13 Tuesday Jun 2017
Posted | June 13, 2017 7:56:31 | Economics
I have official guidance that a party is on through 2030. Nothing can possibly go wrong.
Billionaire Ron Baron says blue chips to double by 2030… and Tesla shares to do even better.
What can possibly go wrong with Baron’s prediction? I cannot come up with a single thing. Party on dudes!
Mike “Mish” Shedlock
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The only thing wrong that I can see is that he does not follow SEC guidelines and disclose that he is a huge “d**ucheb@g”!
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Oh well! I’ll see what Harry Dent has to say and average them out.
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ha ha good one Michael.
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Harry Dent would be predicting exactly this, except that the market was supposed to have already crashed. With the Dow at 6,000, it would be easy to predict the market to triple. Since the market didn’t crash, Harry seems to be stuck in his “market must crash” mode, even though the crash was supposed to be a couple years ago.
It’s certainly true that the baby boom of 1991 will come major contributors to the economy in the near future. They are 26 now, and should be entering family formation stage, requiring them to spend, spend, spend, and take on debt. It is equally true that the baby boomers will mostly be retiring over the next seven years, and they should be significantly curtailing spending, paying off debt, and investing for retirement.
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It’s a new paradigm. This is not a buble.
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Whatever was the worth of the economy in 2010, it will have about doubled by 2030. It’s called the rule of 70[or69or72]. The IMF reckons growth is averaging 3.5%. so 2030 is it. Imagine the 3Cubic miles of current oil equivalent energy consumption at 5-6 cu miles, double what we have consumed in all of history. Sound realistic? Obviously is, for Ron Baron. Equally obviously he sells stuff and inconvenient facts are tabu. He ought to go into politics. That’s home ground for such opinions. Amazing!
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Perhaps it should have been Bill and Ron’s excellent adventure?
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So he is suggesting 100% by 2030 while Ethereum has 2000% so far this year.
I guess it’s a confidence thing.
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TINA to continue for 13 years?
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Quantitative tightening is underway with another hike being installed today.
TINA will go away, but like most market turns, only after it no longer matters.
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I want some of whatever he’s smoking…
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Doubling in 13 years is 5.5% annual return. Historically, that’s pretty low.
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No, Bob Prechter has run the numbers for every 10 year period since 1900 in the stock market, and the results aren’t that high. They are much lower except for the last 30 years when the Fed has been juicing the market. After commissions and taxes, they average around 3%.
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The Dow from May 1896 to May 1987 (omitting the last 30 years) has returned 4.5% nominally (1.3% inflation adjusted) and 9.9% with dividends reinvested (6.5% inflation adjusted). *
For May 1896 to May 2017 the numbers are 5.3% (2.2 with inflation) and 10.0% with dividends (6.8% with inflation).
To double between now and 2030 is 5.7% growth, so a bit above the historical numbers, but if invested in a low cost ETF with dividends reinvested, not ridiculous by historical standards.
Since most pension models use 6% to 8% returns, if anything predicting the Dow to double between now and 2030 is realistic. My personal retirement model is based on a 60/40 mix yielding 4.2% total returns with about 5.5% (SD 15%) needed when running Monte Carlos to give a >90% “success” rate.
* Source: https://dqydj.com/dow-jones-return-calculator/
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Exactly. Well managed pension plans have done very well over the last decade and will continue to do so for the foreseeable future. Note I said “well managed”. Does not include Illinois, Cali or Dallas. My plans are similar to yours and I will be able to retire in 4 years at age 58 with a six figure retirement. Unless I go to Vegas, get drunk, and bet it all on red.
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Good for you mate! 58 is a few years earlier than I’m anticipating. The stock market is like a casino in some ways – if you just bet on one stock for a short period of time you are basically pulling a handle on a slot machine, but if you place many bets over a long period of time, history (unfortunately not the mathematics of probability) dramatically increases your chances of winning.
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Good Luck!
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Tesla, a company that has been losing lots of money forever, with no prospects of that changing, will obviously go to infinity….
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Unless the government subsidies directly to Tesla and to all electric cars stop, and they have to compete in a real marketplace. Then, look out below.
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Edmunds – an industry mouthpiece (and not some angry blogger) if subsidies cease:
“Without these credits, this market is likely to crash”
https://static.ed.edmunds-media.com/unversioned/img/industry-center/analysis/EV_Report_April17.pdf
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Tesla is our hope…our dream for the future. We can produce products at a loss infinitely, ultimately working without production, without adding value except in the “belief” that we are simply worth more.
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That would be like believing Putin hacked and rigged the last election, without any evidence but, who needs evidence when there are “anonymous sources”?
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Bankers have printed 3 manias in a row. Bankers may print another one when this one starts to deleverage.
Printing moves the average person backward, but bankers don’t seem to really care about that.
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I’m certain that THIS TIME will be my time to get rich. Bring on the next bubble.
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since it is different this time, you must be right
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What could possibly go right Mish? Anytime people make money you throw a fit. You seem to only gain satisfaction when suffering is either imminent or in progress. I have followed Mish for over a decade and can’t trust him anymore, the whole “perma-bear” thing took a while for me to catch onto, If you listen to Mish you will miss opportunity to make money.
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Jim, let me know when you stop reading Mish and go all in. That will be my timing indicator to get out.
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When exactly did Tesla make any money?
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It’s not about making money, it’s about cash-flow, grasshopper. Tesla is Musk’s way-point and meal-ticket on his way to the big MISC (Military-Industrial-Security-Complex).
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Company namesake Nikola Tesla never made any money and died just about as broke as one can be.
Just wait until investors discover that that aspect of Tesla’s life and not his command of electrical theory is the inspiration of the company’s vision.
🤔
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Actually, Tesla was reasonably well off, in a nice NYC apartment sort of way, that he died a pauper is a myth. What is true is that he should have been one of the richest men on the planet… An engineering genius, but not the best businessman. Or, perhaps he just trusted people a little too much.
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Baron says stocks will only double in the next 13 years? He’s in the wrong stocks!
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And ordinary working folks, living paycheck to paycheck?
Can’t find a brutally honest article by a writer (posted on http://www.davidstockmanscontracorner.com when there were free articles last year). An an income of about $ 100,000 as a writer, the pressure with children at university, leased cars, rent etc., there were times when he had 0 savings and was looking into the abyss.
Personally, I have had to live on a few bucks a day, eating Rahmen soup (8 or 12 for $ 1 + tax). Then I became a victim of crime and was homeless, sleeping in my truck, having no blanket and it was too cold to sleep in the high desert. (It took time to get my credit cards back from overseas).
My customers have been struggling. A family was evicted by the city when they had utilities shut off. (I would have paid the utilities – the red tape was many times more expensive). Then you find depressing evidence of STUPIDITY: http://www.washingtonpost.com/sf/local/2017/06/02/generations-disabled/?utm_term=.4a19f05fd337 look at 4 items. Cable $ 98, electricity $ 600, cell phone bill $ 300 and $ 3xx for “new furniture”.
Use wifi, not minutes! Use Whatsapp, Skype and Google services! Cut down the cable bill, maybe go to rabbit ears if times are tough or use the internet for entertainment. Get an Ipad with a sim card slot and use the $ 3 for Skype’S flat-rate to the USA. Go get 2nd hand furniture somewhere. By carrying it home, their furniture will have lost 90% of its value.
Silly grocery shopping (sugary sodas). Bad parenting. And no attempt to investigate that high electricity bill? Not to mention those cripplingly expensive Pay Day Loans. Just consume n o w, borrowing from the future.
°°°
Who’s benefiting? The tax code is written for the rich. GS paid 1% when I checked.
Even those posers in L.A. in their million bucks homes and with that leased Porsche in the driveway. They take care of the things for bankers. And a few paychecks stand between keeping up appearances and financial meltdown.
Rant over.
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Not a rant, too true for many.
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Agree with The Fish. It’s hard to feel sorry for stupid people.
“Pity is the worst emotion you can have for someone” ~ Ayn Rand
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Rural Germany. A small town called Laupheim. One of the 3 gas stations is fully automated. Just use a bank card. There is nobody there most of the time. No salary and employee expenses (the take home net pay is less than those expenses).
UK supermarkets with their check outs without cashiers. Soon, skyscrapers will be built by robots. And a tax on robots? – Ordinary people are sometimes on “zero hour contracts”, not knowing whether they will make the rent next month. There is more to the UK election result than BREXIT sentiment.
A battery will last about 1000 deep cycles, then what? Pay $ 19,700 kind sir? The German government coined the silly & deceptive phrase of “zero emissions vehicles”. Yeah, I’d like to have one of those, too. While coal powered power stations blast millions of tons of CO2 into the atmosphere…
1913 was the heist of the millenium. The FED is neither Federal nor does it have “reserves”. Hello fellow debt slaves. Feel the debt chains? Keep on working, stop thinking.
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You are right about the Federal Reserve Bank, and BTW it’s not a bank either.
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That’s bullsh**t. It most definitely is a Bank, doing Treasury’s bidding and holding deposits for investors aka government bonds] The main difference is that commercial banks create Credit and the Fed creates reserves, to pay for government expenses, money spent into existence.
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In the 1970’s I went on vacation to a small island off the West coast of Scotland (Islay – great whisky!). There was a coin operated gas station. Nobody there after 5pm, but no problem.
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This evening I picked up a gleaming silver dime off the sidewalk. Minted 2017. That is a top of the market omen.
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There was no silver in it, Galbraith. It was just shiny, being new.
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Did you at least look for steamrollers or bankers in the vicinity before bending over to pick it up?
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hah.
I remember when the beard scratcher economists said the same thing toward the end of the dotcom bubble.
We must be getting close to another meltdown.
Time to batten down the hatches. Take heed.
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Remember CSCO, NOKIA, Lucent and some Linux companies? Not pretty.
The FAANGs have been responsible for most of the S&P 500’s gain of the last 12 months.
Unashamedly, CNBC posts shills’ opinions who are long TSLA and then predict a doubling of the stock based on a fresh look at some other “pie in the sky” aspect or something, for example.
Mish, keep watching acttual tax revenues. And the need for a new debt ceiling. At some point, reality does bite. And everybody scrambles to adjust their lifestyle to new harsh realities.
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The x axis exaggerates the point to absurdity – but he probably became a billionaire betting on peoples stupidity. That is a pretty clever bet really.
For my part, I stupidly thought that people had a brain.
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The S&P at some number means nothing unless you think what it is relative to.
What will have happened to everything else?
Yes, market might double by 2030 but in REAL TERMS may be lower than today.
I suspect the market will halve in the next 3-4 years, then quadruple in next 9-10
I suspect inflation will take off along with a deluge of currency debasement
I suspect the $ will come a cropper
I doubt Tesla will exist by 2030 but lots of other new stuff will
I wouldn’t pom-poo the idea of the market number doubling but a lot of other stuff will have shift to new levels too.
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Banks lend money into existence. Organizations with lots of money/credit can borrow a lot of money and invest it in the S&P. So it doesn’t necessarily have to come from somewhere else.
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Baron’s optimism could be right, or Mish’s pessimism could be right. Chances are they are both wrong. Sensationalism sells and makes headlines. The truth is boring and rarely makes headlines.
Barring some sort of black Swan event, the most likely course for the future is 1-2% US growth and 2-3% world growth.
Of course it won’t be a straight line, and there will be bumps along the way. Faster growth will occur in industries of the future, and older industries will barely grow at all.
Barons call for Tesla could easily come true (though it probably wont). It is an amazingly innovative company.
I am currently travelling in China. Growth is evident everywhere (both urban and rural). There are more cranes here than in the rest of the world combined. Their high speed trains are amazing. They have 19000 km of high speed track and this is scheduled to grow to 32000 km in the next 5 years. Everyone works. There is no concept of retirement. They are still backwards in many ways, but they are modernizing rapidly. They will be contributing a lot to global growth for many years to come. I have seen a lot of Tesla’s here, though I’ve seen even more Mercedes, Buicks, and BMW’s. Travelling here makes me more of an optimist, than a pessimist.
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I would actually agree…
Central Bank proved that they would not allow anything to happen…
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They “allowed” the 2008 fiasco to happen — or more accurately the Fed was powerless to stop it
The answer to the age old question is “Yes, the mighty sovereign King **CAN** order the tide not to come in. However, the tide is going to come in anyway, and there is nothing the King can do about it.”
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I recently read that Tesla spends roughly $800k for every vehicle they produce. All they need to do is get a million or so for every car and they’re stock will take off.
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As long as he’s fully invested in his recommendations, Party On!
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What he is really saying is no problems until the debt bubble pops in 2030.
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The oncoming recession will be a harpoon – not a needle – to the debt bubble.
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What a hoot.
What is it with these billionaires? So outta touch.
The King of the (billionaire) Clueless Mountain, though, still Stanley Druckenmiller.
Left an election night Trump party to place “inflation” trades … actually said 10 yr yield going to 6%.
Speaking of which, 10 yr having a great start today … down 8 bps to 2.13.
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Mr Barons public fund has generated a compounded rate of return of %5.75 since its inception in 2000,a compounded return of %18 since its low in Feb,2009,a compounded return of %15 since its low in 9/2011 and a return of %43 since 11/1/2016.
It suffered a drawdown of %64 from 2000 thru 2001,drawdown of %55 from oct,2007 thur fed,2009 and a drawdown of %20 from Feb,2014 thru Nov,2016
In order for stocks to double in the next 13 years,they will have to grow at a compounded rate of %5.75.It is VERY unlikely that GDP growth will reach anywhere near that level,unless inflation averages above %3 during that period.Will interest rates stay at absurdly low levels under those circumstances?Not a chance.
So for Mr Baron to be correct ,then stocks will have to represent an even larger share of total GDP than they currently do(highest in history).While this is not impossible,it will certainly lead to higher GINI levels and the high probability of social unrest.
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This is a sound analysis. Here is a scenario that you might want to contemplate. Most U.S. stocks reflect both U.S. (say 50% of their market) and World growth (the other 50%) rates. It is not inconceivable that the impact of a combination of U.S. growth (50% of 2% = 1%), slightly higher inflation (2.5%), a slightly lower dollar (0.25%) and world growth (50% of 5% = 2.5%) could add up to 6.25% nominal dollar based growth over the next 12.5 years.
Even if you change the balance of growth from U.S. based stock to 75% U.S. and 25% World the growth rate would be 6%.
Lose the dollar depreciation and you are at 5.75%
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Should have said “most large U.S. based stocks”
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If the Fed includes sewage in what is acceptable QE collateral, the price of sewage will “go up” as well…
As long as even the well indoctrinated dimbulbs who are not owners of large stock portfolios, keep falling for the scam that higher asset prices are a good thing, the theft can go on and on until limited by literal starvation.
The whole “ownership society” racket, underwritten by the abandonment of proper money, has ensured that all virtually all “asset” prices are waaayyy out of line as it is. Hence, obviously to anyone with even a fractional brain, them coming down, is what needs to be cheered on.
Pretending, due to money printing and the perceived ability to push downside risk and costs off on someone else, that paying ever more today for the exact same future income stream tomorrow, somehow increases systemic wealth, is, par for the course in idiotopia, just idiotic.
Instead, no new wealth is created. All that happens is wealth is being redistributed, by theft, from those who creates it, to the already wealthy and well connected.
Just as a good target price for Gold is whatever it was under Jefferson ($20), a similarly good target for some stock index, would be it’s pre Fed (1910 or thereabouts) level, plus a couple of percent a year reflecting growth of the overall level of growth of the economy. The closer you get to the better things are.
As by definition, economies are about discovering true values, such that resources can be more efficiently allocated based on that. Not, never mind what the “ownership society” idiots have been told to regurgitate uncritically, about pumping up the price of what is nominally deemed “assets.” The only effect of engaging in the latter, is slower growth and development due to misallocation of resources (presumably literate people wasting way playing childish zero sum games on Wall Street or trying to get worn out whores to “recall” drugged up frenzies with Bill Cosby sometime back in the Pleistocene, instead of doing something even tangentially useful…), and mass theft of what decreased wealth there is, by those who are already wealthy and connected.
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Tesla is not viable without massive ongoing subsidies; its not even worthy of being called a ponzi scheme.
What happens as money in Washington DC gets tight, and the military complex has to choose between bankrolling Elon Musk or protecting themselves / their own lifestyle?
I predict the military guys will protect themselves…
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The other part of his forecast, that “blue chips” will double over the next 12 years, implies they will return a little less than 6%… I wouldn’t guarantee that, but it is plausible if socialism doesn’t end the USA first.
FANGs will fall back to earth, because half of them are ad companies in drag and the other half are hot air… but actual blue chip stocks with actual products / services? The swamp known as Washington DC needs the blue chips to double (at least) just to avoid collapse.
The swamp will stop fighting Trump later this year and become his new “best friend”. Not because they like him (they don’t) — but because their way of life depends on having a viable tax base to exploit
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Thanks, Mish. It’s nice to have no doubts about the next several years. (/sarc)
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Decisions, decisions,,,,,
http://pricedingold.com/sp-500/
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Who will remember in 2030 what Baron said in 2013
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