Hedge Fund CIO: "We’ve Realized Roughly 3 Years Of Gains In The First 6 Months Of 2017"

Tyler Durden's picture

As part of the local Sunday ritual, here is Eric Peters with his latest Weekend Notes, providing some context on recent, and not so recent market moves.

Weekend Notes

 

“US stocks rise roughly 7% per year,” he said. “Same holds true for Australia; basically, for all economies uninterrupted by catastrophic war at home.”

 

The 7% roughly equals 5% nominal GDP growth plus an extra 2% which is due to the S&P 500 index periodically kicking out bad companies and replacing them with better ones.

 

“Sometimes the market runs ahead of this 7% rate of return, which doesn’t mean it’s the wrong price, it simply means it’s premature.” In a world of fiat money, high prices are never wrong, they’re only early. 

 

“It took fourteen years for the stock market to return to its 1968 highs,” he continued. “And at that point in 1982, with overnight interest rates at 20% and the S&P 500 price-to-earnings multiple at roughly 8, the market still had miles to run.”

 

By the year 2000 with the S&P 500 P/E multiple at roughly 29, it was kind of the opposite. Then roughly 13 years later, it broke back above that Jan 2000 high, with a P/E ratio of roughly 17.

 

Today the trailing P/E is roughly 26, with overnight rates 19% below the 1982 levels, and 4.5% below the 2000 levels. 

 

“So we’re obviously not at a similar point to 1982,” he continued. “But where are we?”

 

Nerds forecast a 3% a year S&P 500 returns for a decade. Quants say we’re in the top few percentiles of historical valuation across every asset class (except volatility).

 

The S&P 500 is up roughly 10% this year. Which means we’ve realized roughly 3yrs of gains in the first 6mths of 2017.

 

“At some point, you rally so much that your 10yr return forecast turns flat. At which point you could go sideways for a decade.” But roughly speaking, stocks either go up, or down.

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Looney's picture

 

But roughly speaking, stocks either go up, or down.

Eric Peters must be smoking pubic hair… again.   ;-)

Looney

I_rikey_lice's picture

put all my $ in cryptos last month. what do i do now? sigh..

I_rikey_lice's picture

should I buy more now and lower my average? Lots of people on reddit averaging down now. Buy now or sell? confused....

larrythelogger's picture

Wait until after August 1.

http://www.zerohedge.com/news/2017-07-15/bitcoin-battered-below-2000-eth...

https://hackernoon.com/casual-bitcoin-users-you-need-to-know-about-aug-1...

https://bitcoinmagazine.com/articles/bitcoin-beginners-guide-surviving-b...

I would highly recommend moving your coins from Coinbase (if that's where you store them) and into a wallet YOU control per that last link.

I have absolutley NO idea what bitcoin, ethereum, etc will do after August 1 if there is a split but I do know I could possibly lose all my teeny fraction of a bitcoin (I don't have enough to fill a thimble), if I leave it in Coinbase. So I moved it to a wallet where I control the keycode.

 

Bigly's picture

Or how about WINNING...until you are not....

Giant Meteor's picture

Federal Reserve Collusion ..

Kidbuck's picture

Translation: The dollar buys a lot less now than it did even 3 months ago.

Fartboxbuffet's picture

Hilarys pubes lots of brain eating amebas in those puppies

Restorative_Ally's picture

Insider info on a new armor technology:

 

According to reports from the OrderTech CEO, the company has recently finished prototype testing of a new multipurpose armor system. The new system is some 90% percent lighter than traditional steel or ceramic composite armor, more fracture resistant, flexible, and can survive temperatures in the range of 4,000 degrees Fahrenheit.

The US Department of Defense, as well as NASA are heralding this new armor as "revolutionary" to the fields of defense and space travel. One DoD spokesperson was quoted as saying "This new technology will lighten the load carried by soldiers by up to 20 lbs, and has the potential to make future combat vehicles, even tanks, light enough for transport by helicopter. This is a real game changer." NASA is expected to welcome the new technology as a replacement for heavy and brittle heat shielding tiles for future space missions.

When asked what the secret to the new armor was, the CEO was quite candid. "We looked for inspiration in the world around us. We found a common thread in several high-profile incidents around the world. Without getting too involved, one particular ingredient was a special kind of paper. We found several major incidents in which the only things to survive a particular disaster were passports. Passports had survived even where steel beams were melted and remained undamaged when aluminum had been vaporized." He added that "not all passport paper is created equal, however. We found the most damage resistant to be those made in Langley, Virginia. We are working with suppliers to meet industry demand as soon as possible."

When asked for information on the company's next venture, the CEO replied: "We have in the pipeline what we believe will be a radical new non-stick coating that far surpasses Teflon in durability and repelling ability. We have procured a batch of 500 Kippahs as the prime ingredient in our test batch. We look for a trials to be complete in January."

mary mary's picture

:-)  They are also working on a biological armor.  It's made from cloning a genetic anomaly found in high concentration in the Clintons, with a little Obama thrown in.  It deflects lawsuits, evidence, and complaints about corruption, and seeks out, returns to, and kills the originators of said lawsuits, evidence, and compaints.

Restorative_Ally's picture

Project Blue Dress, I've heard of it. Looks promising. 

mary mary's picture

10% is roughly 1.5 times 7%, not roughly 3 times 7%.

Also, who invests 100% of their savings in the S&P500?

BlueHorseShoeLovesDT's picture

Stocks only go up, going down was outlawed back on 2008

Cordeezy's picture

Everyone knows the stock market is overvalued yet it continues To go up so I wonder at what point the crash happens so all the bears can say I told you so

www.escapeamazon.com

lester1's picture

These stock market gains are not real people buying. It's the Fed's plunge protection team, aka PPT who are covertly buying stocks so that the rich stay rich and pension plans and 401ks stay propped up!.. If they didn't buy stocks and bonds we would see a crash that makes 1929 look like a picninc and politicians +Trump would call to end the Fed!

 

Why else did Janet Yellen said there won't be another crash again in our lifetime ?? She knows PPT will save the day and keep her assets prices propped up too.

 

 

mary mary's picture

3% return in the SP500 is far below the amount of inflation created by the FED.  If one thinks the FED is inflating at 10%/year, then one must conclude that the SP500 returns NEGATIVE 7% per year.  This is the exact opposite of Capitalism.  I guess its proper name might be Socialism.  Capitalism replaced by Socialism, all by one privately-owned company, the FED.  Rothschild must be very proud.

lester1's picture

Who remembers August 24, 2015 when the Fed's PPT outed themselves by reversing -500 points in just 15 minutes??

 

Who else is powerful enough to do that  and get away with it ??

Schmuck Raker's picture
"In a world of fiat money, high prices are never wrong, they’re only early." I like that.
NotApplicable's picture

Sure is a fancy way to say "debasement."

lester1's picture

Bernie Madoff didn't have a way to create unaudited electronic money like the Federal Reserve's PPT does. So basically the Federal Reserve Ponzi can go on forever.

 

Write that down permabear Peter Schiff !

PUNCHY's picture

Scary thought there, and I thought Fictional Reserve Banking was the worst thing that could happen to us retirees.

Shame on you sir.

NotApplicable's picture

Too bad those "gains" don't translate into purchasing power.

Anarchyteez's picture

Now is a great time to buy. This is just the beginning...32,000 here we come.

The millenials have poured into the market trading from moms basement using student loan money and 30% cash advances off their credit cards. That is the surest timing indicator I've ever heard of.

lester1's picture

Students can barely understand how to register to vote. They aren't buying this market.

 

PPT machines based at 33 Liberty Street NYC is what's keeping this fraudulent market propped up.

Rick Cerone's picture

The oil game is risky, fella.

Conax's picture

Bragging about their welfare checks. That's annoying. Just shut up and take your alms.

adr's picture

"High prices are never wrong, just early."

The dumbest comment ever uttered. 

mpcascio's picture

My advice would be to take your profits and the next three years off.

MrNoItAll's picture

"the market still had miles to run..." Stated differently, the FED and CB printing machines still had trillion$ to print.

The Real Tony's picture

More like thirty years of gains as the market indexes should be lower 30 years in the future than they are today.