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I hear the cavalry charge
Old 10-17-2014, 08:32 AM   #1
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I hear the cavalry charge

That drop in stocks is following the presidential cycle - Need to Know - MarketWatch

Really, I think that the only safe times to invest in most US stocks is when PE10 does not indicate meaningful overvalue. Still, few of us can emotionally or tax wise completely liquidate and then wait who knows how long until a safe long term investing level shows up. Certainly I hit this recent drawdown with more stock than I would really like given my estimate of valuation.

I also pay attention to the so called presidential cycle. Various people look at it differently, but Jeremy Grantham uses Oct 1 of an election year as the start of a 8-9 month period during which losses are quite rare. We shall see if that continues to hold this year. The data set is not very large which introduces meaningful caveat.

Anyway, here is a chart that projects an average result of 2nd term midterm years onto the present.


Mike
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Old 10-17-2014, 11:32 AM   #2
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I like the Hemline theory as a better indicator.... Works as well for me but is much more enjoyable research.

http://www.investopedia.com/terms/s/...ngththeory.asp


The idea behind this theory is that shorter skirts tend to appear in times when general consumer confidence and excitement is high, meaning the markets are bullish. In contrast, the theory says long skirts are worn more in times of fear and general gloom, indicating that things are bearish.

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Old 10-17-2014, 11:42 AM   #3
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I personally like the Bangladesh Butter Production indicator. Take the change in butter production in Bangladesh and multiply it by two. This will give you the exact percentage by which the S&P 500 Index will change in the year ahead.
Butter in Bangladesh Predicts the Stock Market
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Old 10-17-2014, 12:28 PM   #4
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Taxes do make it tough to be nimble for those of us with significant taxable positions. They are the main reason why my equity allocation is higher than I would like to. The last time I bought equities in a big way was 2011. Many of those positions have huge unrealized gains. Between the Federal and State taxes, we'd pay over 35% in taxes on LTCG.
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Old 10-17-2014, 12:44 PM   #5
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As a leading indicator all you have to do is count the cars on Saturday mornings in Home Depot's parking lot. This bull market ain't finished yet.
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Old 10-17-2014, 12:48 PM   #6
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Quote:
Originally Posted by haha View Post
That drop in stocks is following the presidential cycle - Need to Know - MarketWatch

Really, I think that the only safe times to invest in most US stocks is when PE10 does not indicate meaningful overvalue. Still, few of us can emotionally or tax wise completely liquidate and then wait who knows how long until a safe long term investing level shows up. Certainly I hit this recent drawdown with more stock than I would really like given my estimate of valuation.

I also pay attention to the so called presidential cycle. Various people look at it differently, but Jeremy Grantham uses Oct 1 of an election year as the start of a 8-9 month period during which losses are quite rare. We shall see if that continues to hold this year. The data set is not very large which introduces meaningful caveat.

Anyway, here is a chart that projects an average result of 2nd term midterm years onto the present.


Mike
From his last quarterly newsletter, Grantham was still optimistic over the immediate term, while still pessimistic overall.
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I think it is likely (better than 50/50) that all previous deal records will be broken in the next year or two. This of course will help push the market up to true bubble levels, where it will once again become very dangerous indeed.
European equities have been beaten down, I don't think they are as expensive as US.
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