Posted on 06/12/2021 7:37:41 AM PDT by BenLurkin
1. Historically high valuations are bad news
To begin with, the widely followed S&P 500 is pricey...really pricey. As of the close on June 7, 2021, the Shiller price-to-earnings (P/E) ratio for the S&P 500 hit 37.5. The Shiller P/E, also known as the cyclically adjusted P/E (CAPE) ratio, is based on inflation-adjusted earnings from the previous 10 years. This reading of 37.5 is well over double the average Shiller P/E ratio of 16.8, which dates back 151 years.
2. History says we're in trouble
Looking back 61 years, there have been nine bear markets. In the previous eight bear markets...there were either one or two double-digit percentage declines within three years following the bottom. In aggregate, we're talking about 13 double-digit drops spanning the three years following these eight bear-market bottoms.
3. Crashes and corrections happen frequently
According the market analytics company Yardeni Research, there have been 38 separate instances since the beginning of 1950 in which the S&P 500 has retraced by at least 10%. Put another way, we observe an official correction or crash in the benchmark index, on average, every 1.87 years.
4. The Federal Reserve can't remain dovish forever
One reason equities have rallied so ferociously off of the March 2020 bottom is the amount of support they've received from the nation's central bank. The Federal Reserve has stood pat on historically low lending rates and continued with its monthly bond-buying program that's designed to weigh down long-term yields.
5. Margin debt is skyrocketing
Perhaps the most terrifying fact of all is the current level of margin debt. Margin is the debt that brokerage customers take on to buy equities. Consider it a way to leverage their gains, as well as their losses, if they're incorrect about which way a stock will move.
(Excerpt) Read more at fool.com ...
Why not just buy now and then. You will be able to lose so much more. 😆
A major crash is coming, has too as the entire economy is artificially created as near 50% of all dollars in circulation was printed after Jan 1, 2020...
It's astonishing how often this kind of scenario plays out -- even among people who should know better.
My theory is that a person's investment acumen is inversely proportional to the amount of time they spend watching TV.
“GE, IBM, GM were all well run companies.”
GE, IBM, GM were all also badly run companies.
2. I made the shrewdest real estate investment of my life just before the 2008 fiasco.
3. Except in rare cases where I sold an asset at a loss for tax reasons, I have never lost money on an investment.
None of this was skill, and yet there wasn't much luck involved, either. The only two attributes I brought to the table as an investor were discipline and patience. Being methodical is far more important than being "smart" in investing.
I agree. The deep state has come out of the closet and along with the multi-national corporations have asserted their authority as to who really runs this country.
The illusion of two opposing parties with at least one of them as patriotic representatives of the citizens has been exposed.
Why any Trump supporter is still on Facebook is beyond me. We really haven’t fought back hard enough.
My experience since 1962 says, the best strategy is to start buying long term bonds during high inflation period, because they must pay ugly high dividends during high inflation. When inflation tapers off, as it always has in the past, bond values go up AND you are still getting those high dividends.
Ditto here. I am too much of a chicken to stay in when valuations are crazy high. Right at this moment I am now 95% out of stocks. I just can not sleep well with current valuations.
“The republic is dead.“
This is a terminally corrupt and wholly evil federal government.
This perversion of a nation needs to be thrown onto the ash heap of history.
At one time (like the 1960’s) hey were considered blue companies and had reliable earnings and dividends.
IBM was called “Big Blue”!
bookmark
“When inflation tapers off, as it always has in the past, bond values go up AND you are still getting those high dividends.”
Only once since 1962 did we see this be really effective and then you would have missed the big stock market move in the 80’s.
“At one time (like the 1960’s) hey were considered blue companies and had reliable earnings and dividends.
IBM was called “Big Blue”!”
Well run companies don’t go bankrupt.
“Ditto here. I am too much of a chicken to stay in when valuations are crazy high. Right at this moment I am now 95% out of stocks. I just can not sleep well with current valuations.”
I sleep very well. Portfolio has a 2021 P/E of about 17 and pays 2.5% low tax qualified dividends.
“In the long run we are all dead anyway.”
Might as well end it sooner than later then. That way you don’t have to go through the suffering and humiliation of old age, no?
Nice! At age 81, I no longer buy individual stocks.
It is only and strictly index funds. A 20% correction happens every 4 years on average. That is my trigger to start getting in again. Then wait as long as 4 years, and when 30% profit shows up overall, I begin bailing out. Been doing this since 2005 and never had a tax loss on my tax returns.
I know there are more profitable methods, but this is easy on my nerves.
As the CEO group changes, or the product produced becomes obsolete, even well run companies hit bumps.
I can bet a latte at starbux, every stock on NYSE will be down 20% for at least for a short period in the next 4 years.
Yes, but in terms of what? Same with real estate. Six trillion printed dollars aren’t going to suddenly gain value in relation to equites and hard assets. The market may indeed be worth less in relation to gold or Bitcoin, but in dollar terms there is no reason for stocks or real estate to keep doing anything except go up.
As a real estate expert recently explained, if inflation hits 10% and house prices go up 5%, the real estate market will have “crashed” - even though prices are higher.
“As the CEO group changes, or the product produced becomes obsolete, even well run companies hit bumps.”
Bankruptcy is not a ‘bump’!
“Then wait as long as 4 years, and when 30% profit shows up overall, I begin bailing out.”
So you missed out on all the big stock market moves?
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