалют. На днях он заявил, что в некоторых регионах цена биткоина и правда может искусственно раздуваться, однако сама криптовалюта не является пузырем.Однако, Новограц отмечал, что биткоин и криптовалютный рынок могут стать крупнейшим пузырем "нашего века"."Я думаю, что криптовалюта станет самым большим пузырем нашего века. Это пузырь, и в нем много мошенников. Мы видим очень много разных проектов - некоторые из них широко финансируются, хотя сильно напоминают финансовые пирамиды", - сказал Новограц.Новограц также подчеркнул, что в прошлом было много пузырей вокруг инновационных и революционных технологий, таких как интернет. Например, пузырь интернет-компаний. Но сам интернет при этом не был пузырем. Он изменил работу каждой индустрии в мире, революционизировав связь и обработку информации.Эпоха интернет-компаний также была наполнена мошенническими проектами, как и сейчас среда биткоина и криптовалют. Внутри криптовалютного рынка существует множество мошеннических компаний и проектов, которые работают как финансовые пирамиды, но есть и реальные проекты, приносящие пользу."Исторически пузыри и мании возникают вокруг вещей, которые коренным образом меняют нашу жизнь. Будь то железные дороги или интернет - они кардинально поменяли наш образ жизни", - сказал Новограц.Кроме того, как показали недавние исследования Citigroup, если некоторые аналитики решили назвать биткоин пузырем - можно сказать, что практически все технологии, компании и активы, которые получали значительную выгоду, также являются пузырями. На протяжении последних двух десятилетий аналитики утверждали, что Amazon, Tesla, Facebook, недвижимость в Великобритании, подержанные автомобили и другие формы инвестиций являются "пузырями".В исследовании Citigroup подчеркивается, что если биткоин считается пузырем, то и все остальное можно назвать пузырем.(https://bits.media/news/s...)

04 декабря, 19:26

This Time Is Different, It Just Ends The Same

Authored by Lance Roberts via RealInvestmentAdvice.com, This past weekend, I was in Florida with Chris Martenson and Nomi Prins discussing the current backdrop of the markets, economic cycles, and future outcomes. A bulk of the conversations centered around the current “everything bubble” that currently exists globally. Elevated valuations in stock prices, extremely low yields between in “junk bonds,” or intense speculation around “cryptocurrencies” all suggest we have entered once again into “bubble” territory.” Let me state this: “Market bubbles have NOTHING to do with valuations or fundamentals.” Hold on…don’t start screaming “heretic” and building gallows just yet. Let me explain. Stock market bubbles are driven by speculation, greed, and emotional biases – therefore valuations and fundamentals are simply a reflection of those emotions. In other words, bubbles can exist even at times when valuations and fundamentals might argue otherwise. Let me show you a very basic example of what I mean. The chart below is the long-term valuation of the S&P 500 going back to 1871. First, it is important to notice that with the exception of only 1929, 2000 and 2007, every other major market crash occurred with valuations at levels LOWER than they are currently. Secondly, all of these crashes have been the result of things unrelated to valuation levels such as liquidity issues, government actions, monetary policy mistakes, recessions or inflationary spikes. However, those events were only a catalyst, or trigger, that started the “panic for the exits” by investors. Market crashes are an “emotionally” driven imbalance in supply and demand. You will commonly hear that “for every buyer, there must be a seller.” This is absolutely true. The issue becomes at “what price.” What moves prices up and down, in a normal market environment, is the price level at which a buyer and seller complete a transaction. In a market crash, however, the number of people wanting to “sell” vastly overwhelms the number of people willing to “buy.” It is at these moments that prices drop precipitously as “sellers” drop the levels at which they are willing to dump their shares in a desperate attempt to find a “buyer.” This has nothing to do with fundamentals. It is strictly an emotional panic which is ultimately reflected by a sharp devaluation in market fundamentals. Bob Bronson once penned: “It can be most reasonably assumed that market are sufficient enough that every bubble is significantly different than the previous one, and even all earlier bubbles. In fact, it’s to be expected that a new bubble will always be different than the previous one(s) since investors will only bid up prices to extreme overvaluation levels if they are sure it is not repeating what led to the last, or previous bubbles. Comparing the current extreme overvaluation to the dotcom is intellectually silly.   I would argue that when comparisons to previous bubbles become most popular – like now – it’s a reliable timing marker of the top in a current bubble. As an analogy, no matter how thoroughly a fatal car crash is studied, there will still be other fatal car crashes in the future, even if the previous accident-causing mistakes are avoided.” He is absolutely right. Comparing the current market bubble to any previous market bubble is rather pointless. Financial markets have already studied and adapted to the causes of the previous “fatal crashes” but this won’t prevent the next one. I previously discussed George Soros’ theory on bubbles which is worth reviewing at this juncture: “First, financial markets, far from accurately reflecting all the available knowledge, always provide a distorted view of reality. The degree of distortion may vary from time to time. Sometimes it’s quite insignificant, at other times it is quite pronounced. When there is a significant divergence between market prices and the underlying reality the markets are far from equilibrium conditions.   Every bubble has two components: An underlying trend that prevails in reality, and;  A misconception relating to that trend.   When a positive feedback develops between the trend and the misconception, a boom-bust process is set in motion. The process is liable to be tested by negative feedback along the way, and if it is strong enough to survive these tests, both the trend and the misconception will be reinforced. Eventually, market expectations become so far removed from reality that people are forced to recognize that a misconception is involved. A twilight period ensues during which doubts grow, and more people lose faith, but the prevailing trend is sustained by inertia.   As Chuck Prince, former head of Citigroup, said, ‘As long as the music is playing, you’ve got to get up and dance. We are still dancing.’ Eventually, a tipping point is reached when the trend is reversed; it then becomes self-reinforcing in the opposite direction.” Typically bubbles have an asymmetric shape. The boom is long and slow to start. It accelerates gradually until it flattens out again during the twilight period. The bust is short and steep because it involves the forced liquidation of unsound positions. The chart below is an example of asymmetric bubbles. The pattern of bubbles is interesting because it changes the argument from a fundamental view to a technical view. Prices reflect the psychology of the market which can create a feedback loop between the markets and fundamentals. This pattern of bubbles can be clearly seen at every bull market peak in history. The chart below utilizes Dr. Robert Shiller’s stock market data going back to 1900 on an inflation-adjusted basis with an overlay of the asymmetrical bubble shape. There is currently a strong belief that the financial markets are not in a bubble. The arguments supporting those beliefs are all based on comparisons to past market bubbles. The inherent problem with much of the mainstream analysis is that it assumes everything remains status quo. However, the question becomes what can go wrong for the market? In a word, “much.” Economic growth remains very elusive, corporate profits appear to have peaked, and there is an overwhelming complacency with regards to risk. Those ingredients combined with an extraction of liquidity by the Federal Reserve leaves the markets more vulnerable to an exogenous event than currently believed. It is likely that in a world where there is virtually “no fear” of a market correction, an overwhelming sense of “urgency” to be invested and a continual drone of “bullish chatter;” markets are poised for the unexpected, unanticipated and inevitable reversion. As Chris Martenson recently penned: “I hate to break it to you, but chances are you’re just not prepared for what’s coming.   These bubbles – blown by central bankers serially addicted to creating them (and then riding to the rescue to fix them) – are the largest in all of history. That means they’re going to be the most destructive in history when they finally let go.   Millions of households will lose trillions of dollars in net worth. Jobs will evaporate, causing the tens of millions of families living paycheck to paycheck serious harm.   These are the kind of painful consequences central bank follies result in. They’re particularly regrettable because they could have been completely avoided if only we’d taken our medicine during the last crisis back in 2008.  But we didn’t. We let the Federal Reserve –the institution largely responsible for creating the Great Financial Crisis — conspire with its brethren central banks to ‘paper over’ our problems. So now we are at the apex of the most incredible nest of financial bubbles in all of human history.” I am not trying to scare the “bejeebers” out of you, but he is right. “All financial assets are just claims on real wealth, not actual wealth itself.  A pile of money has use and utility because you can buy stuff with it.  But real wealth is the “stuff” — food, clothes, land, oil, and so forth.  If you couldn’t buy anything with your money/stocks/bonds, their worth would revert to the value of the paper they’re printed on (if you’re lucky enough to hold an actual certificate). It’s that simple.   But trouble begins when the system gets seriously out of whack.   ‘GDP’ is a measure of the number of goods and services available and financial asset prices represent the claims (it’s not a very accurate measure of real wealth, but it’s the best one we’ve got, so we’ll use it). Look at how divergent asset prices get from GDP as bubbles develop. “What we see in the above chart is that the claims on the economy should, quite intuitively, track the economy itself.  Bubbles occurred whenever the claims on the economy, the so-called financial assets (stocks, bonds, and derivatives), get too far ahead of the economy itself.   This is a very important point. The claims on the economy are just that: claims.  They are not the economy itself!” Take a step back from the media, and Wall Street commentary, for a moment and make an honest assessment of the financial markets today. If our job is to “bet” when the “odds” of winning are in our favor, then exactly how “strong” is the fundamental hand you are currently betting on? This “time IS different” only from the standpoint that the variables are not exactly the same as they have been previously. Of course, they never are, and the result will be “…the same as it ever was.”

30 ноября, 17:03

Роберт Шиллер: биткоин подешевеет, но не до ноля

Робер Шиллер Биткоин растет, благодаря своей антигосударственной, компьютеризованной и нерегулируемой природе, полагает лауреат Нобелевской премии по экономике 2013 года и научный сотрудник Йельского междунаро… читать далее…

28 ноября, 17:45

Курс биткоина превысил 10 тысяч долларов

Курс биткоина достиг очередного исторического максимума, составив 10086 долларов. Между тем на южнокорейской бирже криптовалют Bithumb курс биткоина превысил 11 тысяч долларов.

26 ноября, 03:00

Francesco Filia: The World's Twin Asset Bubbles Could Collapse Under Their Own Weight

In this week's MacroVoices podcast, Erik Townsend interviews Francesco Filia, a fund manager at Fasanara Capital. After exchanging pleasantries, Townsend begins the interview by asking Filia, an analysts who's widely regarded for his research about how post-crisis monetary policy has impacted distorted markets, about the different metrics he uses to determine whether a certain asset is in a bubble. Filia begins by ticking off a laundry list of metrics that all point to the same conclusion: That today’s market is more overvalued than at any point in recent history – including the run-up to the financial crisis. Thank you, Erik. I think the equity bubble is quite uncontroversial, is quite unambiguous. There are a lot of different valuation metrics for those that care to look into them. They’ve been valid for over a hundred years of modern financial markets. And this time is no different in that respect.   There are the usual metrics that the valuation guys are looking at, like financial assets to disposable income that shows that this market is way more expensive than at any point in history including the big dot com bubble and the Lehman moment in 2007-2008.   But there are other metrics like the Buffett Indicator (market cap on GDP), the median debt on total assets, the corporate debt to GDP, the price on sales, the price to book, enterprise value on sales, enterprise value on EBITDA – there are a number of different metrics. They all convene that this is a market bubble that has not been seen before in history. Filia said he created his own valuation metric that is loosely based on the famous Shiller PE (or CAPE) ratio. Economist Robert Shiller, who teaches at Yale School of Management. Filia's ratio helps filter out distortions caused by the drop off in corporate earnings caused by the crisis. But we at Fasanara, we developed our own indicator just to try to add something to what was available already. And we started with one of the most famous of all the indicators in this respect, which is the Shiller adjusted PE ratio, or the CAPE ratio. This is the most famous of them. Professor Shiller got a Nobel Prize in 2013 for it. And for his studies on market inefficiencies and for the ability to infer future expected returns from valuation metrics such as the Shiller PE.     And, based on the Shiller PE, what it does is simply to compare current prices to not spot earnings of foreign earnings, but a more reliable measure of the average of the last ten years and adjusted for inflation. So the average of the last ten years of real earnings. And on the basis of this index, we find out that the market is as expensive and just a little bit less expensive than it was in 1929 during the Great Depression, the peak of the market before the biggest collapse in equity prices ever seen, and the year 2000. So just slightly cheaper than the year 2000. Filia's ratio is loosely based on the work of John Hussman of the Hussman funds, who was the first to utilize peak earnings instead of average earnings in his PE ratio calculations. What we do is an evolution of the Hussman PE ratio (which is taken from the Shiller ratio) which is to compare – kind of putting all in the basket. So we put the peak earnings as opposed to average earnings, and for peak earnings we really mean the peak. We take the two top quarters over the last 40 quarters. So we cannot really be seen as being any more generous to the current markets, we take the two peak quarters of the last 40 quarters. And then what we do is we compare these peak earnings to potential growth, or trend growth.   Because the point here is that what you pay in terms of stocks, should compare, not just to the past or the earnings of proposition, but also to the overall economy generally. Because if the overall economy has a lower potential growth you should be expecting to be able to pay less in terms of multiples than otherwise. The overall economy has a big correlation to earnings and to profit margins, so you should expect the potential growth rate of the economy to be quite relevant when it comes to PE multiples. Of course, what makes modern markets so uniquely precarious is the fact that investors are struggling with twin bubbles in bonds and equities. However, the former is often overlooked because the public doesn’t have as nuanced an understanding of the bond market. Yet historically speaking, bonds are even more closely correlated with metrics like inflation, as the chart below shows. However, NIRP and ZIRP has created distortions in bond valuations that have left them extremely overvalued compared with history, meaning that the inevitable regression to the mean will likely take the form of a vicious selloff. And our point is, look at bonds and look at how they compare to history and how they compare to metrics such as inflation and the GDP – to which historically they are very well correlated – and you find out what this chart on this page, which is showing that we are in totally uncharted territory at present.   What is this chart? This chart compares the real rate on German bunds – which are some of the most expensive government bonds on earth and in history – and takes, basically, the real rate on German bunds and compares them to the growth currently experienced by Germany. So the idea – and you see that also in the next slide – the idea is that the real rates in Germany are heavily negative at present.   Because what you had was, at the turn of the year, at the end of 2016, inflation started to resurface. So you had deflation and you had a pickup in inflation, which is exactly what you see on the next slide.   You see that inflation picked up, whereas nominal rates on German bunds continued their descent. And they continued deeper into negative territory because, obviously, of the ECB policy, of the policies of the central bank. At that point you had a gap opening up between nominal rates and inflation, which means that the real yields were becoming very, very negative. And you see here a table with the negative yields being minus 2.5 on average.   And the other thing that interest rates are correlated to is growth. We know that very well, that long-term interest rates, they tend to converge on nominal growth expectations for the economy. So here, in this one indicator which we call the real rate of growth ratio, we put it all together so we compare the nominal rate to inflation to growth. And we end up seeing this.   That these bonds have never been so expensive, because they are in deep negative territory – despite a GDP which has resurfaced. It’s not any more zero negative; it is close to 2% as far as Germany is concerned. Having discussed the bubbles in equity and bond markets, Townsend proceeds to the next logical question. Now that we know we’re in a bubble, how can we tell if the bubble is going to burst? To his credit, Filia admitted he has no idea what the catalyst might be. Furthermore, there doesn’t necessarily need to be a catalyst for these bubbles to burst – but once their valuations have reached a kind of tipping point, they could implode on their own. There can be a catalyst. Or there can be no catalyst. If you talk about catalysts, I could argue that can be inflation, for example. At the moment, we have seen that inflation resurfaced. We have seen some tightness in the job market. It has not translated yet into wages growth and therefore inflation. But we could just be about to see that. And, in that case, rates would rise and they would provoke as a catalyst the kind of downfall that we expect. Or the catalyst could be political. A lot of quantitative easing is being created and it is benefiting only the top 1% of the population. And it is resulting in this so-called income inequality concept.     And, so much, the central banks are pushing the wealth effect as they try to make people easier for them to spend more in the economy. But in reality what they are really triggering is income inequality. The consequence of income inequality is populism. Populism can provoke a regime change. Regime change can then affect quantitative easing if the result was not to help the real economy and the middle classes but only the top 1%.   So the catalyst could be political.   But I can also argue the catalyst could be China. China has a huge problem over indebtedness. It is said to be between 300% and 600% of GDP. GDP is $11 trillion. So it is a monumental credit bubble that could give troubles at any point. And if it gives troubles you can expect the whole world to listen carefully like it did in August of 2015 and January of 2016, and even more than that.   I think that it can be also no catalyst. And why is it no catalyst? Because at moments in which the market is overvalued you can never know for sure how much further the bubble can go. But at some point, it reaches a tipping point, a critical mass, where the probability is higher and higher for it to fall down. At a certain point, swollen valuations reach a level where they no longer make sense, bids evaporate, and prices plunge. But it’s exceedingly difficult to pinpoint just when that point might be.

25 ноября, 13:18

Ничего себе, ну и бомбануло пердак у мудаков)

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Стоило мне впервые заговорить за результаты моей почти 2-х недельной торговли на рынке криптовалюты, как вдруг… поехало Ребята, Вы серьезно? Вам больше нету чем заняться? Что за тупые вопросы и сравнения битка с какой-то ушедшей на покой российской компанией? Вы знаете, что происходит? Вы просто мудаки. Серьезно, мудак — это нормально. Я сам был мудаком, но выбираюсь с ямы, в которой 99,99% людей. Мудак — это когда ты ничего не делаешь, а твои результаты удовлетворяют разве что твою женушку. По поводу отдельных вопросов «выведи деньги, все это МММ, где твои результаты» и прочее Хочу дать несколько ответов: 1. Мне все равно, считаете ли Вы рынок криптовалюты реальным или пирамидой. Я трейдер и моя задача заработать, а не спорить с мудаками 2. Я Вас нае***… я в большей степени не трейдер, а предприниматель. Моя цель иметь доходный бизнес, среди которых и торговля криптовалютой. Сюда же меня занесло с помощью моего товарища, который открыл один из немногих криптофондов в Украине и пригласил меня управляющим трейдером. 3. На рынке криптовалюты — много рисков. Но, риски есть везде. Вы думаете, что нет рисков в том, что открываешь продуктовый магазин или покупаешь франшизу знаменитой торговой сети? Вы хотите сказать, что нет рисков торговли российскими акциями или на Форекс? Серьезно? Тогда я Вам сочувствую! 4. Мои результаты — это работа со средствами клиентов (пока что). Вопросы касаемо выводов, блокировок, налоговых — все это в Украине решается за бабло. Не умеете решать и Вас нагибают раком? Значит Вы не просто мудак, Вы лох! Ну и последнее, если не интересно — проходите мимо. Интересно по хейтерить — уйдете в ЧС. На смарт-лабе я писал сотни постов. Моя аналитика и статьи заходили во многие СМИ, включая РБК. Но, поймите. Мир меняется, у нас йопта цифровая экономика, и если Вы не знаете что такое иррациональный оптимизм и блокчейн, тогда Вам в помощь книга Роберта Шиллера и Википедия! Но а я… но а я буду пока что двигаться дальше к своей цели. Не будьте мудаками, живите своими целями и мечтой!

Выбор редакции
14 ноября, 20:00

Yale's Robert Shiller: The strength of the 'Trump boom' i...

Robert Shiller, Yale University economics professor and Case-Shiller Index co-founder, discusses investors' confidence in market valuations and the overall sentiment shift.

14 ноября, 17:46

It's A 'Turkey' Market

Authored by Lance Roberts via RealInvestmentAdvice.com, With Thanksgiving week rapidly approaching, I thought it was an apropos time to discuss what I am now calling a “Turkey” market. What’s a “Turkey” market?  Nassim Taleb summed it up well in his 2007 book “The Black Swan.” “Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race ‘looking out for its best interests,’ as a politician would say.   On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.” Such is the market we live in currently. In a market that is excessively bullish and overly complacent, investors are “willfully blind” to the relevant “risks” of excessive equity exposure. The level of bullishness, by many measures, is extremely optimistic, as this chart from Tiho Krkan (@Tihobrkan) shows. Not surprisingly, that extreme level of bullishness has led to some of the lowest levels of volatility and cash allocations in market history. Of course, you can’t have a “Turkey” market unless you are being lulled into it with a supporting story that fits the overall narrative. The story of “it’s an earnings-driven market” is one such narrative. As noted  by my friend Doug Kass: “Earnings are there to support the market. If we didn’t have earnings to support the market, that would be worrying. But we have earnings.”—Mary Ann Bartels, Merrill Lynch Wealth Management   “Earnings are doing remarkably well.”—Ed Yardeni, Yardeni Research   “This is very much an earnings-driven market.”—Paul Springmeyer, U.S. Bancorp Private Wealth Management   “This is very much earnings-driven.”—Michael Shaoul, Marketfield Asset Management   “Equities have largely been driven by global liquidity, but they are now being driven by earnings.”—Kevin Boscher, Brooks Macdonald International   “Most of the market action in 2017 has been earning-driven.”—Dan Chung, Alger Management   “The action is justified because of earnings.“—James Liu, Clearnomics   In another case of “Group Stink” and contrary to the pablum we hear from many of the business media’s talking heads, the U.S. stock market has not been an earnings-driven story in 2017. (I have included seven “earnings-driven” quotes above from recent interviews on CNBC, but there are literally hundreds of these interviews, all saying the same thing)   Rather, it has been a valuation-driven story, just as it was in 2016 when S&P 500 profits were up 5% and the S&P Index rose by about 11%. And going back even further, since 2012 S&P earnings have risen by 30% compared to an 80% rise in the price of the S&P lndex! He is absolutely right, of course, as I examined in the drivers of the market rally three weeks ago. “The chart below expands that analysis to include four measures combined: Economic growth, Top-line Sales Growth, Reported Earnings, and Corporate Profits After Tax. While quarterly data is not yet available for the 3rd quarter, officially, what is shown is the market has grown substantially faster than all other measures. Since 2014, the economy has only grown by a little less than 9%, top-line revenues by just 3% along with corporate profits after tax, and reported earnings by just 2%. All of that while asset prices have grown by 29% through Q2.”  The hallmark of a “Turkey” market really comes down to the detachment of price from valuation and the deviation of price from long-term norms. Both of these detachments are shown in the charts below. CAPE-5 is a modified version of Dr. Robert Shiller’s smoothed 10-year average. By using a 5-year average of CAPE (Cyclically Adjusted Price Earnings) ratio, it becomes more sensitive to market movements. Historically, deviations above 40% have preceded secular bear markets, while deviations exceeding -40% preceded secular bull markets. The next chart shows the deviation of the real, inflation-adjusted S&P 500 index from the 6-year (72-month) moving average. Not surprisingly, when the price of the index has deviated significantly from the underlying long-term moving averages, corrections and bear markets have not been too distant. Combining the above measures (volatility, valuation, and deviation) together shows this a bit more clearly. The chart shows both 2 and 3-standard deviations above the 6-year moving average. The red circles denote periods where valuations, complacency and 3-standard deviation moves have converged.  Of course, with cash balances low, you can’t foster that kind of extension without sufficiently increasing leverage in the overall system. The expansion of margin debt is a good proxy for the “fuel” driving the bull market advance. Naturally, as long as that “fuel” isn’t ignited, leverage can remain supportive of the market’s advance. However, when the reversion begins, the “fuel” that drove stocks higher will “explode” when selling forces liquidation through margin calls. While the media continues to suggest the markets are free from risk, and investors should go ahead and “stick-their-necks-out,” history shows that periods of low volatility, high valuations and deviations from long-term means has resulted in very poor outcomes. Lastly, there has been a lot of talk about how markets have entered into a new “secular bull market” period. As I have addressed previously, I am not sure such is the case. Given the debt, demographic and deflationary backdrop, combined with the massive monetary interventions of global Central Banks, it is entirely conceivable the current advance remains part of the secular bear market that began at the turn of the century. Only time will tell. Regardless, whether this is a bull market rally in an ongoing bear market, OR a bull rally in a new bull market, whenever the RSI (relative strength index) on a 3-year basis has risen above 70 it has usually marked the end of the current advance. Currently, at 84, there is little doubt the market has gotten ahead of itself. No matter how you look at it, the risk to forward returns greatly outweighs the reward presently available. Importantly, this doesn’t mean that you should “sell everything” and go hide in cash, but it does mean that being aggressively exposed to the financial markets is no longer opportune. What is clear is that this is no longer a “bull market.” It has clearly become a “Turkey” market. Unfortunately, like Turkeys, we really have no clue where we are on the current calendar. We only know that today is much like yesterday, and the “bliss” of calm and stable markets have lulled us into extreme complacency. You can try and fool yourself that weak earnings growth, low interest rates and high-valuations are somehow are justified. The reality is, like Turkeys, we will ultimately be sadly mistaken and learn a costly lesson. “Price is what you pay, Value is what you get.” – Warren Buffett

14 ноября, 16:00

Passive investing is a 'chaotic system' that could be dangerous, warns Robert Shiller

Nobel Prize-winning economist Robert Shiller sees potentially dangerous issues surrounding the growing popularity of index funds and ETFs.

09 ноября, 18:48

Adjusting the CAPE measure: Equity valuations are high. But other options look even worse

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Print section Print Rubric:  Equity valuations are high. But other asset classes look even worse Print Headline:  Adjusting the CAPE measure Print Fly Title:  Buttonwood UK Only Article:  standard article Issue:  America’s global influence has dwindled under Donald Trump Fly Title:  Adjusting the CAPE measure EVERY investor would like to find the perfect measurement tool to tell them when to get into, and out of, the stockmarket. The cyclically adjusted price-earnings ratio (CAPE), as calculated by Robert Shiller of Yale University, averages profits over ten years and is used by many as an important valuation indicator. Currently it shows that American shares have hitherto been more highly valued only in 1929 and the late 1990s, periods that were followed by big crashes. That seems ominous. But as a paper by Dylan Grice and Gregor Obrecht of Calibrium, a Zurich-based private-investment office, makes clear, it is far from ...

08 ноября, 18:50

Three Easy Pieces

Authored by 720Global's Michael Liebowitz via RealInvestmentAdvice.com, If someone told you that the President of the United States in 2028 would be a Democrat and a woman from the state of New York, could you guess who it might be? We highly doubt it. In 1998, ten years before being elected president, Barack Obama had just been re-elected to the Illinois State Senate and was on no one’s radar as a Presidential candidate. In fact, had you been told at that time an African-American Democrat from Illinois would be president in 2008, it’s likely you would have assumed that two-time democratic presidential nominee Jesse Jackson would be the 44th President. In 1990, George W. Bush had just bought the Texas Rangers baseball club and was still four years from becoming Governor of Texas. In 1983, Bill Clinton was ten years out of law school and serving his second term as Governor of Arkansas. We could keep going down the line of presidents, and you would realize that even armed with some key details about the future, it would be extremely difficult to predict who a future president might be. Stock investing is a little different. If you know the future level of three simple data points, you can calculate to the penny the price of any stock or index in the future and the exact holding period return. This precise prediction will hold up regardless of wars, economic activity, natural disasters, UFO landings or any other event you can dream up. Unfortunately, those three data points are not readily available but can be inferred using historical trends, future expectations and logic to project them. With projections in hand, we can develop a range of price and return expectations for an index or an individual stock. In this paper, we provide an array of projections based on those factors and provide return expectations for the S&P 500 for the next ten years. Factor 1: Dividends Dividends are an important and often overlooked component of stock returns. To emphasize this point, an investor guaranteed a 3% dividend yield based on the current price, receives a 30% gain (non-compounded) in ten years. In other words, the investor has at least a 30% cushion to guard against price declines over a ten-year period.  That is what Warren Buffett refers to as a “moat,” and it is a wonderful benefit of investing in dividend-paying stocks. The scatter plot graphed below compares the S&P 500 dividend yield to the Ten-year U.S. Treasury Note yield since 1980.  This historic backdrop helps project the S&P 500 dividend yield for the next ten years. Data Courtesy: St. Louis Federal Reserve (FRED) From 1980-1999, Treasury yields and dividend yields behaved alike. The trend line above, covering these years, has a statistically significant R-squared of 0.84 (84% of the move in dividend yields can be explained by moves in the 10-year yield). Since the year 2000, that relationship has all but disappeared. The R-squared for the post-financial crisis era is a meaningless .02. Around the year 2000, dividend yields appear to have hit a floor ranging from 1-2%, despite a continued decline in Treasury yields. The reason for this is that many companies want to entice investors with higher dividend yields. As such, they raised dividends to keep the dividend yield relatively attractive. Had the regression of the 1980-1999 era held, dividend yields would be below 1% given current Treasury yields. The graph above makes forecasting the future dividend yield relatively easy. As long as Ten-year U.S. Treasury yields stay below 5-6%, we expect dividend yields will range from 1-2%. Accordingly, we simplify this analysis and assume an optimistic 2% dividend yield for the next ten years. Dividend Yield – Base/Optimistic/Pessimistic = 2% Factor 2: Earnings Over the long-term, earnings are well correlated to economic growth. Our ten-year analysis easily qualifies as long-term. Over shorter periods, there can be sharp variations due to a variety of influences such as regulatory policies and tax policies all of which influence profit margins. To arrive at reasonable expectations for earnings growth, we first consider economic growth. The following chart plots the declining trend in GDP growth since 1980.  Given the burden of debt, weak productivity growth and the obvious headwinds from demographics, we think it is likely the trend lower continues. Data Courtesy: St. Louis Federal Reserve (FRED) Next, we consider S&P 500 earnings growth rates. Earnings growth over the last three years, ten years and since 1980 are as follows: 3.18%, 4.38%, and 5.93% respectively. Given the economic and earnings trends, we believe a 3% future earnings growth rate for the next ten years is fair, 5% is optimistic, and 1% is pessimistic. Earnings Growth – Base/Optimistic/Pessimistic = 3.00%/5.00%/1.00% Factor 3: Valuations Robert Shiller’s Cyclically Adjusted Price-to-Earnings ratio (CAPE) is our preferred method of valuation as it averages earnings over ten year periods. In doing so, it avoids short-term volatility of earnings and provides a more consistent baseline reflective of a company’s or indexes true earnings potential.  Currently, the CAPE of the S&P 500 sits in rare territory, as shown below. In fact, outside of the late 1990’s tech boom, there were only two months since 1881 when the Shiller CAPE was higher than today’s level – August and September of 1929. CAPE has a history of extending well above and below its mean. Importantly, it also reverts to its mean after these long stretches of time. It does not seem unreasonable to expect that, over the next ten years, it will again revert to its mean since 1920 of 17.29. An optimistic scenario for 2028 is a CAPE reading of one standard deviation above the mean at 24.77. The pessimistic case is, likewise, one standard deviation below the mean at 9.70. Further, as shown below, we also present an outlook assuming CAPE stays at its current level of 31.21. The graph below shows CAPE and the three forecasts along with the current level. Data Courtesy: Robert Shiller http://www.econ.yale.edu/~shiller/data.htm CAPE – Base/Optimistic/Pessimistic = 17.29/24.80/9.70 What does 2028 hold in store? The following graph and table explore the range of outcomes that are possible given the scenarios outlined above. To help put context around the wide range of expected returns, we calculated an equity-equivalent price of the 10-year U.S. Treasury Note and added it to the graph as a black dotted line. Investors can use the line to weigh the risk and rewards of the S&P 500 versus the option to purchase a relatively risk-free U.S. Treasury Note. The table below the graph serves as a legend and reveals more information about the forecasts. The color shading on the table affords a sense of whether the respective scenario will produce a positive or negative return as compared to the U.S. Treasury Note. The far right column on the table indicates the percentage of observations since 1881 that CAPE has been higher than the respective scenarios. Data Courtesy: Robert Shiller http://www.econ.yale.edu/~shiller/data.htm and 720Global/Real Investment Advice As shown in the graph and table above, only scenarios 8 through 12 have a higher return than the ten year U.S. Treasury Note. Of those, three of the five assume that CAPE stays at current levels. Scenario 8, shaded yellow, has a negligible positive return differential. Summary The bottom line is that, unless one has a very optimistic view on earnings growth and expects valuations to remain elevated beyond what historical precedent argues is reasonable, the upside is limited, and the downside is troubling. The odds favor that a risk-free investment in a 10-year Treasury note will provide a better return through 2028 with less volatility. With current 10-year note yields at roughly 2.25%, that should emphasize the use of the term “troubling.” The lines in the graph above are smooth, giving the appearance of identical returns each period. Markets do not work that way. These projections do not consider the path taken to achieve the expected total return and they most certainly will not be smooth. The best case scenario, and the one least likely to occur is for volatility to remain low. This would generate the most orderly path. Given that the post-crisis VIX (equity market volatility index) has averaged 17.7, current single-digit levels are an aberration and it does not seem unreasonable to expect more volatility in the future. Even if one of the scenarios plays out exactly as we describe, the path to that outcome would be very choppy. For instance, if the worst case scenario played out, an investor may lose 60-80% of value in a matter of one or two years. However they would most likely have better than expected annual returns in the years following. In a follow up to this article we will take this thought a step further and discuss the so-called path of returns. We show you the expected and actual path of returns from 2005 to 2015 and argue that an investor armed with the three factors, and a little discipline, may have generated much better returns than those earned by investors using a buy and hold approach.

30 октября, 23:22

Procrastination/Links and Such for October 30, 2017

**Must-Reads**: * [What Is a "Static" Revenue Analysis?](http://www.bradford-delong.com/2017/10/what-is-a-static-revenue-analysis.html) * [Basic Econ 1-Level Tax Incidence Primer: Owen Zidar Requests MOAR Tax Incidence Model Blogging](http://www.bradford-delong.com/2017/10/basic-econ-1-level-tax-incidence-primer-owen-zidar-requests-moar-tax-incidence-model-blogging.html) * [A Question I Did Have Time to Ask Alice Rivlin](http://www.bradford-delong.com/2017/10/another-question-i-do-not-have-time-to-ask-alice-rivlin.html) * [Another Question I Didn't Have Time to Ask Ask Alice Rivlin: Possibilities for Technocracy](http://www.bradford-delong.com/2017/10/another-question-i-didnt-have-time-to-ask-ask-alice-rivlin-possibilities-for-technocracy.html) * [A Question I Will Not Have Time to Ask Alice Rivlin This Afternoon...](http://www.bradford-delong.com/2017/10/a-question-i-will-not-have-time-to-ask-alice-rivlin-this-afternoon.html) * [Q & A: Should We Focus Our Attention on a Revitalized Public Sector and Social Insurance System?: INET Edinburgh](http://www.bradford-delong.com/2017/10/q-a-should-we-focus-our-attention-on-a-revitalized-public-sector-and-social-insurance-system-inet-edinburgh.html) * **Alan Auerbach**: [Five Questions for Congress on Tax Reform](https://www.bloomberg.com/view/articles/2017-10-27/five-questions-for-congress-on-tax-reform): "Congressional leaders say they’re working on a corporate tax reform... * **Will Wilkinson**: [Public Policy after Utopia](https://niskanencenter.org/blog/public-policy-utopia/): "That all our evidence about how social systems actually work comes from formerly or presently existing systems is a huge problem for anyone committed to a radically revisionary ideal of the morally best society... * **Chandrasekhar Ramakrishnan**: [The DeLong-Shiller Redux](https://medium.com/@cramakrishnan/the-delong-shiller-redux-dc9dd21eefd1): "2014, Robert Shiller and Brad DeLong.... [Shiller] claims if the value of this [CAPE] ratio is above 25, a major market drop is probably brewing... **Should-Reads**: * **Kim Clausing**: [Would Cutting [U.S.] Corporate Taxes Raise Workers' Incomes?](http://econofact.org/would-cutting-corporate-taxes-raise-workers-incomes): "Overall, it is difficult to document a relationship between lower corporate taxes and...

30 октября, 16:24

Эффект Пэрис Хилтон: когда лопнет пузырь на рынке криптовалют?

Рынки токенов ICO и криптовалют обладают всеми чертами финансового пузыря на поздней стадии. Накапливается критическая масса плохих проектов. Крах крупного проекта или ужесточение регулирования могут запустить панику и бегство держателей токенов и криптовалют.

27 октября, 18:22

"The Nightmare Scenario" Revisited: Albert Edwards Lays Out The Next "Black Monday"

Is it the onset of a recession or the fear of a recession that causes a crash? That is what SocGen's bear (or, as he calls himself this time, wolf) Albert Edwards contemplated on the 30th anniversary of Black Monday, before reaching the conclusion that it's the latter. Having taken several weeks off from publishing his ill-named global strategy "weekly" report to meet with clients, Edwards finds that most clients "seem to harbour similar fears as I, namely that the QE-driven bubble will burst at some stage and lay low the global economy, just as it did in 2007." Yet where clients differ, is on the timing of said burst: "despite my bearish (or is it wolfish) howling, virtually no clients think the denouement will come any time soon and that the equity bull market should have at least 12-18 months left to run. Most can see nothing on the immediate horizon that might burst this bubble." So, doing his public service to boost the overall sense of dread, and perhaps fear, Albert takes it upon himself to reprise recent discussions with clients, and in his latest letter explains "what might catch them out in the near term." To do this, Edwards focuses first and foremost on the catalysts behind the abovementioned 1987 "Black Monday" crash. A retrospective macro-narrative was inevitably wrapped around the ?Black Monday? 19 October 1987 equity market crash. My 30-year recollection is pretty good: 1987 saw a buoyant equity market rising briskly through most of the year as the oil price recovered from the previous year?s collapse (from $30 to $8, see chart below). After a year in the doldrums the US economy started to accelerate notably through 1987 as the impact of 1986 interest rate cuts and a lower dollar worked. By the time of the Oct crash the US ISM had surged from 50 at the start of the year to over 60 - a level seldom ever reached (see chart below). Amazingly the ISM has just last month exceeded 60.0 for only the second time since 1987. Spooky!   While one may disagree on the causes, Edwards makes one thing very clear: to hime it was all painfully memorable, and he recalls events from 30 years ago "as if it were yesterday (actually I can?t remember yesterday.)" And whether it was the fear of a recession, or something else, once the selling started, it wouldn't stop until a fifth of market values were wiped out. Of course the machines took over the selling in the form of Portfolio Insurance programmes, but speaking to my colleague Andrew Lapthorne, he reminds me we also have similarly pro-cyclical ?doomsday? vehicles today - with so much money being run by volatility targeting, risk parity and CTA/trend following quant funds. A fascinating article by stockmarket guru Robert Shiller in a NY Times article to mark the 30th anniversary of the crash, suggests that it was not the Portfolio Insurance that was responsible for the crash, as most official post-mortems suggested, but fear passed by word of mouth. Shiller thinks, in the internet age, there is even more scope for fear to spread like wildfire to set off a market crash - which would of course be limited to 20% in any one day due to circuit breaker rules. Putting it together, Edwards concludes that "the trigger for the 1987 crash was the fear of US recession caused by the likelihood of US rate rises to stem a hypothetical dollar collapse." I am clear in my mind both at the time and now, that the US equity market was priced for a continuation of rapid economic and profit growth and this was under threat. The Dow was on nose-bleed valuations, especially as it had ignored the bond sell-off for most of 1997 (was it really 30 years ago that US 10y yields briefly crawled back above 10% - the last time we would see double-digit yields). None of this would have mattered if the US equity market had been cheap. In my view the record 25% ‘Black Monday’ October 19 decline was due to a horrendously expensive equity market suddenly confronted with the fear of recession. Equity valuations matter. Fast forward to today, when equity valuations matter again; in fact, as Goldman and virtually all other banks agree, company valuations have never been higher.  And yet nobody cares, at least none of Edwards' clients. He admits that at this moment, SocGen's clients fear "very little it appears in the near term." Oh, everyone knows stocks are a bubble, but after nearly a decade of crying valuation bubble wolf, so to speak, with no effect whatsoever, "oe thing we hear consistently is that they are not interested in being told equity valuations are expensive. They have been for a while and that does not seem to stop the market going up!" But, "valuation DOES eventually matter" Edwards writes, as it did 30 years ago, in 1987, when "in the immediate aftermath of the crash, the extreme expense of US equities certainly was clearly a major contributing factor." So could 1987 happen again, and if so, what would be the catalyst that nobody can see? The answer to the first, according to Edwards, is that "of course it could. It could happen tomorrow given the extreme expense of US equities and the near universal consensus of a continued acceleration in the economic cycle ? despite the Fed also in the midst of a tightening cycle.As the excellent David Rosenberg of Gluskin Sheff points out, of the13 post war Fed tightening cycles, 10 have ended in unexpected recession." And, as observed above, one may not even an actual recession, just the fear of one, to start the next 20% plunge: "at these extremes of equity valuation it might not even be an actual recession that produces the next precipitous equity bear market, but the fear of a recession, however misguided that fear may or may not be." * * * And yet, as Edwards started off his letter, while "fears" may be pervasive, few clients (or traders, or analysts, or pundits) believe there is a catalyst for a quick and sudden reversal in the market's nearly 9 year momentum is in the immediate future. But is that accurate? "Is there anything out there that can cause a rapid change in market expectations of future economic growth? Not according to most investors we speak to. But let?s try and think of some things that we maybe need to watch out for." Here, in addition to the latent overhang of overvaluation, one main concern is "the expectation, or more importantly the fear of more rapid Fed rate rises threatening the economic recovery might be one thing to watch out for." Yet while Janet Yellen's replacement at the Fed will hardly seek to pursue tighter monetary policy, they may have no choice if the recent spike in averae hourly earnings proves to be long-lasting and widespread: wage inflation has been the dog that didn?t bark this year - or indeed the wolf that didn?t howl. Wage inflation actually slowed this year against the expectations of some naysayer commentators (ie me) of an acceleration (and yes I do mean an acceleration rather than a rise). But it was notable that in the September payroll release, average hourly earnings jumped sharply to 2.9% - a high for this cycle (see chart below). While many have explained the recent spike in inflation as being a transitory consequence of the two Hurricanes to slam the US this summer, "if for whatever reason it is not an aberration and the Phillips Curve is reasserting itself, similarly high wage inflation data in the months ahead could cause a rapid reappraisal of the pace of Fed rate hikes. At these high equity valuations, that could really scare investors." Going back to what Deutsche Bank discussed two weeks ago, namely that the Fed is trapped in the 60 bps of space between the short and long end, Edwards writes that any expectation of faster rate hikes will impact the yield curve, which has already been flattening rapidly - a usual prelude to decelerating economic activity. Furthermore, "the dollar is likely to reverse the weakness we have seen since the start of this year, which was in large part a result of an unwinding of ultra long speculative dollar positioning against the euro (as suggested by the CFTC data)." That has now completely reversed and speculators are very short the dollar. The catalyst for the resumption of the dollar?s rise may have been a sharp recent widening of the US 2y spreads with both Germany and Japan as investors embrace the near certainty of a December US rate hike, but this could go considerably further if investors actually begin to believe the Fed?s own forecasts of future interest rates (ie the Fed dots). Which brings us to a topic Edwards discussed most recently at the end of August, namely the "Nightmare Scenario" for investors. The nightmare scenario for equities would be if US wage inflation flickers back to life and investors not only decide that they are too far behind the Fed dots, but they also decide that the Fed itself is behind the tightening curve. In that scenario yields would jump sharply higher across the curve, but especially at the short end and the dollar would soar. Ironically, as an aside, two weeks ago New River's Eric Peters defined the "Nightmare Scenario" - from the perspective of the next Fed chair - as the opposite: a world in which inflation and wages do not rise, effectively boxing the central bank into continuing to inflate the biggest asset bubble ever leading to a historic crash. To this, we imagine Edwards' response would be that the crash - as is - would be devastating enough. How to determine if the market is on the verge of said "nightmare scenario" looking at market indicators? "Two critical long-term trend-lines to watch: First our head of technical analysis, Stephanie Aymes, highlights that the breakout point for the 30y downtrend in the dollar against the yen is around Y123/$ (chart left below). Second, as 10y US yields ?smash? above the multi-month support of 2.4%, they can rise all the way to 3% and still be in a bull market (see below)." Indeed, while many have pointed out the recent breakout in the 10Y above the critical - for the past 6 months - support level of 2.42%, a stronger dollar may be as much, if not more, of a negative factor. The equity markets? rise this year has been fuelled by profits growth and the expectation of a continuation of the current [weak dollar] trend. Much of that rise in US profits is the direct result of the dollar’s weakness so far this year. Take a look at the two charts below, both comparing US and Japanese profits. On the left, we show forward earnings expectations (TOPIX and S&P500) while on the right we show whole economy profits measures. The key difference is that the stockmarket profits measures have considerably more exposure to overseas earnings and the currency as well as not including smaller and unquoted companies. Hence it is notable that Japanese whole economy profits have considerably outperformed Japanese stockmarket profits, while on the other hand it is startling how US whole economy profits have underperformed US stockmarket profits. I think it?s mainly down to dollar weakness this year. It's not just nosebleed valuations, rising rates, a spike in the dollar, however: Edwards also brings attention to the bubble in corporate credit markets, or as he puts it, "corporate debt will be the 2007-like vortex of debility in the next downturn. Even the moderate, reasonable, and usually well behind-the-curve, IMF suggests a staggering 20% of US corporates are at risk of default in the next economic downturn." More: I certainly believe QE has also inflated US corporate debt prices way above what they otherwise should be. Indeed looking at the top left-hand chart, it is clear that typically, the corporate debt market would be in revolt by now in the face of the cyclical debauchment of corporate balance sheets. The fact that both yields and spreads are near all-time lows is, like over-extended equity valuations, a ticking time-bomb waiting to go off. (The chart on the left uses top-down corporate balance sheet data from the Federal Reserve Z1 Flow of Funds book. But the right-hand chart is stockmarket data from Datastream and shows a higher peak recently for quoted stocks, tying up closely with Andrew Lapthorne?s bottom-up analysis. ) There is one last catalyst: China. Finally a word on China...which does not seem to concern clients at the moment. Incredible when you consider that a little over a year ago China was investors? number one concern. What changed was that the dollar?s weakness this year subdued jitters about renminbi devaluation and the plunge in Chinese reserves.... although on the surface the Chinese economy looks stable, increasingly volatile swings in credit policy are necessary to keep the show on the road ? most apparent in the boom and bust cycle in house prices (see left-hand chart below). A stronger dollar may necessitate another shift towards easy Chinese policy, including a weaker renminbi. That could cause trouble. And, of course, the overarching factor behind all of the above is the Fedral Reserve. Which brings us to the conclusion: So a reappraisal in the market?s expectations on the pace of Fed rate hikes, perhaps because of higher than expected wage inflation data, would likely trigger both a rise in yields along the length of a flattening curve and a resumption in the dollar bull market. When the equity market is ridiculously expensive and priced for profits perfection, these events (or indeed as in 1987, the FEAR of these events) could prove catastrophic for QE inflated equity markets. Which, for those who have followed Edwards' warnings, is in line with his long-running narrative, and which - one day - will prove prescient. For now, however, just do what the algos do and BTFD.

07 октября 2015, 11:41

Фондовый рынок теряет триллионы: кризис уже близко

Мировой фондовый рынок потерял в III квартале 2015 г. $11 трлн. Падение во всех крупных мировых экономиках сильно ударило по "бумажному богатству", и это был худший квартал для фондового рынка с 2011 г.

03 сентября 2015, 17:12

Роберт Шиллер: «справедливая» стоимость S&P 500 составляет 1300 пунктов

«Сейчас очень опасное время», - отметил в интервью CNBC нобелевский лауреат Роберт Шиллер. – «Типичное соотношение P/E (прим. ProFinance.ru: цена акции/доход на акцию), на которое обычно смотрит большинство инвесторов, на самом деле вводит в заблуждение. В то же время соотношение CAPE (Cyclically Adjusted Price-Earnings, разработанное господином Шиллером) указывает на «спра… читать далее…

23 октября 2013, 21:27

Пузыри на рынкax недвижимости?

Не могу уже вспомнить, когда мне тут объясняли, почему не надо было ждать роста цен на недвижимость в Германии...Как бы то ни было, Бундесбанк уже разглядел возможные пузыри на рынке недвижимости в крупных городах страны :). Логика прежних рассуждений о недвижимости в Германии была простой. Валюта в Германии казалась недооцененной из-за большущего профицита по счету текущих операций, поэтому цены должны были расти.  Процентные ставки ЕЦБ были слишком низкими для Германии, что обязано было стимулировать рост цен на недвижимость. Понимающие это инвесторы должны были ускорить рост цен... Сегодня трудно найти читающего человека, который еще не слышал о свежеиспеченном лауреате Нобелевской премии Роберте Шиллере. Многие сразу же нарисуют его знаменитую картинку американского пузыря на рынке жилья. Но еще больше вокруг уверенных в том, что они видят пузырь на рынке недвижимости, будь то в Австралии, Канаде, Великобритании, Китае, России...Нельзя за такое осуждать. Раз уж жилье доминирует наше и их богатство, то очень хочется знать, пора ли купить квартирку или же лучше вовремя соскочить с обреченного поезда. Вдобавок к мыслям о Москве, Лондоне, Париже, Берлине, Таллине, Риге, Юрмале и Малаге, не лишне еще раз вспомнить о Гонконге. Ведь это Гонконг был правильной подсказкой к пониманию кризиса в Латвии и еврозоне. На рисунке из мартовского доклада цб Гонконга о финансовой стабильности показаны цены на жилье. Виден пузырь 1997 года, падение цен к 2004 году, в течение 6 лет, как заказывали Рейнхарт и Рогофф, и последующий волшебный взлет к сегодняшнему счастью (или горю?).  После лопнувшего пузыря в 1997 году правители Гонконга уже прекрасно понимали, чем рискуют, как понимают сейчас специалисты Бундесбанка, насмотревшись на страдания Ирландии и Испании.  Поэтому они внимательно следили за ростом цен на недвижимость и изо всех сил старались защитить экономику от будущих потрясений. О перспективах Гонконга в период "необычной" политики ФРС давно уже записывал здесь и здесь.  Там же сохранил параграф Позена о трудностях определения пузырей, не говоря уже об их предотвращении оружием денежно-кредитной политики. Со времени тех записей, несмотря на 6 раундов (!) затягивания гаек в Гонконге и настойчивые публичные предупреждения цб, цены на жилье продолжали расти...Уже много лет не стихают споры о пузыре на рынке недвижимости Гонконга.

22 октября 2013, 20:18

Олег Григорьев о лауреатах премии им. Нобеля

Колонка опубликована в журнале "Профиль" от 20 октября 2013 года (N833) Присуждение Нобелевской премии 2013 года по экономике еще раз подтвердило, что современная экономическая теория — это не наука и с научными критериями подходить к ней глупо В этом году решение о присуждении Нобелевской премии в области экономики выглядело донельзя скандальным. Два из трех лауреатов — Юджин Фама и Роберт Шиллер — не только радикально расходятся в своих концепциях по одному и тому же вопросу, но еще и крайне неодобрительно отзываются друг о друге. Кстати, последнюю из известных мне колкостей в адрес своего оппонента Шиллер опубликовал совсем недавно, в конце июля этого года. Ситуация, конечно, абсурдная. Один (Фама) говорит, что финансовых пузырей нет и быть не может, потому что никто не знает, что это такое. Другой (Шиллер) утверждает, что пузыри возможны и он знает, что они собой представляют. Он же предсказал кризис 2007—2008 годов. Фама же уверяет, что такого рода предсказания ничего не стоят, поскольку раз в сто лет и палка стреляет, и если постоянно одно событие предсказывать, то рано или поздно повезет. Третий лауреат, Ларс Хансен, теорией не занимается и своей концепции не имеет. Он разрабатывает методы количественного анализа явлений финансового рынка. И полученные им результаты опровергают теоретические построения обоих его коллег. Впрочем, чтобы опровергнуть разработанную Фамой концепцию эффективных рынков, никаких сложных расчетов и не требуется. События 2007—2008 годов наглядно показали ее ценность. Любопытно, что Фама был одним из претендентов на Нобелевскую премию еще в 2009 году, но тогда ему ее постеснялись дать. Как будто с тех пор что-то изменилось! Один из наших отечественных либералов, защищая решение Нобелевского комитета, заявил, что «на самом деле в гипотезе эффективных рынков нет ничего такого, что можно опровергнуть эмпирически». Ну да, и в гипотезе всемирного заговора тоже нет ничего такого, что можно опровергнуть эмпирически. Невозможность эмпирического опровержения — это, согласно общепринятому критерию Карла Поппера, как раз явный признак ненаучности теории. Любой человек, претендующий на то, чтобы называться ученым, кто бы он ни был, должен это понимать. Но ни тем, кто вручает премию, ни нашим либералам Поппер не указ, хоть именно он и разработал любезную сердцу и тех, и других концепцию открытого общества. Так какую мысль хотели донести до нас таким экстравагантным способом? Еще раз подтвердилось то, о чем многие догадывались, но не решались говорить вслух. То, что называется современной экономической теорией, — это вовсе не наука, и с научными критериями подходить к ней глупо. Это религия, организованная как бюрократическая структура. В таких структурах вознаграждается не реальный результат, а правильное поведение. Что сегодня является правильным и одобряемым поведением? Прежде всего это доходящая до абсурда верность букве и духу первоисточников религии. Это качество в полной мере присуще Юджину Фаме. Он из трех лауреатов самый титулованный, обладатель множества других премий. Его теория эффективных рынков — это теория о божественной сущности финансовых рынков, то есть теория ни о чем. Другой нобелевский лауреат, Пол Кругман, в свое время иронизировал по этому поводу, что рынки правильно оценивают, что пол-литра кетчупа должны стоить ровно в два раза дешевле одного литра, но ничего не могут сказать о том, почему и литр, и пол-литра стоят столько, сколько они стоят. Присуждение премии Роберту Шиллеру сигнализирует, что в рамках религиозной доктрины допустима некоторая доза безобидной и не сильно противоречащей догматам ереси. После кризиса такой допустимой ересью были признаны исследования в области так называемой поведенческой экономики. Здесь идея заключается в том, что сам рынок устроен идеально, но сомнению подвергается способность простых людей правильно пользоваться ниспосланным им инструментом. В тех сложных условиях, в которые попала ортодоксальная экономическая наука, когда противоречия между ее утверждениями и реальным положением дел бросаются в глаза всем, хорошим поведением считается «просто возделывать свой сад» и стараться не задумываться о высоких материях. Упорный труд есть лучшее средство справиться с обуревающими человека сомнениями. Этот образец поведения демонстрирует Ларс Хансен — и поделом награда. В общем, последнее решение о присуждении Нобелевской премии по экономике показало, что она не имеет никакого отношения к поиску истины, а есть лишь способ контроля и управления научным сообществом. http://www.profile.ru/article/ekonomika-kak-religiya-77602. От ред. so-l.ru - в смысле религиозности науки показательны слова самого Шиллера в которых он это прямо и признает, см. интервью: