Recent market gains

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skor99
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Recent market gains

Post by skor99 » Wed Jan 17, 2018 4:43 pm

The question that comes to mind with all the recent very quick market gain is where is the money coming from ? Is this all the stock shunning conservative people suddenly getting bold and shoving money in or is it overseas investors ? People who are already in the market are probably rebalancing OUT of stocks to keep their asset allocation in line, so that should actually be a downward drag. So what’s going on ?

TheHouse7
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Re: Recent market gains

Post by TheHouse7 » Wed Jan 17, 2018 4:49 pm

Mr. Market is always insane! Ignore short-term market volatility.

Stay the course. No one knows nothing.

I would guess the weakening of the us dollar is giving most industries a more positive eps future.

:confused
"PSX will always go up 20%, why invest in anything else?!" -Father-in-law early retired.

Buddtholomew
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Re: Recent market gains

Post by Buddtholomew » Wed Jan 17, 2018 4:52 pm

Investors can also be contributing to fixed income in order to maintain AA. In other words, not selling stocks.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.

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cfs
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Re: Recent market gains

Post by cfs » Wed Jan 17, 2018 5:01 pm

Nobody knows nothing. But, Miss Market likes the good news, i.e. Tim Cook announcing today that Apple is bringing MUCHOS billions of dollars currently parked overseas back to the USA and creating MUCHOS jobs in the good ole USA. Best thing to do is to ignore all the noise [otherwise you will go insane], maintain proper course and speed [making course corrections only to avoid ships collisions], and wish for the best. Your money, your portfolio, your decision. God Bless everyone here, and thanks for reading ~cfs~
~ Member of the Active Retired Force since 2014 ~

livesoft
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Re: Recent market gains

Post by livesoft » Wed Jan 17, 2018 5:11 pm

Bitcoin profits
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Cyclesafe
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Re: Recent market gains

Post by Cyclesafe » Wed Jan 17, 2018 5:23 pm

The "value" of the market is the price the last buyer was willing to pay for each of the last individual shares traded on that market times the total number of each of the shares outstanding.

Value of your shares (to you) is whether your buyer when you sell is actually willing to pay the price of the last buyer described above.

Not likely.

Stay the course.

dbr
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Re: Recent market gains

Post by dbr » Wed Jan 17, 2018 5:27 pm

Keep in mind there is no money in the market because stocks are not money. What is happening is that the buyers of stocks are transferring money to the sellers of stocks, but there is not more money in total than before.

However, that does not change the actual question as to who is giving up money and who is getting it. I am close to needing to rebalance so I might soon be a person who is getting some money from someone else, but the market does not work so that I can identify who in fact is giving me that money.

alex_686
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Re: Recent market gains

Post by alex_686 » Wed Jan 17, 2018 5:32 pm

Cyclesafe wrote:
Wed Jan 17, 2018 5:23 pm
The "value" of the market is the price the last buyer was willing to pay for each of the last individual shares traded on that market times the total number of each of the shares outstanding.
To extend on this a little bit, this means there is a disconnect between money flows into the market and the value of the market. One share changing hands sets the market capitalization for the rest of the market.

There was a joke back in the 1930s. A wife mocked a husband for buying a puppy for $100. How could a puppy be worth so much? Later that day the husband returns home triumphant, saying he had sold the puppy for $1,000. When the wife asked for the money he handed to her the 2 $500 kittens that he traded the puppy for.

CoAndy
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Re: Recent market gains

Post by CoAndy » Wed Jan 17, 2018 5:35 pm

cfs wrote:
Wed Jan 17, 2018 5:01 pm
Nobody knows nothing. But, Miss Market likes the good news, i.e. Tim Cook announcing today that Apple is bringing MUCHOS billions of dollars currently parked overseas back to the USA and creating MUCHOS jobs in the good ole USA. Best thing to do is to ignore all the noise [otherwise you will go insane], maintain proper course and speed [making course corrections only to avoid ships collisions], and wish for the best. Your money, your portfolio, your decision. God Bless everyone here, and thanks for reading ~cfs~
You, Sir, are always such a class act. :sharebeer

skor99
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Re: Recent market gains

Post by skor99 » Wed Jan 17, 2018 5:39 pm

dbr wrote:
Wed Jan 17, 2018 5:27 pm
Keep in mind there is no money in the market because stocks are not money. What is happening is that the buyers of stocks are transferring money to the sellers of stocks, but there is not more money in total than before.

However, that does not change the actual question as to who is giving up money and who is getting it. I am close to needing to rebalance so I might soon be a person who is getting some money from someone else, but the market does not work so that I can identify who in fact is giving me that money.
I would argue that stocks are not money isn’t correct. US produces $18 T of goods and services every year and that is new money that goes in the economy. A portion of it gets saved and invested and gets transferred from a bank account to a brokerage account where it is held in stocks or bonds as money equivalents.

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MortgageOnBlack
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Re: Recent market gains

Post by MortgageOnBlack » Wed Jan 17, 2018 5:40 pm

Right when i finally got $3,000 in my Vanguard Taxable Money Market account. Was looking to finally buy into Total Stock Market tomorrow. :shock: Guess, I'll just blindly through the money in.

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bottlecap
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Re: Recent market gains

Post by bottlecap » Wed Jan 17, 2018 5:53 pm

Couldn't this be said every time the market moves up?

Clearly there is money on the sidelines. Most likely in cash. If earnings projections rise, you don't think some of that money is going to take advantage?

There are only so many rebalancing Bogleheads. Plus, if a Boglehead holds a 50/50 stock bond allocation and the stock market doubles, the Boglehead would sell 25% of his stock allocation, only half the gain, to get to 50/50 again.

Don't sweat the small stuff.

JT

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randomizer
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Re: Recent market gains

Post by randomizer » Wed Jan 17, 2018 5:57 pm

I'm sure it's a lot of things: accumulators investing new money whenever they get their hands on it (eg. salaries, windfalls etc), people lured by the bull/bubble etc.
87.5:12.5, EM tilt — HODL the course!

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AnalogKid22
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Re: Recent market gains

Post by AnalogKid22 » Wed Jan 17, 2018 5:59 pm

Several major US companies are reporting very positive results for the quarter. They're meeting or exceeding expectations and with the huge tax break this year, and continuing declining unemployment, there is speculation of a very strong 2018.

https://www.msn.com/en-us/money/markets ... ar-AAuNRlM

The 1 BILLION I invested in VTSAX this morning might have helped as well...
A fool and his money are very easily parted - Anonymous

alex_686
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Re: Recent market gains

Post by alex_686 » Wed Jan 17, 2018 6:03 pm

skor99 wrote:
Wed Jan 17, 2018 5:39 pm
I would argue that stocks are not money isn’t correct.
There is a difference between money, stocks, and value. Money is a special investment asset. It is liquid, fungible, and preserves value. Let me give you a slightly flawed analogy.

First, lets say we have a property that we rent out. Each month it kicks out some rent. That rent is cash. We can bank it, reinvest it, whatever. That is money. It is rock solid.

Second, what is the value of that property? Maybe we discount Future Cash Flow to Equity - classic cash flow analysis value. Requires a few assumptions. What about the market? Well, that is going to change day to day. A appraiser might come in one day and give us a value X, the next value Y. But really, what is the value?

At Boggleheads we say the value is what the market gives us because that is what the market says. But it is not exactly rock solid. While the money is rock solid the value fluctuates from day to day.

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MEA
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Re: Recent market gains

Post by MEA » Wed Jan 17, 2018 9:12 pm

skor99 wrote:
Wed Jan 17, 2018 5:39 pm
dbr wrote:
Wed Jan 17, 2018 5:27 pm
Keep in mind there is no money in the market because stocks are not money. What is happening is that the buyers of stocks are transferring money to the sellers of stocks, but there is not more money in total than before.

However, that does not change the actual question as to who is giving up money and who is getting it. I am close to needing to rebalance so I might soon be a person who is getting some money from someone else, but the market does not work so that I can identify who in fact is giving me that money.
I would argue that stocks are not money isn’t correct. US produces $18 T of goods and services every year and that is new money that goes in the economy. A portion of it gets saved and invested and gets transferred from a bank account to a brokerage account where it is held in stocks or bonds as money equivalents.

GDP isn’t money, it’s things of value. The only way to create money in our system is to create debt. If every dollar the government owes, and every dollar all of us owe were to be paid off we would have no money. In our system debt is money.

When they passed the tax bill they pulled future spending forward. They created debt\money.
“Stay the course is the most important piece of advice I can give you.”-Bogle

KyleAAA
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Re: Recent market gains

Post by KyleAAA » Wed Jan 17, 2018 9:22 pm

Earnngs growth has been very strong recently. I’d be surprise don’t if the market wasn’t up.

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Johnnie
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Re: Recent market gains

Post by Johnnie » Wed Jan 17, 2018 9:57 pm

From "Dow Closes Above 26000 for First Time as Investor Caution Turns to Greed," WSJ 1/17/18:
...The most recent gains have been powered in part by a sudden hunger for stocks among certain money managers and individual investors who have long been wary of the nearly nine-year bull market.
Gotta love the image of panicky money managers rushing in from the sidelines they've been sitting on for the past year or more.

Also from a WSJ editorial on the same day:
...We’ve been hosting an op-ed debate on stock prices, and last week financial consultant Donald Luskin made his case for the running of the bulls as expected corporate earnings are adjusted upward due to tax reform. Harvard economist Martin Feldstein makes the case for caution nearby, arguing that equity prices are fated to fall as the Federal Reserve reverses its long period of asset purchases and low interest rates, and inflation makes a comeback. Both men could be right, depending on your investment time frame. (Emphasis added.)
That last line makes a lot of sense to me, and sounds like a good argument for "stay the course" (but keep your seatbelt buckled).
"I know nothing."

Bastiat
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Re: Recent market gains

Post by Bastiat » Wed Jan 17, 2018 10:00 pm

skor99 wrote:
Wed Jan 17, 2018 4:43 pm
The question that comes to mind with all the recent very quick market gain is where is the money coming from ? Is this all the stock shunning conservative people suddenly getting bold and shoving money in or is it overseas investors ? People who are already in the market are probably rebalancing OUT of stocks to keep their asset allocation in line, so that should actually be a downward drag. So what’s going on ?
The percentage of market participants who rebalance regularly is likely <10.

There are millions of people in the accumulation stage who are buying every month.
MEA wrote:
Wed Jan 17, 2018 9:12 pm
GDP isn’t money, it’s things of value. The only way to create money in our system is to create debt. If every dollar the government owes, and every dollar all of us owe were to be paid off we would have no money. In our system debt is money.

When they passed the tax bill they pulled future spending forward. They created debt\money.
According to the Credit Theory perhaps, but that's not the whole story nor is it widely accepted... M0 is certainly not debt; nor is M1.

I'm not sure what you're trying to say with your tax bill/future spending comment... It sounds like you may have a tortured understanding of MB as it relates to fractional-reserve banking.

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