The whole market is overvalued, not just the tech unicorns.
Also, this has nothing to do with discounting the cash flows, it's mostly stock buybacks that's driving all the action:
http://www.bloomberg.com/news/articles/2016-04-19/early-warn...
http://blog.emoneyadvisor.com/industry-news/trending/complet...
No, they are off because they are making way less money (down 55% from a year ago!). In general volatility can be good for investment banks because it means higher trading volume. Revenue has been way down thanks to fewer deals (remember when tech companies had IPOs?) and reduced fixed income trading volume (GS revenue from fixed income trading is down 48% from a year ago).
Then you could calculate revenue per trade (or something more useful along those lines) to use as a signal in these cases.
http://www.goldmansachs.com/media-relations/press-releases/c...
The numbers are pretty brutal, especially in institutional client services.
GS has $11BB in oil sector exposure. MS is $4.8BB. BofA and Citi are around $20BB. JPM is around $15BB. These are fractions of total loans outstanding (MS is 5%, all the rest are much smaller). Each of these banks has more in reserves than oil loan exposure. Does that sound scary to you?
Again, relatively sophisticated investors understand these things. This is basic research. Where is your evidence?
The limits on the banks' exposures are dependent on counter party risk. GS's exposure is far more, but they insured most of it with other banks, and please allow me the simplifying assumption they insured all of it with BAC. Which means that (hypothetical scenario) if BAC goes bankrupt, suddenly GS exposure to oil goes up to, say $100BB. Suddenly the reserves are woefully insufficient. Then there's the sudden risk that GS goes belly-up, which would increase everyone else's exposure. One of them goes and ...
Additionally, oil fuels the economy. Oil is what builds the roads, what makes everything on the roads moving, what keeps planes in the air and boats going forward. Oil provides significant parts of our electricity supply, and so on and so forth. So you can look at the oil sector problem in 2 ways. Either you look at the supply side, which is producing somewhere around 2% more oil than the market is willing to buy (at any price). This is short-sighted. "If we'd all just put 2% more gas in our tanks, there wouldn't be a problem", which is not realistic.
The other oil to look at is demand-side oil. The market is simply not buying 2% of the oil, except to store it. Why not ? One explanation would be that there is a global recession and the oil price move is simply the result of that. The fact that the price crash happened with oil production/supply constant (even slightly declining) would seem to support this. For instance the baltic dry index plunged before oil started having problems, same with container shipping, and this explains quite a bit of the excess capacity in oil, and therefore, I say caused the price drop in oil. Oil crashed because manufacturing (the source of the demand for shipping) crashed a few months before the oil crash (and hasn't recovered).
In other words : you've identified the wrong problem. Oil is a symptom of the underlying situation, not a cause. You say banks are capable of withstanding one aspect of a greater problem ? Well, I'm not saying that's bad, but it's not reassuring at all (and may not be true due to financial engineering).
I do agree with you overall about indexing, however "Just wait until the recession is over" is market timing and I dont believe I (or others) can do this dependably well.
https://www.quandl.com/data/MULTPL/SP500_PE_RATIO_MONTH-S-P-...
check how high it was in the 2000 and 2008, we're aren't even close
My fear is that the central banks are pumping so much liquidity into the market that they are driving up equities and pushing people out of safer assets into things like high yield bonds and momentum stocks. If we do have a recession, the pain could be worse than usual (for stocks) for the mere fact that the debt market could have liquidity problems when tons of funds begin to pull their money out at once from HY.
Not to mention all of the corporate buybacks that companies are doing by leveraging, because cash is too expensive to bring back overseas.
You can still invest in solid companies, but companies like Tesla, Netflix, anything with a super high P/E is going to be taken out back and shot (that doesn't mean the companies will go out of business, only that their stocks are much like Amazon in the 2000s.)
Not that I disagree with you, but I believe a contrarian viewpoint would be something along the lines of "We are currently in the midst of an economic revolution as increasingly large swathes of activity are digitized and lingering mechanical/human processes are computerized. Companies likely to be successful in this new economy are unlikely to be the same ones which were successful in the old."
(To which the obvious rebuttal is probably "People are always saying things are about to be different, and they're usually wrong.")
The 2008 bubble was eminently predictable. The problem was that no one knew the exact trigger, and no one had a politically acceptable means to deflate the bubble until the domino effect started, and then hedge funds and then major banks started collapsing.
Until the knife started falling, no one had a financial incentive to stop. After all, subprime mortgages have crazy interest rates, and if you're BoA or JP Morgan Chase, the government will probably step in to stop your collapse...
One can argue the way to judge stocks value is not by P/E but by E/P relative to interest rates; that is whether their excess return relative to risk-free assets is justified by their risk.
Interest rates remain 5% below their long-term historical average, which can justify E/P going up significantly. Currently stocks offer a 3.5% return over some classes of t-bonds, well in line with historical norms.
The current danger is that both will move down at the same time, and then where should one invest?
Not even close to a record high. It's slightly high, but is it surprising that people are will to put a premium on earnings with negative interest rates?
I'm not saying the market is overvalued or not, but this is in no way indicative of that.
On Intel I think the "everything is going mobile" is PR for investors, the PC market doesn't have any foreseeable growth potential atm.
edit
Here's a link to read about it. https://mises.org/library/unseen-consequences-zero-interest-...
As a general FYI to those reading -- please fact check before commenting.
The Federal Reserve's quantitative easing program ended on Oct 29th, 2014 (538 days ago!) It is difficult to assert that a program which ended over 500 days ago is permanent.
Additionally, one may be willing to assert that "ZIRP is permanent regime now" too, to tack onto the culture that central banking has entered a new era.
For anyone who did not see that news, ZIRP (zero interest rate policy) ended on Dec 15, 2015 with a rise, and is currently believed to rise again at the next meeting.
http://b-i.forbesimg.com/jessecolombo/files/2014/01/united-s...
http://moneymorning.com/wp-content/blogs.dir/1/files/2015/09...
http://www.naic.org/images/capital_markets_archive/2013/1305...
whether they do a token 0.5% hike (they probably won't), it's obvious that something very basic has changed, and quite likely irreversibly.
They also don't support your hypothesis that something has changed irreversibly.
Raising the interest rate more than 0.5% would have likely had a negative impact. It's very likely the Fed will raise it again later this year.
Please explain the problem here. You're acting like there's some big deception imposed on the public due to companies choosing to return capital to shareholders via one specific mechanism. As if somehow they're buying back stock and "fooling" people into thinking they're making more money or something, and stock prices are irrationally rising. The buybacks, earnings, financials are all open for everyone to read. It's evident by some of your commentary that you can't be bothered.
If you don't agree with the price that other people are willing to sell for shares in this market, you are more than welcome to take the other side of that trade and sell into every buyer on the planet. I'm sure you're not doing that.
Nor is it remotely the only way to assume a bearish position.
>Stock buybacks can be deceptive if a company buys back stocks with debt and doesn't have proper cashflow to pay it off.
You can't tell the cash flow and debt levels from the financial reporting? You don't account for this in your valuation? Where is the deception? Report it to the SEC.
>Non-technical investors see the stock going up and keep piling more cash in.
An equivalent number of people are "pulling cash out". A stock trade is just that: a trade. Again, what makes you a better judge of the "correct" price than those actually making the deal?
>If you think markets are perfect, you have a lot to learn my friend
Not sure where that comes from, but you're right, I do have more to learn. That said, it looks like I'm a few levels up on you (and far less confident in my ability to predict anything).
In the modern era of frac wells where depletion rates are like 50% in 2 years, broad economic demand is now much slower than production declines.
That's the problem with secondary recovery... The "balance sheet" looks good in that you'll profit (unless prices tank) but the cashflow is terrifying you don't dig a well and collect for 30 years like the old days, you do exotic processes and get high production rates for like two years, then production drops to zilch.
On a large, century size scale it screws up Hubbert graphs. You can ramp up for a century, but extensive secondary production means the decline slope will be just a couple years instead of a nice symmetric century or whatever.
By analogy its like switching farm land from an olive orchard to corn production and being surprised at fundamental shifts in the financial sheets. (Yo its just another plant, right, well theres a bit more to it...)
I'm a power user. I have a 4 year old MacBook and a 2 core * 4GB VDI session. I won't replace the MacBook for another 18 months.
Even in enterprise IT... Every project we did in 2004/2005 required a server purchase with two Xeon sockets and a NIC that might be Intel.
Now the average marginal unit of virtual server needs 1/50 of an Intel Xeon. And a lot of those Xeons are at AWS, which squeezes the margins.
It is absolutely picking a narrative.
http://www.epi.org/publication/the-class-of-2015/ For young college graduates, the unemployment rate is currently 7.2 percent (compared with 5.5 percent in 2007), and the underemployment rate is 14.9 percent (compared with 9.6 percent in 2007).
Things have really levelled out for average loads even developer loads (mostly do web dev, run vagrant machines that kind of thing).
I can't see me upgrading til this thing dies tbh.
I'm really looking forwards to VR if it catches on though, having an insanely high resolution headset so I can dump multiple monitors for programming is a big win, combine that with something that has the portability/form factor of a MS Book/Macbook Pro and you'd be able to program as capably from a hotel room as at your desk at home/work.
That would be the biggest shift in my work habits since I went from Windows to Linux in the late 90's.
Also I think once everyone can get down to the same size as intel we might start seeing more exotic architectures, Intel has often won with the "with enough thrust a brick will fly" approach to engineering, it doesn't matter if your chip is clock for clock more efficient if Intel is operating at a level where they can put 5 times as many transistors down in the same unit area and ramp the clock speed way up.
Mostly it's about shuttling around 4 times as much memory for each screen as well as 4 times as much processing.
1920x1080 has ~ 2 million pixels. 3840x2160 has ~ 8 million pixels.
Internally iirc this is often done as vectors before been rasterised out and having various filters and shaders applied but that step requires that you store multiple buffers etc, same reason a card that will play a game just comfortably at 1024x768 will run away crying at 1920x1080 I guess.
My i7 desktop will be four years old in June. I've done the research and all I need to run the Oculus or HTC Vive (or the upcoming games that look good) is a graphics card upgrade.
I would like to compare CPU's with roads: Roads increase traffic, not the other way around. So if you make a faster CPU, the demand for a faster CPU increases.
So if Intel stops making faster CPU's, the demand will (unexpectedly) go down.
Good pick: it's still one of the faster chips around. However, it's TDP is 95W, which is fine for a desktop. Since then, Intel has been concentrating on delivering the same (or, often, much less) speed with lower TDP ratings.
These address the market need for thin, high-priced laptops -- preferably without fans -- that you can use in Starbucks.
You could "upgrade" to a new Intel Core i7-6600U that's actually slower than your i5-2500K but has a TDP of only 15W.
But I got tired of 190F slowly being pumped out of my case and into the room. Its replacement is finally on the way. I preordered Intel's Skull Canyon NUC[0]. Got 32GB of DDR4-2800Mhz memory and a 512GB Samsung 950 Pro PCIE/NVME M.2 SSD. I'll be dailychaining a single DisplayPort cable to 3 new LCDs as well.
Pretty huge leap in performance. It just made sense to stop building new computers and jump on the NUC bandwagon. All I do is development, League of Legends and the rare CSGo. The ~Geforce 750 performance levels that NUC will provide will be enough. The inclusion of the Thunderbolt3 port for an external GPU case really put my mind at ease. Not that I intend to utilize it, but I'm glad it's there. Same upgradability as any other machine. SSD/RAM/GPU. The CPU is soldered, but I never once replaced a CPU after building a computer anyway. Other than the few Athlons I killed from overclocking in ~2001.
Probably upgrade more often if these new gaming NUCs are as good as I think they'll be. Next upgrade for me will be 10nm + Thunderbolt4 NUC. And the final perk, all-Intel so it'll work great with any Linux distro natively. That's worth a lot to me.
Unless Intel failed hard with this thing, which I highly doubt.. it's Intel.. I'm all-in on NUCs from here on out.
[0]http://www.newegg.com/Product/Product.aspx?Item=N82E16856102...
I'd assume these acquisitions added to revenues.....
Really? About the only reason why I'm getting a new phone every so often is when the old one stops being updated. (My Nexus 4 lasted 3 years, and it would have done another year.)
Planned obsolescence, if you want.
Incidentally I had a HTC Desire HD before and that became unusable on newer versions, as is the Nexus 7 now. These two clearly didn't have the good enough hardware specs.
Also, I play some games on my phone, and having better hardware helps a lot with that.
I could see how infrared sensor like in that new Caterpillar phone could come in useful especially if you are in a building trade, but fingerprint scanner?
You have to get a phone with one and use it for a week or so until its use becomes routine to really understand how big of a game changer it is. I subconsciously unlock my phone now every time I pick it up. It's amazing. Every day it saves me probably 60 seconds in total typing in stupid PINs, and those savings add up real quickly.
They sold off their ARM processors to Marvell. They've made various forays into wireless, though WiMAX didn't work out so well for them.
The automotive industry faced the same issue a long time ago, and their solution was to turn cars into a fashion statement. You no longer upgrade your car because your old one is worn out, you upgrade to signal your wealth through conspicuous consumption. The mobile phone market is somewhat the same way. The desktop PC market? Not so much.
There is some legitimate utility derived from novelty -- I don't want to be walking around in my grandfather's battered rags either -- but I wonder if some day we can shift towards something more sustainable and less paying to dig consumerist holes then paying again to fill them back in.
The point about your grandad's battered rags is that they're battered rags, though, not that they're old. His good leather jacket is probably still perfectly serviceable today.
But most of them are full of ARM chips fab'd by companies not named Intel.
hmm... only if I kid myself that the mobile phones (even the smart ones) are actually computing devices on which "I can compute whatever I wish to compute AND the way I can compute on a PC". Most of the ARM devices sold are NOT computing devices for the general person who purchases them.
It reminds me the fallacy of calling smart-phones "supercomputers in one's pocket".
May be the ARM chip based devices are "computing devices" for companies like Samsung, Google, or some car makers but certainly not for general public.
How much complexity do you think the average mind generates with its time? Enough to justify the ATP?
How much thinking do you think the average human does with his brains? Are brains worth it? Stay tuned.
I crunched to inbox zero with my phone while commuting to work, while I'm typing this at my "real work computer"
Even if we disregard how arbitrary that definition of "computing device" is, it's still a false proposition. Anyone can easily get a browser, a word processor and spreadheets on their mobile device or tablet (ARM). That's about as much computing as a significant chunk of the population requires.
I have debian chroot on my Android device which gives me Vim, GCC and javac out of the box.
It's a sign of market maturity. Intel shouldn't be trading at a premium if it's selling a highly predictable, stable product to a consolidating marketplace.
Both Intel's sales and profit are even YoY in 2015, and up from 2013. This doesn't have much to do with computer sales.
Valuing growth over sustainability makes these backwards ass goals of hiring more, building more and growing. The way this is spun is pretty horrible.
Amazon and Wal-mart losing is a good thing for the environment and society as a whole.
You yell, "But people lose their jobs..." There are more jobs, plus why does everyone need a job anyway? Can people in Silicon Valley not make $150 ~ $250k a year, everyone else get a minimum income and we work together to make better art, smaller factories and a world that will last much longer by recycling and rebuilding and not needing to buy an endless supply of shit?!
"Ending is better than mending. The more stitches, the less riches." -Brave New World, Huxley.
This is kind of silly. Job losses are a bad thing precisely because we don't yet live in a world where you can get by on a guaranteed minimum income without a job.
If you think it's worthwhile to push society in that direction, then great, but don't kid yourself that believing in it is the same as having already accomplished it.
What this system boils down to is a compulsory savings scheme. So an alternative would be a voluntary savings scheme, which would have higher efficiency by not consuming resources for administration.
[0] http://money.cnn.com/2015/03/30/pf/income-saving-habits/ [1] http://money.cnn.com/2013/06/24/pf/emergency-savings/
What Swiss specifically have - we all pay social deductions, within 3 pillars. If you end up unemployed, then you are entitled to 1-2 years of unemployment benefits in 70% of your former income, with some reasonable cap. That is if you worked 100%, in perm contract, at least a year in a row. Otherwise not entitled or payments are much lower.
You have to actively search daily for new job and prove it to your unemployment councilor, otherwise they will cut benefits. Those benefits are really structured in a way to pay you while you are looking for a job, not to have some extra long holidays on everybody's else budget.
Motivating setup, and since there is a social net of that 70% of my income, I am not frightened on the prospect of losing job and needing to store enough cash to live at least X months/years without any income. Handy when one has big fresh loan on his shoulders.
In Norway you can get 1-2 years benefits at about 60% your previous annual income with a cap near median national income.
As long as we move quickly to "you don't need a job to live" because otherwise these job losses are destroying people's lives.
A 50 year old Intel employee might find it quite difficult to get a new job any time soon. Not to mention that where they live they'll have some other thousands ex-colleagues recently fired looking for similar type of jobs.
We're talking about thousands of people -- few of them will be highly sought after chip gurus. In fact obviously it's the less sought after ones that will be let go.
Add a recent mortgage, medical issue or kid at college and here goes their pension savings (or worse). Have the same layoff happen to their spouses near the same time (which it's not that rare), and they're pretty much screwed.
Really, it's as if people have no real world experience with these things...
Where do you have stats showing all of these job cuts will happen in the same location? Where are the stats that show when a person loses their job, their spouse is also likely to lose their job?
As for the same location: typically companies have so-called offices in a few locations --not individual people equally distributed around the country.
Plus, who said that their spouse is "equally likely to lose their job"? It's just an example of a thing that can happen, and does happen, not something that anyone claimed inevitable or "as likely"...
In most of the world, including large parts of western Europe, unless you're upper middle class and higher, it's either hand-to-mouth or smallish savings (nowhere near 30%).
I see via google that minimum wage in Germany is 1473 euros per month for a full time worker.
According to [1], food, housing, necessary household items, and public transportation look like they could reasonably total less than 800 euros per person. Add another 100 for having fun and for the occasional wardrobe expense, and you still get to save nearly 40%.
Having children ruins all of this, of course, but that's pretty easy to avoid.
That's nowhere near being able to save 30-40% of your pay, as the parent said. And Germans are some of the biggest savers in Europe. For places like France, crisis stricken "PIIGS" (Italy, Spain, Portugal, Greece etc) and especially the UK it's even worse.
Most of the UK's mobile industry was staffed by Ex Cellnet/BT who took Redundancy with some massive TAX free payouts - Senior Guys could get 5 figure payoffs and an extra 6 years on your pension.
The head of Vodafone in the UK was an example and as soem one said at his level they threw in a gold plated wheelbarrow for you to take your cash away in.
Everyone else will live in 100 square foot apartments in Soviet-style concrete bunkers, eating ramen (or possibly Soylent). But they won't need to work! They'll spend their entire day painting and composing music!
A lot of people here push this vision, and of course they always imagine themselves to be part of the elite. It really is insufferable.
elites (political in communism vs actually still working people in BI scenario) have amazing life with various luxuries. rest will be allowed to exist and not die of starvation and have a lousy place for sleep. truly bright future...
At least with BI, you don't have to toil away at a time-wasting job that's just busy-work: you can do something you enjoy, and maybe we'll all get lucky and you'll write the next Harry Potter series and become a multimillionaire, while paying a bunch of taxes to keep the system going. If not, at least you have the dignity of not digging holes and then filling them back in all day long to justify your paycheck.
If you don't like this, then let's hear your alternative. The only alternative to this that I can think of is to ban automation, or strictly regulate it so that any automation which does a job that humans can do is banned (allowing only automation which does things that humans cannot do). Do you really want to go that route?
Anyway, the world you are so worried about is already here. A small number of people do continue to do important work that can't be automated. Most other work is unecessary busy work. Artists and musicians already live off of government largesse, either by taking "McJobs" that are artificially highly paid because of government minimum wage, or by actually being on welfare.
Since people can't wrap their heads around the concept of Basic Income, we end up with hordes of people paid to do stupid shit that doesn't matter. The endgame is that we're all government employees in a Dilbertesque hell. Moving papers from one pile to another and back again. Digging holes and then filling them again, since letting people decide what to do during the workday would be too disruptive.
I once heard about the British Colonial Office. The time when it had the most employees was precisely the time when it was dissolved because Britain did not have colonies anymore. They were all just shuffling papers around all day.
I sadly don't have a source for that. Does anyone have a link, by any chance?
C. Northcote Parkinson, 1955. http://www.economist.com/node/14116121
"A glance at the figures shows that the staff totals represent automatic stages in an inevitable increase. And this increase, while related to that observed in other departments, has nothing to do with the size - or even the existence - of the Empire."
What I don't know is where Parkinson got his own figures from. Some of them are cited in the article, but I think not this one.
For $400 you get a device that will let you watch movies, play games, check email, get phone calls, etc.
Granted you could also get a cheaper phone but this replaces your TV and computer! Smartphones are really high-value!
How do you expect that person with meager income to pay for the network bandwidth and usage bill?
>>Smartphones are really high-value!
This I agree wholeheartedly. At least for people like me, who enjoy reading books, smart-phones (with sites like project Gutenberg) provide such an utopia that I feel like living in heaven. Of course, I know that smart-phones don't solve all problems automatically, but from knowledge-seeker's PoV, smart-phones are of great value.
Also, I understand that not all people like to read, but that's a different thing to ponder upon.
I think if you're looking to invest in one useful thing, a good phone would be a great purchase. Maybe the Moto G at $200?
Amortized over a year, you're talking about a lot of bang for the buck.
The S3 generation of hardware has stood up very well.
My only reason to upgrade would be for some good security hardware that can support full disk encryption with no slowdown.
You'll see it if you lose your job and can't find a new one, like it happens to millions of people the world over.
Add a medical or family emergency to that, and you'll totally get it.
Unemployment in the real world is not about some Sci-fi automation fantasy. Might be, but not yet. And even when historically it leads to new jobs or other benefits (something not always a given) the pain and trouble is still there for those unfortunate to be left on the wrong side of those new jobs.
If a lot of companies suddenly go bust that are today supposedly getting in the way of innovation, it might be good for long term innovation, but in the short term, say 10-15 years it can really be hell. Not to mention that in this 10-15 year period while the economy is hemorrhaging it makes the entire economic ecosystem very vulnerable, and significantly reduces its capacity to deal with external attacks.
That is while US companies may start failing, who's to say that a foreign company won't take its place. Then you have to start taking isolationistic measures, which is a whole other mess.
The ideal scenario would be to see these companies slowly, over a period of decades fade out, and be replaced by others, which I honestly don't see happening as of yet in SV, but things like this generally do come out of the left field.
So if we see these companies shrink rapidly, with no one else to take the mantle, I honestly think it would be a dangerous situation as it can be a catalyst for something bigger.
Yep. That's what Peter Thiel is saying as well: https://news.ycombinator.com/item?id=11485376
"My investments are over valued, oh the lessons I have learned"
"All investments are overvalued, oh the lessons we will learn"
are two very different statements.
Its because bad news is good news in the twisted upside down world of speculating on the Fed's interest rate policy direction via the stock market. Expectations of rate hikes go further into the future with every bad economic indicator released and there are many(retail sales, auto, housing, industrial production, rail traffic, oil and gas, capex) . Will continue to wait for the day the market finally figures out that interest rate policy frameworks are broken, the Fed has no more ammunition, and the stock market jumps out the window rather than using the stairs. At that point, I'm buying lads.
Who is it overvalued by, and how is the "true" value determined?
The true value is determined by what happens next, for short to medium values of "next."
Current fundamentals simply don't support a future of continuing growth.
A correction is certain. The only questions are when, how fast, and how much.
Suppose everyone expects the demand for widgets to grow by 1% per year for the next 10 years. This growth might get priced into the market with some sort of net present value calculation. Capital will flow into building new widget factories to fund all of this new construction.
Now what if actually an asteroid hits a city with lots of widget demand. 50% of demand is wiped out instantly. Well in this case, everyone was overvaluing the market for widgets! All of those net-present-value calculations were way off. The market will correct.
Or maybe the asteroid takes out 50% of production. Suddenly much more investment in widget factories is required. The price shoots up to capitalize all of the construction, since demand has not changed.
In either case, before the asteroid the market was not correctly valued since no one had yet priced in the asteroid.
Valuation only includes all available information.
You can't expect random acts of God to be priced in.
Overvalution is when psychology everyone is bullish, but the facts are not backing that up.
Four companies don't represent the market. Come on. I swear some users here will wish will wish bubbles out of the air to gripe about.
There is most likely a corporate bond bubble, as we know from representative market signals. With the S&P 500 though, four companies are not representative signals.
BTW, this is a great site for tracking S&P ratios: http://www.multpl.com/
Practically speaking, I personally don't believe the efficient market hypothesis due to the very obvious meddling by political actors, central banks, national treasuries, etc. Behavioral finance has also consistently demonstrated that humans do not react rationally in markets.
My point is a pedantic one referring to the OP using the word "overvalued". The market price is never over/under valued. It is merely the market price at that moment.
As you said, it is merely tautological.
In other words I think it's futile to try to attach moral attributes (for example saying that a market is "best" valued at the moment or not) to things like financial transactions, which don't have any intrinsic moral values associated with them. Otherwise we risk talking about long-dead German philosophers when trying to illuminate the problem.
Carrier is moving manufacturing operations to Mexico.
We're on the verge of something really big and really bad.
This is nothing but an asset bubble that is sure to burst someday, as is akin to what the Gov't, the credit agencies, and WS did with housing and mortgages back in the 2000's that led to the meltdown and TARP.
[1]http://www.safehaven.com/article/39140/jobs-report-moves-fed...
But the sum of all prices does in fact vary. I'm sure you're familiar with Tulip Mania. Prices can be bid ever-higher in a cycle, and they can also decline in tandem as in the depression.
For the entire market to have an expanding total price, new money has to be entering the market, or the net real value of the underlying financial assets has to be declining. Either way, the entire market can become overvalued or undervalued, especially compared to non-financial (or illiquid) assets denominated in the same currency — e.g., wages, energy, or land.
I have one company for sale at USD329 billions, it grows 50%-100% a year for now and currently generates USD3.29 billions
I have another company for sale at USD219 billions, it is shrinking at 1.4% a year and currently generates USD14.69 billions
And finally I have another company for sale at USD200 billions, it is growing/shrinking between -8% and 60% a year and generates USD7.35B
Most people prefer the second one, who makes you a good 7% return a year. the first one looks good, but will take at least 6 years to be as good as the second and the last one is so so. the companies where 1) Facebook 2) Walmart and 3) Coca cola. (we're ignoring how much assets and liabilities they have for simplicity)
And as you see, even when facebook has a promising future, we don't know if it will reach a good value/margin level as walmart. so we may agree it's overvalued at is current price.
Hope this shed some light, I'm not a trader or something, so this info is very simplistic
P.D.: this analysis is called Fundamental Analysis, you can go deeper and honestly it has worked very well in my portafolio. I bought stock in Gerdau (GGB), a brazilian steel company, because I studied as a whole business and discover it was priced very low. that was starting in November, I bought those stocks at 1.22 and recently they reached 2.44. I basically duplicated my money in 6 months. Remember stocks aren't just tickets, they are little parts of a big business.
Quite a few people would disagree.
Only if you subscribe to the "Greater Fool" theory[0]. On the other hand, if you think the stock price should reflect some sort of intrinsic value, say the net present value of the stream of all future dividends, then it could be the case that you would never recoup your investment with any stock currently.
Get paid a lot more money, receive double digit gains on your retirement account year after year -- and be completely fucked in the process, ironically, because prices went up even faster and its more profitable to simply hoard things than sell them.
Considering the money the government is still pumping into the market directly, I don't think people QE will have the same effect. It really depends on how it's executed though.
To the extent that Intel and the tech unicorns are complements, Intel's profits declining may actually signal that tech unicorns are undervalued.