What do you think is in more of a bubble right now?

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McGilicutty
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What do you think is in more of a bubble right now?

Post by McGilicutty » Thu Dec 15, 2016 10:09 pm

Just curious. What do you think is in more of a bubble right now?

(1) U.S. Stocks (the PE ratio of the S&P 500 is at 26 for chrissakes!, etc.)

(2) long-term bonds (government stimulus is going to cause inflation to go up which will be heckish on long-term bonds, etc.)

(3) Other

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Re: What do you think is in more of a bubble right now?

Post by Toons » Thu Dec 15, 2016 10:11 pm

I havent' the foggiest.
Stick with the asset alloacation.
8-)
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Re: What do you think is in more of a bubble right now?

Post by columbia » Thu Dec 15, 2016 10:13 pm

3:) Number of people, who believe that they can more accurately read the tea leaves and outsmart the market.

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Re: What do you think is in more of a bubble right now?

Post by countofmc » Thu Dec 15, 2016 10:15 pm

Art and exotic cars.

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Re: What do you think is in more of a bubble right now?

Post by KyleAAA » Thu Dec 15, 2016 10:48 pm

I'd say neither is particularly bubbly.

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Re: What do you think is in more of a bubble right now?

Post by White Coat Investor » Thu Dec 15, 2016 10:59 pm

McGilicutty wrote:Just curious. What do you think is in more of a bubble right now?

(1) U.S. Stocks (the PE ratio of the S&P 500 is at 26 for chrissakes!, etc.)

(2) long-term bonds (government stimulus is going to cause inflation to go up which will be heckish on long-term bonds, etc.)

(3) Other
3) Number of colleges in the US
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Re: What do you think is in more of a bubble right now?

Post by AlohaJoe » Fri Dec 16, 2016 12:01 am

McGilicutty wrote:Just curious. What do you think is in more of a bubble right now?

(1) U.S. Stocks (the PE ratio of the S&P 500 is at 26 for chrissakes!, etc.)

(2) long-term bonds (government stimulus is going to cause inflation to go up which will be heckish on long-term bonds, etc.)

(3) Other
I don't think anything is in a bubble right now.

The South Sea Bubble resulted in a 1,000% increase in a single year. That's a bubble.

The Tulip Bubble resulted in a 99.999% price decrease in a single year. That's a bubble.

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snowshoes
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Re: What do you think is in more of a bubble right now?

Post by snowshoes » Fri Dec 16, 2016 12:10 am

White Coat Investor wrote:
McGilicutty wrote:Just curious. What do you think is in more of a bubble right now?

(1) U.S. Stocks (the PE ratio of the S&P 500 is at 26 for chrissakes!, etc.)

(2) long-term bonds (government stimulus is going to cause inflation to go up which will be heckish on long-term bonds, etc.)

(3) Other
3) Number of colleges in the US
I was thinking this too WCI. Higher educations economic costs are unsustainable.
Last edited by snowshoes on Fri Dec 16, 2016 12:18 am, edited 1 time in total.

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Re: What do you think is in more of a bubble right now?

Post by Chadnudj » Fri Dec 16, 2016 12:14 am

Gold.

Then again, I think gold is always in a bubble. It's a hunk of metal, that on its own creates no jobs, makes no product, earns no interest, and makes no profit. It just sits there.

I will never invest in gold (to the extent I can control -- I can't help it if some small, unknown part of Vanguard LifeStrategy Growth, say, ends up in gold).

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Re: What do you think is in more of a bubble right now?

Post by Pajamas » Fri Dec 16, 2016 12:18 am

3. U.S. dollar

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Re: What do you think is in more of a bubble right now?

Post by Valuethinker » Fri Dec 16, 2016 3:36 am

Housing in Sydney Melbourne Vancouver BC Toronto ON Auckland NZ

All ancillary services related to same- -mortgage finance (particularly non bank lenders), real estate agents, condo builders etc.

Chinese housing and commercial property. All industries related to same (e.g. timber and construction materials; Chinese lending against property).

The valuation of the "Unicorn" tech stocks that are unquoted but have values in excess of $1bn (although to be fair, valuations have come down). Uber in particular.

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Re: What do you think is in more of a bubble right now?

Post by Valuethinker » Fri Dec 16, 2016 3:37 am

Pajamas wrote:3. U.S. dollar
Hard call but at least whilst the current Federal Reserve Chair remains in place, I don't think so. She is a hard money advocate (who has been very soft in her tenure).

The very difficult political-economic matrices in Eurozone, Japan, UK-Brexit mean that it's not obvious why those countries would strengthen against the USD, which has a far stronger economy and therefore higher interest rates are more likely in US than in other countries.

I agree that post her departure we do not know.

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Re: What do you think is in more of a bubble right now?

Post by TomCat96 » Fri Dec 16, 2016 5:13 am

I have a general rule about bubbles. It's too early to call anything a bubble unless the ordinary person can look at something and say "something seems out of place here." That was true during the dot com era. It was true during the housing boom from 2004-2008.

One of the scenes in "The Big Short" that stuck out to me is that even Michael Burry who called the housing crisis called it far too early. The property market didn't explode in 2007, it took another two years to finally hit. It seems that even when bubbles can be unmistakably identified, they can still keep afloat longer than people realize.

Right now, there are no bubbles I can identify. Where's the excess? Are stocks insanely overvalued? No. Are bonds? No.
Is Gold? Are properties? No, no, and no. The only exception is the Chinese property market where something is clearly out of joint. Having whole cities empty counts as a scenario where even the ordinary person can look around say "something seems out of place"

Being slightly high doesn't count as a bubble. Prematurely calling bubbles is a bad habit, and is psychologically very destructive to staying the course.

As for China, they've put up so many capital controls, I wonder about the risk of contagion. The effect I believe is that they greatly limited any potential damage to global financial markets outside of China.

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Re: What do you think is in more of a bubble right now?

Post by Tycoon » Fri Dec 16, 2016 7:02 am

snowshoes wrote:
White Coat Investor wrote:
McGilicutty wrote:Just curious. What do you think is in more of a bubble right now?

(1) U.S. Stocks (the PE ratio of the S&P 500 is at 26 for chrissakes!, etc.)

(2) long-term bonds (government stimulus is going to cause inflation to go up which will be heckish on long-term bonds, etc.)

(3) Other
3) Number of colleges in the US
I was thinking this too WCI. Higher educations economic costs are unsustainable.
I agree with this too. In MANY cases the costs don't support the outcome.
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Re: What do you think is in more of a bubble right now?

Post by MEA » Fri Dec 16, 2016 7:43 am

McGilicutty wrote:Just curious. What do you think is in more of a bubble right now?

(1) U.S. Stocks (the PE ratio of the S&P 500 is at 26 for chrissakes!, etc.)

(2) long-term bonds (government stimulus is going to cause inflation to go up which will be heckish on long-term bonds, etc.)

(3) Other
This is how I think about bubbles.

1. A bubble starts with the smart money going in. Nothing is overvalued yet.

2. The price doubles and the dumb money starts to change its mind and it gets in. The price goes up and, it is overvalued.

3. Now that it has made a lot of people a lot of money the moron money starts to get in. It doubles again, and it is really overvalued. There is no way of knowing how long this part will last. No one is thinking right. The bubble has skewed everyone's thinking, no one really sees it.

4. Now the smart money has turned into moron money and it starts the selling.

I don't think anything is in a bubble right now. I think you need a lot of optimism to form a bubble. I agree with Alan Greenspan, and Larry Summers. The high cost of education and healthcare are interfering with domestic savings and investment. That is the problem we face today. That is the reason we can't get back to our normal growth.

Now if we try to fix that with a large fiscal stimulus program in a economy that is already at full employment that could mask things and who knows what bubbles will form or be exposed.
Last edited by MEA on Fri Dec 16, 2016 11:03 am, edited 4 times in total.
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Re: What do you think is in more of a bubble right now?

Post by qwertyjazz » Fri Dec 16, 2016 7:57 am

Valuethinker wrote:
Pajamas wrote:3. U.S. dollar
Hard call but at least whilst the current Federal Reserve Chair remains in place, I don't think so. She is a hard money advocate (who has been very soft in her tenure).

The very difficult political-economic matrices in Eurozone, Japan, UK-Brexit mean that it's not obvious why those countries would strengthen against the USD, which has a far stronger economy and therefore higher interest rates are more likely in US than in other countries.

I agree that post her departure we do not know.
Maybe not a bubble and may not be quick. But I find it hard to imagine the US dollar being the same over the next fifty years as it has been over the last fifty compared to other curriencies. I also do not put it past the world to reset the past 150 years of state level money being the only curriencies of import - cities, companies and even whatever block chain like things morph into in the next couple of decades.
The dollar might strengthen given short term problems. But absent another world war or migration crisis that the US relatively avoids (separated by two oceans), the place of the economy will likely decrease and the concept of the dollar as the reserve currency of the world.
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Re: What do you think is in more of a bubble right now?

Post by DaleMaley » Fri Dec 16, 2016 9:51 am

I profess to having no ability to predict bubbles, so I stick with my 60:40 asset allocation.

I made this chart back in 2014 to illustrate typical bubbles:

Image
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Re: What do you think is in more of a bubble right now?

Post by sid hartha » Fri Dec 16, 2016 9:54 am

I think the business of declaring bubbles is in a bubble!

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Re: What do you think is in more of a bubble right now?

Post by Tamalak » Fri Dec 16, 2016 9:58 am

I'd stay US stocks are pretty bubbly. It sure seems that way to me.
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Re: What do you think is in more of a bubble right now?

Post by midareff » Fri Dec 16, 2016 10:02 am

I think it's the Venezuelan Bolivar..... took them right off this year's travel to list.

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Re: What do you think is in more of a bubble right now?

Post by tim1999 » Fri Dec 16, 2016 10:10 am

College tuition

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Re: What do you think is in more of a bubble right now?

Post by Flashes1 » Fri Dec 16, 2016 10:14 am

I think European stocks are the most overvalued right now despite being in the pits for 10 years: I) US dollar will continue to outgain Euro, II) demographic changes work against Europe, III) political risk of EU breaking-up, and IV) unfriendly business environment compared to US and China.

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Re: What do you think is in more of a bubble right now?

Post by Theoretical » Fri Dec 16, 2016 11:02 am

Higher education is a huge bubble.

"It's different this time"
- Students: Everyone HAS to have at least a bachelor's degree now, regardless of the nature of the position.
- Colleges: We have to stay competitive with our peer schools, and many of the students are financed. I went to a private law school in the popping of the worst bubble in american legal profession history, in one of the best remaining markets (DFW), and tuition increased an average of 10% per year, in a deflationary bubble and minimal interest rates. My wife's undergraduate and graduate tuition, and her brother and sister's tuitions have similarly been rising. This is the case just about everywhere.

Historical valuation ratios exceeded:
- A college education used to be a clear distinguisher of achievement that opened many doors both relationally and vocationally. Now it only does the former, aside from engineering-type disciplines and a few outliers.

- Sky-high cost for reduced earnings increases, including for advanced and professional degrees.

Speculation:

- New college capital expansions and professional programs keep getting created, even in markets with oversupply, such as law.

- SLABs - Student Loan Asset Backed Securities have more than $1 Trillion, and the unique feature is that student loans cannot be extinguished in bankruptcy and frequently have parental cosigners and government guarantees. In addition, the interest rates are well above current market rates.

Popular media:

- Student loan refinancing programs are all over social media.
- College recruiters and high school counselors push hard for expensive college and graduate options.
- Employers demand college degrees as the new high school diploma, including for entry-level jobs.

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Re: What do you think is in more of a bubble right now?

Post by coacher » Fri Dec 16, 2016 11:08 am

- Executive, Investment Banking, and Pro Athlete salaries/bonuses
- Tweets
- Top ten lists
- Pop-ups

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Re: What do you think is in more of a bubble right now?

Post by MEA » Fri Dec 16, 2016 11:54 am

Education is too obvious. Bubbles are stealthy.
It is speculators speculating on other speculators speculations. It is a tale told by an idiot, full of sound and fury signifying nothing.

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Re: What do you think is in more of a bubble right now?

Post by Theoretical » Fri Dec 16, 2016 12:17 pm

MEA wrote:Education is too obvious. Bubbles are stealthy.
So was the tech bubble and so was real estate. I was reading articles about housing overheating even as early as 2005 and that it'd be ugly. The tech bubble was ludicrously obvious.

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Re: What do you think is in more of a bubble right now?

Post by Engineer250 » Fri Dec 16, 2016 1:40 pm

Theoretical wrote:Higher education is a huge bubble.

"It's different this time"
- Students: Everyone HAS to have at least a bachelor's degree now, regardless of the nature of the position.
- Colleges: We have to stay competitive with our peer schools, and many of the students are financed. I went to a private law school in the popping of the worst bubble in american legal profession history, in one of the best remaining markets (DFW), and tuition increased an average of 10% per year, in a deflationary bubble and minimal interest rates. My wife's undergraduate and graduate tuition, and her brother and sister's tuitions have similarly been rising. This is the case just about everywhere.

Historical valuation ratios exceeded:
- A college education used to be a clear distinguisher of achievement that opened many doors both relationally and vocationally. Now it only does the former, aside from engineering-type disciplines and a few outliers.

- Sky-high cost for reduced earnings increases, including for advanced and professional degrees.

Speculation:

- New college capital expansions and professional programs keep getting created, even in markets with oversupply, such as law.

- SLABs - Student Loan Asset Backed Securities have more than $1 Trillion, and the unique feature is that student loans cannot be extinguished in bankruptcy and frequently have parental cosigners and government guarantees. In addition, the interest rates are well above current market rates.

Popular media:

- Student loan refinancing programs are all over social media.
- College recruiters and high school counselors push hard for expensive college and graduate options.
- Employers demand college degrees as the new high school diploma, including for entry-level jobs.
I agree with all your points, but I wonder how the tuition bubble can really "burst"?

State schools in my state have increased tuition 300% in the last 20 years adjusted for inflation. The state used to provide 32% of the university's budgets. In 2004 this was 16%. As of a couple years ago this was 11%.

Since I also live in a HCOL area it's been interesting to watch the 2008 recession on housing prices and what has happened since. All the "unsustainable" home prices and rents in 2008 are back again. My home is "worth" what some flipper sold it for in 2006. So so much for the crash having a long term impact on my local housing market. People still want to live here (it's HCOL for a reason). And people still want their kids to go to college, and go to the best college. Maybe it will take until the millenial's kids are going to school for people to question the value of college. Or a financial crisis around student loans, but not necessarily around college tuition. I agree tuition is absurd and appears "unsustainable" I just don't see what fixes it. Medical expenses used to be tiny parts of people's budget and now they are a huge percentage. You take it for granted that you pay your HMO every month etc etc. Maybe tuition will just become part of the normal lifestyle expenses like healthcare is.
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Re: What do you think is in more of a bubble right now?

Post by whodidntante » Fri Dec 16, 2016 1:48 pm

I don't think either are in a bubble. But I don't expect fantastic returns over the next 10 years

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Re: What do you think is in more of a bubble right now?

Post by BackOfTheNet » Fri Dec 16, 2016 2:09 pm

Hatchimals
NES Classic
Bitcoin

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Re: What do you think is in more of a bubble right now?

Post by Theoretical » Fri Dec 16, 2016 3:33 pm

Engineer250 wrote:
Theoretical wrote:Higher education is a huge bubble.

"It's different this time"
- Students: Everyone HAS to have at least a bachelor's degree now, regardless of the nature of the position.
- Colleges: We have to stay competitive with our peer schools, and many of the students are financed. I went to a private law school in the popping of the worst bubble in american legal profession history, in one of the best remaining markets (DFW), and tuition increased an average of 10% per year, in a deflationary bubble and minimal interest rates. My wife's undergraduate and graduate tuition, and her brother and sister's tuitions have similarly been rising. This is the case just about everywhere.

Historical valuation ratios exceeded:
- A college education used to be a clear distinguisher of achievement that opened many doors both relationally and vocationally. Now it only does the former, aside from engineering-type disciplines and a few outliers.

- Sky-high cost for reduced earnings increases, including for advanced and professional degrees.

Speculation:

- New college capital expansions and professional programs keep getting created, even in markets with oversupply, such as law.

- SLABs - Student Loan Asset Backed Securities have more than $1 Trillion, and the unique feature is that student loans cannot be extinguished in bankruptcy and frequently have parental cosigners and government guarantees. In addition, the interest rates are well above current market rates.

Popular media:

- Student loan refinancing programs are all over social media.
- College recruiters and high school counselors push hard for expensive college and graduate options.
- Employers demand college degrees as the new high school diploma, including for entry-level jobs.
I agree with all your points, but I wonder how the tuition bubble can really "burst"?

State schools in my state have increased tuition 300% in the last 20 years adjusted for inflation. The state used to provide 32% of the university's budgets. In 2004 this was 16%. As of a couple years ago this was 11%.

Maybe it will take until the millenial's kids are going to school for people to question the value of college. Or a financial crisis around student loans, but not necessarily around college tuition. I agree tuition is absurd and appears "unsustainable" I just don't see what fixes it. Medical expenses used to be tiny parts of people's budget and now they are a huge percentage. You take it for granted that you pay your HMO every month etc etc. Maybe tuition will just become part of the normal lifestyle expenses like healthcare is.
Administration is a huge, HUGE cost of both health care and higher education. In addition, activities, athletics, grossly overpriced housing/food, and the like also add into the mix. Innovative community colleges could so some very interesting things in the future.

On the employer side, there's lots of potential for a disruptive marketplace to identify pockets of non-graduates superior to graduates or for a private sector certification program to gain repute.

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Re: What do you think is in more of a bubble right now?

Post by nisiprius » Fri Dec 16, 2016 3:48 pm

I don't see anything I truly suspect is a bubble. I looked at some past bubbles and decided that past things that were called "bubbles" usually involved run-ups of about a factor of three or more, followed by crashes of about that size.

I could certainly be wrong, but I don't perceive stocks are a bubble because I think you should measure from some baseline representing "proper value," and not from of the bottom of the 2008-2009 hole.

And, riffing on DaleMaley's chart, I don't see any obvious signs of a "mania." Circa 1998-1999 I felt that people truly thought they'd found the secret to wealth without work. A memorable data point was the day I was in the software lab, circa 1999, I think, working away, while some electricians were installing some wiring in the dropped ceiling for a new piece of equipment. I heard a cell phone ringing, and the electrician climbed halfway down the ladder, sat on a rung, took out his cell phone, and chatted with a broker for several minutes about buying and selling several individual stocks--I think GE was one of them. It was a time when people talked about "day-trading" as if it were the equivalent of having a job. I'm not seeing anything resembling that nowadays.
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Re: What do you think is in more of a bubble right now?

Post by lack_ey » Fri Dec 16, 2016 4:09 pm

I think the fashionable answer for a while (not sure now) has been privately held tech companies/startups. A bubble in unicorns (valued over $1 billion) generally. Somewhat relatedly, maybe Bay Area real estate? Perhaps some Chinese real estate. I don't really know.

I don't have an answer on the merits there, though, and sympathize a little with the skeptic's take of there being a bubble in bubble prognostications.

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Re: What do you think is in more of a bubble right now?

Post by minesweep » Fri Dec 16, 2016 4:29 pm

I don’t think we are even close to a stock market bubble. The Fed Chair has yet to utter the phrase irrational exuberance. :happy

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Re: What do you think is in more of a bubble right now?

Post by metacritic » Sat Dec 17, 2016 5:58 am

College tuition is the popular reply. For quite a while, I would have made the same argument. Now I wonder.

First, admissions increasingly are a result of a global search, meaning universities simply need to find attendees who can afford current tuition costs anywhere in the world. That's a big pool from which to draw.

Second, the value proposition remains reasonably high for those who can afford. Wages remain highly correlated to college degrees. Resilience from economic contractions remains high, too, for college graduates. This is a global fact, not a regional or national one.

That said, numbers matter. What is the right cost for the returns? I'm not sure but so far the market supports current tuition prices. Those of us saving aggressively for college allow those prices for the top 50 schools in the US or top 100 globally. It very well might be that tuition outside of those schools is at an unsustainably high level -- especially if Pell grants and other means of support disappear. It would be catastrophic for members of disadvantaged communities, though debt levels likely are approaching catastrophic levels, too, for members of these same communities.
tim1999 wrote:College tuition

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Re: What do you think is in more of a bubble right now?

Post by Valuethinker » Sat Dec 17, 2016 6:15 am

Flashes1 wrote:I think European stocks are the most overvalued right now despite being in the pits for 10 years: I) US dollar will continue to outgain Euro, II) demographic changes work against Europe, III) political risk of EU breaking-up, and IV) unfriendly business environment compared to US and China.
1. last I looked, valuation of European stocks was at a substantial discount to US stocks? Part of that is sectoral (very little tech in Europe) part of if is the continuing European banking crisis (in some countries ie Italy).

So what in your estimates do you know that the market as a whole does not? That would justify an even larger discount for European stocks?

2. The thing about a less favourable business environment is that it's relatively easy to fix. It's a lot easier for France or Germany or Poland to become more business friendly than, arguably, it is for the USA, which is already pretty business friendly (but note long term drop in new business formation in USA-- something going on, I don't think anyone quite knows what, but it does not look good)

3. European companies are of course quite global in their operations. Think Glaxo Smithkline, Astra Zeneca, Nestle, Siemens, Carrefour etc. Because they have greater experience operating in different countries with different languages, nationalities, rules, they actually often do better than US companies in that regard in Emerging Markets (the best US multinationals are quite multinational, themselves).

So in buying European markets, you are buying into global companies, just as you are with S&P500.

4. I saw a number that American companies are really very lousy exporters. It was something like only 1% of US companies. Now I didn't track back that stat (it was this week, saw it on twitter) BUT I've heard that general comment before. US companies make great multinationals (establishing operations and production in foreign jurisdictions etc.) but compared to the Germans or the Japanese or Koreans, lousy exporters. Without digging in the stats on this, I don't want to make too big a thing of this, but it's out there.

5. USD is likely to be stronger than Euro and many other foreign currencies for reasons we both probably agree on-- US economy closer to full employment (output gap closed or closing), loose fiscal policy to come, hawkish Fed, Eurozone stagnation. So, again, that's going to favour Airbus over Boeing, say.

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Re: What do you think is in more of a bubble right now?

Post by Quark » Sat Dec 17, 2016 7:25 am

Valuethinker wrote:...2. The thing about a less favourable business environment is that it's relatively easy to fix. It's a lot easier for France or Germany or Poland to become more business friendly than, arguably, it is for the USA, which is already pretty business friendly (but note long term drop in new business formation in USA-- something going on, I don't think anyone quite knows what, but it does not look good)...
A distinction might be made between being friendly to established businesses and being friendly to new businesses, as well as more general business environment matters.

Issues to consider include antitrust enforcement to prevent mergers that reduce competition, relative power of businesses and workers (increase margins by reducing worker bargaining power), intellectual property laws that make it harder to compete, licensing laws that cover increasing numbers of occupations and therefore reduce competition, availability of financing, government subsidies and giveaways, consumer protection laws and a host of other structural issues.

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Re: What do you think is in more of a bubble right now?

Post by jdb » Sat Dec 17, 2016 3:48 pm

Only ones in my opinion are in Champagne. In fact have become more of a Champagne drinker, prefer to white wine, will be enjoying a bottle tonight with friends. Buy at Costco of course. So here's to the New Year, may the only bubbles be in Champagne.

danaht
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Re: What do you think is in more of a bubble right now?

Post by danaht » Sat Dec 17, 2016 4:18 pm

3) Healthcare costs. Especially yearly premiums seems to have gotten out of hand in the last three years. Definitely not sustainable at the current rate.

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billyv
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Re: What do you think is in more of a bubble right now?

Post by billyv » Sat Dec 17, 2016 4:33 pm

I see a lot of bubbleheads at the moment, but not a lot of bubbles. Then again, if the bubbleheads insist on doing a lot of bubbleheadsy things, then I could see some bubbles forming down the road. 8-)

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Phineas J. Whoopee
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Re: What do you think is in more of a bubble right now?

Post by Phineas J. Whoopee » Sat Dec 17, 2016 11:55 pm

I think there is a bubble in shrilly calling things bubbles in order to garner more clicks to serve up more Ford F-150 paid advertisements, and that it's due to recency bias.

Perhaps we should call the idea that there is a bubble in calling things bubbles PJWgate.

PJW

msk
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Re: What do you think is in more of a bubble right now?

Post by msk » Sun Dec 18, 2016 12:43 am

A very strong belief amongst BHs is that stocks, over long periods of time, always go up, despite the occasional severe, (and in BH belief) temporary declines. That's bubble-talk; but I have no clue when the burst will come. I like to enjoy the ride up, but under no illusion that the next severe decline will be short-lived like in the past 70 years. I am invested in total world, not just the US, because out there amongst the currently unpopular markets, there ought to be some that may survive the cataclysmic event that resets P/E ratios in the USA. Anything less than cataclysmic can be shrugged off.

My overall view: P/E ratios are quite inflated, but have been so for many decades. One day I expect a substantial and sustained reduction in P/E. But with interest rates so low, there's a dearth of alternative investments for us, the non-entrepreneur lazies. Interest rates are so low that I am unwilling to loan even a trusted brother-in-law any significant $ amount at the current bond rates. Yet BHs are happy to loan total strangers at these rates. Hence IMHO bonds are also inflated beyond long term reasonableness, as per trusted brother-in-law yardstick. Is the $ also inflated? Compared to what? IMHO our current environment is that we feel comfortable with high stock P/Es and very low interest rates, and $ exchange rates, because we do not see alternative venues to park. Youngsters should be entrepreneurs in REAL businesses. The environment is ideal for new business ventures, cheap money and ready buyers at high P/E upon success. Race is between the creation of new businesses and, in my view, a major reset of "reasonable" P/E.

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capitalG
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Re: What do you think is in more of a bubble right now?

Post by capitalG » Sun Dec 18, 2016 2:16 am

Advertising driven tech companies. There's only so many ad dollars to go around and the umpteenth iteration of a company centered on sharing photos/updates/content with others will slice the pie sufficiently to drag down all the others.

G

heyyou
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Re: What do you think is in more of a bubble right now?

Post by heyyou » Sun Dec 18, 2016 3:15 am

Not the answer that you wanted:
My worst investment was making easy money on the first turnover, then investing extra on the next one, expecting a repeat.
My advice is that I hope you are wrong at whatever you are trying to forecast correctly, so that you won't pay as much for the lesson that I received.
Risk and return are relative, no risk, not much return. We just have to tolerate the stress, to reap the rewards of investing. What the geezers know is, whatever stock index you buy this decade, 20-30 years from now, the value will be so large that the purchase price will no longer matter, but the first decade of ownership will have some bad years.

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Tycoon
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Re: What do you think is in more of a bubble right now?

Post by Tycoon » Sun Dec 18, 2016 8:41 am

capitalG wrote:Advertising driven tech companies. There's only so many ad dollars to go around and the umpteenth iteration of a company centered on sharing photos/updates/content with others will slice the pie sufficiently to drag down all the others.

G
I've often wondered about this. But then on vacation in Aruba I observed that nearly everyone was there to take pictures of themselves for posting so others could see them enjoying their phones. No enjoying the weather, water, sand, and breeze, just posing for pictures and obsessions with phones. I now understand. I should have studied sociology at one of those expensive universities.
Appeal to Pity:When pity is envoked to support a statement | Appeal to Popular Sentiment:Appealing to unrelated prejudices and attitudes | Hasty Generalization:Too little evidence to support the conclusion

Valuethinker
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Re: What do you think is in more of a bubble right now?

Post by Valuethinker » Sun Dec 18, 2016 9:19 am

Quark wrote:
Valuethinker wrote:...2. The thing about a less favourable business environment is that it's relatively easy to fix. It's a lot easier for France or Germany or Poland to become more business friendly than, arguably, it is for the USA, which is already pretty business friendly (but note long term drop in new business formation in USA-- something going on, I don't think anyone quite knows what, but it does not look good)...
A distinction might be made between being friendly to established businesses and being friendly to new businesses, as well as more general business environment matters.

Issues to consider include antitrust enforcement to prevent mergers that reduce competition, relative power of businesses and workers (increase margins by reducing worker bargaining power), intellectual property laws that make it harder to compete, licensing laws that cover increasing numbers of occupations and therefore reduce competition, availability of financing, government subsidies and giveaways, consumer protection laws and a host of other structural issues.
The distinction, and the subsequent points, are all excellent--- thank you.

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yatesd
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Re: What do you think is in more of a bubble right now?

Post by yatesd » Sun Dec 18, 2016 9:31 am

White Coat Investor wrote:
McGilicutty wrote:Just curious. What do you think is in more of a bubble right now?

(1) U.S. Stocks (the PE ratio of the S&P 500 is at 26 for chrissakes!, etc.)

(2) long-term bonds (government stimulus is going to cause inflation to go up which will be heckish on long-term bonds, etc.)

(3) Other
3) Number of colleges in the US
Funny, I 100% agree. Not sure why there are so many bank branches or college locations. Eventually, I believe MOOCS will change the whole concept of college. While specialized hands-on roles (medical, vo-tech, etc.) will still require substantial in person classes, other classes should be conducted virtually. No need to pay for sports stadiums, buildings, libraries, etc. Really good libraries should become the "Amazon" for all Universities.

Coursera, Khan Academy, etc.

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ClevrChico
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Re: What do you think is in more of a bubble right now?

Post by ClevrChico » Sun Dec 18, 2016 9:38 am

3) Real Estate - It's taking me six months to renovate a bedroom due to skilled trades being booked up. I've never seen it like this.

Engineer250
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Re: What do you think is in more of a bubble right now?

Post by Engineer250 » Mon Dec 19, 2016 12:54 pm

Tycoon wrote:
capitalG wrote:Advertising driven tech companies. There's only so many ad dollars to go around and the umpteenth iteration of a company centered on sharing photos/updates/content with others will slice the pie sufficiently to drag down all the others.

G
I've often wondered about this. But then on vacation in Aruba I observed that nearly everyone was there to take pictures of themselves for posting so others could see them enjoying their phones. No enjoying the weather, water, sand, and breeze, just posing for pictures and obsessions with phones. I now understand. I should have studied sociology at one of those expensive universities.
You kids and your cameras! In my day you paid a professional artist and sat for him for days so that someone could have a likeness of you.

When we were on vacation, we went inside and wrote all our letters to everyone about how wonderful the seaside was this year. We didn't have these fancy machines that prevent us from simultaneously enjoying something and sharing the experience. :wink:
Where the tides of fortune take us, no man can know.

alfaspider
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Re: What do you think is in more of a bubble right now?

Post by alfaspider » Mon Dec 19, 2016 2:16 pm

yatesd wrote:
White Coat Investor wrote:
McGilicutty wrote:Just curious. What do you think is in more of a bubble right now?

(1) U.S. Stocks (the PE ratio of the S&P 500 is at 26 for chrissakes!, etc.)

(2) long-term bonds (government stimulus is going to cause inflation to go up which will be heckish on long-term bonds, etc.)

(3) Other
3) Number of colleges in the US
Funny, I 100% agree. Not sure why there are so many bank branches or college locations. Eventually, I believe MOOCS will change the whole concept of college. While specialized hands-on roles (medical, vo-tech, etc.) will still require substantial in person classes, other classes should be conducted virtually. No need to pay for sports stadiums, buildings, libraries, etc. Really good libraries should become the "Amazon" for all Universities.

Coursera, Khan Academy, etc.
I think the main obstacle is accreditation and certification. There's nothing all that special about Kahn Academy that couldn't have been accomplished 100 years ago with a good library. Learning has been inexpensive as long as there has been cheap access to the written word. Heck, most of what I learned in college I could have learned on Wikipedia. What costs money is for someone trusted by society to evaluate your learning and have their institution certify that you have learned it.

Another big barrier is the unspoken truth that many employers aren't preferring the college educated because they think the students learned anything useful. They are using the college degree as a proxy for class. In another era, the well-to do social climber might have spent a considerable sum to buy a title. Today, they go or send their children to Ivy League schools.

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nisiprius
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Re: What do you think is in more of a bubble right now?

Post by nisiprius » Mon Dec 19, 2016 4:57 pm

alfaspider wrote:...Another big barrier is the unspoken truth that many employers aren't preferring the college educated because they think the students learned anything useful. They are using the college degree as a proxy for class. In another era, the well-to do social climber might have spent a considerable sum to buy a title. Today, they go or send their children to Ivy League schools...
THAT is the elephant in the room.

Quoting from a Wikipedia article,
The connection between certain colleges and social ranking is old; Jerome Karabel, in a note citing Kenneth Davis, says that "in the mid-eighteenth century, the [president of Harvard] personally listed students when they enrolled, according to ... 'to the Dignity of the Familie whereto the student severally belong'—a list that was printed in the college catalogue and that determined precedence in such matters as table seating, position in academic processionals, even recitations in class." Ronald Story, however, says that it was during “the four decades from 1815 to 1855” that “parents, in Henry Adams′ words, began sending their children to Harvard College for the sake of its social advantages.”
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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