We've seen a few bubbles in the last 40 years in the stock market.
Here are a few comments on the major bubbles and news items.
Note how Nixon went out the same way that George Bush went out - ugly in the polls and ugly in the stock market. And note how the party switched in both cases and then malaise set in, for similar reasons - a lack of economic growth. In the former example, we had inflation due to an opec-induced cornering in the oil market together with a lack of central bank intervention. In the current example, we had deflation due to worldwide capacity increases and excessive central bank intervention.
Note the "Calls for Peace" mark the top prior to major stock market melt-downs 1973 & 2007.
Note the Peaks in 1973 and 2000 and 2007 were at times when the collective group of 50 or so hot stocks had a P/E of 50 in 1973's Nifty Fifty, then in 2001 the PSR (Price to Sales Ratio) reached well beyond 50 preceding a crash, then the P/E of a house reached beyond 50 prior to the Gov't cutting the leverage down in banks to reduce lending to an overpriced asset (real estate).
Note the "internal trend" that has paced along this whole time, but also keep in mind that it isn't adjusted for inflation since it is a "nominal" price and not a "real price". One share of the S&P500 might buy 2 ounces of gold now, but that isn't always the case. It changes around a lot. How much land does 1 share of S&P500 buy? These are the important questions in the long haul, what does your one share of the S&P500 buy? What is the dividend income from that one share? And what does one share earn?
There are many more stories in this long term chart pattern that I would love to share. Feel free to comment below or ask questions.
Best regards,
Tim West
12:00AM February 24, 2017
Kommentar
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1974-1994 COPY & PASTE to the 2009 low
Kommentare
IvanLabrie
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Thanks for sharing Tim. People many times ignore the big picture, or the lessons from history, and focus too much on technical charts.
Cheers.
@IvanLabrie, Sounds about right. Also going too much into details and fine grain with daily and hourly makes one miss the big picture at times.
IvanLabrie
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@2use, exactly. Finding the timeframe 'in control' is key...also, 'OUR' timeframe.
TiMMiT
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I guess you can copy that 'worry about China bubble popping' a second time here. Great chart and specially for me as a young trader enormous important to go back and zoom out sometimes.
A-shot
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@timwest Are you going to be in in higher beta or safer ones? Consumer? Internet? Small cap or big caps?
timwest
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@2use, Small caps - mid caps. Healthcare & Biotech mainly. Emerging markets are very cheap and could "turn the corner". I'll be light on Semiconductors which are getting ahead of themselves. Good question. Energy is always a strategic area of focus, so I want to be long energy as a hedge. I want to be long electrification but opportunistically. I want to be focused on the aging of America trends, including Express Scripts (healthcare name, but also a technology, internet and distribution company). I want to still have Amazon as they dominate retail and almost everything they try. Apple is always a focus, opportunistically. I was long for the 95 to 131 ride but I'm off now. Airlines are dirt cheap, so I want to be double-weight airlines over the index exposure, or more. I had quadruple rate exposure back in the fall and pulled back most of that in the first quarter after Buffett announced he had joined the party. So, overall, I want growth at a reasonable price, I want long term trends, and I want to lighten up and trade around a position opportunistically.
timwest
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@timwest, So clearly there are a lot of large caps in my ideas list also @2use
A-shot
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@timwest, So it seems it is all caps, but i see you do focus on large names and biotech. EMM can indeed turn, but so far they have been unstable. If semi conductors, do you look at MU as a trade. And why you took away after Buffet went in?
timwest
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@2use, I'm trading away Buffett because it is up 40% in a short period of time. It was an unexpected bonus to have Buffett pushing these stocks. I am reallocating to JBLU because it is cheap too and overlooked. I prefer to fly JetBlue also. I do not have an opinion on MU. Emerging Markets have a lot of upside and are the cheapest they've been in decades.
Cheers.