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Explaining market prices -- the new solution

You know a market is overheated when traders/brokers are looking for new metrics to justify the stratospheric prices of stocks, in the '00 it was "clicks" remember those -- its like saying "we lose money on every sale, but will make it up on volume!"  Anyway, some brokers that I can of respect have decided that the standard p/e is no longer a good measure (considering we are at historical highs -- or very near there) and where companies profitability is also a historical high levels -- these things have a way of returning to the mean!

However, if your job is to sell the market, then you find GAAP adjusted models, or using future statements as good metrics.  There are a number of ways to show that the market is not yet fully valued.

However, as a prudential investor the rule has to hold -- if it looks expensive it probably is expensive; better to leave some money on the table than being steamrolled out of the market.


Recent posts

Electric cars everywhere!!!

Ok so Germany, France and China have all announced the end of the internal combustion engine.  Needless to say that the American twitter's sphere has been agoog about that change, once again missing the point:

What are you going to do with an electric car in Florida?-- the answer is the same as a gasoline one -- not be able to use it when it runs out of juice...  The usual issues, there are not enough charging station, or that the electricity comes from coal/nuclear etc etc.  Again missing the point!

Because the same people who are against the introduction of electric cars would have (did) voice the same issue with the internal combustion engine...look how wrong they were.

Part of the problem is that people's view of the world is static, they cannot conceive that the wold will change, and now they don't remember not having a computer in their shirt pocket...

The Europeans know that the electric grid is at an inflection point as is battery technology, and factor of massive …

Bank of Canada raises rates!

Colour me pink, I wrote a few days ago that there are no barriers to central banks tightening considering the total absence of inflation (wages) where as asset prices are into the stratosphere.  Well this morning the bank of Canada raised rates by 0.25% --

BOC statement reveals that according to [Steven] Poloz [Governor of the BoC], "removal of some of the considerable monetary policy stimulus in place is warranted" given stronger than expected economic performance while adding that "future monetary policy decisions are not predetermined" and will be guided by economic data and financial-market developments as they "inform the outlook for inflation."
The short term impact is that the Canadian dollar rose by 3c within a few minutes of the announcement.  The market was of the view that the CAD was a one way sure bet towards weakness. I still think that the trend is weakness (for the CAD) it could be that they are just the first to move (not unheard).  Germa…

100, 500 year flooding (which actually occurs just about every three years)

There's been a lot of information from the US government about the floods that have afflicted Houston.  To give you a sense of proportion -- the weight of the water in Houston, lower land levels by 2cm...so it was a lot of water.

The 100 and 500 benchmarks are used to illustrate a point that in any one year there is a 1% and a 0.2% probability that there will be a certain specified flooding level.  It doesn't mean that it will not happen every other year (which is the case now).

The model making these prediction makes no assumption about how often this will happen, but how often in a year this will happen (1% chance).  Of course all this stuff is based on assumption -- that can be wrong.

If the weather patterns change -- then the assumptions on the amount of rain by each storm has to be revised.  The problem is that the "right" has been using these 100 years and 500 years as a reason to do nothing -- while at the same time stoping any analysis as to climate change.

I…

Trump's tax trial balloon -- cutting taxes to the middle class for the 1% and corporation!

The idea that the administration will cut 401k deductions and cut the ability of tax payer to exclude , as income, the taxes they have paid to the states, are almost certainly complete B.S.  This would be tantamount to raising the taxes on the middle class to give to the 1% and to corporation -- this would kill the GOP's 2020 prospect -- dead!

The removal of deduction for state income taxes is clearly a little "Fu#k You" to all the democrats states -- its not the red states that will suffer from that since state taxes tend to be lower -- although the red states are by far the biggest beneficiary of the largess of the Federal government...something to remember!  It would be tantamount to a declaration of war with NY, California, Washington, New Jersey and Connecticut (to name but a few).

Taxing the 401k at the source (rather than when people retire) is impractical, it could become a huge windfall for those who've already retired (yeah I get it -- if you are 70 you are…

Crystal ball time; will I get it wrong...again!

First let me be very honest, by crystal ball has been remarkably out of wack.

I got Greece wrong -- I don't know what the ECB had on Greek leaders but it was enough to get them to back down from leaving the Euro/ECB.  The consequences for the country and its citizen has been dire!  Unemployment is still very high, retiree are still suffering from massive cuts to their pensions.  The system has broken downThankfully young Greeks with some language skills have been able to leave the countryBrexit:  Although I though there was some very good reasons for Britain to leave Europe the reason's my compatriots decided to leave were for jingoistic reasonsSterling has so far done rather wellThe economy has not collapsed -- its even growing againThe Euro:  She strength of the Euro; now around 119 to the greenback is unsettling insofar that it shows a greater confidence in Europe, than in America -- who's currency has been rather weak -- against everything except the Canadian dollar.  I…

Not being prepared: Its a feature of the American System (update)

[Update:  A good friend made the following comment earlier this week:  "50 inches of rain is 50 inches of rain -- whatever you do, what ever you plan, you don't plan for 50 inches of rain.  Despite that the water evacuation system for the city of Houston works as planned... but 50 inches of rain is 50 inches of rain, even with the best planning there will be massive flooding.  Houston is ridiculously flat, there is simply no technology (or even green spaces) that can deal with 50 inches of rain"]

Last Friday I friend was flying to central America via Houston -- as NOAA was announcing that Harvey (which made land fall as a cat 4 hurricane) was approaching the coast of Texas, and where Houston, although not at the centre of the storm, was on the leading edge.

United the airline that was routing her via Houston would not change her flight, that as long as the airport was not closed -- they would continue to route passenger via that airport.  The business of flying passenger…