The Shiller

RYAN   By Guest Blogger Ryan Lewenza
.

Today I’m going to discuss the exciting topic of equity valuations, in particular, the much-hyped ‘Shiller P/E ratio’.

I’ve been reading a lot about this ratio recently and fielding questions from clients about this elevated valuation metric, so today I’m going to explain what it is and why it may not be everything that the bears make it out to be.

The Shiller P/E or the ‘Cyclically adjusted price-to-earnings ratio (CAPE)’, compares the current price of the S&P 500 to the average of 10 years of earnings, after adjusting for inflation.

Stepping back, when trying to value a stock or index, a very common valuation metric is to divide the stock or index by its earnings to get a price-to-earnings (P/E) ratio. Most commonly, you divide the stock/index price by the 12-month trailing or forward earnings. In contrast, the Shiller P/E instead uses a 10-year average earnings to help smooth out the earnings and compare stock prices to a longer term trend.

Currently, the Shiller P/E is at a very elevated level of 35x, which is basically double its long-term average of 17x. Some are pointing to this as proof that the equity markets are overvalued and therefore, that markets are primed for a major correction. I disagree with this overly simplistic view and here’s why.

US Shiller CAPE Is Elevated at 35x

Source: Robert Shiller, Turner Investments

My first issue with this metric is that it doesn’t have a good track record for predicting stock market returns in the shorter term. Below is a chart that illustrates this.

In the scatter plot below I show all the monthly Shiller P/E levels going back to 1950 (on the x-axis) with 12-month forward returns for the S&P 500 (y-axis). For example, if the P/E was say 26x in a given month, I then calculated what the next 12-month returns were based on these different levels. You can see there is no clear pattern or correlation. Meaning, the level of the Shiller P/E has little predictive power in forecasting future 12-month returns. So, just because it’s elevated, it doesn’t mean the stock market is going to roll over and crash.

CAPE Levels and Subsequent 12-Month Returns for the S&P 500

Source: Robert Shiller, Turner Investments

Second, the bears always talk about how the Shiller P/E is high relative to its long-term average. Well here’s an interesting stat for you! Since 1990, the Shiller P/E for the S&P 500 has only been below the long-term average of 17x for 10 months of the 365 months or 2.7% of the time. Meaning, it’s been ‘expensive’ for years, according to the bears, and if you didn’t buy in those 10 months during the financial crisis than you’ve missed a huge opportunity. Because over this period, the US stock market has crushed it!

Since 1990, the S&P 500 has returned 10.5% annually and since the 2008 financial crisis low, the S&P 500 is up a staggering 18.3% annually. So this indicator has sucked in predicting stock returns over this long period.

Third, the valuation metric does not adjust for the incredibly low interest rate environment we’re in. In the early 1980s interest rates were close to 20% and today they are less than 2%. This surely will have an impact on stock prices and valuations.

There’s two ways that low interest rates support higher stock valuations. First is simply when interest rates and bond yields are low, stocks look more attractive. Second, one way to value companies is through a dividend discount model and the level of interest rates is a big factor in driving equity valuations. Put another way, when interest rates are low, like they are right now, that increases the present value of future cash flows from companies. So, low interest rates definitely supports higher stock valuations. Now that works both ways, so if interest rates we’re to spike then the stock market could face some real challenges.

Finally, in this ratio the denominator is earnings and earnings are low (from last year’s recession) but recovering. Look at the current quarter for US earnings. A total blowout!

So far, S&P 500 companies have reported earnings of roughly $44/share, which equates to earnings growth of a staggering 53%. But this is year-over-year, so that’s coming off a really low base when earnings were crushed last year due to the pandemic. Additionally, earnings came in over 23% higher than analysts initially forecasted. Basically we all (myself included) underestimated how quickly profitability would recover.

For this full-year S&P 500 earnings are forecasted to be up 48% from last year, so if earnings continue to grow at these impressive rates, then the denominator will go up and potentially start to bring down the elevated Shiller P/E. Basically, earnings are forecasted to surge this year, which could help to alleviate the current high valuations we’re seeing in the equity markets.

S&P 500 Earnings Are Roaring Back

Source: Robert Shiller, Turner Investments

Ok so there you have it.

The Shiller P/E is one tool that I look at among many. There is no perfect indicator that’s going to tell you when to sell and when to buy. I’ve seen so many investors and portfolio managers put too much weight on this elevated Shiller P/E and miss the ‘forest for the trees’.

The economy is rebounding, as our corporate profits, and technicals are bullish (albeit a bit stretched in the short-term) so chill out! The higher Shiller P/E doesn’t mean we’re all doomed and we need to load up on tuna cans and shotguns.

And finally, I recently got my ‘jab’. There are positives out there, if you’re looking.

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

 

93 comments ↓

#1 LewenzaCountry aka Prince Polo on 05.08.21 at 9:47 am

Is the photo of Ryan in his high school days? Achieving new heights!

Jab scheduled for Tuesday PM – I sure hope it’s not Mike Tyson doing the jabbing.

#2 Happy Renter (that might get the boot) on 05.08.21 at 9:53 am

Can someone please tell me, using the rule of 90, is the percentage of real estate of your net worth based on equity in that asset or total purchase price?
If we are 49, have a million in liquid assets, and are looking to put a downpayment on a 700k home for example. Is the 41% the downpayment amount on the new net worth of 300k?

#3 Dharma Bum on 05.08.21 at 9:54 am

The future’s so bright, I gotta wear shades.

– Timbuk 3

#4 KNOW IT ALL on 05.08.21 at 9:58 am

“The Shiller P/E for the S&P 500 has only been below the long-term average of 17x for 10 months of the 365 months or 2.7% of the time.”

Q1) So then how many months has the Shiller P/E been above the current 35X of that same 365 months period?

#5 GrumpyPanda on 05.08.21 at 10:14 am

Good article Ryan. Made me think how good math can be used to justify a bad decision.

Of greater short term importance: where is Juniper, the goat stolen from the Riverdale Farm?

#6 can't be a bear on 05.08.21 at 10:58 am

the worst this market will do right now is pause. maybe. there are absolutely zero signs of longer term weakness.
this bull run has a few years in it still.

#7 Beetman on 05.08.21 at 11:00 am

Yehhhhhh a picture that doesn’t have a dog on it.

#8 crowdedelevatorfartz on 05.08.21 at 11:04 am

“…..the valuation metric does not adjust for the incredibly low interest rate environment we’re in. In the early 1980s interest rates were close to 20% and today they are less than 2%….”

++++

The Boomers had is so easy in the 80’s.

Great comments Ryan

#9 crowdedelevatorfartz on 05.08.21 at 11:13 am

Housing Sales stalling?

https://www.burnabynow.com/local-news/burnaby-sellers-have-already-missed-out-on-real-estate-madness-3759883

#10 Ponzius Pilatus on 05.08.21 at 11:19 am

Friedrich von Schiller
Famous German playwright and poet.
Wrote “Ode to Joy”, used by Beethoven in his 9th Symphony.

#11 Hey Kanada on 05.08.21 at 11:31 am

Tomorrow is “Birthing Persons Day” in Kanada.
To all the “Birthing Persons”, Have a Happy day.

#12 Robert on 05.08.21 at 11:34 am

Ryan,
Markets seem expensive, but if graphed on a log scale over a long time they look undervalued. Consider the long term effects of the hidden inflation tax on the value of a real assets like gold, silver, quality real estate, or the value of good businesses. In addition, add the impact of a falling dollar (DXY=0.902), low bond yields (TNX=1.58), an exponentially increasing M2 (money supply) and an enormous unpayable debt load (the big white elephant).

The Shiller Index is well above average but all other things are not at all equal at this time. Some of all of the extra trillions of dollars being created right now are seeking assets which might protect from inflation and increased taxation in the future.

So where else are you going to put your money to protect it? You don’t have that many options other than real assets and real businesses that generate something of value.

ps. I do not consider DoggieCoins to be of any value, though I do have a nice dog.

#13 TurnerNation on 05.08.21 at 11:35 am

According to tradition on the weblog the Guest Bloggers will probably always be known as ‘the new guys’.

In the same vein the oldest cast/family member on The Sopranos is named ‘Junior’ Soprano. Go figure.

–For the first time in history healthy people are being tested then diagnosed using a PCR test. And the country shut down on the numbers.

“Globe says Sun Life cuts back on floor space
The Globe and Mail reports in its Friday edition that Sun Life Financial has begun to pilot workplace rapid testing for COVID-19 as it prepares to open some offices later this year. The Globe’s Clare O’Hara writes that the insurer is in the midst of downsizing about 15 per cent of its office space throughout North America as it prepares for employees to return to work. ”

—–
I heard regions of AB, ON just extended their ‘mask mandates’ to Dec 2021.
This ain’t going away. Kanada has more to come imo.
Manitoba shut down. In the New System if you are declared “Non-Essential” which fate awaits? UBI?

…..

Why are our airport hotels and many city hotels converted into CV camps for returning citizens and as as permanent homeless shelters? Where are tourists? Who would come anyway to a shut down country, with the curfews and armed checkpoints?
That’s the point. #1 goal of the New System is control over our movements/travel.

.New Zealand to spend millions weaning holiday towns off international tourism (theguardian.com)

.B.C. residents want travel checks at Alberta border, MLA says (sookenewsmirror.com)

#14 Flop... on 05.08.21 at 11:40 am

Gotta clean the sleepies out of my eyes before I read these early morning posts.

At first glance at the title I thought Rhino wrote a post about toilets…

M46BC

#15 Flop... on 05.08.21 at 12:02 pm

Of course I could be imagining it, but I could have sworn in years past Canada used to be closer to the Outer Banks in this visualization with the likes of Australia.

Canada debt to GDP…116%

Australia debt to GDP…72%

Now they are drifting towards the eye of the debt hurricane with the likes of Spain, Italy and of course Japan.

At least Canada is giving its debt effort more than 110%…

M46BC

————————————————————————

“Visualizing the State of Government Debt Around the World (Update, 2021)

The COVID-19 pandemic forced governments around the world to go on a spending spree to prop up their economies. At the same time, fear of the virus combined with strict lockdowns are keeping people at home, causing tax revenues to plummet. How has this ultimately impacted the world’s debt? This visualization breaks down the debt to GDP ratio for each.

* Japan still has the highest debt to GDP ratio in the world at 257%, which is significantly higher than other developed countries.

* The COVID-19 pandemic significantly increased government debt around the world, with 3 countries now over 200% of debt to GDP and 32 over 100%.

* At the opposite end of the spectrum, a handful of petro countries carry very little debt, including Kuwait (14%), Russia (18%) and Saudi Arabia (31%).

* The coronavirus pandemic is far from over, and many countries are continuing to spend a lot of money to support their economies, suggesting government debt will only continue to get worse in the future.”

https://howmuch.net/articles/state-of-the-worlds-government-debt-2021

#16 IHCTD9 on 05.08.21 at 12:27 pm

Bears are taking a beating on every front these days it seems. Thanks for the perspective Mr. L.

Best advice imho, is to just park your $$ in the hands of a Pro, and pay their fee. Too many distractions online tugging at your strings, and screwing with your emotions. Most folks will never have enough market knowledge to effectively sort thru the bombardment.

The modest IH nest egg is sitting at an all time high as I type, performance has been great, moving over to TI was the best move we’ve made yet on the financial front.

None of these homies would have a job if they weren’t well worth their price – and I bet the toys in their garages put mine to shame.

I probably win on a weight basis though (unless Mr. T still owns that tugboat…).

#17 Russ on 05.08.21 at 12:29 pm

Hi Ryan,

Are we still slightly overweight in CDN on the portfolio weighting? Say, 22%?
Mine moved above 24% while I wasn’t looking, and presumably commoditieshave a way to go yet.

Out West we get the shot. It seems people who are beyond Hope get a jab.
The missus & I got it Wednesday, had a slightly sore shoulder on the injection side for the next day.

#18 TurnerNation on 05.08.21 at 12:33 pm

For Dolce and others, the reasons for the Economic shutdowns: this apparently shows CDC recommending 28 test setting. Ontario is using 35, Quebec 45 – also as per these documents: https://i.redd.it/t78ih7l8rvx61.png

………
Mind. Blown. From March 2020-Dec 2020 we were told a deadly pandemic was raging.
However, air travel was wide open. In late 2020 the vax became available.
People have suggested the reason Kanadians were banned from flying (including via costly CV hotel quarrantines and fines) as of **January ‘2021** was to PREVENT them from going south and getting a Vax.

USA is wide open now. There are some states which never shut down or did so for literally the 2 weeks or months as sold to us.
———–
Why are golf courses, skill hills, and sun destination flights banned in Ontariowe?
Take a look at the identifiable demographic to those activities. Who do you normally see lined up, and why are they being targeted & punished so?
Why yes it’s the Middle Class People. People who may afford a few hundred or thousand on a day or week out.
Those people must go. In the Former First World Countries our Way of Life is no longer.

You know it’s serious when our elites attack their own cash cow, pro sports. CFL league cancelled right away, kaput; Leafs and Blue Jays are still banned from the country. Again who would drop a few hundo on tickets and a night out. Yep the the (former) middle classes.

#19 crowdedelevatorfartz on 05.08.21 at 12:54 pm

Geez last year Lobster fishermen were getting $4/lb for their catch from the wholesalers….

This year $8.50/lb for “Market” sized lobster.

https://www.cbc.ca/news/canada/prince-edward-island/pei-lobster-prices-may-2021-1.6014578

Inflation here we come.

#20 Ryan Lewenza on 05.08.21 at 12:59 pm

crowdedelevatorfartz “The Boomers had is so easy in the 80’s. Great comments Ryan”

Yeah but now they are getting screwed! The central banks and their zero bound interest rates are hurting boomers in their retirement with incredibly low interest rates from bonds and GICs. The millennials are benefiting from these low interest and mortgage rates, but affordability sucks for them and they will have to pay for all the deficits/debts that are piling up, so they will end up getting ‘screwed’ like the boomers are today. – Ryan L

#21 G on 05.08.21 at 1:02 pm

Some may be interested in a graph shown in a podcast starting at about the 1hr 50min mark regarding oxygen isotopes in Greenland ice core that correlate to global temperature changes. The discussion on climate change starts a bit before the graph when they start,
‘We get into a discussion on the historical context of climate change, and the deplorable modern trends of historical revisionism and the cancel culture.’
https://www.youtube.com/watch?v=ptdpKuEgmbw&t=712s

I’m not sure the PMT want you to know about this type of discussion. Why the push to try and pass Bill C-10? Perhaps to control what you can see on the web and from whom. Maybe the C-10 is so you won’t be reminded about things like the two Meckel’s still thrown in jail, and other things during the next election.

I hope the world’s nuclear power plants all have hardened back up power system to run cooling pumps fro a long time. Just in case. Largest Solar Flare of Cycle 25/CME. May 8th 4min.
https://www.youtube.com/watch?v=FeuVUKSQ2Pg

re pix, glade they didn’t include a ‘Dog’ in the try at a Darwin award. But who knows it might just be a photo shopped pix after all. LOL

PS, glade you’re happy about getting your ‘shot’ when one became available. RT https://www.rt.com/ has an op-ed today about freedom and choice some might find interesting.

#22 Ryan Lewenza on 05.08.21 at 1:03 pm

Russ “Hi Ryan, Are we still slightly overweight in CDN on the portfolio weighting? Say, 22%? Mine moved above 24% while I wasn’t looking, and presumably commodities have a way to go yet.”

Correct. US first, then Canada, then international as far as weights. TSX is having a great year so far and I think could be just the beginning as commodities are looking great right now. Oil has broken its long-term downtrend, copper is at $4/pound and lumber prices are nuts. I see inflation picking up so this is generally a supportive backdrop for commodities. We recently switched our Canadian holdings to get more resource exposure. – Ryan L

#23 Sunny Daze on 05.08.21 at 1:14 pm

Feels like we might be in a grind against Covid for another year or two to me. Hate to say it but Ontario logged almost 150 P1 cases yesterday. It’s getting kind of annoying watching all the incompetence time after time. Hoping the booster can help next year.

Just not sure how populations are going to respond to all of this again. Will they get fed up, do things become depression like for many, can they keep printing, what happens to jobs long term and does the west become a total basket case as this continues?

I wondered for the first time today if Bolsanaro is the only one telling the truth to the world.

For now the same old outdoor fun. All we got. And a nice day for it.

#24 crowdedelevatorfartz on 05.08.21 at 1:21 pm

@#11 Hey Kanada
“Tomorrow is “Birthing Persons Day” in Kanada.
To all the “Birthing Persons”, Have a Happy day.”

++++

I had no idea what you were talking about until I googled it.
I only have one question…..

I wonder when our woke, feminist, leader, Trudeau, will jump on the “Birthing People” bandwagon…..

https://www.youtube.com/watch?v=4l-u0BoiW9w

#25 Agree with IHCTD9 on 05.08.21 at 1:33 pm

#16 IHCTD9
I couldn’t agree more. Thought I had CAPE figured out enough to put away cash and not invest anymore until the correction. Then poof! Ryan shows up and says “shut up fool”.

#26 Wrk.dover on 05.08.21 at 1:36 pm

#96 Bdwy on 05.07.21 at 8:37 pm

Helping my friend w electrical on his benz. Passenger window wont go. Look for fuse .
Listed as window control, fuse #3,#11,#13, AND #18
Wtf?
________________________

Stuck motor brushes.

Put finger on driver door switch for that window while Buddy slams that door. He will think you are smarter than the Germans!

#27 Dogman01 on 05.08.21 at 1:40 pm

Newfoundland is gutted. It is on the splitting table.
https://nationalpost.com/opinion/rex-murphy-its-hard-hard-times-in-newfoundland-and-it-doesnt-look-hopeful

Is this precisely where Canada will be in a decade?
It looks like Canada is selling the silverware (debt) to keep up with the payments…that can only go on so long. Hock the future for today.

Does not this “righteous” Woke crowd understand that you cannot do any “good things” and do not have options when you are in poverty. Generating Wealth allows you the space to do good work. The problem with being poor is you have to spend all your time\energy\thought on the problems that occur as a result of being poor.

Destruction of entire wealth generating industry’s by this Liberal Govt in the name of Climate will impact all Canadians.
Adding costs will just drive Industry to jurisdictions that do not have our standards and we will then import their goods losing the benefits of employment in our Country and exporting the global impact to their country.

It’s like the cabal running the show thinks the country has some sort of magical Trust Fund.

#28 Concerned Citizen on 05.08.21 at 1:50 pm

Now do price to book and price to sales next!

https://www.multpl.com/s-p-500-price-to-book
https://www.multpl.com/s-p-500-price-to-sales

By the way, all-time high (pre COVID) GAAP earnings on the S&P 500 are ~$144. At Friday’s close, the S&P 500 trades at ~29 times that number (bearing in mind that earnings haven’t yet recovered to that level).

But who knows, maybe central banks can continue to print trillions a year to buy assets and governments can continue to run 10-30% of GDP deficits year in, year out to keep this spectacular gong show going. Maybe they’ll think about stopping when a loaf of bread costs $100 (and official inflation has risen all the way up to 3%, no doubt).

Remember a month or two ago when a Chinese official issued a warning about asset bubbles abroad? The numbers would certainly seem to back him up. Everything is flashing red, except the greater fools with infinite buying power (the central banks) keep printing with reckless abandon. Take that away, and it gets ugly right quick.

#29 Tripp on 05.08.21 at 2:07 pm

If not doctored, the picture is quite an accurate representation of the risk associated with buying a $1m bungalow, with a $150k family income. Two cups of adrenaline, large smiles, a once-in-a-lifetime-experience and the feeling of being above everyone else.

Hopefully nothing really bad happens on the way down…

#30 Tripp on 05.08.21 at 2:22 pm

#26 Wrk.dover on 05.08.21 at 1:36 pm
#96 Bdwy on 05.07.21 at 8:37 pm

Helping my friend w electrical on his benz. Passenger window wont go. Look for fuse .
Listed as window control, fuse #3,#11,#13, AND #18
Wtf?
________________________

Stuck motor brushes.

Put finger on driver door switch for that window while Buddy slams that door. He will think you are smarter than the Germans!

———————————————-

Another trick, once a year: disconnect the battery, wait ten minutes, reconnect. You may lose some settings, but it may help with with the memory sears, odd dashboard lights, integrated garage remote. Every modern car has a mini OS running the electronics, rebooting helps.

#31 truefacts on 05.08.21 at 2:43 pm

Ryan,

At these prices, should we expect lower returns (over the next decade or more)?

The “Buffett Indicator” also seems quite high…

https://www.currentmarketvaluation.com/models/buffett-indicator.php

Thoughts???

#32 IHCTD9 on 05.08.21 at 2:43 pm

#26 Wrk.dover on 05.08.21 at 1:36 pm
#96 Bdwy on 05.07.21 at 8:37 pm

Helping my friend w electrical on his benz. Passenger window wont go. Look for fuse .
Listed as window control, fuse #3,#11,#13, AND #18
Wtf?
________________________

Stuck motor brushes.

Put finger on driver door switch for that window while Buddy slams that door. He will think you are smarter than the Germans!
————

Heh, I had a SAAB with a dying fuel pump. Driving along, motor dies, pull over, get out and reach under the car, pound on bottom of gas tank, return to drivers seat, start up and drive off.

Good for another week or two worth of driving!

#33 Decel on 05.08.21 at 2:47 pm

Nice, love these posts explaining stuff then contextualizes them in the here & now “practical” reality

#34 crowdedelevatorfartz on 05.08.21 at 2:47 pm

@#27 Dogman01
“Is this precisely where Canada will be in a decade?”

++++
Or …at the most… two decades.

Great article.

#35 baloney Sandwitch on 05.08.21 at 2:48 pm

The subsequent 12 month returns are clearly sloping down. If you were to extend the analysis to 5 years and 10 years, you may reach a different conclusion.
If you have already reached your “number”, then its better to lower your risk. Other valuation measures such as Tobin-Q https://www.advisorperspectives.com/dshort/updates/2021/05/04/the-q-ratio-and-market-valuation-april-update
and the Buffett indicator are also showing overval of the US equity markets.
https://www.gurufocus.com/stock-market-valuations.php

#36 Fishing in a barrel on 05.08.21 at 2:55 pm

The higher Shiller P/E doesn’t mean we’re all doomed and we need to load up on tuna cans and shotguns.

____________________________

Yes, but I already did load up anyways. Because you just never know.

#37 Ryan Lewenza on 05.08.21 at 2:57 pm

truefacts “ Ryan, At these prices, should we expect lower returns (over the next decade or more)?

The “Buffett Indicator” also seems quite high…”

The Buffett Indicator is similar to the Shiller PE and yes it’s elevated. I would agree that next 10 year returns will be lower than what we’ve seen over the last decade but returns will still be decent. So maybe instead of returning 10% since 1990 we see returns closer to 7-8%. But key point is a higher Shiller PE doesn’t mean negative returns. – Ryan L

#38 Sail Away on 05.08.21 at 3:07 pm

#30 Tripp on 05.08.21 at 2:22 pm
#26 Wrk.dover on 05.08.21 at 1:36 pm
#96 Bdwy on 05.07.21 at 8:37 pm

Helping my friend w electrical on his benz. Passenger window wont go. Look for fuse .
Listed as window control, fuse #3,#11,#13, AND #18
Wtf?

————

Stuck motor brushes.

Put finger on driver door switch for that window while Buddy slams that door. He will think you are smarter than the Germans!

————

Another trick, once a year: disconnect the battery, wait ten minutes, reconnect. You may lose some settings, but it may help with with the memory sears, odd dashboard lights, integrated garage remote. Every modern car has a mini OS running the electronics, rebooting helps.

————

One more trick, to be used once per car: get rid of it if it’s not a Tesla and buy a Tesla. All problems solved.

Glad to help.

#39 Dolce Vita on 05.08.21 at 3:36 pm

#15 Flop…

That’s Public Debt only and they are using IMF as their source. The picture changes when you factor in Household Debt as well. Recall, Govs not the only ones feeling the Pandemic Pinch.

Re-ran the numbers from a few months ago for the G7 and threw in Australia* so you would not feel left out, most up to date data I could find:

https://i.imgur.com/GDKIYrf.png

As can be seen Japan & Canada are the overall debt to gdp heavyweights. Your Australia* in the mix.

Now, how to make a new moniker for Japan, Canada & the US to rival the former PIGS.

JUSC
/dʒuːs/
https://www.youtube.com/watch?v=m-NgsWTFZ54

If I add in Italia I geet:

JUSCI
/ˈdʒuːsi/
https://www.youtube.com/watch?v=a6LPCCTemnc

————————-

*Visual Capitalist Change in Debt to GDP (since you like pictures) impressed with Australia less so with Canada, data to Q32020.

https://www.visualcapitalist.com/debt-to-gdp-continues-to-rise-around-world/

#40 Dolce Vita on 05.08.21 at 3:38 pm

#15 Flop…

That’s Public Debt only and they are using IMF as their source. The picture changes when you factor in Household Debt as well. Recall, Govs not the only ones feeling the Pandemic Pinch.

Re-ran the numbers from a few months ago for the G7 and threw in Australia* so you would not feel left out, most up to date data I could find:

https://i.imgur.com/GDKIYrf.png

As can be seen Japan & Canada are the overall debt to gdp heavyweights. Your Australia* in the mix.

Now, how to make a new moniker for Japan, Canada & the US to rival the former PIGS.

JUSC
/dʒuːs/
https://www.youtube.com/watch?v=m-NgsWTFZ54

If I add in Italia I get:

JUSCI
/ˈdʒuːsi/
https://www.youtube.com/watch?v=a6LPCCTemnc

————————-

*Visual Capitalist Change in Debt to GDP (since you like pictures) impressed with Australia less so with Canada, data to Q32020.

https://www.visualcapitalist.com/debt-to-gdp-continues-to-rise-around-world/

#41 S.Bby on 05.08.21 at 3:40 pm

Apparently the “Buffett indicator” is also at an all time high. I think this is total US market cap divided by US GDP.

#42 S.Bby on 05.08.21 at 3:42 pm

Just saw #31 and #36 you guys are way ahead of me!

#43 Dolce Vita on 05.08.21 at 3:55 pm

Ryan, that was some very good analysis.

I especially liked your Heteroscedasticity plot:

CAPE Levels and Subsequent 12-Month Returns for the S&P 500

There was the odd outlier you could have thrown out in the plot but having taught that stuff before, THAT data is beyond help. Right you are to chide it.

An R-squared number would have been nice to hit the home run (residuals measure in a plot like that, probably near 0 = the plot leaves much unexplained like near 100% of it).

Not even go to intrepid Jim can fix that poster child for Heteroscedasticity:

Read: How to Fix Heteroscedasticity
https://statisticsbyjim.com/regression/heteroscedasticity-regression/#:~:text=Heteroscedasticity%20means%20unequal%20scatter.,the%20range%20of%20measured%20values.

————————–

The unexamined life is not worth living.

Said Socrates, used in my Twitter profile and I have been trying to Zen that in my own words for some time, to no avail.

Thank you for doing that today.

#44 willworkforpickles on 05.08.21 at 4:00 pm

#27 Dogman01
…off topic from your post but with regard to Newfoundland – there’s an exploration company 15 kms from Gander Newfoundland recently reported the highest grade gold (discovery) in the world.
Consistent assays too.

#45 Dan in Nanaimo on 05.08.21 at 4:10 pm

Based on gravity defiant PE multiples, and the latest April NFP print, it might be reasonable to assume we are close to a top in these momentum driven, stimmie dependent markets (stocks / RE / crypto).

When momentum shifts, big money sells the news. PE multipliers descending back to earth will reveal the true strength of the economy.

#46 Flop... on 05.08.21 at 4:18 pm

Yeah, I like pictures and charts.

Light and fluffy.

Probably comes from my Dad continually whacking me across the back of the head with a 700 page text book yelling “Do you get it yet?”

Worse thing that can happen with a single chart is confusion….or a paper cut.

Since it is Chartuday, I see a chart-off developing.

This one is pretty cool too, except if you are a tourism operator.

Let’s check the usual suspects.

Canadian Tourism Income 2019 …28B, last year 11.3B, probably the bulk of that number before Spring Break.

Australian Tourism 2019…47.5B, last year…25.7B

Italian Tourism 2019…49.6B, last year….19.9B

U.S Tourism 2019….193B, last year 63B

Even on a bad year the U.S earns more from tourism than supposedly more cherished places on the planet to visit like Australia, Canada and Italy on a good year.

These countries can’t compete with six membered families touring around in mini vans wheeling coolers through hotel lobbies…

M46BC

—————————————————————-

“Visualizing the Negative Economic Impact of COVID-19 on Tourism.

The coronavirus pandemic has caused widespread revenue loss for lots of different industries, but none more so than the tourism sector. We focused on the highest tourism countries to visualize the negative impact of COVID-19 on a year-over-year basis. The economic losses are staggering.

* Spain had the single biggest drop in tourism spending due to COVID-19 from 2019 to 2020 when measured as a percentage of the total, decreasing from $79.7B to $16.2B or -80%.

* The U.S. witnessed the single biggest overall decrease, going from $193.3B to $63B, or about -67%.

* Every country in our visual experienced massive losses in tourism spending, with most countries suffering through drops of over 50%.

* Travel bans are still in place for lots of countries around the world, which suggests it will take a long time for the tourism industry to recover to pre-pandemic revenue levels.”

https://howmuch.net/articles/high-tourism-countries-income-loss-due-to-pandemic

#47 Dolce Vita on 05.08.21 at 4:23 pm

#18 TurnerNation

For Dolce and others…

I sympathize* but they have to use some measure or goal post of some kind for viral infectivity.

Look at the chart here in Section 1:

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7970463/

Canada conservative or USA reckless?

ON & PQ at the plateau, CDC at the inflection before the plateau.

Not a practitioner but if I were, I’d rather be conservative (except in Federal elections but with Trudeau that goes out the door).

———————-

In my Region of FVG in Italia and my Province, Pordenone specifically, we should not even be doing anymore mask or social distancing or what not. But because of the rest of my Region and Italia itself, we have to continue these avoidance measures.

And it pisses me off to no end.

So ya, very sympathetic to what you are saying which is lockdowns prolonged by infectivity measures that are very conservative in ON and PQ, more so than in the US.

#48 J on 05.08.21 at 4:31 pm

Ryan, thanks for this informative and interesting analysis.

Just eyeballing the charts, it seems the CAPE was a predictor for the 1929 and 2000 crashes, but not the 2008 crisis. Perhaps if your analysis looked ahead more than 12 months, say 36 months, then the CAPE would be more predictive? I’m unsure based on simple intuition whether or not this would be the case.

Your insight into how interest rates impact stock prices is also informative. Maybe there is a way to adjust the CAPE calculation to take interest rates into consideration, and then maybe this new index would be a better predictor of future stock prices? The CAPE average over the past 20 years is much higher then the very long term average, probably due to lower interest rates as you noted.

#49 SoggyShorts on 05.08.21 at 4:38 pm

#36 Ryan Lewenza on 05.08.21 at 2:57 pm
…So maybe instead of returning 10% since 1990 we see returns closer to 7-8%. But key point is a higher Shiller PE doesn’t mean negative returns. – Ryan L
*******************
I love these positive posts. All of my FIRE planning and decisions on what “my number” was and when I could pull the trigger on retirement were based on doom&gloom so the idea that my Sequence of Returns might actually be good is amazing.
“7% per year”?! as in +100% nest egg in a decade?(minus withdrawals) oh baby.
Certainly makes up for stupid cryto FOMO…

#50 Dolce Vita on 05.08.21 at 4:39 pm

#15 Flop…

Correction on my table:

Deutschland = 128% GDP Total. Changes nothing really, they were already at the bottom of the list for the G7 + Oz and now, comfortably so.

Their Gov Debt is 70.3% not 115.2 as for France. Typeover by me.

My bad.

https://i.imgur.com/6ToXFfe.png

Source links:

https://www.imf.org/external/datamapper/[email protected]/OEMDC/ADVEC/WEOWORLD/VEN/AFG

https://tradingeconomics.com/country-list/households-debt-to-gdp

#51 BillinBC on 05.08.21 at 4:42 pm

#37 Sail Away

#30 Tripp on 05.08.21 at 2:22 pm
#26 Wrk.dover on 05.08.21 at 1:36 pm
#96 Bdwy on 05.07.21 at 8:37 pm

Helping my friend w electrical on his benz. Passenger window wont go. Look for fuse .
Listed as window control, fuse #3,#11,#13, AND #18
Wtf?

————

Stuck motor brushes.

Put finger on driver door switch for that window while Buddy slams that door. He will think you are smarter than the Germans!

————

Another trick, once a year: disconnect the battery, wait ten minutes, reconnect. You may lose some settings, but it may help with with the memory sears, odd dashboard lights, integrated garage remote. Every modern car has a mini OS running the electronics, rebooting helps.

————

One more trick, to be used once per car: get rid of it if it’s not a Tesla and buy a Tesla. All problems solved.

………………………………………………………………………..
Great advice! BTW, here’s my Tesla maintenance schedule:
Every November-check windshield antifreeze and top up
Once/year-rotate tires
That’s it!

#52 Ryan Lewenza on 05.08.21 at 5:01 pm

J “Ryan, thanks for this informative and interesting analysis.

Just eyeballing the charts, it seems the CAPE was a predictor for the 1929 and 2000 crashes, but not the 2008 crisis. Perhaps if your analysis looked ahead more than 12 months, say 36 months, then the CAPE would be more predictive? I’m unsure based on simple intuition whether or not this would be the case.”

I’ve seen similar analysis as my scatter plot above but with longer term returns (eg 5 and 10 years) and it does point to lower long-term returns over the next decade. But we should probably expect this given the incredible returns over the last decade and there’s many more markets than just the US so if we start to see some weakness there and more strength in Canada/International then this could trigger us to reduce our US weight. For now we’re still very bullish on the US markets. – Ryan L

#53 Nonplused on 05.08.21 at 5:18 pm

Them pesky Russians are at it again:

https://www.zerohedge.com/energy/cyberattack-forces-shutdown-largest-fuel-pipeline-united-states

Oh well this might give us a bit of a preview of what happens in Ontario when line 5 gets shut down.

And how come American owned pipelines are aloud to cross all kinds of waterways but Canadian owned pipelines can’t?

#54 Dolce Vita on 05.08.21 at 5:26 pm

#45 Flop…

The Fluffy Chart was fine, just not telling the entire picture.

BTW, Italia turismo per Istat, Italian StatCan, to June 2020, year over year =

€93B

not $49.6B.

I mean Canada and Australia near same tourist $ as Italia? Are you kidding me?

One is frozen over or drenched for most of the year, the other is the last stop to Antarctica and in Italia we have horse races (Il Palio) older than both let alone World beating cuisine, art, history, culture, etc. I mean Canada + Oz total tourists is < than Venezia alone gets in 1 year (30.38M tourists).

But true, latest from Istat for Jul to Sep 2020 number of fewer tourists in Italia:

-63.9%

295 million less "presences" (e.g., instead of a 10 night hotel stay, 7 instead)

What that amounts to in €'s lost I do not know and nothing yet from Istat that I could find. Certainly not $19.9B.

Correct Google Search terms to get Istat data, usually restated by an Italian Daily – let your source know they are full of dung (probably by know nothing Americani or Canadesi):

valore di turismo in italia
valore di turismo in italia 2020
valore di turismo progettato in italia 2021*
quanti turisti a venezia in un anno

*Expected to be uglier than 2020 in terms of tourism.

————————-

Why there will be a EU Vax Passport mid-June tentatively called the "Green Pass".

Basically Spain and Greece whining holy hell to the EU that they do not want their vacation $$$ lost for another year.

Of course, Italia agrees and is having its Green Pass effective TOMORROW. 1 month up on the hapless Greeks and Spaniards and Super Mario in effect saying "come visit Italia".

As I said the other day, I'm happy with the Peace & Quiet in Italia of a lot fewer tourists.

#55 leebow on 05.08.21 at 5:27 pm

To get a perspective, estimate P/E for a rental property. Probably 60-70 in the GTA, and going up. That’s Japanese level.

#56 Ponzius Pilatus on 05.08.21 at 6:20 pm

Sailo, is back!
Can’t resist
Is Tesla a Reliable Car Brand?

Tesla vehicles are not known for their reliability. In fact, the 2020 J.D. Power Initial Quality StudySM rated Tesla dead last in quality out of 30 car brands tested. 

The study, which measures the number of problems new vehicle owners experience during the first 90 days of ownership, found 250 problems per 100 Tesla vehicles, which was the highest number of problems found among individual car brands.
https://www.autoguide.com/tesla-maintenance-cost/

#57 Nonplused on 05.08.21 at 6:42 pm

#20 Ryan Lewenza on 05.08.21 at 12:59 pm

“The millennials are benefiting from these low interest and mortgage rates, but affordability sucks for them and they will have to pay for all the deficits/debts that are piling up, so they will end up getting ‘screwed’ like the boomers are today. – Ryan L”

I don’t think the millennials are going to pay for all the deficits/debts any more so than the boomers or GenX before them. Where would they get the money? Instead, the can will continue to be kicked down the road a.k.a. Japan.

As for housing affordability, I don’t know that a starter home in Calgary is any harder to buy today than it was in my parent’s day. But the numbers are all different after 50 years of inflation and the dramatic drop in interest rates.

#58 Wrk.dover on 05.08.21 at 6:44 pm

#50 BillinBC on 05.08.21 at 4:42 pm

Great advice! BTW, here’s my Tesla maintenance schedule:
Every November-check windshield antifreeze and top up
Once/year-rotate tires
That’s it!

___________________________

I have a few good weather seasonal cars maintained that easily, but I also change the $25 oil and filter every six years, and the $200 battery every twelve years.

It’s the buck a day each insurance, and $19 antique plate that runs up the expenses.

#59 Yukon Elvis on 05.08.21 at 6:59 pm

#37 Sail Away on 05.08.21 at 3:07 pm

One more trick, to be used once per car: get rid of it if it’s not a Tesla and buy a Tesla. All problems solved.

Glad to help.
……………………………..
When the newer models catch fire they drive off into the ocean all on their own. No driver necessary. New improvements every year.

#60 Ponzius Pilatus on 05.08.21 at 7:08 pm

#27 dogman0
Destruction of entire wealth generating industry’s by this Liberal Govt in the name of Climate will impact all Canadians.
Adding costs will just drive Industry to jurisdictions that do not have our standards and we will then import their goods losing the benefits of employment in our Country and exporting the global impact to their country.
———-
Biden gets it, Trudeau gets, Even O’Toole gets it.Rex does not get it.
And you definitely don’t get it.
But you’re right if Canada sticks to the oil standard it will be left behind and indeed become a poor country.
The future is green, like or not.
Germany, the 4th largest economy, could possible vote for a Green Chancellor (Prime Minister) in the Fall.
And btw, many companies are already going green.
I know It will take time, but it will happen.

#61 Jim on 05.08.21 at 7:29 pm

What about G2 Goldfields which operate in the same resource-rich region as OMAI? The Amazon basin is rich in oil, gas and gold reserves, and their governments are friendly towards extraction, unlike Sunny Ways.

#62 Dogman01 on 05.08.21 at 8:02 pm

#48 SoggyShorts on 05.08.21 at 4:38 pm

#36 Ryan Lewenza on 05.08.21 at 2:57 pm
…So maybe instead of returning 10% since 1990 we see returns closer to 7-8%. But key point is a higher Shiller PE doesn’t mean negative returns. – Ryan L
*******************
I love these positive posts. All of my FIRE planning and decisions on what “my number” was and when I could pull the trigger on retirement were based on doom&gloom so the idea that my Sequence of Returns might actually be good is amazing.
“7% per year”?! as in +100% nest egg in a decade?(minus withdrawals) oh baby.

——————————————-

Don’t forget about Inflation, just 2%Inflation and you are getting close to the 4% rule with Ryan’s crystal ball.

Yes always better to be cynical and then be pleasantly suprised

#63 crowdedelevatorfartz on 05.08.21 at 8:03 pm

Hmmmm
A strategic ransomware attack to the pipeline supplying fuel to the US east Coast.

https://www.reuters.com/article/us-usa-products-colonial-pipeline/cyber-attack-shuts-down-u-s-fuel-pipeline-jugular-biden-briefed-idUSKBN2CP03R

Two observations.

Russia or China in retaliation for sanctions?

How high will fuel prices go this year?

#64 crowdedelevatorfartz on 05.08.21 at 8:09 pm

@#52 Nonplused
“And how come American owned pipelines are aloud to cross all kinds of waterways but Canadian owned pipelines can’t?”

+++++

Apparently our “Woke leaders” decided “because it’s 2021″…….

#65 Dogman01 on 05.08.21 at 8:31 pm

#59 Ponzius Pilatus on 05.08.21 at 7:08 pm

Every barrel of Oil that Canada cannot produce will still be used by the world , but the production wealth will accrue to the likes of Russia or Saudi Arabia. Canada will forgo this national wealth and there will be no difference on the impact to the “climate”
Canada will be poorer and less able to innovate towards any “Green Future”.

Unfortunate that the Green religion has become less and less pragmatic and more and more righteous. They are earnest people but like children not very serious or accountable.
“Men who are in earnest are not afraid of consequences.” Marcus Garvey

This is what is in store for the rest of Canada soon….. The coming Green boondoggle.

https://www.cbc.ca/news/opinion/ontario-disaster-architects-1.3884108

#66 Ustabe on 05.08.21 at 8:58 pm

#58 Yukon Elvis on 05.08.21 at 6:59 pm

#37 Sail Away on 05.08.21 at 3:07 pm

One more trick, to be used once per car: get rid of it if it’s not a Tesla and buy a Tesla. All problems solved.

Glad to help.
……………………………..
When the newer models catch fire they drive off into the ocean all on their own. No driver necessary. New improvements every year.

I understand that Elon sent a memo to all his fans telling them that if they are sitting in their Tesla with Kleenex and lotion at hand and watch his Saturday Night Live appearance on their in vehicle screen he will send then a free present.

You can chose between Elon Musk branded sox, specially logo’d so as to be visible while you wear them with sandals or or a slave labour signed emerald certificate from his South African emerald mines, where it all began.

#67 crowdedelevatorfartz on 05.08.21 at 9:13 pm

https://www.express.co.uk/news/science/1433610/china-rocket-crash-reentry-latest-2am-to-4am-long-march-5b-space-ont

Apparently Chinese rocket scientists are poor drivers…..

#68 espressobob on 05.08.21 at 9:26 pm

Thanks Ryan, for your thoughts on valuations and earnings.

It’s easy to become cynical as a retail investor.

#69 Nonplused on 05.08.21 at 9:47 pm

#50 BillinBC on 05.08.21 at 4:42 pm

Great advice! BTW, here’s my Tesla maintenance schedule:
Every November-check windshield antifreeze and top up
Once/year-rotate tires
That’s it!

———————————-

Don’t forget to sock away $200 a month for new batteries. If I’ve learned anything about batteries, they last about 7 years. Just long enough for you to pay the Tesla off and go out of warranty.

#70 crowdedelevatorcoughz on 05.08.21 at 10:00 pm

Awesome!

So far 12% of all ….co…ugh! co…ugh!! co-mments today here are from me!

This blog is …COUGH! COUGH! ….mine!

Thank you Ryan, you’re a fine…COUGH! COUGH! …employee for my… COUGH! COUGH!… fragile ego.

Let’s stay close together everyone, so you can hear me talk…COUGH! COUGH! …about myself and my fabulous opinions! To hell with…COUGH! COUGH!…fears about airborne transmission – I’m..COUGH!… IMPORTANT!

#71 Billin BC on 05.08.21 at 10:12 pm

#55 Pontius
Sailo, is back!
Can’t resist
Is Tesla a Reliable Car Brand?

Tesla vehicles are not known for their reliability. In fact, the 2020 J.D. Power Initial Quality StudySM rated Tesla dead last in quality out of 30 car brands tested.

The study, which measures the number of problems new vehicle owners experience during the first 90 days of ownership, found 250 problems per 100 Tesla vehicles, which was the highest number of problems found among individual car brands.
https://www.autoguide.com/tesla-maintenance-cost/
…………………………………………………………………………..
Coming up on two years for me and not a single problem

#72 Handsome Ned on 05.08.21 at 10:37 pm

#70 Billin Bc

Two words: spontaneous combustion.

#73 Tesla on 05.08.21 at 10:52 pm

At 1130pm, you will see the most highest rise of an asset ever in the history of the world. Elon Musk going TO THE MOON, Baby!

The asset has potential to increase from 69 cents to $6,900 overnight.

#74 happygolucky on 05.08.21 at 11:18 pm

I’ve seen so many investors and portfolio managers put too much weight on this elevated Shiller P/E and miss the ‘forest for the
trees’.
—————————————————-

Was the market cap to GDP ratio mentioned today?
Many prudent ones hear “chainsaws humming”

Great photo today. “Future must be friendly”

#75 happygolucky on 05.08.21 at 11:46 pm

#67 espressobob on 05.08.21 at 9:26 pm
Thanks Ryan, for your thoughts on valuations and earnings.
It’s easy to become cynical as a retail investor.
———————————————————

Casinos are closed, so that’s what we have for now…

#76 Faron on 05.08.21 at 11:55 pm

#62 crowdedelevatorfartz on 05.08.21 at 8:03 pm

Hmmmm
A strategic ransomware attack to the pipeline supplying fuel to the US east Coast.

https://www.reuters.com/article/us-usa-products-colonial-pipeline/cyber-attack-shuts-down-u-s-fuel-pipeline-jugular-biden-briefed-idUSKBN2CP03R

Two observations.

Russia or China in retaliation for sanctions?

How high will fuel prices go this year?

North Korea. Just read an article on their cyber operations and their talent pipeline. Very sophisticated. I seem to recall Kim Jong Un promising retaliation for a recent slight…

#77 westcdn on 05.09.21 at 12:08 am

One of my favorite pictures is my eldest holding a plastic shovel to help me out with the gardening as designed by an architect – she may have been 3. Lousy decision but it turned out okay with work.

I get I am average with an edge. It will be the death of me. Yet …

#78 R on 05.09.21 at 12:46 am

The main trend is renewable green energy.It is not only the more economic alternative, it is needed. Many of the climate change “tipping points” have “tripped”. Positive feedback loops are accelerating the rate of change. The “Hydrogen as a future green fuel ” is a fools errand, because is is made by stripping the hydrogen from natural gas, emitting the CO2 upfront. Climate change is real, and will create future hardships that will dwarf current Covid19 issues.

#79 crowdedelevatorfartz on 05.09.21 at 12:48 am

@#69 CoffeeCough
“So far 12% of all ….co…ugh! co…ugh!! co-mments today here are from me!”

+++
Glad I could annoy you.
Makes me smile.
Coffee cough.

Haiku over

P.S. Did anyone in the Maldives get hit by that Chinese Junk?

#80 happygolucky on 05.09.21 at 1:23 am

#47 Dolce Vita on 05.07.21 at 3:23 pm
Off topic.
Feeling very bad about what is happening in India. In late Feb they had all of 12K new cases/day.
Today from NDTV news:
Record daily new cases 412,000
Near 4,000 deaths
Record national test positivity rate of 22.1%
Selected area, city positivity rates yesterday:
– Goa 48%
– Haryana 37%
– West Bengal 33%
– Delhi 32%
1.37B people in India.
Low vax rate.
—–
The Indian variant, B.1.617, is in Canada.
36 in ON, Apr 23.
39 in BC, Apr 22.
https://globalnews.ca/news/7842023/covid-variant-india-british-researchers/
https://globalnews.ca/news/7780851/india-covid-variant-canada-cases/
————–
PS:
mRNA vax (Pfizer, Moderna) efficacy against variants…
This out today by VP Moderna Italia:
“Our NEW drug against the most dangerous variants is ready”
https://www.lastampa.it/topnews/primo-piano/2021/05/06/news/carfi-pronto-il-nostro-nuovo-farmaco-contro-le-varianti-piu-pericolose-1.40236481
Imply what you will from the above article. Americans are calling it a “booster shot”.
—————————————————————–

Dear Dolce,
You are really “hooked” on those numbers and “variants”, don’t you? Which Agency “Pushers” you subscribe to…?
Have you ever traveled to India?
Have you ever followed India socio-political big challenges in the last few decades?
And I am not saying you haven’t
Nevertheless, your narrative is misguided…

#81 Tyberius on 05.09.21 at 1:25 am

Ryan,
You haven’t factored some other important events. One is the doubling (+/-), of capital gains taxes that Biden has hinted at. Bezos has already sold over 2 billion dollars worth of stock, and is probably not done yet.
Also, the Nasdaq underperforming the sp500 last couple months is another strong omen that this bull market is on its last leg.
Lookout below!

#82 Lobster Man on 05.09.21 at 5:02 am

#43 willworkforpickles,

I believe this is the gold exploration company you were referring to, appropriately named: Newfound Gold.

Garth, Please “Delete” if you feel your Blog is not the place to show the following link from mining.com.

To all Greaterfools: Do your own diligence before you commit anything. Full Disclosure: I own their shares.

https://www.mining.com/new-found-gold-stock-hits-new-high-on-more-outstanding-assays-from-keats-drilling/

LM

#83 IHCTD9 on 05.09.21 at 9:12 am

#62 crowdedelevatorfartz on 05.08.21 at 8:03 pm

How high will fuel prices go this year?

———-

1.60. Unless you live in BC, then figure 2.00, with insurance rates to match.

#84 willworkforpickles on 05.09.21 at 9:30 am

#59 PP
…the copper miners get it too and are getting it.

#85 Marcia M on 05.09.21 at 9:39 am

#69 crowdedelevatorcoughz

LOL!

Thank you :)

#86 IHCTD9 on 05.09.21 at 9:56 am

#70 Billin BC on 05.08.21 at 10:12 pm

Coming up on two years for me and not a single problem.
————

Not hard to do with an ICE car either these days. Ms. IH’s Mazda is at 4 years with zero unexpected repairs done. We’ve put 115k on it over that time, with a couple wheel bearings, a set of tires, a few light bulbs, and a new battery.

It’s getting new brakes this summer too (new disks and pads all around = 190.00 in parts) as they’re just about done.

#87 Don on 05.09.21 at 10:46 am

Shiller or no Shiller, this market is wayyyyyy overheated and ready for a correction. One might think that if they didn’t get in now, they would lose the train (FOMO).
We are approaching 35,000 a psychological headwind. We just broke through a resistance level 34256. Why? many reasons. But most likely, a lot were short there. By breaking through and heading to 35000, it took out all those with stops above it and forced them to cover. And gives the illusion that it is going higher. Yes! to 35,000. The correction could be here and this week!!. It is just looking for the reason. That reason will not be just an NFP but a geopolitical one. So keep your eyes peeled. The range is this. Breaking over 35,000 can go to 37,000 and a breakdown will have an immediate reach of 33,000 ( or 32000/31250) and then trickle down to 29,000. My attitude: if it breaks and goes to 37,000, I don’t care. Correction is coming and it is going to last till 2023. Stay in cash and buy 20/30% lower. So chill Shiller.

#88 Cici on 05.09.21 at 10:57 am

#2 Happy Renter

This post should explain it all:

https://www.greaterfool.ca/2015/03/20/rule-of-90/

#89 BillinBC on 05.09.21 at 11:03 am

#71 handsome Ned
#70 Billin Bc

Two words: spontaneous combustion.
………………………………………………………………………….
“From 2012 – 2020, there has been approximately one Tesla vehicle fire for every 205 million miles traveled. By comparison, data from the National Fire Protection Association (NFPA) and U.S. Department of Transportation shows that in the United States there is a vehicle fire for every 19 million miles traveled.”

https://insideevs.com/news/501729/number-tesla-vehicle-fires-2020/

So, not much comparative risk there. Installed a smoke detector in my garage anyway.

#90 crowdedelevatorfartz on 05.09.21 at 11:26 am

Political correctness meets reality coming to an Olympics near you.

https://nationalpost.com/news/world/female-athletes-told-to-be-quiet-regarding-transgender-competitor-ex-weightlifter-says

#91 Doug in London on 05.09.21 at 11:34 am

While I agree this bull market will continue as the economy opens up again, if you’re worried then sell off some stocks or equity ETFs you bought 14 month ago when they were all on sale. You all did scoop up equities back then, didn’t you?

#92 willworkforpickles on 05.09.21 at 11:53 am

#81 LM
…right you are NFG…wish i would have heard of them earlier…when did you get in?

#93 Diamond Dog on 05.09.21 at 12:07 pm

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

Not to be overly critical (even though it’s what I do), Schiller is now at 37.84, and flirting with the 40’s, so there’s that.

Ryan makes a good strong point concerning interest rates but lets be clear, government engineered low rates topped off with government buying MBS’s means a juiced housing market that pours money into the market place. Without direct intervention from the Fed, the markets wouldn’t be where they are at today.

The key question isn’t so much how long can this stock market bull run last, but how long can this juiced housing market last built on ultra low interest rates. The BoC has said recently that low rates are long term but can the BoC really say that with a straight face? The fate of rates after all, rests outside of Canada.

In Canada, housing is in what voices of reason would call an unstable situation. Our housing bubble could last for years cresting on long term low rates, or rates could surprise and rise and cream the markets. It’s not like this hasn’t happened before (think GFC).

https://www.bnnbloomberg.ca/canadian-housing-bubble-worse-than-lead-up-to-u-s-subprime-crisis-rosenberg-1.1579481

Point is, to think the markets will rise for the next few years unadulterated, is to believe Canada (and to a lesser degree the U.S.) won’t have a housing market crash. Is this realistic?

Lets look outside Schiller’s P/E ratio for a moment for further clarity as to whether the stock market is overvalued or not. Price to revenue says it is:

https://www.multpl.com/s-p-500-price-to-sales

So does price to book value:

https://www.multpl.com/s-p-500-price-to-book

Are investors shedding off this risk blinded by past gains and the belief that the Fed has their backs? Absolutely. Is that wise to believe government intervention will keep it all going higher into the next election cycle in 2024? Time will tell, but I have serious doubts. I have the belief that come summer or fall, the golden goose of “expectation” will lay an egg. And why shouldn’t it. The cost of everything is soaring past what incomes can support.

At the end of the day, it comes down to risk and that risk augments as values soar higher. Is there more risk from Canadian housing to the economy than there was a year ago? Hell yes. More risk in the stock markets? Yup. Commodities? You bet there is. Risk in trusting that the Fed will endlessly have our backs? Sure. Risk in big expectations of a strong recovery leading into the winter months as the cost of everything soars past incomes? Why not.

This is the bear’s argument. As risk augments, take some money off the table. Take profit and live to gamble another day that is, if one is disciplined and secure enough to hang onto one’s gains.