It’s Monday already — where did the weekend go?  Start your workweek with these expertly curated reads: (continues here)

• Blast From the Past: Could Stocks Melt Up? (MoneyBeat)
• Why stock buybacks are losing their fizz (MarketWatch) see also Can you handle the market’s stress test? (MoneyBeat)
• Shiller CAPE Peaches Smell Like BS (Investing Caffeine)
Michael Lewis: A Bazillionaire’s Guide to Stress Relief (Bloomberg View)

continues here

Category: Financial Press

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.

12 Responses to “10 Monday AM Reads”

  1. rd says:

    This is what T.E. Lawrence envisioned the Middle East should look like after WW I. He based this on what he saw were the natural physical, tribal, and cultural divides that he observed. I suspect that the final outcome of this decade will look more like this than what is in the current world atlases used by diplomats. It will take massive military forces ready to exercise brutality to keep anything else in place.

  2. Concerned Neighbour says:

    Can stocks melt up? They’ve got to me kidding me with this crap. I think what they mean is, could stocks continue to melt up. And obviously the answer is yes, stocks will never go down again.

  3. willid3 says:

    amount of noise about Piketty’s book may mean it really scarey to some? and that it has uncovered what some may want to keep covered up?

  4. rd says:

    The constant beating on CAPE’s use as a trading tool is interesting.

    CAPE came out of Benjamin Graham’s approach to valuing stocks for investment purposes in a manner that is the antithesis of technical analysis and short-term trading. My view on CAPE is that it is really just a measure of the factor of safety and overall risk in the stock market focused on the big picture volatility that is generally the focus of the small investor. The professional traders are focused on short-term volatility measures like VIX but small investors react much more to their portfolio losing 50% of its value periodically. CAPE is more of a measure of the likelihood of your portfolio getting nuked in a bear market than anything else. It is not accidental that this period of elevated CAPE values over the past 20 years has already included 2 massive stock market crashes. The current CAPE value indicates that the risk of another one in the next few years is fairly high.

    Since most of us aren’t sitting with cash in the bank for two+ years of living expenses , retirement funds are also potentially emergency funds in case of an extended layoff etc. An unprepared small investor seeing much of his wealth evaporate in a few weeks while also suddenly concerned about the layoffs that came out of nowhere at work is likely to do stupid things. However, if that person understands the risks an elevated CAPE is indicating, then they can make sure their portfolio and personal finances are positioned so that they don’t panic in the next crash, but can use it as a rebalancing opportunity to buy underpriced assets.

    CAPE also has some value in identifying if stock market returns are likely to be higher or lower than average over the next decade or two but that by itself doesn’t set an investing strategy. In 1932, bond yields were quite low, much lower than stock dividend and earnings yields, so stocks were clearly a screaming buy using the raw numbers. However, in 1982 bond interest rates were sky high and competitive with expected future stock returns. Since ZIRP/QE, bonds have been unenticing but stock dividend and earnings yields have only been a raging buy for short periods of time, so balanced funds rebalancing between stocks and bonds have done quite well over the past decade.

  5. kcarver says:

    Investing Caffeine’s peach analogy to CAPE seems flawed. It seems the peach ratio may be calculated using a different method than CAPE ratio.

  6. machinehead says:

    Wade Slome couldn’t even find a valid example for his drive-by shooting of Shiller’s CAPE.

    He creates a ’10-year Peach CAPE ratio’ of PRICES. But CAPE is a RATIO of price to earnings. Peaches have no earnings, which is general problem in valuing commodities.

    Apparently this poor dude thinks peach prices are ratios because of the ‘/lb’ affixed to them. Maff, oy! Ain’t gonna invest with this innumerate loser.

  7. RW says:

    It’s Monday and you-know-who is confused about the economy (redux)

    Robert Samuelson Looks to the Stock Market to Get Guidance About the Direction of the Economy

    His column expressed his concern that the stock market and bond market are going in opposite directions. While the stock market has been rising, which in his view is supposed to mean a stronger economy, interest rates in the bond market have been falling which is supposed to mean a weaker economy.

    …there is no reason, either based on past evidence or in economic theory, that higher stock prices should be taken as implying stronger economic growth. This is another great non-conundrum to keep economic policy types in Washington employed.

  8. willid3 says:

    what a surprise. companies will attempt to make them selves look better by moving tax liability to the lowest tax rate (if any even).
    course it only adds to the cost cutting meme.
    eventually they have to figure out how to increase sales. or the game is up for them

  9. rd says:

    This is an interesting look at the recent mergers with a primary goal of off-shoring profits away from the US.

    The one that caught my eye is the bid to buy Allergan by Valeant which is domiciled in Laval, Quebec but run out of NJ. Quebec is generally not regarded as an Ayn Rand tax-free paradise – to theGOP it would be regarded as something between Socialist and Communist. The United States REALLY needs to look at its corporate tax policies if companies are preferring to be domiciled in Quebec instead of the US.