This subreddit should enable sharing and discussing economic research and news from the perspective of economists. Academic work and summaries are welcome. Image and video submissions are not allowed.
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Agree US listed companies are more “international” now.
But European and Asian MNCs also operate in and make profits in the US too, albeit intuitively lower profits than what US companies make from their international operations.
Even if you adjust for this, the Buffet indicator should be well above 100% (perhaps lower than 200%, but still indication of over-valuation)
The math goes out the window when governments are printing in the Trillions of dollars. These are uncharted waters in my personal opinion. Grab an asset class and hang on. I’m not selling or reallocating my positions. Maybe this will come to bite me in the ass.
Also the point of people yoloing their 401ks at buying the dip every time there is a major market swing, there by staving off a massive decline. The circuit breakers also help with this as well...no more 20% drops as a whale exits the tank. Based on the dynamics your position to just hold onto your butts is imo the correct one. Next five to ten years as corporates mop up the excess is going to be massive, and then the boomers are about to sell the farm to long term senior care at the Ritz and high end hospice to keep the party going until they die.
The dips seem to be getting smaller and recover much faster
Part of it is the "buy the dip" mentality, but it really is monetary policy and fiscal policy history that has shown the fed and congress are happy to bail out too big to fail companies
As an investor your downside risk, including the duration of a downturn, are much more limited today given the government will do anything to prop up equity markets
There’s also a lot more dumb money and political money. Are the Middle Eastern sovereign wealth funds investing for a certain ROI? Or are they trying to buy up power and influence over key western strategic industries? Basically do they care about ROI in the same way that someone building a pension has to care about ROI.
We’re seeing totally financially irrational deals happening in the broadcast sector happening for purely politically strategic reasonings.
Basically what happens when key players in a market are acting rationally from political perspectives but stop acting economically rationally?
Tesla from multiple perspectives is performing awfully, it’s a bad company right now, its sales are literally downward trending, it’s PR has never been worse, it’s moonshots less likely to become a thing, yet it’s share price is up massively over the last 12 months.
It feels like a mega crash is overdue, but it also feels like dumb money is hugely oversupplied. So what you’re really looking for is when the dumb money tap will get turned off, and that’s more a game of musical chairs than traditional financial calculations. Weird, weird times.
I’m leaving my 401k in its current allocation but my Roth is all in precious metals and miners, oil stocks and agricultural stocks. I reckon I’ll weather out this commodity super cycle like that.
This methodology seems outdated. Why is American GDP an important metric when American companies are generating massive revenues and profits from OUTSIDE the US on a global scale? Seems pretty myopic. Google, Microsoft, Meta, Apple, etc They generate hundreds of billions in revenue from foreign nations.
As long as the credibility of the USD as a world reserve currency is in doubt, investors are going to look for places to park their excess cash. Gold, silver, commodities, euro-dominated stocks/bonds, and US stocks.
Anything but US treasuries.
Since there is so very much money already in the financial markets, and that money has to go SOMEWHERE, the sheer mass of it will push all the values of all the available things that can be invested in... beyond the norms.
If American politics stabilizes and they address their debt in any manner, I'd expect investors to start withdrawing their cash for more normal investment opportunities.
I’m so tired of these stupid predictions. I’ve followed this sub for years and every week for years there are predictions about the collapse of the US stock market lmao.
Economics-ModTeam | a day ago
This subreddit should enable sharing and discussing economic research and news from the perspective of economists. Academic work and summaries are welcome. Image and video submissions are not allowed.
--
If you have any questions about this removal, please contact the mods.
laxnut90 | a day ago
The Buffet Indicator used to be a lot more accurate when US companies predominantly operated within the US.
But you probably need an adjusted one now to account for international operations.
Maybe measure Total Stock Market Global against Global GDP instead of just US stock market against US GDP.
PurpleReign123 | a day ago
Agree US listed companies are more “international” now.
But European and Asian MNCs also operate in and make profits in the US too, albeit intuitively lower profits than what US companies make from their international operations.
Even if you adjust for this, the Buffet indicator should be well above 100% (perhaps lower than 200%, but still indication of over-valuation)
world_tsar | a day ago
The math goes out the window when governments are printing in the Trillions of dollars. These are uncharted waters in my personal opinion. Grab an asset class and hang on. I’m not selling or reallocating my positions. Maybe this will come to bite me in the ass.
ElectricGeetar | a day ago
There has also never been more demand from retirement funds for index funds which fuel these prices
Complex_User_2 | a day ago
yeah， this time is different.
chomponthebit | a day ago
The market’s never seen a passive bid this big
CardiologistPrize712 | a day ago
What happens when the ai bubble pops and disproportionately effects those invested in big index funds?
Ok-Feature4962 | a day ago
Also the point of people yoloing their 401ks at buying the dip every time there is a major market swing, there by staving off a massive decline. The circuit breakers also help with this as well...no more 20% drops as a whale exits the tank. Based on the dynamics your position to just hold onto your butts is imo the correct one. Next five to ten years as corporates mop up the excess is going to be massive, and then the boomers are about to sell the farm to long term senior care at the Ritz and high end hospice to keep the party going until they die.
Alicyclobacillus | a day ago
The dips seem to be getting smaller and recover much faster
Part of it is the "buy the dip" mentality, but it really is monetary policy and fiscal policy history that has shown the fed and congress are happy to bail out too big to fail companies
As an investor your downside risk, including the duration of a downturn, are much more limited today given the government will do anything to prop up equity markets
3rdPoliceman | a day ago
Is the expectation that inflation will be higher as a default moving forward?
Alicyclobacillus | a day ago
My expectation is yes
The fomc target inflation rate has been 2%
But we've been hovering near to 3%
The fomc monetary policy doesn't change to support lowering inflation to the alledged target 2%.
I think 3% is the new acceptable level of inflation for the fomc
That's just monetary policy. The oil supply shock is going to pump inflation even higher, at least until demand destruction takes over (recession).
Blue_winged_yoshi | a day ago
There’s also a lot more dumb money and political money. Are the Middle Eastern sovereign wealth funds investing for a certain ROI? Or are they trying to buy up power and influence over key western strategic industries? Basically do they care about ROI in the same way that someone building a pension has to care about ROI.
We’re seeing totally financially irrational deals happening in the broadcast sector happening for purely politically strategic reasonings.
Basically what happens when key players in a market are acting rationally from political perspectives but stop acting economically rationally?
Tesla from multiple perspectives is performing awfully, it’s a bad company right now, its sales are literally downward trending, it’s PR has never been worse, it’s moonshots less likely to become a thing, yet it’s share price is up massively over the last 12 months.
It feels like a mega crash is overdue, but it also feels like dumb money is hugely oversupplied. So what you’re really looking for is when the dumb money tap will get turned off, and that’s more a game of musical chairs than traditional financial calculations. Weird, weird times.
RimjobStevesDeadWife | a day ago
I’m leaving my 401k in its current allocation but my Roth is all in precious metals and miners, oil stocks and agricultural stocks. I reckon I’ll weather out this commodity super cycle like that.
Gandalftron | a day ago
This methodology seems outdated. Why is American GDP an important metric when American companies are generating massive revenues and profits from OUTSIDE the US on a global scale? Seems pretty myopic. Google, Microsoft, Meta, Apple, etc They generate hundreds of billions in revenue from foreign nations.
Happy_Feet333 | a day ago
As long as the credibility of the USD as a world reserve currency is in doubt, investors are going to look for places to park their excess cash. Gold, silver, commodities, euro-dominated stocks/bonds, and US stocks.
Anything but US treasuries.
Since there is so very much money already in the financial markets, and that money has to go SOMEWHERE, the sheer mass of it will push all the values of all the available things that can be invested in... beyond the norms.
If American politics stabilizes and they address their debt in any manner, I'd expect investors to start withdrawing their cash for more normal investment opportunities.
lamedogninety | a day ago
I’m so tired of these stupid predictions. I’ve followed this sub for years and every week for years there are predictions about the collapse of the US stock market lmao.
Euphoric_Regret_544 | a day ago
I hear ya, dog. But we never had 20% of the world’s oil just shut off like a spigot before….just sayin’
lamedogninety | a day ago
I promise you everything will be fine. No economic collapse is coming lmao