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Bubbles all over the place
Old 08-06-2016, 03:37 PM   #1
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Bubbles all over the place

https://www.thefelderreport.com/2016...in-1200-years/

OK, I think a 1200 year event qualifies as a bubble. And in a sector such as utilities that is usually believed to be conservative investors' domain! Likewise some other "bond substitutes" are at 2 sigma overvaluations. Bonds themselves are showing heroic interest rate and in some sectors default assumptions.

Another bubbly thing is the increasing reliance on index funds in stock market investing. You don't have to tell me that these are cheaper in terms of annual charges, but they also make no pretense to any price discipline in security choice. For my money, perhaps not a great all weather bet.

Always foolish to call tops, especially with bubble tops. Still, I would find this a bad time to invest new money in most of these areas. And for me, if I had money in accounts that were not subject to current taxation, I would be selling most equities that I owned in these accounts.

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Bubbles all over the place
Old 08-06-2016, 04:00 PM   #2
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Bubbles all over the place

Preaching to the converted...


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Old 08-06-2016, 04:02 PM   #3
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Have to agree here. I am less than 30% in stock.

Fortunately for me, I don't need have a higher percentage to be in the market. Also, I have other investment. Yes, including but not limited to RE.
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Old 08-06-2016, 04:05 PM   #4
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Yes, but what if you wait five years on the sidelines waiting for the bubble to burst and it just keeps inflating 5% a year.
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Old 08-06-2016, 04:27 PM   #5
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there is a bubble in bubbles
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Old 08-06-2016, 04:31 PM   #6
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Yes, but what if you wait five years on the sidelines waiting for the bubble to burst and it just keeps inflating 5% a year.
Keep on dancing if that is the way you lean!

In generations past there were nursery rhymes and children"s games to teach the deep truths of life.

Now, we head to Facebook or twitter to become even further confused.

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Old 08-06-2016, 04:37 PM   #7
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Yes but a mulberry bush won't feed my weasel when inflation is 2% and cash earns near zero.
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Old 08-06-2016, 04:55 PM   #8
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Yes but a mulberry bush won't feed my weasel when inflation is 2% and cash earns near zero.
That is why I say, Como quieres! Luckily, you are free to do whatever you want with your money. I have only one horse in this race, and I am on him.

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Old 08-06-2016, 05:00 PM   #9
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Yes but a mulberry bush won't feed my weasel when inflation is 2% and cash earns near zero.

Return of principal always trumps return on principal...


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Old 08-06-2016, 05:03 PM   #10
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Another imploding bubble is over in tech & VC land. Fortunately only rich insiders and founder hopefuls suffer from those. Many unicorns are losing their horns right now, and turn out to be limp horses instead.

Consumer staples might be strongly valued, but a P/E of x20 is still a yield of 5%. And with a steady growth promise too of say, 1% real.

Still a decent deal considering the alternatives. And if we stay in a low-growth world with poor fixed income alternatives, I find that valuation justified even for the longer term.

A once in 1.200 years event also sounds like hyperbole to me, and/or one's approach to using descriptive statistics in this fashion needs revisiting.
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Old 08-06-2016, 05:07 PM   #11
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The 2000 bubble was weird because although average equity index valuations were extremely high, there was great divergence between sectors. Anything .com or tech was at insane levels, everything "real economy" was bargain basement. Do we have something like that now? Well, utilities and the like with steady dividends are probably at crazy levels. You cannot give cyclicals away, OTOH. So I would say that the divergence is not quite as spectacular as it was in 2000, but it definitely is there.
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Old 08-06-2016, 05:08 PM   #12
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A once in 1.200 years event also sounds like hyperbole to me, and/or one's approach to using descriptive statistics in this fashion needs revisiting.
I guess it is hyperbole, in the sense that the author knows that these out of distribution events are much more frequent than would be expected if stock returns were a Gaussian distribution.

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Old 08-06-2016, 05:09 PM   #13
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Agree that utilities have been overvalued for a while - sold one recently that I had owned for years with plans to move back into it after they come back to earth.
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Old 08-06-2016, 05:15 PM   #14
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The 2000 bubble was weird because although average equity index valuations were extremely high, there was great divergence between sectors. Anything .com or tech was at insane levels, everything "real economy" was bargain basement. Do we have something like that now? Well, utilities and the like with steady dividends are probably at crazy levels. You cannot give cyclicals away, OTOH. So I would say that the divergence is not quite as spectacular as it was in 2000, but it definitely is there.
Excellent point. I made my retirement on tobaccos coming out of the 2000 market distress. I recently noticed that it seems likely that Carl Icahn, a big investor in cyclical issues, may step back in favor of a son and one other firm member. fF course Carl is 80, and one of my favorite people.

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Old 08-06-2016, 05:51 PM   #15
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I like bubbles for the most part...but some are downright frightening.

I moved some money around last Monday because our stock allocation was a bit high. Only 35% in stocks in our port at the present...yeah, I'm a bit of a wuss I suppose. Let the bubbles pop where they may.
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Old 08-06-2016, 06:14 PM   #16
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Excellent point. I made my retirement on tobaccos coming out of the 2000 market distress. I recently noticed that it seems likely that Carl Icahn, a big investor in cyclical issues, may step back in favor of a son and one other firm member. fF course Carl is 80, and one of my favorite people.
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Carl has not been nice to me, thankfully I don't know him too much
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Old 08-06-2016, 06:25 PM   #17
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I totally agree that folks are chasing yields since bonds and cd's are paying so little, while cat food keeps going up in price.

So things keep getting bid up. I believed this 4 years ago and finally capitulated 2 years ago and so far am glad I did.

Now I want to switch my 100 % stock allocation to some bond like thing, and it's like eating cow pies. Besides selling my stock and leaving it in cash, tell me what I can buy ? ?

OK, I did pick up $35K in preferred stocks paying very roughly 6% / yr. forever... but I recognize while the income is nice, they will not appreciate so its really like a bond.

I'm thinking TIPs would be better than cash as at least there is the inflation factor there.
Otherwise, I'm stuck collecting the ETF dividends and riding the roller-coaster up and down and back up .... sometime.

I'm open to suggestions as well. ... . .
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Old 08-06-2016, 06:26 PM   #18
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Carl is the anti-Buffett. One's choice here is kind of a personality test. If you cleaned erasers for that nice teacher, you'll like Warren. Shoot spitballs? You might prefer Carl.

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Old 08-06-2016, 06:29 PM   #19
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Another bubbly thing is the increasing reliance on index funds in stock market investing. You don't have to tell me that these are cheaper in terms of annual charges, but they also make no pretense to any price discipline in security choice. For my money, perhaps not a great all weather bet.
I think something like 9% of all investment dollars are indexed now. Index investing essentially relies on others money being used for price discovery and just riding the collective give-and-take of others trades. If 90% is still duking it out to figure out what Boeing is worth, the indexers are probably still fine.

That said, I have no clue what the tipping point is.
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Old 08-06-2016, 06:30 PM   #20
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