The markets have come a loooooong way from their 2009 lows. Close to 200% return including dividends. In slightly less than five years.
The Wall Street Pundits - or shall we say those without an iota of original thought - are, as a group, bullish. The “consensus” calls for a 7-8% return this year. What is the reason for this optimism? Don’t fight the trend, my friend, for the trend is your friend.
We got more where they came from. So here is a cliched list of banal justifications for an up year in 2014.
The technicals. The accuracy police among us would object this is related to the “trend is your friend” reasoning. To that, we say, TAKE A HIKE".
Something to do with who won the Superbowl.
The Presidential cycle
The kitchen sink.
So friends, you can’t do worse. From close of Feb 20, where do you predict the market ends up by the end of the year?
No pressure. This merely is the most widely read column in the financial world.
The markets have come a loooooong way from their 2009 lows. Close to 200% return including dividends. In slightly less than five years.
The Wall Street Pundits - or shall we say those without an iota of original thought - are, as a group, bullish. The "consensus" calls for a 7-8% return this year. What is the reason for this optimism? Don't fight the trend, my friend, for the trend is your friend.
We got more where they came from. So here is a cliched list of banal justifications for an up year in 2014.
1) The technicals. The accuracy police among us would object this is related to the "trend is your friend" reasoning. To that, we say, TAKE A HIKE".
2) Something to do with who won the Superbowl.
3) The Presidential cycle
4) The kitchen sink.
So friends, you can't do worse. From close of Feb 20, where do you predict the market ends up by the end of the year?
No pressure. This merely is the most widely read column in the financial world.
Stock pickers market I think the emphasis will be value stocks as against growth stocks, had an amazing year last year with stock picking, Had purchased Fb at 18, sold early at 24, kicking myself, Best Buy at 12 sold at 15, Brp at 7 sold at 14, My biggest pick is apple but it is a 2 yr play, it trades at 7 times enterprise value if you back out the 150B in cash, I think politically US govt will limit samsungs growth and apple will venture
into search, they will go after user experience and try to challenge Goog, banking sector should double in 3 yrs, I think s&p pe ratios are very reasonable right now and room to run. Since the economy is not running at full capacity there is a lot of room to run, Dow could hit the big 20 this year.
If you have enough cash buy rental properties when PE funds are in there you know that it is an amazing opportunity, In my city my most conservative estimate is that you make 200k on 70k investment in 10 years, based on a flat market going up only by amount of inflation. The Chinese money is flowing in like a flood and I am selling to investors like there is no tomorrow.
There is some discussion on whether the markets are overvalued in the undervalued thread. I expect sno500 to end at 1550 by years end. Around 17% below March 8 close.
@h24. You indicate even if real estate mkt is flat in ur area a 70k expected to rise to 200k in 10 yeras just on basis of inflation. That is 3x. Are you saying ijfation is 10% in ur area?.
Looks like ubdid well in stocks last yr. Congrats. Be well. We do believe in reincarnation. Who knows, we run into each other again.
The acquaintance was brief. The pleasure was all mine.
How long before the bubble bursts this time ? Need to redeem and/or move to stable value options like bond funds.
This is a serious question. So I will give a serious response.
The markets P/E based on inflation adj last 10 yr earnings is 25. Median is 16.5. So per this 51% overvalued.
Market p to e based on last 10 yrs 18. Median I think 14.5? So 20% overvalued.
Average is 35% of above two.
So fair value 100 means mkt 135.
Coukd drop 35. That is 25%. Or 470 pts in sno500. From 1870 to 1400.
But it could keep trundling along for next 3 to 5 years till earnings catch up.
I have detailed analysis in undervalued stock thread. Above is from memory.
I AM NOT A FINANCIAL PROFESSIONAL. But my two cents which I repeat often:
If you do your asset allocation, you will AUTOMATICALLY LIGHTEN UP on asset classes that have gone up a lot. You mentioned moving to bond funds. Note that bonds arr coming off a 30 yr bull mkt. They have underpergormed stocks last 12 months. But arr by no means cheap.
In individual stock account I now have 60% cash. But retirement Acct I haven't messed with. Just dollar cost aveeraging. I might move 5% into money market.
I DO NOT RECOMMEND GOING IN AND OUT OF MARKET. Take dome of the table? Certainly.
Note in 2000 market p to e was abt 35. Neatly twice of today. THAT WAS OVERVALUED. 2007 p to e probably 21. That was 15% more overvalued than today.
Asset allocation. Assume Ur's is 65%stocks 20% bonds 15% cash.
Let us assume u started with this allocation in 2004. By 2007 Oct if u didn't do notn the stocks exploded. Bonds also went up slightly. So now assume u had as of Oct 2007
Stocks 73%
Bonds 20
Cash 7%
So just rebalance. Sell some stocks and raise cash! Baack to 65 20 15
Fast forward to now. Say u didn't do notn last 7 yrs. Stocks have explored. Bonds also did well. Say ur split now is
Don't go ALL IN OR ALL OUT. YOU WILL LOSE UR SHIRT. JUST BALANCE UR ALLOCATION PERIODICALLY. U WILL AUTOMATICALLY SEL HIGH AND BUY LOW. LITTLE AT A TIME. BABY STEPS.
Feel free to ask for clarification. Will answer if I know.
One more clarification. It is fair to state specific actions I have taken.
Over last 10 months the stock portfolio was converted to 65% cash as stocks rose. Also in last 6 months, raised contribution to money mkt in retirement account. Result? What was 100% in stocks or stock funds is now 80% in sstocks and 20% cash.
Before all of this 8o% in stocks and funds 20% in cash.
After, 20% o stocks in cash. Or 16%.; do cash now 16+20 or 36%. Stocks and stock funds 64%.
So I have actually done the transfer out ofstock into cash.
I was 80% stocks 20% cash
Now 64% stocks 36% cash.
So yes this is good time from my POV. I could be wrong. I would lighten upnbit on stocks. Use my % as gauge if u must. Also any money u need for next 2 years ( some say ) should not be in stocks
Recalculated was 76% stocks/funds. Trimmed to 64% stocks/ funds.
Today sold a pharmacy stock. Had balooned to 10% of stock portfolio. Trimmed it to 7%. Gain was not a lot. But LLY now at Multics year highs. So take some off the table.
