WaPo - Are we hostage to the stock market?

[TomCADem]

Even though we are heading back to pre-2001 and 2008 levels of valuation, you are not hearing that. Instead, you have Fox News and RW media acting as though the normal rules of valuation do not apply under Trumponics. It is the magic of tax cuts. Of course, if the bubble pops, then the solution is more tax cuts! Look at how this worked for Kansas!

Interestingly, this article is written by a normally conservative economist who is trying to thread the needle between offering sound economic analysis while trying not to appear critical of the hoopla about Trump's tax cuts.

https://www.washingtonpost.com/opinions/are-we-hostage-to-the-stock-market/2018/01/28/5e7e67ea-02c6-11e8-8acf-ad2991367d9d_story.html?utm_term=.4d0e1540d9e4

The stock market is going gangbusters — but whether this reflects the economy's underlying strength or runaway speculation is a question that stumps many experts. Hence, the need for this column: a primer on the red-hot stock market. Will it sustain the economy or ultimately kill it?

The boom is undeniable. In 12 out of the first 15 trading days of 2018, stocks reached record highs, with an overall gain of 6 percent, worth about $1.9?trillion, according to Wilshire Associates. Since Donald Trump's election on Nov. 8, 2016, stocks are up one-third, or $8.4?trillion.

Nor is there much quarrel that, at present levels, stock valuations are "stretched." In layman's language, this means that stock prices are high relative to company earnings (profits). Since 1936, the median price-earnings ratio for the Standard & Poor's 500 stock index is 17; the present P/E is about 24, says Howard Silverblatt of S&P Dow Jones Indices.

Or consider another measure, the CAPE index. This stands for "cyclically adjusted price-earnings" ratio. Devised by economists Robert Shiller of Yale and John Campbell of Harvard, it provides a longer view of market behavior. The CAPE averages 10 years of P/Es and corrects for inflation. This index, too, is historically high at 34, which is roughly double the long-term median of 16.

[democratisphere]

1. There is nothing real to support the lofty levels of the current stock market.

drumpf's presidency is a bunch of smoke, mirrors and BS!