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Time for a cold shower or a warm bath?
Old 11-21-2013, 07:04 PM   #1
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Time for a cold shower or a warm bath?

Kind of liked this article.
Is A Bear Market Right Around The Corner? What The 2007 Top Can Tell Us About The Present - Seeking Alpha



right or wrong I'm taking a tub
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Old 11-21-2013, 10:39 PM   #2
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Well that's frustrating. The title indicates there is going to be some learning from 2007 applied to the present, but the article just makes some broad generalizations and tries to suggest the stock market is like deciduous trees. Then I'm hit up for a registration to see the rest of the article. Maybe the second page is really good, but I can't see it and the first page is useless. Hard to have a meaningful discussion about it if we cannot read it. Some summary or other details besides the link would be helpful.
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Old 11-22-2013, 09:34 AM   #3
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Quote:
Originally Posted by growing_older View Post
Well that's frustrating. The title indicates there is going to be some learning from 2007 applied to the present, but the article just makes some broad generalizations and tries to suggest the stock market is like deciduous trees. Then I'm hit up for a registration to see the rest of the article. Maybe the second page is really good, but I can't see it and the first page is useless. Hard to have a meaningful discussion about it if we cannot read it. Some summary or other details besides the link would be helpful.

Oh my, sorry about that! Did not know you had to register, I must have registered a long time ago and forgot. The guts of the article is that companies are in much better shape as we hit 16000 on the dow then they were back in 2007 when they it 15000.

It must be free to register because I never pay for that kind of stuff and I do not think they send me any emails ( If they do they are going to spam).
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Old 11-22-2013, 10:43 AM   #4
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Meh.
Although by many measures the "market" today is not as "expensive" (e.g. ave PE) as 2007, IMHO the current situation has no real historical precedent. Economic growth remains tepid at best despite world's artificially cheap money supply (e.g. QE, Abe-nomics, etc.). If that cheap money supply gets turned off, e.g. by pressure on national debts growing too large, rates could rise dramatically without major economic growth. In that scenario, equities are likely to be hurt badly. OTOH- Equities could continue to rise with modest profit growth and continued multiple (PE) expansion. Who really knows what the future holds?
Everyone has to decide on their personal risk tolerance & AA, and periodically rebalance to that AA.
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Old 11-22-2013, 11:07 AM   #5
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The article's argument is not one of fundamental analysis, but on the technical side.

The writer argues that the 2007 market top was carried by only a few large stocks, while many smaller stocks were already in a decline at that very top. He says that in contrast the current stock rise is more broad-based, with many stocks advancing. In his view, that means more people will be flocking to buy stocks, and the price advance will continue based on supply and demand.

I prefer to see bullish arguments based on fundamentals, so that the stock gains will have support long-term. I am not a trader, and would rather hold than jumping in/out of the market. On the other hand, there has indeed been evidence that people are now flocking to stocks as they bail out of bonds. An article on Bloomberg has the following excerpts.

"Stock funds won $172 billion in the year’s first 10 months, the largest amount since they got $272 billion in all of 2000, according to Morningstar Inc. (MORN) estimates.
...
The move marks a reversal from the four years through 2012, when investors put $1 trillion into fixed income as the financial crisis drove many to redeem from stocks and miss out as the Standard & Poor’s 500 Index almost tripled from its low.
...
Intermediate-term bond funds, a category often used for primary fixed-income holdings, declined 0.9 percent in 2013 through Nov. 19, according to Chicago-based Morningstar. Fixed-income funds had net redemptions of $11.2 billion in this year’s first 10 months, the firm estimated."


If one compares the $172B inflow to stocks to the $11.2B outflow from bond funds, and assumes these numbers are correct, then perhaps people are putting cash to work? What happens to the $1 trillion that went into fixed-income as the article says? Will there be more money coming out of there?

See: Stock Funds Lure Most Cash in 13 Years as Market Rallies - Bloomberg.

Anyway, this Bloomberg article notes that not everyone thinks this stock inflow is a good sign, and that we can have a big correction anytime. Oh well!

PS. So far, all 10 sectors of the US markets have rallied, from the healthcare sector at the top to the ones at bottom like utilities and telecoms. The rally is indeed broad-based.

PPS. The -0.9% decline in intermediate-term bond funds as mentioned in the above article is mild, compared to long-term Treasuries. Vanguard MF VUSTX is down -12%YTD while its ETF EDV is down -20%YTD as of 11/21/2013.
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