J. Paul Getty Quote! The professional investor has no choice but to sit by quietly while the mob has its day, until enthusiasm or panic of the speculators and non-professionals has been spent. He is not impatient, nor is he even in a very great hurry, for he is an investor, not a gambler or a speculator.

30.28

Shiller PE¹⁰

Shiller PE-10 as of 7-19-17 is 30.28

Biggest Fed Flip Flop in History-Gregory Mannarino

Analyst/trader Gregory Mannarino says the Federal Reserve just did an about-face on raising interest rates in a matter of weeks. Mannarino contends, “This is incredible and hard to get my head around.  This has got to be the flip-flop of all flip-flops.  At the last FOMC meeting, Janet Yellen was practically pounding the table talking about how they were going to be continuing to raise rates, that they are going to start unloading their balance sheet here, and then she does an absolute 180.  

I am sitting there in real time watching it (this past week).  My face dropped, and the moment I heard this, I started buying everything I could. . . . I thought this is it.  The market is going to keep going higher. . . . 

The Federal Reserve has created a freaking monster.  These distortions are now going to get much worse because Janet Yellen has given these markets the green light to go record up, record up and record up.”

In closing, Mannarino says, “I’ll tell you what concerns me. Despite the fact we have a stock market at a record high, housing near record high, interest rates near record lows, tax receipts are down, money velocity is near historic lows and our economy is stuck. . . . 

So, without the Federal Reserve keeping their foot on the floor, and that’s what Janet Yellen is going to continue to do, this will all melt down in a blink of an eye. The Federal Reserve has got to keep the juice going.  

The moment they decide to take away the juice, all of this is going to correct to fair value.  It’s going to do it no matter what.  It will either do it when the Fed decides to pull their foot off the pedal, or it’s going to happen from some random event where people are going to start selling.  I think it will begin in the debt market.”

DYI:  10 year estimated average annual rate of return based upon PE¹⁰ at 30.28 regressing back to its mean of 16 with an initial dividend yield of 1.87% is…..0.41%!  Higher the valuation lower future returns – lower the valuation higher future returns.  Simple yet when euphoria reigns simple math logic escapes those needing it the most.  So hang onto your hat better values ahead!

DYI