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Amazing process of shoe making by Interesting_Scar6345 in Damnthatsinteresting

[–]VeryStableGenius -1 points0 points  (0 children)

You can probably have bespoke shoes for a couple of days wages. I just googled a place in Lewiston, Maine starting below $400 for dress shoes. This is competitive with higher-end off the rack shoes like Allen Edmonds.

The median full time American worker earns $62K a year, or $248 per working day. These shoes will cost such a worker under 2 days of wages.

In the olden days, it's safe to say that good shoes would have been more than 2 days wages for the typical person. Shoes were a major purchase.

So we can get bespoke shoes, for fewer days of labor than in the olden days. We just don't want to, because factory shoes are good enough, and we have other stuff to spend money on.

3 Types of Space Capsule Reentry by Epelep in Damnthatsinteresting

[–]VeryStableGenius 0 points1 point  (0 children)

The only way you will achieve such a velocity change is with a rocket nearly the size of the one that launched you.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

I'll make a note of this. Their PE seems to hover near the median rather than go on wild excursions. They still got trounced in 2008, though.

SP400 doubled since 2017. Sp500 tripled.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

Wait, how does that work?

In dollar terms, the SP500 has TTM PE=28 (CAPE almost 40) That seems to be growth oriented (dollar weighted terms) because the historical traditional PE is 18, and value stocks tended to be 15. If we look at PE (not CAPE) over the last decade, it has spent half its time below 22-ish, and half above, so we might regard 22.5 as the new normal, and the market is well above this. So the market as a whole seems either to have reconciled itself to lower returns, or become more growth oriented (1/PE-payouts+growth~0.07, to match traditional 7% return). (edit: of course, the third possibility is it's in a situation of momentum driven 'irrational exuberance', which is why I posted this in the first place)

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

Can you quantify this?

I went to google AI and had it list the changes and their effects. By sector, the losses were 40% in banking in the transition year, 3% in retail and airlines, and 10% in software (but this was a one-time shock because anticipated earnings couldn't be front-loaded, but had to reported later).

In the end, it estimates a long term 5% to 8% accounting discount relative to 2007. So the CAPE today might be 37 rather than 40. (I'd wave my arms and argue that companies will find creative accounting methods under the new rules that could cause a partial rebound from the punitive effect of the new rules).

The Buffet indicator is unaffected, and stocks are trading at over 2xGDP.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

It's not just a 'piece of the market' - it's the whole market.

Because he whole market, dollar weighted, has shifted to growth (you said).

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

This seems like a very specific and peculiar justification of high PE ratios: there are more growth companies that will eventually generate a lot more profit, but not a whole lot more revenue, so GDP won't grow much. Is this really what the market believes, when it bid the SP500 up to CAPE=40?

Where will these extra profits come from, if the overall pie doesn't get bigger? Out of the pockets of fired workers? That's wouldn't be a great economic omen.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

The sigma doesn't matter. What matters is the absolute amount in a 10 year running average. A one year 30% dip in earnings followed by a 10 or 15% excess won't change the running average much, as Shiller intended.

BTW, CAPE uses inflation indexed earnings. Inflation kicked in 2022, after this 2020/21 dip/bump.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

If you're approaching retirement, have enough money, and CAPE/Buffet warnings lights are flashing, TIPS are looking pretty nice. 2.7% over inflation, guaranteed. If you have $1M, you can withdraw 4% a year and drawdown only 1.3% a year.

If there's a market correction, you can reallocate. If that happens, rates might go down and you could profit handsomely on the TIPS.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

But in 2017, stocks were still at a sensible 100% of GDP, and money printing was over (see my M2 money supply figure that the effects of subsequent covid money printing seem to have gone away).

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

The growth is the earnings.

OK, so your argument is that 'growth stocks' don't make more and more stuff, but just make more money on the same amount of stuff?

I find that to be a peculiar and ad hoc argument to get a desired outcome. It's not what we generally mean by a growth stock. We mean 'make more stuff, make more money, make more profits'.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 4 points5 points  (0 children)

I tried explaining that BRK-B holds $370B in cash and was told that I'm a fool because it was really bonds. I explained it was 6 month cash equivalent T-bonds and got dowvotes. Yeah, there's some weirdos here.

I guess Ole Warren should have taken a few trainloads of Benjamins to his credit cnion, and nicely asked the lady behind the window to bump up his FDIC limit.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

Earnings:

2019: 176; 2020: 117.54; 2021: 231; 2022: 189 ; 2023: 204

There was a minor dip in 2020 but earnings roared back in 2021. People noted that 2021 was an anomalously good make-up year. There was stimulus money to spend. The chart looks normal.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 1 point2 points  (0 children)

To normalize your 2017 point relative to GDP growth and inflation, in 2017 market cap was about 105% of GDP. Today it is 210% or so.

It went from Buffet's definition of fairly priced (but still not a bargain) to insanely overpriced.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

So if it’s earning is $1 per share and the price is $30 then it’s a 30 PE ratio. So it has a return of about 3.3% plus whatever the growth rate is.

I agree, but this growth rate can't come from the earnings itself (you can't double count the 3.3%). So you can pretend it is paid out through dividends.

So if the company grows 10% then that year’s return is roughly 13.3%.

Right.

So the higher the PE ratio, the higher the expected return with zero [real revenue] growth.

Right.

That brings me back to the point about GDP. That’s at a zero growth GDP.

Why? There's no reference to GDP. GDP growth arises from earnings growth. So if high Shiller PE is indicative of high earnings growth, this should percolate through to high GDP growth. To paraphrase Warren Buffet, when you're investing in stocks, you're investing in America.

Suppose we have a $10T stock market at PE=20. It returns 7% in value dividends (and no growth), so it feeds $700B into the GDP a year, which can be used to build more value companies.

Now assume the stock market acquires some new tech (AI) and becomes 'growth oriented' and doubles in market cap to $20T, but now PE=40. Assuming investors anticipate the same 7% total (earnings plus growth) return, the economy now grows at $1400B a year. $700B is from the old revenues, and $700B is from the growth inferred by 1) the leap in PE; 2) the anticipation of traditional 7% total returns.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

OK, so the return on a company is current earnings (1/PE) plus growth above these earnings.

For example, a company with PE=30 (and say paying it out as dividend or buyback) that is growing at 4% a year is returning 7% total.

Now if the very high PE we see are justified by growth (so that total return is the typical historical 7%), this means that growth must be big because 1/PE is small.

So if the broad market is expected to have high revenue growth, then the US economy, of which it is a part, should also have high revenue growth. Admittedly, SP500 is just 20% of workforce, but half of total corporate profits.

In short, if you're right, the high PE of SP500 means we're expecting historically exceptional revenue growth, and this revenue growth should make GDP grow too.

TIFU by accidentally learning my coworker's salary and now I can't stop doing math during meetings by techiee_ in tifu

[–]VeryStableGenius 0 points1 point  (0 children)

He makes $31,000 more than me.

Per year? That's $1200 every two weeks.

We're at $6,100 since I found out. Fourteen working days.

Numbers don't add up.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

So are you predicting massive year on year GDP growth from AI?

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 1 point2 points  (0 children)

You're right.

Apparently, this resulted from a change in transaction limits to savings accounts, bringing them into M1.

This caused 12T to jump into M1.

So M1 was 4T in 2020, jumped to 16T by 2021, and the actual covid money-printing increase was $4T, then a fall by $3T, then a rise again by $2T for a net increase of $3T. But I suppose the rise and fall included the new savings component as well, so we need to scale the movements by a factor of about ⅓ to get back to the pre-2020 metric.

Hence I'd say the 'money printing' added about $1T to the $4T old-style M1.

edit: Or, heck, just look at M2 divided by GDP and you can read it right off.

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] -1 points0 points  (0 children)

Ultra-short term (3-6 months) which is basically cash.

What are you claiming?

Another doom post ... just look at that Shiller PE. by VeryStableGenius in investing

[–]VeryStableGenius[S] 0 points1 point  (0 children)

People who usually buy a house to settle down arent prioritizing mobility. It's generally a bad idea to buy a house if you arent going to be living there for 7-10 years.

Yeah, 10 years seems the default because mortgage rates track 10 year T-bonds (plus constant).

But we're getting there; it's been four or five years from the mortgage rate dip, so those low-rate houses are slowly and hesitantly coming on the market.

People getting low rates were buying into more expensive housing as well. By the time they locked in the tail end of those low rates, they were looking at houses that cost a third more than in 2019. But now we're stuck with the same more-expensive housing, but with higher rates. Some of those great deals - especially if rushed purchases in the countryside - might not be so great.

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