Join Early Retirement Today
Closed Thread
 
Thread Tools Search this Thread Display Modes
Stock Market "Experts" told us in 2012 that the market was over valued!
Old 08-31-2016, 07:13 AM   #1
gone traveling
 
Join Date: Aug 2016
Location: Alexandria VA
Posts: 48
Stock Market "Experts" told us in 2012 that the market was over valued!

The "EXPERTS" have been saying that the stock market is way over valued and to expect only a 2-3% real annual return in the next few decades. If this is true this will be tough for the retired people who depend on stock market returns to fund their lifestyle.

Though I was thinking about all these doom and gloom media stories about an overvalued stock market and depressed expected annual returns. I thought I had read this before, years ago. Upon investigation I found these doom and gloom stories about the stock market being overbought and we should expect low returns going forward were found in articles dating back to 2010.

So I googled stories from early 2012 about the subject and found that the EXPERTS back then were warning everyone that the stock market was way overbought and to expect only 2-3% real returns in the upcoming years. They also said get out of bonds in 2012 because the Fed was going to increase interest rates.

That was four years ago and since the overbought stock market has returned 69.91% according to this chart:

http://pages.stern.nyu.edu/~adamodar...histretSP.html



Market Valuations and Expected Returns as of May 2012 - NASDAQ.com
__________________

__________________
Forced to Retire is offline  
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-31-2016, 07:19 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 7,864
I think a lot of folks come to these forums to avoid the noise and hype and doom and gloom and idiotic optimism of the financial media that is all worthless and a waste of time reading or watching.

And now, we have been invaded. Our little island of common sense and rationality and sanity has been penetrated.
__________________

__________________
LOL! is offline  
Old 08-31-2016, 07:35 AM   #3
gone traveling
 
Join Date: Aug 2016
Location: Alexandria VA
Posts: 48
Get out of the stock market now! Written in 2011:

5 Reasons the Stock Market is Over-valued - CBS News
__________________
Forced to Retire is offline  
Old 08-31-2016, 07:44 AM   #4
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 39,787
FTR, here is a recent thread on the accuracy of the gloom and doom prognosticators:

Gloom & Doom Pundits vs. the S&P 500 2010-2016
__________________
Numbers is hard.

Retired in 2005 at age 58, no pension

REWahoo is offline  
Old 08-31-2016, 07:52 AM   #5
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: On the road again
Posts: 21,810
So, financial media is continually publishing reports of imminent disaster or gloom and doom, and they all turn out to be nothing more than "Chicken Little"? Shocking. What shall we do? what
__________________
MichaelB is offline  
Old 08-31-2016, 07:59 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 10,807
"The experts?" Who is that? You can find convincing buy or sell recommendations under any circumstances, even easier in today's online connected world. Long term investors don't listen to the noise...
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is online now  
Old 08-31-2016, 08:14 AM   #7
Thinks s/he gets paid by the post
DFW_M5's Avatar
 
Join Date: Sep 2003
Posts: 4,731
Heck, those experts were also saying back in 2008-9 that it would take a decade or more to recover from the great recession. No one nows anything until you look in the rear view mirror.
__________________
Doing things today that others won't, to do things tomorrow that others can't. Of course I'm referring to workouts, not robbing banks.
DFW_M5 is offline  
Old 08-31-2016, 08:18 AM   #8
Full time employment: Posting here.
 
Join Date: Feb 2014
Posts: 915
QE works wonders!
__________________
jim584672 is offline  
Old 08-31-2016, 08:36 AM   #9
Thinks s/he gets paid by the post
Lakewood90712's Avatar
 
Join Date: Jul 2005
Posts: 1,194
The " Market" is always overvalued, always has been. The days of stodgy companies with loads of hidden value were gone decades ago. Still plenty of money can and will be made thru speculation by those who " Buy and wait" as I call it. I don't call it buy and hold, as things change over time . Growth and dividends are good, but fortunes are made over intermediate / long terms ( like decade long) . Companies like the old GM , some of the tech co's during 1990-2000 had amazing rises, and falls. These were the " forever" stocks. No such thing IMO.
__________________
Lakewood90712 is offline  
Old 08-31-2016, 08:51 AM   #10
Full time employment: Posting here.
 
Join Date: Mar 2010
Location: Chicago
Posts: 831
Reality is DOW 20,000 is just around the bend.
__________________
ripper1 is offline  
Old 08-31-2016, 09:23 AM   #11
Thinks s/he gets paid by the post
sengsational's Avatar
 
Join Date: Oct 2010
Posts: 3,044
It's "reasonable" to predict less than average earnings from the stock market when the CAPE ratio is higher than average. That has been true in recent history, except for 2008. I think average CAPE since 1881 (or whenever Shiller's data goes back to) is about 17 and right now it's about 27. Since 1990 the average CAPE has been 25, so if you're thinking "this time it's different" (different than that very old data), then you might conclude that average stock market returns are expected.
__________________
sengsational is offline  
Old 08-31-2016, 10:10 AM   #12
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 1,591
Two words - "Balanced Fund"

Set it and forget it.

No need for you or the experts to trade in anticipation of future events.

These funds re-balance themselves, often daily, so the fund is automatically buying low and selling high.

-gauss
__________________
gauss is offline  
Old 08-31-2016, 10:14 AM   #13
Full time employment: Posting here.
 
Join Date: Jun 2016
Location: Denver
Posts: 547
Quote:
Originally Posted by gauss View Post
Two words - "Balanced Fund"

Set it and forget it.

No need for you or the experts to trade in anticipation of future events.

These funds re-balance themselves, often daily, so the fund is automatically buying low and selling high.

-gauss
As long as they are in a tax advantaged account otherwise the tax man will get his share at the end of the year from all that churn.
__________________
COcheesehead is online now  
Old 08-31-2016, 10:33 AM   #14
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 1,591
Quote:
Originally Posted by COcheesehead View Post
As long as they are in a tax advantaged account otherwise the tax man will get his share at the end of the year from all that churn.
Most of the daily balancing that I refer to can occur from the natural buy/sell orders that shareholders place on the fund (ie the fund manager can choose to buy/sell either stocks or bonds to meet the needs of the buy/sell orders).

If there is net selling going on (ie market is dropping and shareholders are selling) wouldn't the same tax effect be experienced in an after-tax account if one were to hold a single balanced fund vs a pure bond and a pure stock fund?
__________________
gauss is offline  
Old 08-31-2016, 10:40 AM   #15
Recycles dryer sheets
 
Join Date: Dec 2006
Location: chicago burbs
Posts: 498
Did anyone else ever notice that 'experts" in the financial arena have a much worse track record than weather experts iro forecasts ?
__________________
golfnut is online now  
Old 08-31-2016, 10:59 AM   #16
Full time employment: Posting here.
 
Join Date: Jun 2016
Location: Denver
Posts: 547
Quote:
Originally Posted by gauss View Post
Most of the daily balancing that I refer to can occur from the natural buy/sell orders that shareholders place on the fund (ie the fund manager can choose to buy/sell either stocks or bonds to meet the needs of the buy/sell orders).

If there is net selling going on (ie market is dropping and shareholders are selling) wouldn't the same tax effect be experienced in an after-tax account if one were to hold a single balanced fund vs a pure bond and a pure stock fund?
No, I am talking about the turnover rate within a fund. If a manager is constantly buying and selling within the fund, they are generating short/long term cap gains that have to be passed onto the current shareholder. Some funds are managed for more tax efficiency, less churn, and better for taxable accounts, an example being an index fund. The example you reference of almost daily rebalancing will create many, many taxable events and will probably have a less efficient tax profile than say an index fund or my preference, an ETF.
__________________
COcheesehead is online now  
Old 08-31-2016, 11:27 AM   #17
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 1,591
Quote:
Originally Posted by COcheesehead View Post
No, I am talking about the turnover rate within a fund. If a manager is constantly buying and selling within the fund, they are generating short/long term cap gains that have to be passed onto the current shareholder. Some funds are managed for more tax efficiency, less churn, and better for taxable accounts, an example being an index fund. The example you reference of almost daily rebalancing will create many, many taxable events and will probably have a less efficient tax profile than say an index fund or my preference, an ETF.
Okay,

I think we are comparing apples and oranges. Although I didn't state it explicitly I was referring to Balanced Index funds such as the many Vanguard Target Retirement 2XXX funds. These funds only hold pure index funds such as :

- Vanguard Total Stock Market Index Fund
- Vanguard Total Bond Market II Index Fund

as well as the corresponding International Index funds.

Investing in Actively managed funds would definitely open up the possibility for churn and is not what I was intending to recommend. Thanks for the catch.

p.s. Nobody outside of the fund typically knows the details of the balancing strategy. This proprietary info could be used by other market actors to the determent of the fund. If the fund does not keep much in cash then the daily net buy-sell from shareholders could give the manager a chance to keep nudging the fund back towards balance.
__________________
gauss is offline  
Old 08-31-2016, 11:35 AM   #18
Moderator Emeritus
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 15,612
The webs have to fill all those pages with something, anything, just to get the clicks for the ads. Doom and gloom works--rinse and repeat as needed.
__________________

Bestwifeever is offline  
Old 08-31-2016, 11:42 AM   #19
Recycles dryer sheets
 
Join Date: Apr 2010
Posts: 387
My favorite reply is if not stock market then what?

http://www.stockpickssystem.com/wp-c...-1900-2000.jpg
__________________
Insanity: doing the same thing over and over again and expecting different results.
(Albert Einstein)
wanaberetiree is offline  
Old 08-31-2016, 12:01 PM   #20
Full time employment: Posting here.
 
Join Date: Jun 2016
Location: Denver
Posts: 547
Quote:
Originally Posted by gauss View Post
Okay,

I think we are comparing apples and oranges. Although I didn't state it explicitly I was referring to Balanced Index funds such as the many Vanguard Target Retirement 2XXX funds. These funds only hold pure index funds such as :

- Vanguard Total Stock Market Index Fund
- Vanguard Total Bond Market II Index Fund

as well as the corresponding International Index funds.

Investing in Actively managed funds would definitely open up the possibility for churn and is not what I was intending to recommend. Thanks for the catch.

p.s. Nobody outside of the fund typically knows the details of the balancing strategy. This proprietary info could be used by other market actors to the determent of the fund. If the fund does not keep much in cash then the daily net buy-sell from shareholders could give the manager a chance to keep nudging the fund back towards balance.
__________________

__________________
COcheesehead is online now  
Closed Thread


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Fixed Income Continues to be "Highly Valued" audreyh1 FIRE and Money 17 06-11-2012 01:21 AM
Schiller "Precarious State, Stocks fairly valued but could go down a lot" shotgunner FIRE Related Public Policy 9 07-15-2009 10:08 PM
The Market is Now Fairly Valued twaddle FIRE and Money 100 03-11-2008 02:09 PM
Calling Mortgage Experts (or non-experts, doesn't matter) 034runner Young Dreamers 6 10-10-2007 06:27 AM

 

 
All times are GMT -6. The time now is 06:48 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.