Anyway to compare metrics of today w stock bubble in 2000

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jayk238
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Anyway to compare metrics of today w stock bubble in 2000

Post by jayk238 » Mon Jan 15, 2018 4:07 pm

I remember watching news reports of the tech bubble with reports of companies offering bmws and other nice toys to entice workers because of all the money flowing and competition.

I feel its sort of the same thing now.

Are there any articles or metrics you know of to compare the 2000 months before the crash w today?

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jeffyscott
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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by jeffyscott » Mon Jan 15, 2018 5:42 pm

Still only at about 75% of peak valuations from 2000 (using CAPE).

http://www.multpl.com/shiller-pe/

Using the link for monthly table there, CAPE (Shiller PE) hit 43 in 2000 vs. 32 now. There are also links to other valuation metrics there.
press on, regardless - John C. Bogle

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by willthrill81 » Mon Jan 15, 2018 6:33 pm

jayk238 wrote:
Mon Jan 15, 2018 4:07 pm
I remember watching news reports of the tech bubble with reports of companies offering bmws and other nice toys to entice workers because of all the money flowing and competition.

I feel its sort of the same thing now.
In 1999, there was euphoria in the market. I don't get any sense of euphoria today. In fact, I'd say that until last year, this was the most unloved bull market I've ever heard of. And even now, there are many decrying that we're close to 'the top'.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by nisiprius » Mon Jan 15, 2018 6:44 pm

willthrill81 wrote:
Mon Jan 15, 2018 6:33 pm
...In 1999, there was euphoria in the market. I don't get any sense of euphoria today. In fact, I'd say that until last year, this was the most unloved bull market I've ever heard of...
I continue to think the difference is that the 1995-2000 bull market was piled on top of a solid and long-sustained period of steady growth, while half of this one just represents clawing ourselves painfully out of a deep hole. The 2009-2017 bull market is only cause for wild celebration if you started investing in 2009.

Image

Compare the mood in the stock market to the mood surrounding cryptocurrency. The mood around cryptocurrency is ebullient, euphoric... yes, exuberant. Rationally exuberant or irrational exuberant, but exuberant.

The excitement in the stock market around 2000 was somewhat similar to that today in cryptocurrency. My story is about the day I was working in the software lab, a big room full of fairly large machines controlled by that software. Many of the machines needed 220V three-phase, and there was an electrician on a ladder working about the dropped ceiling adding a new circuit. His cell phone rang, he came down a few steps and sat on the ladder for a short conversation with his broker about buying--I think it was buying--GE. At any party when people were identifying occupations, there would always be someone who's "job" was "day-trading." Of course I'm retired now, but I don't think there's anything comparable going on today.
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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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by TheAncientOne » Mon Jan 15, 2018 6:58 pm

I don't have hard data for you but I was active in the late 1990s market. The thing about it was that outside of stocks in the dot com bubble along with related tech and "concept" stocks, the market then was very cheap. If you look at the Berkshire Hathaway annual report for 1999, which came out in March 2000 at the very peak of the NASDAQ boom, Buffett mentions his willingness to repurchase stock once he let all shareholders know this through the annual report. As it turned out the stock promptly jumped upward due in part no doubt to his public statement and partly to the dot com stocks rolling over.

By contrast, I can't think of a single investment category today that looks undervalued, or even fairly valued. Flipping through Value Line (what can I say, I enjoy buying individual stocks), I see lots of companies with mature businesses, exposure to the inevitable recession after almost nine years since the last one, and the risks of higher interest rates on their debt as they merrily continue to buy back stock with the market at record highs. And they're trading at 20-30 PE!

I'm considering buying two year Treasuries that yield 2%.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by quantAndHold » Mon Jan 15, 2018 7:41 pm

jayk238 wrote:
Mon Jan 15, 2018 4:07 pm
I remember watching news reports of the tech bubble with reports of companies offering bmws and other nice toys to entice workers because of all the money flowing and competition.

I feel its sort of the same thing now.

Are there any articles or metrics you know of to compare the 2000 months before the crash w today?
I was a techie both 2000 and today. In 2000, every company, big and small, in every part of the country, was hiring everyone they could, as fast as they could, whether the person was qualified or not. I was out of work, sent out a dozen resumes, got 10 interviews, including one where I’d forgotten to attach the resume. Did 10 interviews in one week, one every morning and every afternoon. Got offers within 24 hours from all of them. It was insane.

Right now, there are about ten giant companies that are basically sucking up all the best employees. If you have the skills and desire to work for those companies, then you will be extremely well compensated, and there will be a lot of interest from the other “elite” employers. The day after I updated my LinkedIn profile to show that I was working at one of those companies, the recruiters came running.

The rest of the industry, however, is healthy but not insane. If you’re qualified, there will be a job and you can make a good living. But I don’t hear about companies sending stretch limos to pick up candidates for interviews. (Yes, that really happened to one of my friends in 2000.)

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by unclescrooge » Mon Jan 15, 2018 7:51 pm

TheAncientOne wrote:
Mon Jan 15, 2018 6:58 pm
I don't have hard data for you but I was active in the late 1990s market. The thing about it was that outside of stocks in the dot com bubble along with related tech and "concept" stocks, the market then was very cheap. If you look at the Berkshire Hathaway annual report for 1999, which came out in March 2000 at the very peak of the NASDAQ boom, Buffett mentions his willingness to repurchase stock once he let all shareholders know this through the annual report. As it turned out the stock promptly jumped upward due in part no doubt to his public statement and partly to the dot com stocks rolling over.

By contrast, I can't think of a single investment category today that looks undervalued, or even fairly valued. Flipping through Value Line (what can I say, I enjoy buying individual stocks), I see lots of companies with mature businesses, exposure to the inevitable recession after almost nine years since the last one, and the risks of higher interest rates on their debt as they merrily continue to buy back stock with the market at record highs. And they're trading at 20-30 PE!

I'm considering buying two year Treasuries that yield 2%.
While sectors may not look cheap, many companies are still cheap.
Mckesson and Gilead have single digit PEs.

If you're going to invest in companies that buy back stock, you should limit yourself to those that use free cash flow, and not debt.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by jayk238 » Mon Jan 15, 2018 8:41 pm

So are you guys saying that the similarities are there but do not indicate the same fundamentals?

For example the articles i read like ex cons getting jobs make me cringe and wonder what this means.

To me the relevance isnt the stock market-im buy and hikd. But rather the ripple effect of me losing my job/not having much income to pay student debt etc.

No one can predict a recession but knowing that we are are facing an overheated economy shouldnt people spending less on debt and be more careful saving -yet these are all negative! This causes me concern because when this recession happens people will lose their shirt again.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by BuyAndHoldOn » Mon Jan 15, 2018 9:05 pm

TheAncientOne wrote:
Mon Jan 15, 2018 6:58 pm

I'm considering buying two year Treasuries that yield 2%.

Makes sense, that is the end of the curve that has moved up the most. I will be buying some treasuries too.

Let's face it: the market is expensive, and I bet I am not the only one who is a little underweight bonds/safer assets at the moment. And I am buying more International and EM [equities], but even those stocks aren't cheap like they were ~2-3 years ago.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by RRAAYY3 » Mon Jan 15, 2018 9:18 pm

What is suggesting a recession? Markets all over the globe are in great shape with strong fundamentals to support continued (but slightly less/slower) gains ...

Pretty obvious everyone is still shell shocked from 08-09 and just falling into the “too good to be true” mind state

My buddy on Wall Street laughed in my face when I asked if a recession is anywhere on the horizon
Last edited by RRAAYY3 on Mon Jan 15, 2018 9:20 pm, edited 1 time in total.

jayk238
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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by jayk238 » Mon Jan 15, 2018 9:20 pm

RRAAYY3 wrote:
Mon Jan 15, 2018 9:18 pm
What is suggesting a recession? Markets all over the globe are in great shape with strong fundamentals to support continued (but slightly less/slower) gains ...

Pretty obvious everyone is still shell shocked from 08-09 and just falling into the “too good to be true” mind state
Is this a good thing? Being cautious instead of exuberant sounds like it.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by RRAAYY3 » Mon Jan 15, 2018 9:21 pm

jayk238 wrote:
Mon Jan 15, 2018 9:20 pm
RRAAYY3 wrote:
Mon Jan 15, 2018 9:18 pm
What is suggesting a recession? Markets all over the globe are in great shape with strong fundamentals to support continued (but slightly less/slower) gains ...

Pretty obvious everyone is still shell shocked from 08-09 and just falling into the “too good to be true” mind state
Is this a good thing? Being cautious instead of exuberant sounds like it.
The fundamentals are sound and yet I don’t see much “exuberance”

I see a lot of omg omg omg it’s gonna collapse omg omg omg type stuff instead ... this bull is running into 2019

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by EnjoyIt » Mon Jan 15, 2018 9:25 pm

BuyAndHoldOn wrote:
Mon Jan 15, 2018 9:05 pm
TheAncientOne wrote:
Mon Jan 15, 2018 6:58 pm

I'm considering buying two year Treasuries that yield 2%.

Makes sense, that is the end of the curve that has moved up the most. I will be buying some treasuries too.

Let's face it: the market is expensive, and I bet I am not the only one who is a little underweight bonds/safer assets at the moment. And I am buying more International and EM [equities], but even those stocks aren't cheap like they were ~2-3 years ago.
I'm buying bonds also, but no more than would fit my 70/30 AA.

Nice thread. Although I was investing in 2000 I had very little at the time. 100% equities in a few hand picked stocks. For me, this time is different.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by willthrill81 » Mon Jan 15, 2018 10:10 pm

nisiprius wrote:
Mon Jan 15, 2018 6:44 pm
willthrill81 wrote:
Mon Jan 15, 2018 6:33 pm
...In 1999, there was euphoria in the market. I don't get any sense of euphoria today. In fact, I'd say that until last year, this was the most unloved bull market I've ever heard of...
I continue to think the difference is that the 1995-2000 bull market was piled on top of a solid and long-sustained period of steady growth, while half of this one just represents clawing ourselves painfully out of a deep hole. The 2009-2017 bull market is only cause for wild celebration if you started investing in 2009.
2009 is actually when I started really ramping up my investments. The problem is that I didn't have much to grow. Sequence of returns risk may wind up biting me in the accumulation phase if the next ten years' of returns are as poor as many predict. But I still have 14-19 years to go, so we'll see.

But yes, you're right that since 2009, we've just been making up for the poor returns of 2000-2009.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by flyingaway » Mon Jan 15, 2018 10:14 pm

jeffyscott wrote:
Mon Jan 15, 2018 5:42 pm
Still only at about 75% of peak valuations from 2000 (using CAPE).

http://www.multpl.com/shiller-pe/

Using the link for monthly table there, CAPE (Shiller PE) hit 43 in 2000 vs. 32 now. There are also links to other valuation metrics there.
So if CAPE hit 43 in 2000 when the market crashed, will most people hit sell button until CAPE hits 42 this time?

I guess we learnt something from 2000 and can be smarter this time.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by venkman » Mon Jan 15, 2018 11:06 pm

jayk238 wrote:
Mon Jan 15, 2018 8:41 pm
So are you guys saying that the similarities are there but do not indicate the same fundamentals?
The big difference between than and now is interest rates. The yield on 5-year Treasuries just before the 2000 bear market was around 5%. If you didn't want the risk of stocks, you could still get some decent real growth on a safe investment.

Now, yields are a lot lower. If you want real growth, stocks are your only choice. Stock prices are almost certainly being propped up (at least to some degree) by money that would otherwise be in bonds. I think things will start to normalize somewhat as the Fed pares down its balance sheet, but that will take years.

Vanguard has a proprietary fair-value CAPE that takes into account interest rates and inflation. The last version of it I saw had stocks being at the very high end of the Fairly Valued range.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by zonto » Mon Jan 15, 2018 11:33 pm

See Vanguard's analysis here: https://personal.vanguard.com/pdf/ISGGMMRR.pdf.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by randomizer » Mon Jan 15, 2018 11:36 pm

To echo the familiar Star Wars sentiment, "I've got a bad feeling about this".
75:25 — HODL the course!

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by El Greco » Tue Jan 16, 2018 12:01 am

Maybe, just maybe, this time we won't experience "irrational exuberance" or shoeshine boys giving us stock tips before the hammer falls. Maybe the next crash will be different. Perhaps all the sheep were sheared during the last crash and will not be coming back to the meadow to play. While we wait for al the "dumb" money to pile in, we may discover that we are actually the dumb money. I still invest, maintain my AA and stay the course but I continue to steal frequent glances Aft.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by Scott S » Tue Jan 16, 2018 12:23 am

jayk238 wrote:
Mon Jan 15, 2018 8:41 pm
ex cons getting jobs
Are you against this?
My Plan: (Age-10)% in bonds until I reach age 60, 50/50 thereafter. Equity split: 50/50 US/Int'l, Bond split: 50/50 TBM/TIPS.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by mrpotatoheadsays » Tue Jan 16, 2018 12:26 am

flyingaway wrote:
Mon Jan 15, 2018 10:14 pm
jeffyscott wrote:
Mon Jan 15, 2018 5:42 pm
Still only at about 75% of peak valuations from 2000 (using CAPE).

http://www.multpl.com/shiller-pe/

Using the link for monthly table there, CAPE (Shiller PE) hit 43 in 2000 vs. 32 now. There are also links to other valuation metrics there.
So if CAPE hit 43 in 2000 when the market crashed, will most people hit sell button until CAPE hits 42 this time?

I guess we learnt something from 2000 and can be smarter this time.
CAPE is not a predictor of market crashes.

It does, however, have related metrics of future market performance. Google "Plexus Asset Management's multi-year comparison of CAPE PE ratios of the S&P 500 Index and the forward real returns". Using these metrics the next 10 years will return (real return), on average, 1.3% annually. So, no, it's not a sell button, but it's a cold shower for those who believe Dave Ramsey's 12% annual return.

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by jayk238 » Tue Jan 16, 2018 5:11 am

Scott S wrote:
Tue Jan 16, 2018 12:23 am
jayk238 wrote:
Mon Jan 15, 2018 8:41 pm
ex cons getting jobs
Are you against this?
No

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by JoMoney » Tue Jan 16, 2018 5:36 am

In 1999 I remember thinking it was ridiculous that "America Online" had a larger market-cap (I believe by more than twice) than that of "General Motors".
Today, I think of General Motors as a failing company and that it makes sense that Facebook has practically taken over the world.
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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by Cash » Tue Jan 16, 2018 6:13 am

willthrill81 wrote:
Mon Jan 15, 2018 10:10 pm
nisiprius wrote:
Mon Jan 15, 2018 6:44 pm
willthrill81 wrote:
Mon Jan 15, 2018 6:33 pm
...In 1999, there was euphoria in the market. I don't get any sense of euphoria today. In fact, I'd say that until last year, this was the most unloved bull market I've ever heard of...
I continue to think the difference is that the 1995-2000 bull market was piled on top of a solid and long-sustained period of steady growth, while half of this one just represents clawing ourselves painfully out of a deep hole. The 2009-2017 bull market is only cause for wild celebration if you started investing in 2009.
2009 is actually when I started really ramping up my investments. The problem is that I didn't have much to grow. Sequence of returns risk may wind up biting me in the accumulation phase if the next ten years' of returns are as poor as many predict.
Exactly. Unless you had a big pile of cash in 2009, you're not wildly celebrating. That's also when I started seriously investing. I'm happy, but wish I had my current investment account balances in 2009...

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by goblue100 » Tue Jan 16, 2018 9:09 am

willthrill81 wrote:
Mon Jan 15, 2018 6:33 pm

In 1999, there was euphoria in the market. I don't get any sense of euphoria today. In fact, I'd say that until last year, this was the most unloved bull market I've ever heard of. And even now, there are many decrying that we're close to 'the top'.
In the 90's I had my 401k and I had one investment outside of that. I DCA $100 a month into Janus Venture, a small company growth fund. I was just going through old statements the other day, and in 1999 my annual return on that fund was 110%! Followed by a -45%, a -11% and -27% in 2002. I "stayed the course", mainly through inertia and shock than discipline.
Actually dollar amounts:
1/1999 $16,974
12/1999 $40,991 ($1200 new money)
3/2000 $44,773 (high point)
12/2000 $23073 ($1200 additional)
12/2001 $21,563 ($1200 added)
12/2002 $16,752 ($1200 added) low point
For staying the course, I was rewarded with a 56% gain in 2003. I finally exited Venture into a more diverse Boglehead'ish Vanguard portfolio in 2012.

Anyway, back on topic, I don't think we are anywhere near the euphoria of 1999 in the current market. In those days everyone was openly talking about their 401k allocations and I was getting unsolicited fund picks from unlikely people in the halls at work. If anything is close to that today, it appears to be bitcoin.
Some people are immune to good advice. - Saul Goodman

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by jeffyscott » Tue Jan 16, 2018 9:59 am

Cash wrote:
Tue Jan 16, 2018 6:13 am
willthrill81 wrote:
Mon Jan 15, 2018 10:10 pm
nisiprius wrote:
Mon Jan 15, 2018 6:44 pm
willthrill81 wrote:
Mon Jan 15, 2018 6:33 pm
...In 1999, there was euphoria in the market. I don't get any sense of euphoria today. In fact, I'd say that until last year, this was the most unloved bull market I've ever heard of...
I continue to think the difference is that the 1995-2000 bull market was piled on top of a solid and long-sustained period of steady growth, while half of this one just represents clawing ourselves painfully out of a deep hole. The 2009-2017 bull market is only cause for wild celebration if you started investing in 2009.
2009 is actually when I started really ramping up my investments. The problem is that I didn't have much to grow. Sequence of returns risk may wind up biting me in the accumulation phase if the next ten years' of returns are as poor as many predict.
Exactly. Unless you had a big pile of cash in 2009, you're not wildly celebrating. That's also when I started seriously investing. I'm happy, but wish I had my current investment account balances in 2009...
Started about 1997, but by spring of 2009 essentially all gains had been wiped out (and this while at 50% stock). So basically it is as if we started in 2009 with a lump sum. With additions and gains, we were at about 4X the 2009 low balance at my retirement last summer. While not wildly celebrating, we were and are surprised to be where we are financially just 8-9 years later.
press on, regardless - John C. Bogle

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Re: Anyway to compare metrics of today w stock bubble in 2000

Post by 2015 » Tue Jan 16, 2018 4:15 pm

Brings back memories of my interview with eToys in Santa Monica. All those toys in the lobby. A giant Etch A Sketch behind the receptionist's desk. My initial interviewer, probably 25, sat sideways with her legs draped over the side of her chair. Everything was so...cutting edge...or so those days were made to seem (the 1998 movie You've Got Mail comes to mind). Until they no longer were.

The gods were with me that day as I got an offer elsewhere.

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