Exuberant yet?

Eh. Frankly we seem to be overdue for a correction. No biggie.
 
That's it. I'm selling everything and stuffing it in the mattress.
 
jebmke said:
Folks have been re-balancing out of equities, right? Right?
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I have been rebalancing and deconcentrating, but I think the vast majority of the retail rubes have yet to jump into the equity pool.
 
brewer12345 said:
I have been rebalancing and deconcentrating, but I think the vast majority of the retail rubes have yet to jump into the equity pool.
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But is the pool of money from retail buyers enough to push things higher? I don't have any figures on this sort of thing.

My gut feeling is that we are OK through at least January. Many will look at the missed opportunities in 2013 and push more money over into equities. But again, is that really enough to pump the market up? Maybe so baring major shocks like geopolitical ones or major trading partners getting is trouble.
 
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Lsbcal said:
But is the pool of money from retail buyers enough to push things higher? I don't have any figures on this sort of thing.

My gut feeling is that we are OK through at least January. Many will look at the missed opportunities in 2013 and push more money over into equities. But again, is that really enough to pump the market up? Maybe so baring major shocks like geopolitical ones or major trading partners getting is trouble.
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I think we rally through the end of the year, in the usual stop and go fashion. After that, who knows? Europe is coming out of recession, China seems to be muddling through. If the politicians can stop squabbling maybe we will even see some real growth. I have been using the rally to diversify and tweak my allocations so that my risk profile is more appropriate to an ESR.

Tomorrow I am going deer hunting. I kind of doubt I will be bagging a deer and don't really care if I don't get one. I will be out in the woods in nice weather with the cell phone shut off and nobody to bother me.
 
If we agree that the market goes up more often than it does going down, then should investors not be happy more often than not?

I think exuberance is OK. It's irrational exuberance that one should fear. Greenspan first coined this phrase in 1996 in a speech.

[...] Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? [...]

See: FRB: Speech, Greenspan -- Central banking in a democratic society -- December 5, 1996​

So, are we experiencing another bout of irrational exuberance? Same as some earlier posters, I do not think so. One will note that the above Greenspan's speech was in 1996, and the market did not implode until mid 2000, although the current economic condition is different than the dotcom era.

I think the market rise will continue for a while, though this thinking will not make me go any higher than 70-75% in stock allocation. But as I believe that the world economy is recovering, I will look for some markets outside the US.

And talking about Greenspan, as I got curious about what he was up to, I searched the Web, and found that he had recently expressed concerns that the QE had been going on for so long, and it had raised the risk that it was not going to end well.
 
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Reporting back from the wine tasting party I went to Saturday night, not one mention of stocks or investing. Maybe everyone was too interested in wine, food, and football on TV. The office seems quiet too. Will report back in a few weeks.
 
At my office too many of the folks pulled out of the market at the beginning of the gov'ment shut down... Now they're regretting it.
 
I checked the data of mutual fund flows and updated my graph through Aug 2013. You can see people pulling out of bonds and some modest upticks in equity flows, particularly international equity.

rmlg0l.jpg


I'm guessing this stuff is a lagging indicator although you can see declines in 2007 well before the poor 2008.
 
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Maybe I'm a pessimist...but I keep telling DW that just wait....

Some day (I'm thinking within the next 1-4 years), interest rates will rise, and all sorts of bad things will happen. Markets will go down, people will stop spending, businesses will stop investing, and I think one unique thing will happen that we have not seen in a very long time...

Anyone under the age of 50 likely does not remember what it's like to have double-digit interest rates like we did in 1980. Even if we only get to 7-8%, it will be major sticker shock to the youngsters as it pertains to house and car loans. Those with variable rate mortgages are going to REALLY be in trouble. Imagine your variable mortgage rate resetting such that your payment goes from $1,200/month to $1,800/month...yikes! What will happen when workers want to relocate (either to find a job out of college, transfer to a new job in another city, or even transfer to a different city for the same MegaCorp) and find that the house they can afford is 2/3 the size/quality of the one they are used to? Yes, for internal transfers the company will help pay...but that will likely get nipped in the bud also due to the high cost. Over the past 10-15 years we've been so used to easy money that we think nothing about moving...but that won't be so easy IMO if rates double from their current position.

Personally I'll be largely unaffected other than through high inflation...which can usually be partly offset by higher yields on safe investments (I remember having a Gradison Cash Reserve guaranteed account in 1980 that paid 11% guaranteed). Most people, however, don't have that luxury.
 
rodi said:
At my office too many of the folks pulled out of the market at the beginning of the gov'ment shut down... Now they're regretting it.
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Here is your chance. Ask them if they are going to buy a bit soon. ;):)
 
I'm not exuberant but I feel content. The market has pushed my investments well beyond the minimum I felt I needed. I'm not doing anything but my standard rebalancing. I'm also starting to look at the big influx my Megacorp is going to pay into my 401K in December (they pay their match in a lump sum once a year) to determine if I need to do anything with its allocation.

It is interesting to me how divorced the market has become from personal economic lives. It used to be that bad economic news like companies laying off people, high unemployment, slow job growth would bring the market down. Now those are seen as "good" things as the market seems to feel that these things will keep the current government stimulus going, and this keep money flowing into the market. While I personally benefit from this,it does not bode well for peoples lives. It makes one wonder if there will be a slow glide down or a steep fall off a cliff when this music stops.
 
jollystomper said:
It is interesting to me how divorced the market has become from personal economic lives. It used to be that bad economic news like companies laying off people, high unemployment, slow job growth would bring the market down. Now those are seen as "good" things as the market seems to feel that these things will keep the current government stimulus going, and this keep money flowing into the market. While I personally benefit from this,it does not bode well for peoples lives. It makes one wonder if there will be a slow glide down or a steep fall off a cliff when this music stops.
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Unless you are selling stock into this rise, I cannot see how you can personally benefit from what will soon be seen a bubble like all other bubbles, and soon to be more than reversed.

Ha
 
I updated this "decades" chart. It is just the SP500 plotted on semi-log but cut up to overlay each decade since the 1940's. Also includes dividends and inflation.

You can see we've had quite a ride but the slope we are on is not something that is unusual. Markets like this have been seen in practically every decade and have gone on for longer too. Of course, this does not show valuations which is another story.


ok26ar.jpg
 
Heh heh heh... There's a market timer in [-]all[/-] most of us, just waiting to [-]get out[/-] make a post. Heh heh heh...

Just this morning, I saw a Web site headline saying "Soft economic data supports Fed continued stimulus, boosting stocks". I do not feel good about this. Not so good economy, so stocks go up? There's something not right about this.

As I have been trimming some stocks for their individual reasons, I thought about buying something else, but perhaps should refrain now. Stock AA was 70%, but has been headed towards 65%. Is that market timing or tactical AA allocation? Or is it just being chicken?
 
NW-Bound said:
...(snip)...Stock AA was 70%, but has been headed towards 65%. Is that market timing or tactical AA allocation? Or is it just being chicken?
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My rebalance plan has been to not go above 65% and I sold 1% yesterday to get back to that. I do not rebalance when the market goes down.

On a personal level we all have to deal with greed and fear. I'm considering reducing the equities even further as the portfolio goes beyond where the risk is warranted to have the spending levels we would like.
 
Lsbcal said:
On a personal level we all have to deal with greed and fear. I'm considering reducing the equities even further as the portfolio goes beyond where the risk is warranted to have the spending levels we would like.
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If I can sustain 3.5%WR, I will be content. Of course, I still like to make more money. It's the way to gauge if your reading of history is correct, as it is unfolding before you. However, I do not, and never, swing for the fence.

If fixed-income investments pay a decent return, I would not think of going as high as 75% in stocks. But looking at large and seemingly safe (?) companies paying 3 to 4% dividend, it is tough to sit on as much cash as I do now.

It ain't easy!
 
I am not exuberant at all. I started investing in 2000 and my own experience taught me that what the market giveth, the market taketh away soon enough. So I have a strategy of harvesting gains when the market gets overbought, and this is no exception.
 
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