VLMAP as a predictor of the market 4 years hence?

[anethum]

Ten days ago, there was an interesting Marketwatch article claiming that VLMAP (Value Line's Median Appreciation Potential) has been the most reliable forecaster of where the stock market will be 4 years hence.

Finding the best four-year market forecaster - MarketWatch

If you google VLMAP, you can find some past predictions based on this indicator. Much of the time, the indicator ultimately proved to be fairly accurate.

VLMAP is currently at 50%, near the low end of its historic range. At this level, VLMAP would indicate that the market will not be any higher 4 years from now than it is at present.

 

[heeyy_joe]

Now if I could just write a four year covered call...

 

[haha]

I have used this indicator for whatever market timing I was in a position to do. I first read about it in the 80s. One thing to consider is that it is optimistic. I don't remember the correction factor that was recommended, (not by Value Line but by the person who wrote the article I was referring to), and I cannot find that old article in my files, but I think you need to subtract something like 45-50% from the figure given in the weekly Value Line publication. So using this as a guide, we are set for no return or even a negative return over the next 4 years. This is largely in keeping with many other value dependent indicators.

I am not against selling any stock I hold at a loss, or anything I hold in a tax deferred or tax free account, but I am not radical enough to pay a lot of tax to go to completely to cash. Exemptions to being wiling to sell all is things like MLPs, which often have a huge tax hit on sale, and my favorite natural gas stocks which may follow their own beacons. I am not at all afraid of low returns on cash, they have never lasted forever, and it has always seemed better to me to get 0 return than a loss.

The cited article states that the all time high on this indicator was 185%. This is not correct; in 1974 the Value Line Look ahead gave a +234% median price appreciation.

Ha

 

[ERhoosier]

Ha is right about 185 high being incorrect. Apparently highest weekly VLMAP (since late '60's) was 255, although this source did not provide the date-
VLMAP to wealth? - MarketWatch

 

[timo2]

VLMAP is currently at 50%, near the low end of its historic range. At this level, VLMAP would indicate that the market will not be any higher 4 years from now than it is at present.

If the market is level, and bonds are level, where will the money flow? real estate

 

[anethum]

If the market is level, and bonds are level, where will the money flow? real estate

I honestly don't understand your point. There certainly have been multi-year periods when stock markets and bond markets have been flat or dropped in value. Are you saying that something, e.g. real estate, has to be gaining in value if everything else is flat or dropping, sort of like a giant economic whack-a-mole? Wasn't there an overall world-wide reduction in wealth when everything imploded in 2008?

 

[timo2]

I honestly don't understand your point. There certainly have been multi-year periods when stock markets and bond markets have been flat or dropped in value. Are you saying that something, e.g. real estate, has to be gaining in value if everything else is flat or dropping, sort of like a giant economic whack-a-mole? Wasn't there an overall world-wide reduction in wealth when everything imploded in 2008?

Writers write, singers sing, investors invest. Assuming we don't have another implosion, where will people invest? Because cash and bonds returns are low, could it be that some of the money in the markets is just lack of anywhere else to put it? That was the basis of my question. and if markets are going to be flat as conjectured in this thread, then where will people invest? just wondering, not making a grand hypothesis or anything.

 

[haha]

Writers write, singers sing, investors invest. Assuming we don't have another implosion, where will people invest? Because cash and bonds returns are low, could it be that some of the money in the markets is just lack of anywhere else to put it? That was the basis of my question. and if markets are going to be flat as conjectured in this thread, then where will people invest? just wondering, not making a grand hypothesis or anything.

Something that may be similar to this happened in the US in the 70s, and again in the early 21st century. But in the 70s that was helped by high rate of wage growth, and high CPI inflation.

Ha

 

[eytonxav]

Ten days ago, there was an interesting Marketwatch article claiming that VLMAP (Value Line's Median Appreciation Potential) has been the most reliable forecaster of where the stock market will be 4 years hence.

And what does it predict for the bond market in 4 more years