Posted on 05/07/2017 5:53:22 AM PDT by SeekAndFind
Trying to foretell when the stock market is reaching its peak may be a fool’s errand. Even the most respected and famed investors and market pundits can’t claim to know when it’s time to get out—or for that matter into—the market, no matter how savvy they may be on investing.
That is because no matter the fundamentals and trends, stocks SPX, +0.41% can never quite free themselves from human emotions, according to Ben Carlson, director of institutional asset management at Ritholtz Wealth Management.
“There’s no formula for forecasting market tops because you’re really trying to predict human behavior, which can’t be done,” Carlson said on his blog.
That may be significant advise to heed as investors continue to fret about the lofty levels of the equity markets in the wake of President Donald Trump’s election, which by one measure is at their richest levels since 2004. Promises for market-friendly economic stimulus and a relatively dovish Federal Reserve has helped to push stocks to record heights.
Carlson explains that some of Wall Street and academia’s sharpest minds were caught off guard by the U.S. financial crisis a decade ago. And understandably so since, for many, there were no familiar markers to herald the ensuing market mayhem, as he demonstrates in the following table.
(Excerpt) Read more at marketwatch.com ...
“Don’t gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don’t go up, don’t buy it.” - Will Rogers
So true. So true. The first step however is to set aside 10-20% of your income to savings. Then dollar cost invest into a mix of stock and bond mutual funds over decades and pretty much leave it alone.
A giant half truth.
The question is not if we are in a bear market, but that is the data type their argument and graph looks at.
The question is are we nearing, on a progressive leading to, a market peak - BEFORE a bear market.
And by all historical measures, by P/E ratios, we have entered into a “heading to a peak” period. Yes, it could build for some time longer, and reach even past the high tech and dot com bubbles’ peaks. But - who knows - it, the peak will be reached, the bubble burst, and values will drop to point where the average P/E returns to more hsitorically average P/E ratios.
Unless earnings increase to a point that puts P/E ratios back into balance.
Bookmark
It is purely emotional but my feeling is that TPTB have not yet been able yet to effectively damage the Trump presidency and so a “correction” is around the corner. If Trump should start to “take scalps” and punish these folks, then the time to get in has come.
Those who have the power to influence the market have the ability to predict it. I’m not one of them.
I don’t have the power to influence the market, but “you don’t have to be a weatherman to know which way the wind is blowing”.
IMHO, there is a lot of pent-up inflation from the quantitative easing (printing money) of the Obama years.
Owning stocks and hard assets is a way to protect one’s financial position right now, and for a few years into the future.
I also think that business will flourish as DJT cuts regulations and maybe even taxes. The Democrat ideas on taxes are horrible. No society has ever achieved prosperity based on “income equality” and no one can tax themselves into wealth. If we can get to 60 in the senate in 2018, there will be no stopping the US.
My investible money is 100% in stocks and brick & mortar real estate. Serious inflation has already started and the official CPI is set up to hide it.
I have a millon bucks in an IRA. Half of it’s in the S&P 500. I’ll take my chances.
As someone who may or may not attended the 5 day pre-exam class back in another life on passing your Registered Rep / Series 7 License, the old salt teaching it let out a gem that forever stuck a cord. However, I have not looked at the evidence since the 1999-2000 bust. His gem was Small Cap Growth highs signal the end of a Bull Market and conversely when they recover, you are coming out of Bear. 2008 was not a typical crash, that was political / legislative / "Moral Hazard" imposed on us by the fartknockers on Capital Hill. However, 1999-2000 does anyone remember "QQQ" on a tear? Your gut told you making 80% a year just wasn't sustainable.
With the markets more efficient via Indexing by ETF and Mutual Funds, I'd have to spend fair amount of time to see if this old salts axiom still holds true, going back to 99'-00' and finding the style box winners for all those years and the dips and upswings in relationship to SCG performance....
The question, as always, is how high is high? And where is your starting reference point? My money is on a LOT more upside.
You are reading my mind again JD...
Do this proportion. in regards to the Clinton Economy vs Trump's with Larry Kudlow saying 6% is not out of the question. Clinton 3.78% avg GDP = s 225% gain in the Dow. 6% ='s "X" cross multiply and divide, now take that multiplier and multiply it to 21,000.
I'll send you the number I came up with privately.
Clinton had the Internet Revolution, but he will not have the following Trumpian winds in his sails that if they all get done are mind blowing in their totality:
* The Fracking Revolution unleashed ='s jobs, prosperity, and a better balance of trade not to mention energy independence and exportation.
* Fighting to bring back and keep every job here and enforcing trade deals.
* Getting Fedzilla off businesses backs, especially the EPA
* Capital back because of repatriation, De-balling Dodd Frank so banks lend again to business.
* The business world already gets the psychological seed change that they are not the target anymore, and are actually thinking of growing.
* Our health-care system will bet fixed, small businesses will hire with Ocare gone and IMHO it will get so good it will spur competitiveness to the point our quasi-socialist trading partners will have to look at it and emulate it to stay competitive.
* Reducing Corp Taxes to 15 or 20% for all businesses is a Force 5 wind in their Spinnaker.
To me the big one is the 4000 drugs in the pipeline that are being slow-walked by the FDA. Pres. Trump noted he'd love to fast track them. What if their are one or two game changers in the 4000? Something that can change medical cost or control a cronic illness? That to me is a far greater benefit than the dot.com bubble of the Clinton years...
I bet you also have Social Security, and maybe a pension. These things have a value, and many consider them fixed-income investments.
When you put them in the mix, most people are heavier in fixed-income investments than they realize.
Your IRA is an investable asset, your SS and possible pension are assets you have little control over. I have both, which is why the assets I control are not in fixed-income.
Leaving my rose colored glasses OFF, our economy and equity markets don't need ALL of the good stuff to happen to do well. All that is needed is the avoidance of even more regulation and a somewhat saner corporate tax policy. Now let me pop those rose colored glasses back on and add one thing that you didn't mention that would be the holy grail to our country....and in any other circumstance just as impossible to find:
IF (granted, a big if, but not impossible) our Federal government started spending LESS than the income to our Treasury AND interest rates were a couple percentage points higher. We could buy long US debt on the open market at less than face value, and start to reduce our national debt. We could still continue to auction 10 year and shorter Treasuries as to not freak out the market too much, but do so at a pace that no longer squeezes out corporate debt.
There is no other administration I could conceive of where this would even be a faint possibility. If this happened...grab the reigns tight and hold on for the ride of a lifetime. Roaring '20's would be the Roaring 2K's.
No, I'm NOT betting on this, but very interesting, no?
interesting yes. JD, I need time to think about it. The Bernakie Twist, our buying of our own debt ("monetized") when we were downgraded have to all undone to get back to a normal traditional yield curve. Perhaps a rise in rates might help it get "normal" but the whipsaw of buying back all the debt during Porkulus, I don't have a clue as to how, not to mention the flood of sales and a slew of deep discounted bonds and the carrying cost of the higher rates. Buying below face, and essentially going to a "STRIP" as the status quo, I am ok with that.
I am talking about bonds sold in the market, and which is currently being traded at market prices.
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