Price/Earning (P/E) Ratio
The current P/E ratio is about double what it should be, which indicates that stock values are currently heavily overvalued.
I explain why I think stocks are overvalued here via a phenomenon—stock buybacks-- that was made illegal in the 1920s, but is now legal again for companies to do.
The Buffett Indicator
We all know Warren Buffett to be one of the greatest investors of all time. This special indicator compares the total market value of stocks to the Gross Domestic Product (GDP).
If the B.I. is greater than 100%, then stocks are currently valued more than the GDP. In cases of a Buffett Indicator (> 100%), stocks are soon set to regress in order to compensate for such an elevated B.I. levels.
Margin Debt
Margin debt is a measure of the amount of money being borrowed to invest. Margin debt has been growing faster than the stock market. When this happened in the past (2000 and 2007) there was an immediate market correction to follow.
Please note: This in only my opinion and nothing more. Please do not take any of the information presented as investment advice.
We have to understand that fundamentals no longer apply to the stock market since the financial system collapsed in 2008. Nowadays, central banks worldwide are buying the stock and bond markets to postpone the inevitable meltdown.
Yeah but these indicators are being blown out of proportion and stocks will have to regress simply based on these fundamentals. Central banks buying stock and bond markets sparks the artificial growth the stock market is experiencing-- which is going to catalyze the next meltdown by the end of the year
You got a 11.87% upvote from @emperorofnaps courtesy of @conradsuperb!
Want to promote your posts too? Send 0.05+ SBD or STEEM to @emperorofnaps to receive a share of a full upvote every 2.4 hours...Then go relax and take a nap!
I am curious to understand your reasons for believing in a coming market correction versus another meltdown. As deregulation seeps in, stock buybacks become institutionalized, and corporate tax cuts are all the rage, wages are stagnant, home prices soaring how can another market collapse be avoided? I am no doomsday hobbyist and have a fairly large (for me) singular tech stock investment and have done well but experienced a pull back in January and again in June. I am wondering if i should liquidate my investment soon, protect my gains and wait, or have faith that I have done my DD and am in a rapidly growing sector that can weather the regular cyclical storms. I know I am mostly grasping at the proverbial straws. There is no certainty, but I am relatively new to stock investing and am aware that last year was a windfall for many and volatility is back in spades, but I also subscribe to the old adage that when people are maniacally buying sell, and when you smell fear, buy. But I am also not a wealthy man, and my investment is substantial. HCI is the growth industry of which I speak without naming the company. What do you think? Sorry for the rambling post, but with the fox guarding the hen house, and a looming trade war growing in scope, I feel it is time to make a decision. I just hate that feeling of unrealized gains as i experienced in June, and haven't recovered completely from it, nor do i want to feel that ever again. Wishful thinking I know...
I do actually believe a meltdown is nearing by years end, or possibly near the beginning of 2019. I believe the market could fall back nearly 60-70% when this happens, but I think some sectors (such as tech) may not be as heavily affected by this drawback.
I think stocks are being artificially pumped by companies buying their stock back... mainly the larger companies like Apple, IBM, FB, GE, etc. I think these kinds of 'giants' are going to see significant drawbacks while some of the other sectors like tech, marijuana and biotech will only fall back slighly (maybe 15%) or even flourish.
One thing for certain is that I don't know for sure. But the stock market is long overdue for a healthy correction and I believe it to be coming sooner than later. I am not going to liquidize my holdings because I am confident that the stocks I own are not going to fall significantly back... FYI my holdings are mainly in Biotech and tech
Appreciate the reply. I agree with you. Curious if you know of Nutanix. Also do you think that pull back in January was a healthy pullback, just a volitile fluctuation, or an ominous sign of things to come?
I have heard of NTNX; seems as though the stock has been on a good run. If the price rebounds (near ATH's) then it may not be a bad idea to dump and buy back in when the price dips again.
I think the market shifts in January were market insiders shaking up the bag a little. Market insiders like to do this to get the everyday investors (like you and I) scared about what's to come. They are able to fluctuate the price of a stock quite easily which then allows for fear to set in for shareholders-- spurring panic sells.
With that said, I think January was an artificial and volatile fluctuation in tandem with ominous signs to come
Yeah, it seems aside from its IPO NTNX was forgotten about by big MMs and ETFs, but since its quarterly report late last year seems to be a bit of a darling, and often not only volatile but manipulated like you say. Thanks for your time. All market down yesterday but yet it was up 3%. But then a few weeks ago the market shifted up, and NTNX was down over 5%. I though about selling at 63$ back in June, but i am long on this stock. Trying to keep a long term investment to avoid higher tax rate and don't like the stress of day trading, plus i live in Cambodia so the timing is way off to do so effectively. But then again, i could've made enough and bought back in again and paid my taxes for the years just with the gains since i sold at $38 last year and bought back in at $32... Ah well, hindsight is always 20\20.