click for larger graphic

 

 

All of the major markets have had a huge run off of the lows (though they are barely flat since the 07 peaks).

What does this mean? Are markets too expensive, or are they better priced than last time?

What say ye?

 

 

Source:
Is Anything Cheap?
JASON ZWEIG, JOE LIGHT and LIAM PLEVEN
WSJ, March 8, 2013
http://online.wsj.com/article/SB10001424127887324034804578346610043739152.html

Category: Digital Media, Investing, Valuation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

38 Responses to “Discuss: Is Anything Cheap?”

  1. [...] Discuss: Is anything cheap anymore?  (TBP) [...]

  2. Livermore Shimervore says:

    Foreclosures and vacant commercial RE.
    Labor.
    Coffee at McDonalds.
    Trump and Streisand.
    The new Stingray Corvette (relative to BMW/Merc/Porsche/Audi performance).
    Android tablets and Windows laptops vs. Apple stuff (on cost not value).
    Levis 508 and 511 (the under 50 crowd cuts).
    US Postage.
    LED and Plasma TVs.
    Siena Pizza in Midtown (2 slices + Soda = $5).

  3. Mr.Tuxedo says:

    Markets are too expensive.
    I like to get either Barilla or Ronzoni a buck a box, but it was $1.46 this week, and I try to get my PEET coffee for $7.99 but it’s usually $10.99. :)
    I feel for those who have small discretionary incomes.

    http://www.theatlanticcities.com/politics/2013/03/america-food-getting-cheaper-unless-youre-poor/4923/

  4. daykevi says:

    Well, I know what ain’t cheap!!!

    - “High yield” bonds (remember when they used to be called junk?!). BR – I love that chart you posted a while back showing that stock earning yields are above junk yields for the first time – EVER.
    - Master Limited Partnerships (look at the dreck that’s been sold in recent IPOs)
    - long Munis (wow some people are so hungry for yield and/or so pissed at the gov’t that they’ll do ANYTHING to avoid taxes!!)

    I like to look at Closed End Funds (at a site like CEFA.com) and see what’s trading at a premium. The above show up in spades, at 20% – 40%+ premiums!! Yikes, this cannot end well….! (but of course can go on for a long long time).

    Now that I’ve highlighted what’s pricey, perhaps someone will enlighten us on what’s cheap – so I know what to buy!!

    Where I have my discretionary allocation is in large cap equities, select emerging, short term corporates. Definitely avoiding REITs as well – too much rate risk and not enough yield.

    My one exception to the otherwise expensive MLPs is the Kinder Morgan GP interests (KMI) – not very high yield, but damn will it grow the distribution very strongly due to the El Paso deal and high splits.

  5. jaymaster says:

    Workers are pretty cheap right now.

  6. donna says:

    Perhaps if you could get any decent interest rates for savings, people wouldn’t be inflating the markets…

  7. nofoulsontheplayground says:

    Denis Oullet of the News to Use blog had a fantastic entry on this topic today. He plots the S&P out using trailing earnings as well as his Rule of 20 equity valuation method:

    http://www.news-to-use.com/2013/03/the-slow-riser.html

    This guy just posts this stuff in his retirement up in Quebec, and it is some of the best analysis out there.

  8. mad97123 says:

    Everything is reasonably priced if you expect government deficits and Central Bank money printing to continue, and perhaps another trillion in student loans to be issued.

    Just like 2007 was reasonably priced if you expected consumers could continue to get credit to buy whatever they had the urge to buy.

  9. Chief Tomahawk says:

    “Discuss: Is Anything Cheap?”

    Recent college grads (with plenty of debt) will likely work long & hard for something (maybe even anything?) better than retail pay at the mall (so they can move out of their parents’ house…)

    Additionally, there’s a brand called Magnum Ice Cream offering “$10 off a movie and up to $25 off dinner when you buy three (3) Magnum Multipacks”. While the multipacks are on sale this week at Safeway for $2.99 each, mischievious individuals at my store have torn off the offer info from the packages (each contains a special code to be inputted at their website). So I have one telling me about the deal but can’t take advantage because all of the other codes have been stolen. Maybe someone else can have better luck at their store???

  10. boveri says:

    As jaymaster says: “Workers are pretty cheap right now”

    When that changes we’ll shift from a deflationary to an inflationary environment, Fed will begin to tighten and the stock market will not look like a bargain anymore.

    To wit, shame of it all is that the stock and bond market will not like many more employment reports of plus 236,000 jobs with an increasing work week, hourly wage gains and near zero productivity gains.

  11. Pantmaker says:

    Markets are expensive and the risk of a significant drawdown is high. If someone is nearing retirement or already retired I wouldn’t go near equities…”but bond rates are a joke…I need more return”. Just thank the good Lord you still have your principal and be patient.

  12. At the risk of sounding both overly and overtly cynical, I’d say that, as has been the case since the inception of the republic, legislators are an amazingly good deal. A few thousand bucks tends to go a LOOONG way in the corridors of Washington, which is remarkable when you stop to think about the usual dollar value many concerns receive in return for their by comparison quite paltry contributions.

  13. 8albert8 says:

    VIX looks cheap (but I’ve felt that way for awhile).

  14. tradeking13 says:

    My employer (thanks for the 1% raise).

  15. Internet Tourettes says:

    A 30 year conforming mortgage is very cheap but as soon as the rates start to rise (yes I am optimistic) prices will deflate some and capital will be at risk…..

  16. romerjt says:

    Investment-wise, real estate, mortgages. Other wise, autos when you consider the features and quality you can get for $25K, canned beer, an 18 pk of Keystone for $12, electricity @ $3 / $4 a day (bargain realized when the power goes off), the Internet (again, value most apparent in its absence), clothes are really cheap.

  17. Irwin Fletcher says:

    Ethiopian labor force at $1 to $2 per day.

  18. Francisco Bandres de Abarca says:

    Natural gas was cheap last year, and is now rising off of that (presumed) bottom, so perhaps E&P companies more heavily tilted toward natural gas may yet be cheap before those higher prices are reflected in their reported earnings. I’m just thankful that I myself am able to produce natural gas without first having to ingest a fracking solution. Sorry. How juvenile.

    A cluster of elements niggle at me a little bit on this subject: steel, coal, and copper seem to be relatively inexpensive at the moment, which would suggest that globally, industries are not popping quite so much as broader equity markets would suggest (at the same time acknowledging that economic activity and equity markets are not necessarily highly and positively correlated).

    Is there suddenly a glut of coal reserves in China? Odd then, as the Chinese government has recently announced plans to shut down 5,000 coal mines for safety inspections and concerns. But, perhaps it could be suggested or rationalized that these 5,000 mines are rather minor in their collective output.

    The S&P 500 seems rather expensive when using the copper spot price as a divisor, but that would be a wee bit flawed as a valuation device in an economy now so slanted to service rather than manufacturing.

    I have noticed that an ETF which uses the Russel 3000 Value Index as a reference index is currently trading at a 12M trailing P/E of 19.21. This passes as value?!

  19. constantnormal says:

    “Cheap” is a value judgement, not any sort of absolute, what is cheap depends on how much money you have and how badly you want something.

  20. constantnormal says:

    When canned beer becomes expensive, the people will (finally) revolt …

    … gotta know what’s important …

  21. Moopheus says:

    I recently got a pound of nice Indian vanilla for $56, which is not the cheapest you can get, but better than the $300+ of a few years ago. And eight pounds of El Rey chocolate at a reasonable price. I like to bake, what can I say?

  22. rd says:

    Greece is cheap. I believe it currently has a CAPE of less than 5.

    Foreign labor is also cheap, especially since many of them work and live in conditions we haven’t seen since the early 1900s. Manufacturing in countries without pollution controls or labor laws is a surefire way to keep manufacturing costs down.

  23. socaljoe says:

    If everything has become expensive, isn’t that saying the dollar has become cheap?

  24. kek says:

    Mortgage rates, APOL, BAC, SNV

  25. dubaibanker says:

    The company stocks are doing very well (due to lay offs, cost cutting, lower pay and bonuses, more lean and mean set ups, margin squeezing from suppliers, non payment of debt or so called ‘restructurings’ etc) while on the other side economies are not doing well on the macro level (due to lack of infrastructure spending or any major Govt spending, high unemployment levels in the developed world which constitute over 75% of global GDP or consumption, more nationalistic approaches by various Govts globally, higher borrowing rates in Europe, India etc).

    This causes economies to slow down while at the same time, certain corporations continue their rise (although hundreds of corporations have filed for bankruptcies, merged or been nationalised).

    However, unfair, most cash rich, well run and large corporations have remained alive perhaps due to their necessity for everyone such as Microsoft or Nestle or certain banks.

    All in all, stocks will continue their rise even though economies may not have the same might or growth momentum they had 5 years or even 10 years ago.

    Economies will continue to slide gradually downwards while corporations will continue their march gradually upwards.

    This has been the case since Aug 2011 when USA lost its AAA rating and has been a turning point as far as US equities and perhaps most other equities are concerned.

  26. speedius says:

    Talk. Smug, after the fact analysis abounds.

  27. ConscienceofaConservative says:

    This is a form of inflation, asset inflation. Dollar doesn’t buy what it used to.

    ~~~

    BR: Dollar just hit a 3 year high!

  28. tom_ says:

    Credit cheap. So assets expensive. Not rocket science.

  29. Mike in Nola says:

    BR: re dollar

    Yep, the dollar is up, but so are prices of most things: rent, residential RE, food, and gas (despite claims that it’s down, at least on the Gulf Coast). Ben is managing to create simultaneous bubbles.

  30. mathman says:

    nuclear energy – “too cheap to meter”!

    How’s ‘at Fukushima clean-up goin’? Chernobyl anyone?

    Coal ash for everyone!

  31. chromex says:

    If you deconstruct balance sheets , like I was taught to do in grad school, most stocks are overvalued. The assets are not worth what the rules allow them to be stated as . Someday this will manifest again.

  32. jacobh says:

    ORCL is cheap compared to SAP. P/E 13 vs 26

  33. VennData says:

    ConscienceofaConservative,

    You say, “This is a form of inflation, asset inflation. Dollar doesn’t buy what it used to.”

    Under Bush the dollar lost half of its value. Under Obama, it’s hit a three and a half year high.

    You clown car occupants can toot your horns and honk your noses but when your talking points run out of road… aka facts, then you become an…

    …Unconscious Conservative.

  34. maddog2020 says:

    solar panels – going on the house next week.

    (battery storage, on the other hand, is not cheap)

  35. Init4good says:

    Real estate at new jersey shore is cheap now. Some have thrown in towel after Sandy, figuring they’ll be another storm in next couple of years, and they don’t want to stick around for another one.

  36. powerpenguin says:

    Real estate is cheap. All the money that flowed out of it has now poured into every other possible outlet, hence the charts you’re showing here with everything more expensive. When people are confident enough to invest in real estate again, all of these assets will start to deflate.

  37. phillips49 says:

    Cheap used in this context is a “relative” term and is interpreted differently by different individuals. Cheap compared to what? Markets may be better priced than 2007, but that does not make them cheap. It makes 2007 look expensive. What were we thinking?

  38. Richard W. Kline says:

    Four rounds of mass money pixelation, i.e. ‘easing,’ matched to negative real interest rates equals asset price inflation. The real question is, are assets expensive or is the currency dilute? I’d say dilute.

    The dollar ‘at a 3.5 year high?’ Yes, in what context and compared to what? We have massive price inflation in dollar-denominated assets. Anyone think that’s going to drag the currency up? And the dollar high compared to what? Europe is in recession with huge problems floating public bonds, so the euro has taken a beating, naturally. Japan has been doing all in their power to dilute their currency for 25 years, and despite the Chinese pushing it up in the last calendar year, the Japanese have been given a pass on quant-easing their currency down in calendar 2013. While the renminbi has come up some, it is still held low relative to the $ by deliberate government policy. Britain is in a serious recession+; how strong is the pound going to be? It’s not that the dollar has strenghtened per se in the last four years, it’s that _all the other currencies_ are liquifying at the margins. What keeps the dollar above the surface are those pumped up asset prices in my view. If the Fed will buy any financial asset priced in dollars well into _13 figures_, we have a backstop in the dollar which if less effective than buying Treasuries outright still has some of the same effect.

    Seriously, the FED IS the $, and the FED is just bigger than any other central bank also pixelating money. Ergo, for now, the FED is more successfull in muscling the dollar’s head above water, even it that drives up asset prices. The dollar is diluted, it’s just that the other currencies are watered even more.

    What’s cheap are solar panels, as mentioned above. And when canned beer becomes expensive, the public will brew their own—and learn how badly they were served before, hey!