The S&P 500 Is Now a Gambler's Paradise With 76.9% Up Days in May So Far

News & Current Events Public News & Current Events
,
1

Everyone knows the odds of winning in a casino are worse than 50% (and often much worse depending on the game played). So who wouldn't rush to a casino, where instead, the odds were overwhelmingly in the gambler's favor?

That's the promise of today's stock market, which has been experiencing an aberrantly high percentage of up days all year. Toss your money into the market, and on any given day, you're much likelier to make money than not.

So far, May 2013 has been a gambler's paradise in which a whopping 76.9% of the trading days for the S&P 500 have been up:

The chart below shows just how far 2013's up-day percentage exceeds previous years:

 

Of course, none of this boondoggle is merited by the underlying fundamentals, which clearly are not good.

But if you're one of the top 10% of Americans that owns 81.2% of all stock market wealth, send a bottle of Bollinger to Ben and his buddies at the Federal Reserve as thanks for keeping the punch bowl so nicely spiked:

(Source)

However, if you're one of the 9% of Americans who actually understands the concepts of "reversion to the mean" and "overshoot," you may want to run – not walk – to cash in any chips you may still have on the table. But if you have to keep money in the stock market, be sure to work with a prudent financial adviser who prioritizes risk management and is skeptical of today's easy winnings.

Like all good benders, this is going to end with one heck of a hangover...

This is a companion discussion topic for the original entry at https://peakprosperity.com/the-sp-500-is-now-a-gamblers-paradise-with-76-9-up-days-in-may-so-far/

2

This bubble is filled with hydrogen and is leaving the planet.
Bon voyage, Muggins.

3

My guess is we see several more years of this before it ends, just like the internet bubble, so don't get your hopes up for this ending anytime soon. Gold and silver are losers for a while. This too shall pass.

4

You have to get up to speed and to great heights before it can be called a crash.  Everyone has to get to the breathless point of believing that they'd "better get in now, before I miss any more of the gains!"  Then the world will go to . . . .
 

Patience - Rector

5

without a doubt, 100%, beyond question, and above reproach that printing money is the true path to real wealth. angry surprise wink
SS

6

This is looking more and more like Nicole Foss's predictions.
Liquidity evaporates in the real economy as debt/money evaporates due to loan maturation, unemployment and default. There is less and less liquidity to bouy up precious metals and commodities.

Her recommendations seem reasonable to me.

  • Get out of debt; before they rescind the bankruptsy laws. Indentured servitude is an undesireable condition.
  • Buy tangibles with an eye on Maslow's hierachy of needs.
  • PM's will shine in the longer term because most of the worlds population (Asia) trust Gold. 
I shall buy PM's If and only If I feel confident that I can weather at least 10 years with my preperations. Those preperations include the possibility of a world wide resource shooting war. (By resources I mean the only meaningful resource, prime agricultural land).
7

Unbelievable! This will be a correction/crash that will leave a mark.  The investing class has learned nothing it seems since the Greenspan dot com bubble days.
When the smoke clears, it will set up gold and silver quite nicely.  Look at this chart from the two year correction in the 70's and today - 

https://mobile.twitter.com/mjb4632/status/334762266580897793/photo/1

 

 

8

I see all of this handwringing about a bubble being created in the stock market and I think its a good idea to calm people down.
Yes, it is true that the stock-market rally has been engineered by the central banks.  It is specifically their policy to keep interest rates ultra-low to create a modest level of inflation 2-4% (to monetize the debt- i.e. pay the debt off with inflated currency) and to force the economy into taking greater risks.  Yes, its true that trillions of dollars have been created out of thin air, but this is NOT as reckless as many pundits proclaim. 

The worst possible scenario for the economy is deflation.  You only need to ask the Japanese what that felt like over the past 20 years.  Deflation is to the economy as a black hole is to light.  The more pronounced it is the harder it is to get out of a deflationary trend.  If the economy is collapsing and prices collapse along with it, then people have an even greater incentive NOT to spend.  The policy of Quantitative Easing might seem reckless and counter-intuitive but its not.  Its the only hope the world economy has of achivieving escape velocity and the economy spends its savings to generate a self perpetuating momentum. 

The problem is that corporations have countered the economic crisis by cutting spending and investment, which has resulted in a jobless recovery.  There is an estimated $3 Trillion in corporate savings sitting in bank account around the world.  One of the objectives of the central banks is to force corporations to spend that money building plants and equipment to spur more employment.

Sadly, the people who this ends up hurting the most are the savers.  Policy makers are not deranged sociopaths.  Quite often, public policy will end up hurting one group of society at the expense of the other.  In this case quantitative easing and low interest rates hurt society's savers.  The problem is that the alternative of doing nothing is a hell of a lot worse.

As for the Stockmarket, its not outrageously overvalued.  At this stage its "fairly valued" at around 16 Times earnings.  Could the market correct by 10% or even 15%?  Most certainly, this is the natural order of things.  A clever analogy I once heard describing the stock market was like a pile of sand that was having more and more sand added to the pile.  Inevitably, there are mini-avalances as the circumfrence of the sand grows wider and wider and the pile grows higher and higher.

So how does one play this rally that has taken the Stock market to record highs?  Well if you''ve been fortunate enough to participate in the rally, it might be a good idea to take some money off the table.  Pare back your stock holdings maybe 10-15% and wait for the stockmarket to cascade down to a stable level.  I can't tell you when it will happen, but it WILL happen.

If you haven't participated in the rally, don't panic and buy into the market just yet.  Wait until the market corrects at least 10% before buying back in.  Then accumulate good companies.

Its still early days yet,  and there is plenty of money to be made in the coming years.  Eventually the world economy will stabalize and repair itself.  And don't bleive the gloomsters out there.  If the world economy doesn't repair itself then we are all in a heck of a lot of trouble, and it won't matter how much money you have (even $billioniars would suffer).  Why?  Because fundamentally its in everybody's self interest that the world economy repair itself.  The Chineese, Brazilians, Russians, Greeks, Italians, African's, Americans all need each other to make the world go round.

As for the complaint that its the top 10% who own 81% of the stockmarket.  Well, doesn't that tell you something?  If the richest 10% own 81% of the stockmarket, maybe they understand something that you don't?   That if you INVEST in great companies (as opposed to speculate) over the long term you will make better returns than if you just put your money into Government Treasuries- or Bank Accounts.

People who are fixed income investors, can invest in the market easily without "losing it all" by putting their hard earned money into some speculative crap.  All they have to do (and all they should do) is to invest in an index fund like Vanguard's S&P 500 index fund.  Then take a course in how to INVEST for the long term.  The more you know, the more you will prosper as a saver or retiree.

Trust me it can be done.  If I can do it anybody can.

 

9

I give you credit for your post. Pretty courageous considering that many of us do understand the markets. I would guess there will be more replies to come. A few questions:Do you really see what is happening around the world as normal market activity? i.e. Greece, Cypress, Italy, Spain, Ireland, etc.
Do you think Japan hasn't tried in the past 20 years to climb out of their deflationary economy? If they have, why hasn't it worked?
Do you really think the top 10% understands things we don't? Or, do they have access to and controls over the markets that we don't? Were they less smart during the times when wealth distrubution was more fairly distributed?
How do you perceive the derivatives market and the role it plays now?
I don't believe CBers are sociopaths, but I do believe they are completely removed, or too socially distant, from the average person's life experience (say a family of 4 making $50 - 80K), and therefore only have an abstract idea of what that is. Would you expect them to really understand what is in the best interest of this demographic?
I appreciate any answers to these questions.
Peace!
 
 
 

10

Recently our billionaire friends have decided to sell…
When Jamie Dimon testified to congress he said he told his daughter that this happens every 5-7 years. Need I say more?

When the sociopaths decide it's time to cash in the ole chips is the answer. (sell whe it's high)

11

[quote=richardgordon]As for the Stockmarket, its not outrageously overvalued.  At this stage its "fairly valued" at around 16 Times earnings. 
If you haven't participated in the rally, don't panic and buy into the market just yet.  Wait until the market corrects at least 10% before buying back in.  Then accumulate good companies.
Its still early days yet,  and there is plenty of money to be made in the coming years.  Eventually the world economy will stabalize and repair itself.  And don't bleive the gloomsters out there. 
As for the complaint that its the top 10% who own 81% of the stockmarket.  Well, doesn't that tell you something?  If the richest 10% own 81% of the stockmarket, maybe they understand something that you don't?  
[/quote]
Richard,
I would have to politely disagree for the following reasons.
 
10. Many of the most profitable companies are private. If you owned a profitable private company, would you want to subject yourself to the headaches of a publicly traded company while selling shares of your profitable company?
 
9. (16) times earning sounds pretty expensive to me. I sold my business at 4 times earnings and I was happy to get that, yet people overpay for these publicly traded companies that they have no control over. It doesn't make sense to me.
 
8. (16) times earnings only makes sense if these companies can continue to grow earnings at double digits far into the future. If they falter, or god forbid contract, the "value" of your shares quickly find a much lower fair value. I'm not talking a 15% loss either, try 80-90%.
 
7. High frequency trading makes up the majority of the volume. The robots are running the asylum. I don't want to be stopped out and front runned by robots.
 
6. The corruption is only getting worse. If you don't know who the sucker is, it's probably you. Everything is rigged. Check Matt Taibbi's latest article in the Rolling Stone.
 
5. A good majority of the so called blue chips are immorale entities. Do you really want to invest in Monsanto, Goldman, Wal-Mart, Altria, or any other corporate entity that externalizes their costs onto us and the environment while hollowing out our local economies at the same time they are colluding with our facist government to keep the status quo right where it is.
 
4. Why not look locally for an investment? Farmers have been investing in wind turbines all over the Mid West for a decade now. Invest in your own business or property. I am personally building a permaculture farm on my 6 acres. Over the past 2 years, it has been the best "investment" I have ever made. Many smart people on this site are finding great alternatives to Wall St.
 
3. All of the stocks on the exchanges are priced for infinite growth. As Dr M. says, "How can we have infinite growth in a finite world." The signs are all around us. Anything that can't go on forever, simply won't.
 
2. The richest 10% have the majority of the stock market "wealth" because they have the expendable income to do so. It's not because they have some great insight that others don't. We've been marketed to and propogandized since birth to consume and seek wealth. Watch children open gifts at X-mas, or people fight on Black Friday over some new electronic gadget. Only in recent times is retirement even a concept. Wall Street has done a fantastic job convincing all of us that by "investing" in their ponzi scheme, we will find ourselves in retirement walking hand in hand with our spouses on some beach somewhere without a care in the world. 
 

  1. It feels great not to care about whether or not the S&P is up or down. Really, who cares? Walk away, that is the only sane thing to do in my opinion.
12

<<Anything that can't go on forever,  simply won't >>It's a pithy quote, but much longer doesn't need to be forever, just long enough to reduce your wealth substantially. There's an aspect of this discussion that I haven't see fully vetted on this or or other forums, and I think it's a mistake to ignore it. I've tried to stimulate discussion about it in a prior post but would appreciate additional comments. After speaking to hedge fund managers, bankers, corporate leaders, academics, and politicians for several years now, I was intrigued that most agreed (more than I would have thought) with the Martensonian assessment of the global/ domestic economic and energy situations. The difference in opinion, however, was in how long a climbing market could be sustained without setback. They expressed a few opinions I would appreciate the group commenting on:

  1. If a market crash can, for the first time in history, be centrally managed, controlled and if necessary reversed rapidly (minutes to hours) on both a national and global scale, why can't trees grow to the sky for the foreseeable future?
  2. If you want to convince the majority of the citizenry to trust their savings to the market, you've got to make the market appear safer than a bank. Ridiculous you say? If the Dow is at 17000 next May, and metals are in the cellar, where might public sentiment be? Even the more disciplined will start to question their fears of a 2008 repeat and be more inclined to buy the market and dump commodities.
  3. Sure, we all know this eventually ends in tears mathematically,  but TPTB likely have the capability to rig the casino indefinitely. Even if you're correct about the final outcome, you lose time and subsequently wealth the longer it takes you to realize your event timing is way off the mark (decades or more). Would it not be advisable to learn this earlier, instead of years too late? 
     
     
13

your last question presupposes a definition of "subsequent wealth" and a most precious commodity "time".
robie, gotta milk my cow

14

An intereting concept was put on the table. Can the Fed and the central banks fake it forever.  Can the stock market be turned into an american TV sitcom where there is always some minor farcical problem that arises that can happily resolved in 30 minutes?
Each subsequent "recovery" has involved a smaller and smaller percentage of the population, while total work force participation continues to decline despite the apparent improvement in the "unemployment" rate.    I have a feeling that the real question is not whether the stock market is up or down, as Adam has pointed out, but the level of general participation.

After the crash of 2014 will the 5% of the population own 82% of the market, then 3%, 1%, 0.25%? What will the work force participation rate be then (in the "real" economy)?  When such a small percentage of the population is in the game does that make faking it all that much easier?  When that 0.25% of the population owns 82% of the market where will the dow be 20,000, 30,000, maybe 1,000,000?

I do agree that CBers may not be sociopaths, but the system they are running is sociopathic.  The desitute buy drugs in burned out neighborhoods that fund the cartels that fund wall street that fund the TBTF's that fund the corporations that provide us with this wonderful cheap stuff that makes life so affordable.  The cheap stuff puts more local businuess out of business, more neighborhoods fall into destitution, and up goes the drug trade.  Round and round it goes.  And don't mind those factory fires in third world countries, just keep watching the price of the stock market.  You can be rich some day without any meaningful participation in the economy too.

I say don't walk away, don't run either.  Dance away with a skip in your step and a song on your lips.  Don't look back.

15

Robie,These are valid questions.

1. If a market crash can, for the first time in history, be centrally managed, controlled and if necessary reversed rapidly (minutes to hours) on both a national and global scale, why can't trees grow to the sky for the foreseeable future?
I've thought a lot about this, and I agree that the managed market could continue for some time. My thoughts on this are: With all CB printing money at a feverish pace, this will only speed up dislocations in the world markets. As much as the CBers see themselves as a unified global bank, as political and social unrest increase in the countries that are struggling, it will continue to put internal pressure on the entire system. More of these countries are being outspoken on the unfairness and how it is benefitting the few. It becomes a pressure cooker...I think of the money printing as the flame underneath.  As more countries join the already struggling ones, I believe the cohesive "global" bank will fracture. Why can't trees grow to the sky? For the same reason why a corporation is not a person, but the illusion of infinite anything is incredibly addictive.
2. If you want to convince the majority of the citizenry to trust their savings to the market, you've got to make the market appear safer than a bank. Ridiculous you say? If the Dow is at 17000 next May, and metals are in the cellar, where might public sentiment be? Even the more disciplined will start to question their fears of a 2008 repeat and be more inclined to buy the market and dump commodities.
Again, very valid question and not at all ridiculous. I think there is just as much of a chance of the Dow going to 17K as not. I give your scenario a 50/50 chance.  A gradual reduction in the masses income over time is barely noticed on a daily basis. Doing it slowly gets people to accept it. How often have you had a conversation with your neighbor about real income going down in the past 20 years? It becomes something that we expect, and therefore accept. In the US, I think this could go on for awhile since we have a pretty high average standard of living compared to other countries. In addition, with other countries seeking yield, pouring their money into our dollar and stock market, in the short term, this could continue to give the Dow the fuel it needs. But at some point, all these extreme measures and heavy lifting will take its toll. I can lift a 5 lb weight pretty much all day long, but a 50 lb weight? 
3. Sure, we all know this eventually ends in tears mathematically,  but TPTB likely have the capability to rig the casino indefinitely. Even if you're correct about the final outcome, you lose time and subsequently wealth the longer it takes you to realize your event timing is way off the mark (decades or more). Would it not be advisable to learn this earlier, instead of years too late?
This is true only if you have most of your "wealth" invested in the casino. You may be right about the financial markets, this could be a long slow death (decades), but there is still the real-life market of living. Isn't that the whole point of becoming resillient? By removing yourself, or at least limiting the impact, from the artificial abstract market and putting your time, effort, and wealth into your homestead and community. Then the timing of the artificial market doesn't matter. Your concept of value and wealth completely changes when you do this. I keep working toward it!  
16

Lets not forget, as Chris has often illustrated for us, liquid fuels could start to run out any time now.That alone would put a stop to faking it. Of course attempts are also being made, as Chris shows again, 
to paint this in a rosier light than reality warrents!
But, Climate Change is another hugh hammer about to fall, with great consequences for food supplies, water
and political business as usual. The authorities in the U S seem aware of big disruptions on the way - witness the behind the scenes Police State preps.
It harder to fake the weather. The "Nature Bats Last" website is informative but terrifying. Consult it only if you're feeling especially indestructible!
Declan
 
 

17

You hit the nail on the head.   Unlike the go go years of the 90's, this rally is very limited in players.  After the double crashes of 2001 and 2008 the typical investor is wary. I agree that this will last longer because it will take months of constant yapping to convince the doubters to throw caution to the wind.  Besides, the amount of disposable income keeps shrinking as the "nonessentials" (food, gas, energy, housing)  rise and wages stagnate. The ownership chart simply reflects the percent taxes paid.  Is anyone surprised that wealthy folks invest in the stock market more than poor folks?

18

wow silver dropped $2.40 for a short while!
http://www.brotherjohnf.com/

19

[quote=idoctor]wow silver dropped $2.40 for a short while!
http://www.brotherjohnf.com/
[/quote]
Not at your local coin shop it didn't.

20

No doubt and well said. Most of our problems are the projection of our psychosis onto and a complete lack of connection to  natural systems.  In the ultimate end, nature "wins" and so do we, if we are paying attention.  (The whole idea of winners and losers though is part of the baggage of the current paradigm that we need to throw overboard sooner than later). But Nero did fiddle as Rome burned, as the saying goes.  Perhaps we should coin something new for our time, "the printing presses turned while the planet burned", or some such thing.  The question is, when will reality intrude? It intruded on me over thirty years ago, being the self centered creatures that we are, I sort of assumed that everyone was having a similar experience.  Surprise, surprise.
So I have been asking this question for a long time.  Not whether nature bats last, but when will most of humanity figure and that out and more importantly do something about it. As time has gone on things have become perilously more serious.  The question has now become in my mind, will nature being swinging at a ball or the side of our heads?

One of the greatest problems that we as human beings have, is our penchant for self delusion.  It seems a large segment of the population would rather believe that business as usual will work rather than peek under the hood and take a look around.  Anybody who says otherise is a crank or doom and gloomer.  It amazes me how much the belief in the "recovery" has taken hold.

I have a feeling that many of us will never "get it" even after the world has been completely transformed.  I would now argue that we have entered an new phase. The great uncoupling.   And I am not talking about the Chinese, European, or American markets. The demand for silver and gold remains strong - yet the price continues to get hammered, unemployment climbs - yet the unemployment rate goes down, the piigs continue to go broke - yet the markets soar to new highs. We could all come up with a long list of discontinuities.  I like it how at the end of hte day, there is a short one liner that describes what the markets did and why, and it is apoken as if it was the diffinitive truth with a capital T.  "Unemployment numbers were terrible today, but they were better than market expectations, so markets rallied".

The uncoupling I am talking about is reality and the media.  First they generally followed some sort of rules, then they bent the rules here and there, then they broke the rules. Now, they just make stuff up. Plato's cave has gotten a lot more complicated. Trying to parse this crap is now beyond our most trusted seers and sages. Everybody thinks that the central banks have painted themselves into a corner and cannot raise interest rates without destroying the system because of the debt overhang, so we logiaclly must head into hyper inflation.  Well, we are in a managed system and the "laws of economics" will not intrude.

I know that you may think me to cynical and am paintnig with to broad a brush.  The system will come appart because it must, but we will not get the "normal" market signals.  Well will get the prescribed version of reality to keep us in our seats even though the theater may be on fire.  The revoluton will not be televised so we might as well turn that thing off.