Secular Bull?

[frommi]

Then, I guess you have not answered if we are in a new secular bull! ;)

 

Look at the poll its 50/50, and since nobody can look into the future you won`t find a 100% sure answer.

But i can throw in a totally different approach to finding the answer, but i am not sure if it will help you. When you believe in Elliottwave Analysis (comes from behavioural finance/psychology) the last decade was a simple ABC-correction and we are indeed in a new secular impulsive bull wave. But because monetizing on that approach is not easy, i won`t rely on that.  :)

[giofranchi]

"disprove" is an interesting request.  Has anything in fact been proved by that graph?

 

Ok! I have used the wrong word… I mean: does someone have a different chart about the same subject?

 

Gio

[hyten1]

i think the huge supply of cheap/plentiful labor on the world stage cannot be ignore (china, india, southeast asia etc.).

 

it is a major contributor to the stagnate wage in the US and a positive to corporate profit.

 

can this massive shift create a "this time is different" even if its for a short while? decades vs centuries?

 

 

 

[giofranchi]

i think the huge supply of cheap/plentiful labor on the world stage cannot be ignore (china, india, southeast asia etc.).

 

it is a major contributor to the stagnate wage in the US and a positive to corporate profit.

 

can this massive shift create a "this time is different" even if its for a short while? decades vs centuries?

 

Yes! But this is a “this time is different” argument. Instead, I wanted to know: does Mr. Hussman make mistakes in putting together historical data?

 

Gio

 

[ERICOPOLY]

i think the huge supply of cheap/plentiful labor on the world stage cannot be ignore (china, india, southeast asia etc.).

 

it is a major contributor to the stagnate wage in the US and a positive to corporate profit.

 

can this massive shift create a "this time is different" even if its for a short while? decades vs centuries?

 

Yes! But this is a “this time is different” argument. Instead, I wanted to know: does Mr. Hussman make mistakes in putting together historical data?

 

Gio

 

Mr. Hussman makes a claim that corporate profits are high "because of..." .

 

Then he presents only that data (spending levels).  Is this approach prone to making a mistake?  I think so.

 

[hyten1]

this post sums it up for me http://brooklyninvestor.blogspot.com/2013/05/corporate-profits-to-gdp-why-doesnt.html

 

thanks brooklyninvestor

[giofranchi]

Mr. Hussman makes a claim that corporate profits are high "because of..." .

 

Then he presents only that data (spending levels).  Is this approach prone to making a mistake?  I think so.

 

Eric,

You mean mistakes in reasoning or in data collecting? I don’t question Mr. Hussman’s reasoning might be wrong… But I am curious to know if his data collecting is also wrong. In other words, are the charts he shows flawed? If they are, does anyone know how they would look like, once corrected?

 

Gio

 

[ERICOPOLY]

But I am curious to know if his data collecting is also wrong. In other words, are the charts he shows flawed? If they are, does anyone know how they would look like, once corrected?

 

I could show you a chart of ladies' hemlines and my data would be accurate. 

 

It's up to you as an intelligent person to ask if hemlines, even if correlated, can be relied on without further thought.

 

[Valuebo]

Gio, I'm constantly reminded of 'Everything is obvious' while reading your comments. The part on predictions in complex systems comes to mind. Or the part where Watts talks about research that has proven that experts are no better at predicting historical events than a simple algorithm or average people (in fact they did worse than both if I'm not mistaken). These things come to mind because I just read the book but it really is relevant to the discussion (and many like it) IMO. I think you'll enjoy it a lot!

 

Btw, how are those guys at ECRI doing nowadays? :D

[SharperDingaan]

The split on this well informed thread is very healthy. Most industrial engineers would argue that when you see such a well-defined two choice (bull/bear) split like this in the real world, you are looking at an inflexion (tipping) point.

 

Forecasts are what we have; they are best guess, horizon dependent, & we act on them every day. Took an umbrella with me this AM because I expected rain (short-term), to go to the shop to swap radials for snow tires (medium-term), that I will swap back in early spring (long-term). No idea as to exact time of day, or date of occurrence, but I am pretty sure the future event will probably occur. But it is not a guarantee; the sun could break through, the shop could be closed when I arrive, or there may be no snow this winter. There is uncertainty.

 

Uncertainty is marketing poison. All firms are selling branded action & direction: & branding is nowhere near as effective when markets are directionless. Were it soap or beer we would say the brand is ‘tired’, & rebrand to promote sales through a new campaign or product line extension. Sunk investment falls risk to rapid obsolescence, media & fund jobs go on the line, & that business angst feeds back into the market.

 

Industrial engineers would simply argue that the prevailing trend in the lesser split is about to dominate for a period. How long, etc. depends on the science of the physics/chemistry/biology driving the process.

 

Sometimes ……  all you need do is think like an engineer ;)

 

SD

 

 

[twacowfca]

 

Instead, I am asking of some evidence that the historical data he keeps on displaying are flawed!

 

Gio

 

One thing he takes for granted is that today's profit margins are due to government and private sector deficits.

 

So I have a two-part question:

 

Are government deficits going to shrink in the decades to come?

How high are private sector deficits today?

 

 

I read his paper, and I am left with the impression that he is saying the rising deficits led to the rising profit margins.  So what if the government deficit keeps getting bigger?

 

The operating profits of nonfinancial domestic corporations or subsidiaries as a percentage of GDP are about average historically.  :)

[ERICOPOLY]

Btw, how are those guys at ECRI doing nowadays? :D

 

quote:

He also says this downturn appears to be fairly modest and may be over before many people recognize that it even took place.

 

http://money.cnn.com/2013/03/08/news/economy/recession-forecast/index.html

 

 

So perhaps it's over now, and it holds true that few recognized that it even took place.  So he is not wrong!

[ERICOPOLY]

 

Instead, I am asking of some evidence that the historical data he keeps on displaying are flawed!

 

Gio

 

One thing he takes for granted is that today's profit margins are due to government and private sector deficits.

 

So I have a two-part question:

 

Are government deficits going to shrink in the decades to come?

How high are private sector deficits today?

 

 

I read his paper, and I am left with the impression that he is saying the rising deficits led to the rising profit margins.  So what if the government deficit keeps getting bigger?

 

The operating profits of nonfinancial domestic corporations or subsidiaries as a percentage of GDP are about average historically.  :)

 

So the distortion comes from non-domestic corporations and/or financials.

 

Why can't Hussmann invest in domestic nonfinancials?

 

[twacowfca]

 

Instead, I am asking of some evidence that the historical data he keeps on displaying are flawed!

 

Gio

 

One thing he takes for granted is that today's profit margins are due to government and private sector deficits.

 

So I have a two-part question:

 

Are government deficits going to shrink in the decades to come?

How high are private sector deficits today?

 

 

I read his paper, and I am left with the impression that he is saying the rising deficits led to the rising profit margins.  So what if the government deficit keeps getting bigger?

 

The operating profits of nonfinancial domestic corporations as a percentage of GDP are about average historically.  :)

 

So the distortion comes from non-domestic corporations and/or financials.

 

 

 

Why can't Hussmann invest in domestic nonfinancials?

 

That would be too easy , like buying DaVita, mostly because Buffett and Weschler continue to load up on it.

[james22]

Everyone who believes in valuation metrics would do themselves a favor to click on the three links by Hussman that I presented, and read the articles in entirety.

 

As I stated upfront, avoiding bubbles is incredibly hard to do, and this one has been exceptional. But that is precisely the problem with bubbles.

 

Hussman points out (and I agree) "The associated 10-year expected nominal total return for the S&P 500 is negative."

 

Read that sentence again and again until it sinks in. Here is another way of putting it. "10 years from now, the S&P is likely to be lower than it is today". That is how over-valued equities now are.

 

Yes, Hussman sounds like a broken record. And so do I. But this is one hell of a time to become a trend follower.

 

http://globaleconomicanalysis.blogspot.com/#LgppKgcp37qcwi0v.99

[twacowfca]

Everyone who believes in valuation metrics would do themselves a favor to click on the three links by Hussman that I presented, and read the articles in entirety.

 

As I stated upfront, avoiding bubbles is incredibly hard to do, and this one has been exceptional. But that is precisely the problem with bubbles.

 

Hussman points out (and I agree) "The associated 10-year expected nominal total return for the S&P 500 is negative."

 

Read that sentence again and again until it sinks in. Here is another way of putting it. "10 years from now, the S&P is likely to be lower than it is today". That is how over-valued equities now are.

 

Yes, Hussman sounds like a broken record. And so do I. But this is one hell of a time to become a trend follower.

 

http://globaleconomicanalysis.blogspot.com/#LgppKgcp37qcwi0v.99

 

I agree if one 's skill level is not much better than what the market averages will do.  Then, it 's a guessing game about when the market averages will go south, and a lot of skill is needed to play that game well. If ones skill level is greater than that, be aware that The Fed is still goosing the WSBASE, momentum is still a levitating force and tax increases have bitten less than the amount that capital gains have produced. 

 

Even so, realize that not everyone is able to find a safe seat when the music stops in the game of Musical Chairs. :)

[giofranchi]

I could show you a chart of ladies' hemlines and my data would be accurate. 

 

It's up to you as an intelligent person to ask if hemlines, even if correlated, can be relied on without further thought.

 

Eric,

of course the charts I am trying to disprove have some relevance with the discussion on this thread!!

Leave profit margins alone for a second, and just look at the chart on page 8 (Price / Revenue) and the one on page 9 (Market Cap / GDP). I am only interested in the past… no prediction about the future! My question is: are the data on those charts accurate? And, if not, can anyone show me better data, please?

 

Gio

 

[ERICOPOLY]

I could show you a chart of ladies' hemlines and my data would be accurate. 

 

It's up to you as an intelligent person to ask if hemlines, even if correlated, can be relied on without further thought.

 

Eric,

of course the charts I am trying to disprove have some relevance with the discussion on this thread!!

Leave profit margins alone for a second, and just look at the chart on page 8 (Price / Revenue) and the one on page 9 (Market Cap / GDP). I am only interested in the past… no prediction about the future! My question is: are the data on those charts accurate? And, if not, can anyone show me better data, please?

 

Gio

 

The point about the hemlines is to show enough contrast that it would clearly be ridiculous and thus discarded, even if it showed a correllation.  The trouble with what Hussman is presenting is that nobody can discard it out of hand because it is presented as the evidence that will settle all doubt, and unfortunately it is economic data (so you can't just laugh it off).  Instead, you need to present a serious argument as to why "this time is different", as it will be perceived.  So he sits within his impenetrable castle walls...  Wells Fargo was about $22 two years ago, where was Hussmann?.

 

It is frigging IDIOTIC to sit in cash when so many bargains have been available.  He has been a fool.

[giofranchi]

Or the part where Watts talks about research that has proven that experts are no better at predicting historical events than a simple algorithm or average people (in fact they did worse than both if I'm not mistaken).

 

tombgrt,

no prediction about the future here. I just would like to understand if Mr. Hussman’s historical data are correct or not.

I think it is relevant to the discussion on this thread, because we are really left with only two possibilities:

1) Those historical data (chart on page 8 and chart on page 9) are flawed,

2) 51 out of 103 people have voted for “this time is different”.

Possibility n.2 gets me very nervous… Not because the future is bound to repeat the past… Once again, no prediction about the future! But because, in the rare instances when this time really is different, only very few people get it right… Viceversa, when 50% of the people think that this time is different, usually it coincides precisely with the situations in which the future repeats the past…

 

Gio

 

[giofranchi]

Wells Fargo was about $22 two years ago, where was Hussmann?.

 

It is frigging IDIOTIC to sit in cash when so many bargains have been available.  He has been a fool.

 

Well, first of all I hope he invested in WFC, while shorting the general market… That is much different than sitting in cash! The real problem with Mr. Hussman maybe is that he is not a very good stock picker! But that is a completely different story… Anyway, I am not interested in how good Mr. Hussman is as an investor… Who cares?!

Instead, I wanted to understand if 51 people think the historical data he shows are flawed, or if 51 people think “this time is different”.

 

Gio

 

[ERICOPOLY]

Wells Fargo was about $22 two years ago, where was Hussmann?.

 

It is frigging IDIOTIC to sit in cash when so many bargains have been available.  He has been a fool.

 

Well, first of all I hope he invested in WFC, while shorting the general market… That is much different than sitting in cash! The real problem with Mr. Hussman maybe is that he is not a very good stock picker! But that is a completely different story… Anyway, I am not interested in how good Mr. Hussman is as an investor… Who cares?!

Instead, I wanted to understand if 51 people think the historical data he shows are flawed, or if 51 people think “this time is different”.

 

Gio

 

So if the data he shows is not flawed then necessarily "this time is different"?  Right, you see there is a problem with that.

 

How about if the data he shows is not flawed, but rather he is just putting up accurate data that doesn't actually support his conclusions?  Take a look at twacowfa's comment about the profit margins in the domestic non-financial sector.

 

 

[giofranchi]

How about if the data he shows is not flawed, but rather he is just putting up accurate data that doesn't actually support his conclusions?  Take a look at twacowfa's comment about the profit margins in the domestic non-financial sector.

 

This I don’t understand… If you know better valuation models, I mean models that from 1948 until 2003 have a track record of predicting stock market returns better than the ones on page 8 and 9, very well then I would like to see them… But I don’t understand how they could lead to different conclusions… Once again, either the data are flawed, or this time is different.

 

Gio

 

[james22]

What's the categorical difference between Hussman's work and that of the value investor who believes his ...deep dive into the value fundamentals of some large-cap bank has any predictive value whatsoever for the bank’s stock price... (Zero Hedge)?

[Valuebo]

How about if the data he shows is not flawed, but rather he is just putting up accurate data that doesn't actually support his conclusions?  Take a look at twacowfa's comment about the profit margins in the domestic non-financial sector.

 

This I don’t understand… If you know better valuation models, I mean models that from 1948 until 2013 have a track record of predicting stock market returns better than the ones on page 8 and 9, very well then I would like to see them… But I don’t understand how they could lead to different conclusions… Once again, either the data are flawed, or this time is different.

 

Gio

 

 

The question is whether those are indeed predicting stock market returns or by chance doing (close to) the same. Those kind of charts tend to work until they don't and guys like Hussman will dig them up to prove their point.

 

So NO, this is not a matter of flawed data or "this time is different". This time is only different in the way that those models don't correlate with stock market returns anymore, which can have many reasons and not per se because Mr. Market has gone irrational.

[giofranchi]

The question is whether those are indeed predicting stock market returns or by chance doing (close to) the same. Those kind of charts tend to work until they don't and guys like Hussman will dig them up to prove their point.

 

So NO, this is not a matter of flawed data or "this time is different". This time is only different in the way that those models don't correlate with stock market returns anymore, which can have many reasons and not per se because Mr. Market has gone irrational.

 

Well, the fact that those models have stopped working is exactly what I mean by saying that this time is different… But my question is another one. When I ask if the historical data are correct, I mean: have those models truly worked from 1948 until 2003, or is Mr. Hussman manipulating the data?

If they have worked for 50 years (and Mr. Hussman in other charts shows they have worked for 100 years), and now they have stopped working, well then this time is different.

If they have not truly worked, I would like to see the evidence of their flaws. At least 51 people must have plenty of that evidence! ;)

 

As an aside, I don’t think behavioral psychologists are charlatans… Far from me! I have read much of their work and I find it very useful… Yet, great wealth builders of the past have achieved extraordinary goals simply being more sensible and self-controlled than other people… And they have done so, well before the terminology “behavioral psychology” was invented or even dreamt of!

The younger we are, the more we tend to overestimate the true importance of almost anything that grabs our attention… Temperament is paramount in business, no doubt about that! But the usefulness of those books, that at least try to teach us about our temperament and its potential pitfalls, should not be overestimated!

In other words: The Mentalist is and will remain a TV Series!! ;D ;D ;D

 

Gio