Skeptics will point to the S&P 500â˛s price/sales ratio and enterprise value/cash flow multiples, which are indeed back to levels last seen near the year-2000 peak. Yet the reason they are more elevated than profit-based multiples is companies have higher profit margins (in part due to the mix of companies in the index) and interest rates and taxes are structurally lower.
More good days ahead 
What do you think is a good investment then? It seems nothing has a high enough return with low enough risk for you. Has there ever been a period in history with the economic conditions you want? Itâs way more productive to learn the game and be good at it then trying to convince the world to play a different game.
Read in a trusted source âthat investor skepticism in stock market is high â. So, among other indicators to evaluate the stock market overvaluation, this factor isnât one to worry about. Point is, savers or general population arenât overly invested in the stock market yet. My guess is it could be due the psychological effect of 2008 crash.
What was the time period? I saw investor sentiment of millionaires flipped from pretty bearish in Q3 to very bullish in Q4. I was surprised to see such a quick move.
People mix the words investment and speculation frequently on this forum and elsewhere in the financial media.
An investment should (at least try to)
(1) protect the principle
(2) pay a definte return consemurate with risk taken.
Specualation on the other hand involves spending on unproven idea in a hope of significant return. Both principle and return are at risk.
@hanera asked
First thing first, why do you want to save $ or invest?
Can I ask a counter question? Can I just be saver and not be an investor? Should I forced to invest when I do not have inclination, time, or aptitude to be an investor? Or should I be forced to buy a SP500 index fund with historic return of 2-4% and with chances of seeing your principla fall to half and never recover or recover after long time.
Can you define for me who is a saver and who is an investor?
If you can define a saver, then you can also answer the
question, should every saver be an investor also?
@marcus335
What do you think is a good investment then? It seems nothing has a high enough return with low enough risk for you. Has there ever been a period in history with the economic conditions you want? Itâs way more productive to learn the game and be good at it then trying to convince the world to play a different game.
I do not think there is an investment that is not risky.
But, the quesiton even more fundamental is should one be
forced to become an investor?
Creation of FED has led to deterioration of money in US. Now you might ask what is money?
The classic definiton of money is anything (could be a pebble) that provides these four functions:
- medium of exchange
- measure of value
- accepted universally
- store of value
Do you think US Dollar or any known currency passes this test of money? Basically, the FED has killed the 2 and the 4 function of money. The USD does not measure or store value any more. That is why people are forced to invest. So, to answer your question, the period before creation of fed (1914) or even before decoupling of gold with dollars (1971) , people who did not want to be a investor did not have to be an investor. The money saved was good for hundereds of years because it did not loose value (purchasing power) the way it did after these events.
Too academic for me. I was terrible in macroeconomic, finance, and economic classes.
It should be referring to the period Dec 2019 and earlier.
Exact words are below:
Importantly, investor euphoria, one of the most dangerous signs of investor sentiment, remains relatively dormant. This bull market has climbed the wall of worry amidst a healthy level of investor skepticism.
@pandeyathotmail I really donât care whether you are an investor or a saver. My question is what do you want to do with the $ you saved or invested. So it doesnât matter you are an investor or a saver.
Have you studied the period before 1914? Do you realize how much economic instability there was?
Itâs pretty illogical to expect to save, take zero risks, and earn a return above inflation. Economically, how would that return even be generated?
It sounds like you just want to save money, not invest in stocks, bonds, or anything then have it retain the same purchasing power 10 years from now. Thatâs literally never happened.
I know youâre obsessed with the buffet price, but Americans are spending a record low percent of their income on food. Youâre indexing your measure of inflation to a small percent of household spend which is declining in percentage terms.
Please tell about the period before 1914 that we should know.
Turbulence ahead. Textbook example of black swan.
my 2 cents:
Even though history repeats, understanding 1929 or 1914âŚor even 1945 or 1970âŚmay provide just some hints, but how much is that useful to current? Very less.
For better investment.
Assume current environment is good and recession is unknown period.
Fundamentals are key, public available (Refinitiv) consensus estimate is already priced-in.
Filter your best 20 companies (forget all other companies)
Read fundamentals and choose the best, invest a small portion
See if your analysis is correct with actual results
If right, continue,
if not, drop that company and go on to next
Repeat this exercise. You will be master over an year.
Market makers already hedged with spy puts to drop the market as it was excessively inflated.
Coronavirus is a scapegoat to bring down the market. Market will stabilize after some time, but at present ,market makers break the retail investors with Coronavirus sentiments.
When you offer something to read, please guide what conclusion should I be drawing or what is the point you are trying to make and how it relates to the topic at hand. Boom and Bust are part of economic cycles and they have been like this forever. Economic contraction and expansion take place in cyclic way as the bad investments made during expansion phase have to be shaken out. These cycles did not hurt savers as their money was more valuable in time of economic contraction. Those who borrowed money and made bad bets suffered.
Now central banking and fractional banking are entirely different animals from the boom bust cycles, though it was hoped that modern banking system would come to aid during contraction, it has only made life miserable for everyone else. The only real beneficiaries are bankers and borrowers (of which govt is a big one ).
This is a nice summary. Thanks.
Money is best taken care of when one involves oneself actively into managing it. Passive form of investments (like sp500 indexing or through a financial advisory whose hands are always tied with security and investment laws and regulation) rarely provide the return a person putting his money in the line of fire deserves.
This is best, but the individual investors must know more details to grow, esp on stocks. Investor must know how to differentiate between normal volatility and company growth issues. This comes with experience, not easy to learn.
Passive form, esp ETFs & Mutual funds are very useful when investor does not know how to deep dive in stocks/ETFs or mutual funds.
Here is the case, my relative used to contribute 401k up to match (6%) and he used to pay down additional money to his home loan. Since he does not know how/where to invest, it was invested in bonds (2.35% return) !
This is very common mistake by people.
I told him stop paying additional prin. on mortgage and asked him to divert that money to 401k above match, suggested to max out $19000 (now $19500) !
His mortgage was 30 year fixed, no need to pay additional.
Then, reviewed all available investment options his 401k had, and told him to choose FDGRX (not available for public except for 401k). Last year alone, almost 38% growth.
Even today, he does not know how to evaluate a stock/company, but blindly goes with a mutual fund. He is more than happy to continue with it.
For those, who does not want to know more, passive helps with VOO or QQQ or similar funds.
Actually, it did for most of American history. From the founding of the country in the late 1700âs to about the 1930âs prices would spike during times of war or scarcty and then come back down.
Inflation is a modern phenomenon. But i agree that it isnât going away anytime soon. That is, unless population growth slows even more dramatically than is forecast.
I thought the conclusion was pretty obvious if you look at the frequency and severity of the busts. Apparently you think busts donât impact savers, since savers are immune to job loss and other consequences of downturns.
It is pretty amazing you consider yourself the definitive authority on whatâs an acceptable return and determining the level of risk. I guess youâre smarter than everyone else on earth that evaluates those things. You realize if you were then your investment performance would outweigh the average by so much you wouldnât care about a small amount of inflation.