[2020] A little stock market sense

[rapmarks]

Waiting to see how much the fed cuts rates today.

 

[Brett]

Waiting to see how much the fed cuts rates today.

a "big" rate cut

.

 

[PigsDad]

a "big" rate cut

Well, given that the consensus was expecting either a 25 or 50 basis point cut, this was a "big" cut. Hopefully this will still keep inflation in check.

I sure hope the Fed sticks to their guns and targets for a nominal rate around 3%. The almost 0% rates that have dominated the last 15 years is just too low. We will see.

Kurt

 

[Ralph Sir Edward]

The 10 year bond isn't going down.

 

[rapmarks]

Well, given that the consensus was expecting either a 25 or 50 basis point cut, this was a "big" cut. Hopefully this will still keep inflation in check.

I sure hope the Fed sticks to their guns and targets for a nominal rate around 3%. The almost 0% rates that have dominated the last 15 years is just too low. We will see.

Kurt

I can’t get over the people who were bragging how much money they made on their house sale are now whining about how high housing prices are, even though they have no intention of moving. People with savings took advantage of the high interest rates on bonds and cds and still complained about interest rates, but don’t have to borrow money. Friends who went on 40 day cruises and eat out twice a day and are complaining about the cost of groceries. Does anyone ever think positively?

 

[VacationForever]

I can’t get over the people who were bragging how much money they made on their house sale are now whining about how high housing prices are, even though they have no intention of moving. People with savings took advantage of the high interest rates on bonds and cds and still complained about interest rates, but don’t have to borrow money. Friends who went on 40 day cruises and eat out twice a day and are complaining about the cost of groceries. Does anyone ever think positively?

Hey, I am happy that the stock market is up again!

 

[WaikikiFirst]

Party on, Garth. Will Renter tell us about the 0.021% he made today? Will people realize how resilient a market that is trading near ATH is?

 

[TolmiePeak]

Party on, Garth. Will Renter tell us about the 0.021% he made today? Will people realize how resilient a market that is trading near ATH is?

I'm still waiting to invest in the RENTER ETF fund.

 

[letsgobobby]

do new all time highs ever get old?

 

[VacationForever]

do new all time highs ever get old?

Never! Hence we stay invested.

 

[WaikikiFirst]

do new all time highs ever get old?

Data says ... after 99 trading days they do. ymmv, but that clock has been reset

 

[letsgobobby]

I can’t get over the people who were bragging how much money they made on their house sale are now whining about how high housing prices are, even though they have no intention of moving. People with savings took advantage of the high interest rates on bonds and cds and still complained about interest rates, but don’t have to borrow money. Friends who went on 40 day cruises and eat out twice a day and are complaining about the cost of groceries. Does anyone ever think positively?

executive functioning, planning, delayed gratification are not strengths for most human beings. But it is a huge advantage when executing an investment plan.

 

[TolmiePeak]

executive functioning, planning, delayed gratification are not strengths for most human beings. But it is a huge advantage when executing an investment plan.

Or attending an owners update meeting.

 

[rapmarks]

Or attending an owners update meeting.

Quite a few similarities between timeshare sales people and politicians

 

[TolmiePeak]

Quite a few similarities between timeshare sales people and politicians

I never thought about it that way but you are correct. I'm still amazed that so many people show up on here claiming they are owned xxxx because the salesperson told them so. Isn't everyone aware that 99% of what they tell you at those presentations is lies?

 

[Brett]

Quite a few similarities between timeshare sales people and politicians

and some similarities with real estate "moguls" !

meanwhile ...

Stocks Rally Globally, S&P Surges to Record High
https://www.reuters.com/markets/us/fed-rate-cut-boosts-futures-growth-stocks-lead-gains-2024-09-19/

 

[TolmiePeak]

and some similarities with real estate "moguls" !

meanwhile ...

Stocks Rally Globally, S&P Surges to Record High
https://www.reuters.com/markets/us/fed-rate-cut-boosts-futures-growth-stocks-lead-gains-2024-09-19/

What about people who are all three? Those people hit the trifecta.

 

[Ralph Sir Edward]

NOTES ON LONG WAVE GOLD/STOCK RATIOS

As an old technical analyst, I thought that some notes on the gold/Dow Jones Industrial charts would be of interest. As is proper, we will start at the beginning.

The fixed gold/dollar ration first broke in 1968, with the collapse of the Gold Pool. Gold on the free market went from the fixed $35/oz to around $40/oz. The DJIA was around 1000. The ratio (what is important to measure) was around 25.

By December 1974, the ration had dropped to around 2.5 ($198/oz for gold and 525 on the DJIA). A relative value increase of gold of around 10X.

The value rapidly changed thereafter, going back to almost 10 by June 1976 (gold at $102/ DJIA @ 1000 again). A relative drop of of gold by 4x.

After that gold would rally strongly until Jan 21, 1980, when it peaked at $875 on the COMEX, with the DJIA @ 850. The ratio was then about even (or 1). A gain by gold of 10x.

One could consider this period (from 1968 to Jan 1980) as a long gold bull market, relative to the DJIA. From a ratio of 25 to a ratio of 1.

Thereafter a long gold bear market began. Gold/DJIA dropped from 1 in January 21 1980 to 39 in July 1999. (July 1999 - Gold @$252 low/DJIA at around 10,000.) A drop of gold by 39x.

At that stage, the next gold bull market, relative to the DJIA started. The ratio went from 39 to 5 in November 2008, after which it has risen somewhat over time, with no spectacular gains. as of today's close the ratio was 42063 for the DJIA and $2647 COMEX close for gold. That ratio is currently just under 16, a gain of gold of about 2.4x.

Looking over the history, the gold/DJIA ratio is neither overvalued or undervalued currently. It is comfortably in the middle. Whether you consider November 2008 the end of a second gold bull market, or only an intermediate high is a longer gold bull market that is not yet over (a la December 1974), is a matter of opinion. Still it is a good indicator of investor sentiment concerning stocks.

 

[TolmiePeak]

Why would anyone expect the price of gold to be correlated with the DJIA? Besides the DJIA is a terrible index anyway. What happens if Microsoft never splits again and the stock is valued at $5,000 a share?

 

[emeryjre]

What will happen when Intel is removed from the Dow
Replaced by a next generation chip designer
The Dow Jones Index keeps companies in the index for too long

 

[Ralph Sir Edward]

Shrug. You could look at the S&P 500 if you prefer. I keep the Dow in my head since Dec. 1974 - keeps the calculation easier for me. As to being representative and changing over time, there are far more changes in the S&P 500 over time than the Dow. Index changes - every index - are inevitable.

What I am showing are changes in relative value. Buy undervalued things when they are undervalued, and sell things that are overvalued when they are overvalued.

 

[PigsDad]

Shrug. You could look at the S&P 500 if you prefer. I keep the Dow in my head since Dec. 1974 - keeps the calculation easier for me. As to being representative and changing over time, there are far more changes in the S&P 500 over time than the Dow. Index changes - every index - are inevitable.

What I am showing are changes in relative value. Buy undervalued things when they are undervalued, and sell things that are overvalued when they are overvalued.

One HUGE thing you are missing with your analysis (either DJIA or S&P 500 or whatever index): you need to compare gold to the total return index, not the price index. Since stocks produce income (dividends) and gold does not, the total return index represents the true investment return when comparing to the price of gold. Just using the price index (the more common index) does not include dividend reinvestment so when comparing to gold it is an apples to oranges comparison.

FYI, the Dow Jones price index ticker is .DJI and the total return index ticker is .DJITR . Take a look at the graphs just for that index and see what a huge difference reinvested dividend make over time.

Kurt

 

[Ralph Sir Edward]

One HUGE thing you are missing with your analysis (either DJIA or S&P 500 or whatever index): you need to compare gold to the total return index, not the price index. Since stocks produce income (dividends) and gold does not, the total return index represents the true investment return when comparing to the price of gold. Just using the price index (the more common index) does not include dividend reinvestment so when comparing to gold it is an apples to oranges comparison.

FYI, the Dow Jones price index ticker is .DJI and the total return index ticker is .DJITR . Take a look at the graphs just for that index and see what a huge difference reinvested dividend make over time.

Kurt

Let me know where a 60 year chart of .DJITR is, please.

 

[PigsDad]

Let me know where a 60 year chart of .DJITR is, please.

I haven't found one.

Kurt

 

[Ralph Sir Edward]

Neither have I, so I stick to just the price. There are lots of charts for that. What I was showing is the shift of relative value for the two competing investments over time.