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Exuberant yet?
Old 09-13-2013, 10:19 AM   #1
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Exuberant yet?

This interview with Laslo Birinyi worries me because I agree with Birinyi. Link: Birinyi

I'm guilty of liking the guy who is an old timer on Wall St. and appeared regularly on Wall St. Week years ago. He has a great gravelly voice too.

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He says bull markets go through four phases of sentiment: reluctance, digestion or consolidation, acceptance, and finally exuberance. Of course, you can’t precisely measure those phases until the bull market is over, but Birinyi says the current bull entered phase four in July 2012. Since then, the S&P has risen 22%.

The “exuberance” has a funny way of showing itself — Consensus Inc.’s Bullish Sentiment index of professional investors has fallen to 50% from 67% in early August, while the American Association of Individual Investors’ poll last week showed a narrow 35%-31% split between bulls and bears.
Yes, I know nobody can predict the future stock market but investors do seem to go through phases and business cycles do seem to exist.
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Old 09-13-2013, 10:42 AM   #2
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I personally don't think enough people have jumped back into the market. I know too many people that won't buy equities that took a beating during 2008 and early 2009. When they start telling me how they are making enough money in stocks to retire in a couple of years, I'll know the fat lady is getting ready to sing.

I didn't sell out in the last downturn. I rode that pony all the way down and all the way back up. I've been rebalancing the whole time. I have way more money than I did in Oct 2007 and it's still invested conservatively. Market tops are usually full of stories about how much Joe Average is making in a "can't lose" market.
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Old 09-13-2013, 10:59 AM   #3
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I personally don't think enough people have jumped back into the market. I know too many people that won't buy equities that took a beating during 2008 and early 2009. When they start telling me how they are making enough money in stocks to retire in a couple of years, I'll know the fat lady is getting ready to sing.
Ding, ding, ding! We have a winnah!

There are still tons of people piss scared of the equity market. When I start getting stock tips from non financial industry people I will start buying puts.
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Old 09-14-2013, 02:19 PM   #4
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There are still tons of people piss scared of the equity market. When I start getting stock tips from non financial industry people I will start buying puts.

Do you think many of those will EVER be back? I wonder if some will be back even in my lifetime given the brutality of the last bear. That being said, I never believe that "It's different this time" so I'm torn between two thought processes. LOL

I do always come back though to this graph. I'm personally at least in the excitement / thrill range!
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Old 09-14-2013, 02:27 PM   #5
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I think people have the collective attention span of a fruitfly and at some point they will be back to doing wildly stupid things. It is already going on in the junk bond market, so its only a matter of time before it happens in the equity market.
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Old 09-14-2013, 04:08 PM   #6
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I think people have the collective attention span of a fruitfly and at some point they will be back to doing wildly stupid things. It is already going on in the junk bond market, so its only a matter of time before it happens in the equity market.
"Be fearful when others are greedy...." Warren Buffett

As the pain of 2008 and 2009 fades and the cocktail party tales of making a killing on GOOG, TSLA, NFLIX or Twitter etc. become more commonplace more and more people will venture back into the market. The 2008 crash was scary and painful enough that it scared some people permanently out of the market. However, that is a relatively small group and the do eventually die off just like depression era folks are almost all gone now.

The 15% 1 year returns of the S&P aren't juicy enough to make the average joe throw caution to the wind but another year or so of steady double digit returns will get lots more people jumping on the train..
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Old 09-14-2013, 06:12 PM   #7
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If you are crying, you should be buying...if you are crowing you should be selling.
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Old 09-17-2013, 06:19 PM   #8
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I think people have the collective attention span of a fruitfly and at some point they will be back to doing wildly stupid things.
Well, now that I will agree with 100%. Maybe I should just expect it to take slightly longer than normal this time.

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As the pain of 2008 and 2009 fades and the cocktail party tales of making a killing on GOOG, TSLA, NFLIX or Twitter etc. become more commonplace more and more people will venture back into the market.
As hard as it may be to believe, I have done pretty well shorting NFLX this past year. It was somewhat daunting (in and out twice) as the stock has nearly shot straight up. I wish I had the gumption to put on a big short because I really do believe that NFLX is so grossly overvalued that when it crashes it will do so spectacularly. I just can't time it or factor how long the irrational lemmings buyers will keep driving up the price.

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The 15% 1 year returns of the S&P aren't juicy enough to make the average joe throw caution to the wind but another year or so of steady double digit returns will get lots more people jumping on the train..
Oh, how I hope you are right. "Another year or so of steady double digit returns" would make me very happy indeed.
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Old 10-24-2013, 10:08 PM   #9
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I still haven't heard people in the office talk about how great their investments are doing. I haven't seen any news reports about the great bull market. When I start hearing people at parties talk about their investments, coupled with the office talk and news reports, I'll get worried.
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Old 10-24-2013, 11:42 PM   #10
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I still haven't heard people in the office talk about how great their investments are doing. I haven't seen any news reports about the great bull market. When I start hearing people at parties talk about their investments, coupled with the office talk and news reports, I'll get worried.
I suppose you may be right although I don't go to parties and am not in the office nowadays. Let us know when this stuff starts.

With the SP500 up about 27% in the last 12 months can those stories be very far behind? Maybe in December at those Xmas parties people will hear stories being told?

The rise seems pretty broad based and there doesn't seem to be any one really wildly popular industry or category. Then again 40% in some areas is pretty big returns. See this link: Morningstar.com: Fund Category Returns
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Old 10-25-2013, 01:32 AM   #11
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With the SP500 up about 27% in the last 12 months can those stories be very far behind?
When I see those kind of returns I get depressed. I figure that this can't possibly last much longer and that we are in for a drop (not a 40% drop, but maybe 20% or so). I would feel much happier if it was up about 8% over that period of time because I could hope that it would continue on for a good long time.
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Old 10-25-2013, 09:52 AM   #12
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What worries me is the disconnect between 22% annual equity growth and the 1 or 2% growth of the greater US economy.
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Old 10-25-2013, 10:11 AM   #13
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All those QE dollars have to go somewhere. They were intended to push people into riskier assets, and it seems to be working.
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Old 10-25-2013, 10:24 AM   #14
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What worries me is the disconnect between 22% annual equity growth and the 1 or 2% growth of the greater US economy.
Bingo! That worries me as well. I am also amused at the financial media - on up days, stocks have plenty of upside. On down days, they spew all the reasons that the market is becoming stressed. These behaviors and the rapid run-up are concerning to me. I have some money on the sideline, and I'm not quite ready to redeploy until we see some weakness.
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Old 10-25-2013, 10:27 AM   #15
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When I see those kind of returns I get depressed. I figure that this can't possibly last much longer and that we are in for a drop (not a 40% drop, but maybe 20% or so). I would feel much happier if it was up about 8% over that period of time because I could hope that it would continue on for a good long time.
I too would rather see a mild steady rise. It's always hard to interpret this bursty behavior which is an unfortunate but characteristic nature of equity markets.

A semilog growth chart like this helps: Update: equity recovery from SP500 lows . We can see that there was a real dive in the market in Sept 2011. So the longer period behavior (maybe 2.5 year rate rise) is more muted.
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Old 10-25-2013, 10:43 AM   #16
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I do not think 1 year returns mean much.

Since I started investing (in 1990) the Dow Jones has averaged 8% plus dividends.

Pre 2008 the market was too high, then went too low, now it is about right again.

I'm not going to try to time volatility, content with getting 8-10% over time.
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Old 10-25-2013, 10:51 AM   #17
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In 2009 I rebalanced to about 85% equity exposure. Today I'm at 50%. I definitely think we're in the final innings and that the market is fully priced. The question I can't answer is whether the Fed will taper, thereby letting this go through a normal cycle, or whether the Fed will continue to sit on it's hands which could send us into bubble territory and add another 30% - 40% to this bull before it lays down. That's why I'm keeping 50% invested. I just don't know the future and it's going to be based more on the actions of hundreds of millions of investors as opposed to strict rules of mathematical logic.
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Old 10-25-2013, 11:51 AM   #18
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There is a good article at Financial Times here: Markets’ animal spirits need taming before a hard fall - FT.com

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Michael Hartnett’s team at Bank of America Merrill Lynch estimated this week that global central banks have boosted liquidity by roughly $9tn since equities bottomed in 2009. In that time, they say global market capitalisation has risen $35tn while the global economy has expanded only $14tn.
“We believe the longer it takes for liquidity to feed through to economic growth, the greater the risk is that liquidity could cause excess valuations in financial assets,” wrote Mr Hartnett
It mentions how some leverage (struggling?) businesses may have an easier time before tapering.

One may have to register with FT to view this article. They occasionally have some good stuff there.
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Old 10-26-2013, 07:18 AM   #19
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I too would rather see a mild steady rise.
Then there would be little or no equity risk premium and your returns would be lower.
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Old 10-26-2013, 01:30 PM   #20
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I bailed in 2008-2009 and told myself I would get back in after the next election in 2012 when things calmed down. But after the 2010 and 2012 elections Washington DC look more dysfunctional than ever. It doesn't look like I will be back for quite a while. Hmmmm . . . maybe after the 2020 redistricting.
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