Friday, January 8, 2016

Is the Stock Market Too High?

By James Altucher

Someone asked me if prices are too high and about to collapse.

What prices are too high? Housing, while recovering, is still not as high as 2006.

What about stocks? I doubt it. Apple, one of the fastest growing companies ever, is trading at just five times cash flow.

Imagine a bond that you buy that gives you $20 (20%) for every $100 you buy of it.

That’s what investing in Apple is like right now. Investing in T-bills, by comparison, gives you 2.25% for every $100 you put into it. That sucks compared to Apple.

Can Apple go lower? Sure. But then it’s more of a buy. Anything can go lower in the short term.

But where is the cash to buy these things.

In 2009, banks were about to go bankrupt. They had no money.

Now banks have an extra $2.4 TRILLION sitting around doing nothing. Meanwhile, commercial and industrial loans were up over 10% last year.

Businesses grow faster when they can borrow to finance their inventories.

Then they can sell out faster, pay more wages, and the people who are paid those wages can buy TVs and houses, and the people building houses can buy new cars, and so on.

In 1933, 4000 banks collapsed. How many banks collapsed in 2015? I think less than ten.

What About Rate Hikes?

What about them? In 2006, rates were at 6%. Now they are less than 1%. That’s a lot of hiking that has to happen.

The only reason the Federal Reserve is slowing bring up rates is because the economy is crushing it.

AND, unlike the uncertainty we have had all 2014 and 2015, the Federal Reserve has now been very transparent about how fast they will raise rates. i.e. Not fast at all.-

I don’t want to say buy stocks now. I don’t like to predict the future.

But the reason we are alive as a species is because our ancestors who paid attention to bad news (a Lion running at you is very bad news) lived and the people who didn’t pay attention…died.

The news knows this. So they put bad news in front of you all the time to scare you so they can sell subscriptions. Bad news and porn.

The people who are happier and more successful, know that we are no longer in the jungle.

Every day is a day to create and innovate. To start a business or to help make other businesses better. That’s where you tap into the flow of success.

You don’t have to fly to Mars. Or make a cure for cancer. You just have to always ask yourself, how can I help in some small way today?

This is success.

P.S.  Want to see a circus?  Click Here to watch the comments that this post gets.


  1. What a clownish, kindergarten-level perspective. And he's normally so astute.

    Notice he says the economy is awesome and stocks and real estate are not overpriced but he declines to put any of his own money on the line to back that opinion, leaving it for his readers to do so.

    He should stick to motivational self-help. He lost a lot of credibility with this post on economics.

  2. Somewhat surprisingly, the comments were pretty positive there. Probably speaks to the type of reader that likes to read James' blog posts. The real circus was here:

    One comment from WallStreet_Bandit444 that got deleted was, "I stopped reading after the title...But Ill just go ahead and say it...THIS IS THE STUPIDEST WORST FUCKING ARTICLE EVER PUT OUT ON SEEKING ALPHA..

    If I could punch this fucking POS in the face I irresponsible can someone be to put garbage out like this and not be accountable..If someone was stupid enough to buy his garbage and buys in right now they would be slaughtered..

    SP 1400 or lower.."

    AHAHAHHAHAHAHAHA. I took a screenshot of that comment before it was deleted and can't wait to remind him about it once the market zooms to new all time highs shortly.