Is the stock market going to tank?

[rideit]

I have no idea what will end this, but we’re 12 years into one of the greatest rallies in history and stocks are still ripping higher? I’m sorry, but this is some bad juju.

It’s only rational to have a healthy fear of heights.

[Dantheman]

I have no idea what will end this, but we’re 12 years into one of the greatest rallies in history and stocks are still ripping higher? I’m sorry, but this is some bad juju.

I am not an economist, but: Interest rates are still at historic lows. There's few options available besides stocks that provide returns significantly above inflation. Until that changes that's where money will flow and prices will keep going up. How many clockwise turns do you have to make on that spigot before there's not enough flow to feed the beast and the whole thing collapses into itself like a dying star? The hell if I know.

[Benny Profane]

Yup, bottom line, but where will all this money go with no inflation and low interest rates?

[Benny Profane]

X

[Dantheman]

Remember pre-2008 when there were tons of online savings accounts that were yielding 4-5%, sometimes more if you had a large enough balance (I memba, I had one)? 4-5+%, fully liquid and FDIC insured. Good luck finding anything remotely like that today, any time in the last decade, or any time in the foreseeable future.

[Benny Profane]

Real estate speculation only happening in certain markets, and many of them are back to bubble levels. The new tax bill has eliminated a lot of write-offs there.

[Benny Profane]

Remember pre-2008 when there were tons of online savings accounts that were yielding 4-5%, sometimes more if you had a large enough balance (I memba, I had one)? 4-5+%, fully liquid and FDIC insured. Good luck finding anything remotely like that today, any time in the last decade, or any time in the foreseeable future.

Yup. If I could have safe, guaranteed 5% like then, I'd be there, along with millions of boomers and even the wealthy, who had a major chunk of their money in T bills and the like. The markets would crash.

[SlyFoxxx]

https://www.marketwatch.com/story/th...art-2015-12-18

The derivatives are comical..

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[4matic]

FDX was wise to change course. Now AMZN needs them so they have some price stability.

[4matic]

I am not an economist, but: Interest rates are still at historic lows. There's few options available besides stocks that provide returns significantly above inflation. Until that changes that's where money will flow and prices will keep going up. How many clockwise turns do you have to make on that spigot before there's not enough flow to feed the beast and the whole thing collapses into itself like a dying star? The hell if I know.

This is why when the music stops it will be fast and harsh. Interest rates are low for a reason.

I was watching Bloomberg Real Yield and three fixed income managers agreed on one thing. 10y UST goes to zero.

Earnings consensus for 2020 is 8-10% growth this year. I don’t believe it.

Risk adjusted forward return in stocks is way too high right now.

[4matic]

Howard been negative for a while but always a good listen. I’m risk averse like him.


Oaktree’s Marks Says Odds Are Not in Investors’ Favor Right Now https://www.bloomberg.com/news/video...ight-now-video

[Benny Profane]

Take a look at two data points:

1- Value of US commercial & residential real estate market 2010/2011/2012 (pick one year, doesn't matter)
2 - Value of US commercial & residential real estate market @ end of 2019

The problem is that real estate valuation changes induce the perception of wealth while actually taking inflationary credit from the whole country and pooling it up in hot markets. Some benefit, most lose purchasing power in housing & those two camps argue with each other about whether it's good or not. It's zero sum as no productivity gains result from the shifting of resources, they're just moved to different locations. And to the extent they're achieved through increasing leverage, they jeopardize the stability of the overall system.

Certainly makes living in a nice ski town or beach place very expensive.

[Benny Profane]

Yeah, well, I'm an average schmoe and can't afford a forty year old condo in ski country, so, ya, assets propped.

Fucking Jersey shore in a cool place is at least a half million. The Jersey shore. Those assets also propped by government policies for rich people.

[iceman]

well there's like 30 million people who live within ~3 hrs. of the jersey shore, and very limited coastline, and the beaches are actually nice, so it's not just the government proppping it up. Even if you couldn't get insurance at all people would pay money for it. Less money, but real money.

[yeahman]

My in-laws just sold their empty lot in Ortley Beach for 400k. House got wiped out by Sandy and they could not afford to rebuild. It was a great place, I miss going there when we visit. Half block from the beach, prime.

[El Chupacabra]

There's that, but there's also the generalized impoverishing of the average American by using inflationary credit to prop up asset markets, dilute purchasing power & generally make regular life less attainable for each generation.

When I read your posts, I can't help but add - at the end of each one -

"PARKLIFE!"

[stalefish3169]

https://twitter.com/MatiGreenspan/st...052526594?s=19

This is fine.

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[Benny Profane]

well there's like 30 million people who live within ~3 hrs. of the jersey shore, and very limited coastline, and the beaches are actually nice, so it's not just the government proppping it up. Even if you couldn't get insurance at all people would pay money for it. Less money, but real money.

90% of those 30 million people could never afford an almost 7 figure cape cod a block from the beach without very cheap credit and very very cheap insurance. Maybe 95%.

It's absurd that billions of taxpayer money funded rebuilding after Sandy. That is propping up assets owned by the wealthy, because, by definition, you're wealthy if you own beachfront or near beachfront property.

Let's not even start with the hundreds of billions of beach replenishment over the last thirty years.

[iceman]

Probably only 1% could afford that. But there's not anywhere near 300,000 beachfront properties on the Jersey shore, probably not even 30,000. So to some people it has value.

I highly doubt the "hundreds of billions" in beach replenishment too.

But we actually agree, I don't think the Federal government should be in the business of guaranteeing insurance coverage for oceanfront property and I don't think they should be paying for beach replenishment either. All I'm saying is that those places would still be worth money without those things.

here's a searchable "beach nourishment" database. Consider the source, as these people seemfrom a quick look at their site to have an agenda, but it shows a total cost of all replenishement programs in Jersey to be about $1.5 bn since the 1950's: https://gim2.aptim.com/ASBPANationwideRenourishment/ Scanning though it it looks like $5bn would be a high estimate for all beach replenishment programs, ever, in the US. fwiw

[Benny Profane]

Yeah, you're right, what do I know, I thought it was more, but 8 billion since the 1920s. https://www.propublica.org/article/t...erable-beaches

Mostly futile efforts, though. One good nor Easter wipes it out.

I think there are a whole lot more properties on the Jersey coast than you think. LBI must have over a thousand alone. It's almost urban there in density. Same down in Margate and the other towns near AC.

[yeahman]

The NJ beaches could be viewed as a public resource and worthy of public funds to keep them usable. Most people may not be able to afford property close to the beach, but they still come in great numbers to enjoy the beaches. And as somebody pointed out, the beaches on the Jersey shore are great. I'd take them over California beaches and that cold water any day. But the point is, to say that beach replenishment primarily benefits the wealthy is false. Everybody uses the beaches.

As for all the public money that supposedly went to rebuilding after Sandy, it sure didn't go to the homeowners who didn't have flood insurance. Maybe they offered them loans, but nobody was handing out free money to rebuild houses. My in-laws explored every avenue for something like that and came away with nothing.

[ncskier]

90% of those 30 million people could never afford an almost 7 figure cape cod a block from the beach without very cheap credit and very very cheap insurance. Maybe 95%.

It's absurd that billions of taxpayer money funded rebuilding after Sandy. That is propping up assets owned by the wealthy, because, by definition, you're wealthy if you own beachfront or near beachfront property.

Let's not even start with the hundreds of billions of beach replenishment over the last thirty years.

Assuming your math is even close, that means there are 1.5 million people who can afford a beach house. Even with 1% that's still a minimum of 300k people who can provide demand in a relatively small area.
While 8 billion seems like a lot, I imagine we spend 8 billion in drones and missiles in just the past 10 years so 8 billion for sand and insurance since the 20's doesn't seem too bad.
You would probably be less bitter if you just realized there are lots of wealthy people. You're wealthy in global terms, but if you can't buy a 40 year old condo or a run down LBI house, there are apparently plenty of people who can.

[4matic]

T dividend is 5% and the stock is down 5% from its high this month. VZ is weak too.

I like T and want to buy it but this type of action in high dividend payers without news is troubling. If telecom earnings slow what does that mean for economy?

[Benny Profane]

Assuming your math is even close, that means there are 1.5 million people who can afford a beach house. Even with 1% that's still a minimum of 300k people who can provide demand in a relatively small area.
While 8 billion seems like a lot, I imagine we spend 8 billion in drones and missiles in just the past 10 years so 8 billion for sand and insurance since the 20's doesn't seem too bad.
You would probably be less bitter if you just realized there are lots of wealthy people. You're wealthy in global terms, but if you can't buy a 40 year old condo or a run down LBI house, there are apparently plenty of people who can.

I'll bet you a hundred bucks that of ton of the people who "bought" homes all up and down the Jersey Shore will have to sell or simply unload them to survive old age. The game of debt musical chairs, plus taxes, defeats them. Like they actually "own" them.

[Benny Profane]

The NJ beaches could be viewed as a public resource and worthy of public funds to keep them usable. Most people may not be able to afford property close to the beach, but they still come in great numbers to enjoy the beaches. And as somebody pointed out, the beaches on the Jersey shore are great. I'd take them over California beaches and that cold water any day. But the point is, to say that beach replenishment primarily benefits the wealthy is false. Everybody uses the beaches.

As for all the public money that supposedly went to rebuilding after Sandy, it sure didn't go to the homeowners who didn't have flood insurance. Maybe they offered them loans, but nobody was handing out free money to rebuild houses. My in-laws explored every avenue for something like that and came away with nothing.

If the NJ beaches are a "public resource", than make it free and easy for me to drive right up and enjoy them. Robert Mose's Jones Beach is a public resource. Most towns make it very hard to park and charge fees to use "their" beach. That is not a resource for 99% of New Jersey residents. It's restrictive class and racist ownership of that beach by wealthy homeowners in that town, utilizing state and federal funds to enhance the value of their homes and just live better. The Jersey Shore isn't the Hamptons, but, as I said, by definition and relativity, the homeowners there are wealthy, especially if it's a second home, which most are.