Talk of The Villages Florida - Stock Market S&P 500 Fair value calculation

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- - Stock Market S&P 500 Fair value calculation (https://www.talkofthevillages.com/forums/investment-talk-158/stock-market-s-p-500-fair-value-calculation-334564/)

C'mon, guys, pay attention. The CEO who messed up GE was Jack Welch not Jack Welsh. (It was not a pretty sight from what I hear from people who worked there.)

On another note for anyone interested: The Investment Education Club will meet this Thursday, 8/25, at 3:00, at Seabreeze Rec. This meeting will be a group discussion of investing for dividends and income. The announcement said to please come with some dividend equity ideas.

Boomer

Quote:

Originally Posted by Boomer (Post 2128940)

didn't he start some fruit juices also? :oops:

Would love to attend, when I become permanent!

Thanks!

Quote:

Originally Posted by Boomer (Post 2128660)

Because I want to ask you a pertinent question, I must ignore the fact that you could not resist dragging your politics into this with that knee-jerk, dog-whistle routine you did.

Here goes.......

Because of your claimed ed cred, it seems like you are the perfect person to ask for a clear explanation that I have been looking for......

Although I know my holdings have benefited quite nicely from stock buybacks, I still do not understand how they are a good thing......

Sure my share prices go up and, obviously, buybacks are really good for high level execs running those companies. But how are buybacks, especially under the 2017 corporate tax law change, not just plain greed in action at the taxpayers' expense?

I know much of the corporate tax cut money was used for buybacks, instead of investing it in cap improvements and employees.

While some investors, who think they're hot stuff, subscribe to that old, "Greed is good" routine, I always say, "Unrestrained greed is bad economics" -- and all those buybacks could be taking us small investors ridin' for a fall. (Should those buybacks have been restrained in the first place when the corporate tax cuts were unleashed?)

I really do want to know what you have to say about buybacks and how they are of actual benefit to the real business of business and not just playing with easy money.

I hope you will take my question seriously and explain the justification for buybacks helping the big picture -- not just making the big-time execs' net worth a whole lot higher -- and lulling us small investors into a false sense of what ours is really worth.

For small investors who are heavy traders, maybe they are having a good time with these buybacks. For me, it feels like buybacks create phantom wealth and that makes a longterm buy and holder like me a little skittish.

I tend to think big picture, and I have not been able to get my head around how all these recent stock buybacks are good for our big picture economics.

Thanks in advance for your explanation of how I am wrong about my concern over buybacks creating phantom wealth.

I remain,
Buy 'n' Hold Boomer

First, a question for everyone, how do I know if someone has responded to my reply? Do I really have to scroll through the thread again to check? Thus the late reply.

Brandon's bill will tax buy backs, don't know how that is political. I use the name Brandon to clearly state my position. Like the saying goes, know where someone sits, before listening to how they stand. And because the story behind how Biden got that nickname is hilarious.

I don't believe I ever took a stand in favor of buy backs, but am glad to discuss. Corporate Officers are tasked with the optimization of profits for their shareholders, period. Does that mean for example, that they can pollute the planet in the name of profit? Or abuse their workers? Of course not, mainly because that would certainly hurt profits over time. So one big discussion is about the pressure on Corporate Officers to show quarterly profits. Public companies are required to report quarterly. There are ideas that would change that to yearly, 5 years, or something else. But that's enough on that topic.

As you know, stock buy backs decrease the number of shares in the market, which should increase the value of individual shares. The number of shares available for buy/sell in the market is called the "float". Shares held by the corporation and even mutual funds, are not in the float. That's how meme stocks can move so violently. A small number of people on the internet can target stocks with small floats. So stocks with small floats, like those that have big buy backs, are riskier and should reflect that in their stock price.

So on to corporate tax policy. Tax policy is friction in the market. If government introduces that friction and a corporation reacts with their primary goal in mind (to maximize profits), I wouldn't blame the corporation. The problem is with the tax policy. So what happens? The Government skews the market with regulation, then they propose to fix it with more regulation, like taxing stock buy backs. It's nuts!

Last, after the Tax Cuts and Jobs Act of 2017, there was increased revenue to the Federal Government. A tax rate cut does not mean lower revenue. In fact, it's always higher. Revenue crashed from $370B in 2007 to $138B in 2009, and didn't recover until 2015. Look at tax policy during that time for your answers. Talking corporate tax revenue numbers here. Although revenue from individuals mirror these numbers.

Quote:

Originally Posted by CoachKandSportsguy (Post 2128732)

just because the fed has been in easy monetary mode with liquidity pushing P/E's higher for many years, doesn't mean that without the fed support, the p/e won't regress to the mean. don't be an Irving Fisher.

One of the problems in today's markets is passive investing, which is very large percentage of the population in 401K plans. The problem is that the purchases are price/outlook insensitive, just buy the index' stocks and you will match the market performance. As the higher the percentage of passive investment goes, the lower the active management trading float, and active management now starts to control prices with 1/2 the float. That increases volatility and the passive sit and go along with it, because they just can't sell part of the index.

TOTV are not long term investors, they are short term investors as compared to the employed population. retire at 65 and you have no supplemental income to replace any lost income if the investments go bad. if retirees expenses are greater than their social security plus minimum IRA distributions, due to unforeseen circumstances, they have to take from assets. Not the same with employed people, and with average longevity declining, say 80 years old, that's a 15 year horizon from which you will be drawing down your income source. It would not be smart to assume one can keep the same long term mix as a 30 or 40 year old with income and promotion potential

Past behavior gives clues to investor's fear or greed sentiment. short term movements do have some emotion to it, but I would argue that the amount of monthly 401K contributions which are monthly contributions with no emotion completely overwhelm any short term behavior, as well as the active management for pension plans, etc.

The problem is that the scenario is different each time, but investor behavior doesn't change, did you read the link about how price changes sentiment? As an investor, your sentiment has to be the opposite of price.

The higher the price, the closer to the top.
The lower the price, the closer to the bottom.

Trend following by definition is 100% invested at the top
and 0% invested at the bottom. . but Buy Low and Sell High profitability requires the opposite investment behavior.

good luck

When I say TOTV readers are long term investors, well... I can see the confusion, sorry about that. A long term investor would have a riskier portfolio because time is in their side. They are (or should be) risk adverse, conservative, whatever term you like. Short term investor may be accurate, but again confusing.

I am from Texas and sold a few Oil Wells. Bought houses in The Villages years ago and they have doubled in value.

Stock Market movement is based on Money Supply. Big spending bills put money in circulation and Companies will get their share of it. Restrict money and no profits, no revenue, falling stock values.

Also, when ELITES buy price goes up, when they sell price goes down.

That is pretty much it.

By the way, like in 2008, when things CRASH, everything crashes. Gold, Bonds, Real Estate, etc. all crash at the same time.

Wife and I are spending our savings, not still trying to be the richest pair in the cemetery!