Shiller PE Ratio above 30

User Forum Topic
Submitted by burghMan on November 1, 2019 - 10:08am

One thing Piggington has done for me is to convince me that most useful investment analysis comes down to fundamental valuation measures. Rich's chart on the real estate bubble tells the story in one simple, clear picture. During the bubble real estate was realy, really expensive and it inevitable that it would come back down.

I believe the stock market follows the same rules, and for that reason I've always taken an interest in the market's measure of valuation. I check this chart regularly:

https://www.multpl.com/shiller-pe

Based on the chart, I've been reluctant to go all-in on the stock market in the past ten years. I have about half of my longterm portfolio in equities, but just am just too wary about valuations to commit 100%.

My rough analysis is that the market is significantly overvalued:

- Historic mean is around 15
- It's now above 30, double the mean
- We don't really have any economic "revolution" like the late 1990s tech surge that would drive it even higher
- Interesting historic note: It was around 30 on black friday 1929

But there are possible arguments against overvaluation. It's been above the historic mean since 1990, so maybe the longterm mean doesn't mean much and the modern economy has changed some rules? Much of the late 1900s tech bubble was hype, but many of the innovations are now coming to practical fruition (e.g. self driving cars.) I'm reluctant to believe that "it is different this time", but it has been different for a very long time.

So what I'm asking is a market timing question, which is something I know the "experts" say we should never try to do, but I cannot help but try and do it anyway. It seems to me like buying stocks today is much like buying real estate in 2002 or so. Not insanely expensive, but certainly expensive by historic data. Which means a big decline is a real possibility and upside is limited.

So what do you think? I am looking at the wrong chart or reading it wrong or missing something? How long can the bull market go on?

Submitted by flu on November 1, 2019 - 11:29am.

I don't know but I think the strategy for investing in the markets are sort of different from buying real estate.

With real estate, you are limited by one large purchase every so often.

With stocks, metals, bonds, etc, your strategy doesn't have to be move the entire bucket into the market at once. If you are risk adverse z maybe the thing to do is setup an auto investment plan that auto-invests a small amount each month or twice a month. That way, if you moved in at a wrong time, it's only a tiny portion of your total worth that you will eventually move in over a long period of time. it removes any emotions from that decision. The problem with counting on "gut feeling" is most people aren't smarter than the markets.

Too many people are way too emotional and make things more complicated than basic investing should be. That auto invest plan would be on auto pilot irrespective of how one feels about politics, economy, etc, some of which one's feeling might not even be correct....God forbid to actually make financial decisions based on a gut feeling or mood. all those people talking about that one time "kill" in speculation in the markets probably aren't talking a out the dozen or so other times they were wrong and got their ass kicked. that or they waited a long time for that one time "crash" to get in at a really low price...and waited for a long long long time...

Submitted by The-Shoveler on November 1, 2019 - 11:39am.

IMO nowadays there are so many pension funds public and private dependent on the market, they (the fed etc..) will do almost anything to keep the market from a steep decline.

But I am lousy at the market so maybe flu is the most correct.

Or maybe just wait for E. Warren to get elected LOL.
OK Just kidding sort of.

Submitted by henrysd on November 1, 2019 - 12:13pm.

burghMan wrote:
One thing Piggington has done for me is to convince me that most useful investment analysis comes down to fundamental valuation measures. Rich's chart on the real estate bubble tells the story in one simple, clear picture. During the bubble real estate was realy, really expensive and it inevitable that it would come back down.

I believe the stock market follows the same rules, and for that reason I've always taken an interest in the market's measure of valuation. I check this chart regularly:

https://www.multpl.com/shiller-pe

Based on the chart, I've been reluctant to go all-in on the stock market in the past ten years. I have about half of my longterm portfolio in equities, but just am just too wary about valuations to commit 100%.

My rough analysis is that the market is significantly overvalued:

- Historic mean is around 15
- It's now above 30, double the mean
- We don't really have any economic "revolution" like the late 1990s tech surge that would drive it even higher
- Interesting historic note: It was around 30 on black friday 1929

But there are possible arguments against overvaluation. It's been above the historic mean since 1990, so maybe the longterm mean doesn't mean much and the modern economy has changed some rules? Much of the late 1900s tech bubble was hype, but many of the innovations are now coming to practical fruition (e.g. self driving cars.) I'm reluctant to believe that "it is different this time", but it has been different for a very long time.

So what I'm asking is a market timing question, which is something I know the "experts" say we should never try to do, but I cannot help but try and do it anyway. It seems to me like buying stocks today is much like buying real estate in 2002 or so. Not insanely expensive, but certainly expensive by historic data. Which means a big decline is a real possibility and upside is limited.

So what do you think? I am looking at the wrong chart or reading it wrong or missing something? How long can the bull market go on?

CAPE is only one measurement of stock market valuation just like SAT test scores used in college admission. It has serious flaw - it fails to consider the interest rate. Early 80 CAPE can't compared with current time CAPE due to 10% difference in interest rate. Vanguard uses a modified version of CAPE called fair-value CAPE and adjust for current interest rate. In Vanguard research, current U.S. stock market is still considered overvalued, but only slightly due to low interest rate. This is in sharp comparison with many other pure CAPE modelers:
https://vanguardblog.com/2019/03/13/what...

Contrarian view is negative stock marker sentiment is bullish for stocks. For the last half year the sentiment was mostly bearish with all the recession talk. Wall street would love to propel the market higher when so much retail investor money has sidelined.

Submitted by The-Shoveler on November 1, 2019 - 1:11pm.

henrysd wrote:
Wall street would love to propel the market higher when so much retail investor money has sidelined.

LOL That's my other theory, what happens if dumb money does not show up to bale out the smart money.

Submitted by henrysd on November 1, 2019 - 2:19pm.

The-Shoveler wrote:
henrysd wrote:
Wall street would love to propel the market higher when so much retail investor money has sidelined.

LOL That's my other theory, what happens if dumb money does not show up to bale out the smart money.

Dumb money matters less now. Corporate stock buyback totaled $800b last year, probably will be the the similar number this year.

Submitted by The-Shoveler on November 1, 2019 - 3:28pm.

OK interesting, corporate buybacks bailing out smart money.

Anyway there never seems to be a really steep decline until dumb money goes all in.

Submitted by flu on November 1, 2019 - 6:10pm.

As stocks kept rising, I kept selling some stocks to pay down loans and mortgages as part of diversification and building a safety net when times are bad. And then as stocks kept rising, I sold more to pay more off. Well,I'm out of loans to pay, lol. Damnit.

Not quite yet there, but almost getting close to having enough F.U. money...The only problem is, I really don't hate my work either....And they now have a nice 401k match lol

Submitted by burghMan on November 4, 2019 - 10:26am.

henrysd wrote:

CAPE is only one measurement of stock market valuation just like SAT test scores used in college admission. It has serious flaw - it fails to consider the interest rate. Early 80 CAPE can't compared with current time CAPE due to 10% difference in interest rate. Vanguard uses a modified version of CAPE called fair-value CAPE and adjust for current interest rate. In Vanguard research, current U.S. stock market is still considered overvalued, but only slightly due to low interest rate. This is in sharp comparison with many other pure CAPE modelers:
https://vanguardblog.com/2019/03/13/what...

Contrarian view is negative stock marker sentiment is bullish for stocks. For the last half year the sentiment was mostly bearish with all the recession talk. Wall street would love to propel the market higher when so much retail investor money has sidelined.

Thanks henry, that's exactly the kind of insight I was looking for. Do you know if there's any site that maintains the current value of the modified CAPE?

Submitted by henrysd on November 4, 2019 - 1:33pm.

burghMan wrote:

Thanks henry, that's exactly the kind of insight I was looking for. Do you know if there's any site that maintains the current value of the modified CAPE?

Vanguard fair market CAPE is their proprietary tool and is used mostly inside their house. They don't publish daily to outsiders.

Submitted by ucodegen on November 6, 2019 - 10:45pm.

henrysd wrote:

CAPE is only one measurement of stock market valuation just like SAT test scores used in college admission. It has serious flaw - it fails to consider the interest rate. Early 80 CAPE can't compared with current time CAPE due to 10% difference in interest rate. Vanguard uses a modified version of CAPE called fair-value CAPE and adjust for current interest rate. In Vanguard research, current U.S. stock market is still considered overvalued, but only slightly due to low interest rate. This is in sharp comparison with many other pure CAPE modelers:
https://vanguardblog.com/2019/03/13/what...

Contrarian view is negative stock marker sentiment is bullish for stocks. For the last half year the sentiment was mostly bearish with all the recession talk. Wall street would love to propel the market higher when so much retail investor money has sidelined.

When considering valuation, not only do you need to consider the current interest rate, you also need to consider what 'likely' future interest rates may be and rates of inflation. Treasuries are not inflation protected unless you are picking up TIPS(Treasury Inflation Protected Securities). TIPS will tend to yield lower than standard treasuries. Most people consider treasuries to be safer than stocks, but that is not necessarily true unless you are holding to maturity.

  • Interest rate risk At the current (11/6/2019) yield of 2.3%, they are an extreme form of leverage. The SEC has a good short publication on the interest rate risk on treasuries. Basically the price difference(possibly discounted) will be based upon both where the current yield curve is as well as the difference on the Coupon Rate vs Market Interest Rate of the Treasury. A 30 year held for 10 years then sold is basically a 20 year Treasury when sold. If the rates are the same in 10 years as now, you would be selling a 2.3% yielding '20' year treasury in a market where current 20 years are yielding 2.13%. You would be able to sell at a premium. However if the interest rate increases before selling and the 20 year treasuries are yielding 3%, you will have to sell for less than the face value.
  • Inflation Only TIPS are inflation protected. On a non inflation protected 'standard' treasury, if it is yielding 2% while inflation is 1.5%, your actual gain is 0.5% because the tangible value of the treasury will have dropped by 1.5% while you were paid 2%. This is where boring dividend stocks have a potential advantage. The price of the stock, its revenue, its earnings and its dividends will tend to also increase by the rate of inflation while the treasury has remained the same.
  • To get a rough look of Stocks vs Treasuries, you can invert the PE ratio (provided the stock actually has earnings) and it gives you a rough idea of internal 'yield'. A PE ratio of 30 would be a return of around 3.33% - held internal to the company if there are no dividends. PE represents P/E for the stock, E/P is effectively a yield. Of course stocks also have a risk in a increasing interest rate environment because of the rough equivalence yield to Treasury Rate.

    NOTE: Using Black Tuesday 1929 as a guide for the 'watch out' PE is not a good idea. There was a lot more that went into causing Black Tuesday's crash and the depression than just PEs. The financial accounting standards in 1929 were -- well you could call it the Wild West... the NINJA equivalent to the mortgage crisis.

    Submitted by burghMan on November 7, 2019 - 7:34am.

    ucodegen wrote:
    henrysd wrote:

    CAPE is only one measurement of stock market valuation just like SAT test scores used in college admission. It has serious flaw - it fails to consider the interest rate. Early 80 CAPE can't compared with current time CAPE due to 10% difference in interest rate. Vanguard uses a modified version of CAPE called fair-value CAPE and adjust for current interest rate. In Vanguard research, current U.S. stock market is still considered overvalued, but only slightly due to low interest rate. This is in sharp comparison with many other pure CAPE modelers:
    https://vanguardblog.com/2019/03/13/what...

    Contrarian view is negative stock marker sentiment is bullish for stocks. For the last half year the sentiment was mostly bearish with all the recession talk. Wall street would love to propel the market higher when so much retail investor money has sidelined.

    When considering valuation, not only do you need to consider the current interest rate, you also need to consider what 'likely' future interest rates may be and rates of inflation. Treasuries are not inflation protected unless you are picking up TIPS(Treasury Inflation Protected Securities). TIPS will tend to yield lower than standard treasuries. Most people consider treasuries to be safer than stocks, but that is not necessarily true unless you are holding to maturity.

  • Interest rate risk At the current (11/6/2019) yield of 2.3%, they are an extreme form of leverage. The SEC has a good short publication on the interest rate risk on treasuries. Basically the price difference(possibly discounted) will be based upon both where the current yield curve is as well as the difference on the Coupon Rate vs Market Interest Rate of the Treasury. A 30 year held for 10 years then sold is basically a 20 year Treasury when sold. If the rates are the same in 10 years as now, you would be selling a 2.3% yielding '20' year treasury in a market where current 20 years are yielding 2.13%. You would be able to sell at a premium. However if the interest rate increases before selling and the 20 year treasuries are yielding 3%, you will have to sell for less than the face value.
  • Inflation Only TIPS are inflation protected. On a non inflation protected 'standard' treasury, if it is yielding 2% while inflation is 1.5%, your actual gain is 0.5% because the tangible value of the treasury will have dropped by 1.5% while you were paid 2%. This is where boring dividend stocks have a potential advantage. The price of the stock, its revenue, its earnings and its dividends will tend to also increase by the rate of inflation while the treasury has remained the same.
  • To get a rough look of Stocks vs Treasuries, you can invert the PE ratio (provided the stock actually has earnings) and it gives you a rough idea of internal 'yield'. A PE ratio of 30 would be a return of around 3.33% - held internal to the company if there are no dividends. PE represents P/E for the stock, E/P is effectively a yield. Of course stocks also have a risk in a increasing interest rate environment because of the rough equivalence yield to Treasury Rate.

    NOTE: Using Black Tuesday 1929 as a guide for the 'watch out' PE is not a good idea. There was a lot more that went into causing Black Tuesday's crash and the depression than just PEs. The financial accounting standards in 1929 were -- well you could call it the Wild West... the NINJA equivalent to the mortgage crisis.

    Thanks for the response. It's great to see some posts that use data. I understand that interest rates have a big influence, but the interesting question is: how do you work them into the valuation model for stocks?

    Good points about other factors leading up to the 1929 crash. Markets are more transparent today, but I believe there are some hidden risks out there. Consumer debt is higher than it ever has been: https://www.marketwatch.com/story/us-con...

    Anecdotally I'm seeing more friends and neighbors living beyond their means. It's not as much about real estate, but cars, swimming pools, vacations, etc. The data seems to back up my observations. I don't think the data points to a crash, but I do think it suggests that the economy is going to slow down as the current level of consumer spending is not sustainable.

    Submitted by ucodegen on November 7, 2019 - 8:55pm.

    burghMan wrote:
    Thanks for the response. It's great to see some posts that use data. I understand that interest rates have a big influence, but the interesting question is: how do you work them into the valuation model for stocks?
    Treasuries are the alternative to stocks. The risks are different. I listed some of the risks above. A premium needs to be factored in for the risks. There isn't a complete one fits all.
    burghMan wrote:

    Good points about other factors leading up to the 1929 crash. Markets are more transparent today, but I believe there are some hidden risks out there. Consumer debt is higher than it ever has been: https://www.marketwatch.com/story/us-consumer-debt-is-now-breaching-levels-last-reached-during-the-2008-financial-crisis-2019-06-19

    Reading through the entire article, the title is a bit misleading - though it is about the fact that they are starting to see some of the bad behavior coming back. Its not 2006-8 .. yet.
    burghMan wrote:
    Anecdotally I'm seeing more friends and neighbors living beyond their means. It's not as much about real estate, but cars, swimming pools, vacations, etc.
    I think that is the case for many Piggingtons(seeing others/those they know living beyond their means). The state of financial education in this country is abysmal to non-existent. I had some financial education in Intermediate School.(grades 7,8) and some of the Algebra classes added to it. Most people I know have not had any grade-high school financial education.

    Submitted by teaboy on November 8, 2019 - 12:38pm.

    burghMan,
    Anecdotally, I dont have similarly big-spending friends & neighbors as you, but there was an interesting article from nyt recently:
    https://www.nytimes.com/2019/11/06/your-...

    tb

    ___________________________________
    I’ve done it and you probably have, too: looked at a neighbor or friend who seemed to be in roughly the same financial bracket and wondered, “How do they do it?”

    How do they afford the elaborate remodel and the luxury vacations they’re bragging about on their Instagram accounts and the private school tuition?

    The feeling is envy, but it’s mixed with curiosity. And it often comes with a large dollop of self-criticism. They somehow must be better at managing their money than my husband and me. What are we doing wrong?

    Just look at a forum on the popular financial blog Mr. Money Mustache. The question asking whether “the ‘everybody seems wealthy’ illusion — is it really just fueled by debt?” attracted a wide variety of opinions, but more than a few expressed the sentiment of the commenter GeorgeC.

    “I often have this struggle where it seems as if everybody around me is wealthy,” he wrote, adding that he often wondered how people he knew earned as much or less than he did could afford things he could not.

    “To be honest, at times, it kind of makes me feel dumb and sometimes even like a failure at what I do,” he added.

    No doubt, most people could improve how they handle their finances. But better money management isn’t usually the culprit: When people seem to be able to afford much more than their income would suggest, it’s often because there is hidden wealth or hidden debt.

    “Wealth is even more hidden than income, because there’s no job to correlate,” it to, said Dalton Conley, a professor of sociology at Princeton University. We have a general idea what a professor or corporate lawyer makes, but “in terms of family wealth, there’s zero cues.”

    Ellen, who lives in the Washington area, knows that feeling of envy and curiosity. Like everyone else talking about their personal experiences for this article, Ellen (her middle name) spoke on condition of anonymity in order to publicly share her private thoughts about friends’ spending habits.

    For years, Ellen watched her friends, who had similar jobs and the same number of children as she did, spend much more lavishly on just about everything compared with Ellen’s family. They did expensive home additions. They took twice as many vacations to places farther away. They drove nicer cars.

    And she felt bad about it, assuming she and her husband were simply worse financial managers.

    “We go to self-blame when we don’t know the whole story,” she said.

    Then it all collapsed. It turned out that the family was largely living on debt. They were under water on their house and had to sell it. They’re now renting an apartment.

    “I did feel very vindicated,” Ellen said. “I guess we weren’t doing anything wrong.”

    Of course, not all people who seem to be living beyond their means are running up their credit cards.

    Sharon (not her real name), who lives in Westchester County, N.Y., has relatives who have paid her children’s full college tuition and give the family additional help.

    She doesn’t like sharing that with people, “a little bit because I’m protecting the image of my husband that he rolls with the big boys,” she said. “And I also feel really lucky and it doesn’t feel fair. I’m not comfortable, but I’m thrilled we have it.”

    Frederick Wherry, also a professor of sociology at Princeton University, recognizes that sentiment. “One of the things that helps to protect us as we’re trying to make our way through life is that we rely heavily on secrecy,” he says. “We’re really trying to protect our understanding of who we are and other people’s understanding of who we are.”

    I identify with that feeling. My parents contributed to our sons’ university tuition and while I may mention it when discussing college costs, I certainly don’t highlight it. I’d rather be seen as someone disciplined and savvy enough to sock away hundreds of thousands of dollars for eight years of college than as someone relying on parental assistance. So I am part of the problem.

    Not only do people want to play down their inherited wealth or money from family “but they actively try to hide it,” Mr. Conley said. “We have this ideology of individualism and worshiping of the self-made man or woman.”

    And theoretically, there’s a correlation between getting more because you work harder, said Evan Polman, a professor of marketing at the University of Wisconsin at Madison School of Business. “Inheritance is a violation of that correlation.”

    So, why does this matter? What if we don’t know where our neighbors got the money for that new deck? Few would want everyone’s financial status to be transparent.

    But this secrecy helps reinforce the idea that it is only individual choices, not laws and policies, as well as our national history, that comes into building wealth.

    “It seems like a straight-up cultural issue, but public policy plays a role in how we view secrecy about money and also the consequences that secrecy has,” said Mr. Wherry, who is also director of the Dignity and Debt Network. People need to understand others are in a similar situation — struggling to pay for college or retirement or health care — to realize it’s not a personal failing and to push for reforms.

    “That’s what we need to fix the problem,” he said. “If it’s just about you, nothing’s going to change.”

    These issues most likely play out differently in affluent areas compared with low- and moderate-income communities, where “you’re probably much more aware of the struggle that neighbors are feeling,” Mr. Wherry said. “Yes, we need to be responsible, but there’s much more of a sense that there are things that go well beyond me as an individual that affect how we live.”

    “The secrecy surrounding money may also differ to some extent in countries with higher rates of unionization,” Mr. Conley said, “where salaries are more transparent.”

    Some say we’re focusing on the wrong thing if we’re looking at the outward signs of wealth. The reality now is that if we’re going to envy our neighbors, it shouldn’t be for their BMW or new swimming pool. It should be for their fat 401(k) or gold-plated health insurance, because the ability to put away large amounts of money to secure our future and our children’s future is the sign of real wealth now.

    The top 1 percent of households still spend money on conspicuous consumption but “the thing that really separates them is their spending on inconspicuous consumption,” said Elizabeth Currid-Halkett, a professor of public policy at the University of Southern California, who analyzed Americans’ spending habits for her book “The Sum of Small Things: A Theory of the Aspirational Class.”

    Over the last few decades, wealthy people have increased how much of their spending they direct to education and retirement, compared with members of the middle class, whose expenditures in those areas have remained more or the less the same.

    For example, in 2014, the last year of Ms. Currid-Halkett’s analysis, the top 1 percent of American earners — those making at least $340,000 annually — directed, on average, 6 percent of their total expenditures to education. According to her research, that percentage has climbed significantly since 1996.

    Only about 1 percent of the expenditures of the middle class — people making about $40,000 to $60,000 annually in 2014 — was devoted to education, a number that has stayed static for almost two decades, Ms. Currid-Halkett said.

    And about 20 percent of the top earners’ expenditures go to personal insurance and pensions — an annual average of $32,500 in 2014 — compared with just under $4,000 or about 8 percent for the middle class.

    “The change in spending patterns among the rich are probably the biggest signifier of class divide in America today,” she said.

    No doubt, some will scoff at people comparing themselves to their neighbors and offer the advice that they should just focus on their own lives. And there’s some sense in that. But competitiveness and inquisitiveness are part of being human.

    Charles (his middle name) who lives in the metropolitan Phoenix area, said he speculated about friends who seem to spend and spend and spend with no visible income coming in.

    “They do things that absolutely leave my wife and I scratching our heads,” he said. “I would consider our lives completely fine. But I do think people look at all these types of people around the country and wonder: ‘How are they doing that? How can they afford it?’”

    Submitted by flu on November 8, 2019 - 1:23pm.

    Car companies have figured out they make a heck of a lot more money selling the financing for their cars than then the cars themselves. Yes, many people in this country finance everything. Some random guy that I know from someone else spent $4000 on a water filter system and financed the thing over the next 5 years.

    Submitted by phaster on November 14, 2019 - 9:47am.

    burghMan wrote:

    ...what I'm asking is a market timing question, which is something I know the "experts" say we should never try to do, but I cannot help but try and do it anyway. It seems to me like buying stocks today is much like buying real estate in 2002 or so. Not insanely expensive, but certainly expensive by historic data. Which means a big decline is a real possibility and upside is limited.

    as I read the tea leaves (to try and get the big picture) the market is going up because there is a giant pool of money, pushing up prices

    Quote:

    Public Pension Plans Continue to Shift Into U.S. Stocks
    Nov. 5, 2019

    As the bull market enters its 11th year, state and local pension plans are piling on risk, as they try to make up shortfalls.

    ...State and local pension plans have about $4.4 trillion in assets, according to the Federal Reserve, $4.2 trillion less than the value of promised future benefits.

    www.wsj.com/articles/public-pension-plan...

    BUT as they say what goes up,... eventually must come down

    a story in the back pages of the newspaper caught my eye about the CA state auditor raising a red flag about the fiscal health of this city

    Quote:

    AUDIT: SAN DIEGO’S FISCAL HEALTH

    San Diego is the most fiscally troubled city in San Diego County, according to the California State Auditor.

    ...That poor ranking appears to be driven by the city’s large amount of long term debt, more than $3.3 billion, and its failure to set aside adequate funding to meet the demands of its pension and other post-employment benefit obligations, according to the dashboard.

    San Diego also received the worst rating when came to the amount it has set aside in its financial reserves, an issue the auditor specifically highlighted during her press conference.

    “The city of San Diego really only has a couple of months of reserves set aside,” said Howle. “This should be a warning flag for city officials and the city of San Diego, that this is an area officials need to focus on.”

    www.sandiegouniontribune.com/news/politi...

    this is related to a front page story that appeared in the UT (where I noticed the UT watchdog missed a few key facts)

    www.TinyURL.com/13thCheck

    basically looking at the issue as an investor

    www.TinyURL.com/InvestorWarning

    at some point because of all the debt obligation(s) not just here in this city

    Quote:

    PBGC Projections: Multiemployer Program Insolvent in FY 2025
    May 31, 2018

    WASHINGTON - The Pension Benefit Guaranty Corporation’s Multiemployer Insurance Program continues to face insolvency by the end of fiscal year 2025, according to findings in the FY 2017 Projections Report. The agency’s insurance program for multiemployer pension plans covers over 10 million people.

    The new projections show a narrower range of years for the likely date of insolvency of the Multiemployer Program. The likelihood that the Multiemployer Program will run out of money before the end of FY 2025 has grown to over 90 percent, and there remains a significant chance the program will run out of money during FY 2024. The likelihood the program will remain solvent after FY 2026 is now less than 1 percent.

    www.pbgc.gov/news/press/releases/pr18-02

    pretty certain there will be lots more people forced to be between a rock and a hard place because politicians have no financial sense AND the courts don't want to address “the California rule” (which legally implies the taxpayer is the financial backstop for mismanaged pension debt obligations???)

    Quote:

    Calif. High Court Avoids the 'California Rule' in Pension Benefits Change Decision
    March 22, 2019

    In its much-anticipated ruling in Cal Fire Local 2881 v. California Public Employees’ Retirement System, the California Supreme Court avoided opining on the long-standing pension rule, known as the “California Rule,” which is a state court interpretation of constitutional law that prohibits reduction of pension benefits unless they are offset by comparable new benefits.

    www.law.com/therecorder/2019/03/22/calif...

    doing a little more digging, seems all is not right in the SFR housing market,... ever hear of "shadow inventory" held by big financial institutions? using a "special purpose entity" seems its possible to keep assets off balance sheet,... this is useful because it makes the financial position of big financial institutions, look better than it really is

    Quote:

    Why the 2008 Housing Crisis Recovery Is Just an Illusion (w/ Keith Jurow, MarketWatch RealEstate)

    www.youtube.com/watch?v=GFkkN2M3Y3c

    and some of the smart money players who noticed things were not kosher in w/ subprime loans and made smart bets against derivatives,... are at it again

    Quote:

    Citing climate risk, investors bet against mortgage market

    NEW YORK (Reuters) - David Burt helped two of the protagonists of Michael Lewis’ book The Big Short bet against the U.S. mortgage market in the run-up to the 2008 financial crisis. Now he’s betting against the market again, but this time, the risk is not from underwater subprime mortgages, it’s from homes sinking under water.

    As he did then, Burt has given up his full-time job to make that bet. He left his role as a portfolio manager at the $1 trillion Wellington Management last year to start an investment firm, DeltaTerra Capital, which aims to help clients manage climate risk, and, where possible, take advantage of ways the market has not yet priced in that risk. His first investment strategy is targeting residential mortgage-backed securities, or RMBS, with exposure to climate hot spots like Texas and Florida.

    In doing so, Burt is joining the ranks of a small number of investors who have become worried that climate risk is underpriced in these securities, which are pools of home loans sold to investors.

    “The market’s failure to integrate climate science with investment analysis has created a mispricing phenomenon that is possibly larger than the mortgage credit bubble of the mid-2000s,”

    www.reuters.com/article/us-climatechange...

    if you want to know what kind individual one is up against (and is anecdotal evidence why it seems we are headed for eventual market turbulence),... this kinda guy (using NSFW "language") is basically the archetypal character type that sees no problem w/ the mortgage market says banks understand managing risk,...

    www.youtube.com/watch?v=NjlC02NsIt0&t=3m15s

    burghMan wrote:

    ...How long can the bull market go on?

    in general people find good news more credible than bad news,... so this human nature (i.e. psychology) will drive the market forward up until the point various market players have a sudden loss of confidence in the system

    so the trick w/ timing IMHO is keep one eye on the fundamental valuations and the other eye on the mindset of the other various market players,... IOW when fundamental valuations suck and when various market players have a sudden loss of confidence in the system, that is when we have a big crash like in 1929 and 2007/2008

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